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America's pensions can't beat Vanguard but they can close a hospital

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Re: America's pensions can't beat Vanguard but they can close a hospital

#31

Post by lotsofpulp »

epistasis wrote: post #24

> Larry Summers warned against “moral hazard lectures” and demanded SVB depositors be made whole immediately in 2023, months after calling student loan relief inflationary and unfair. Moral hazard for borrowers, bailouts for banks. Not lost on the public. I can't believe I'm about to say something that could be construed as a defense of Larry Summers, but here goes: bank depositors are not engaging in risky behavior,…

> bank depositors are not engaging in risky behavior,

Because the taxpayers (and all users of USD) repeatedly bail them out. I could define anything as not being risky if I knew taxpayers would bail it out.

More importantly, if there is no risk, what purpose does a bank serve? They’re a pretty bloated middleman if their sole purpose is to update a database to reflect incoming and outgoing cash flow. The government should be able to offer that service for free.

Re: America's pensions can't beat Vanguard but they can close a hospital

#32

Post by nradov »

tempest_ wrote: post #3

I do wonder when some unforeseen 2008 like crash someone crashes ETFs. I can't really see how it would happen and that I suppose is part of the fun.

Most pension funds aren't heavily invested in ETFs (or other mutual funds). They're usually large enough that it makes sense to invest directly in the underlying securities.

Everyone has a prediction about what will cause the next major financial panic. Personally I think it will be triggered by property and casualty insurers who have purchased a lot of bonds where the credit ratings don't accurately reflect the true default risk. But who knows, it could be something else.

Re: America's pensions can't beat Vanguard but they can close a hospital

#33

Post by anonporridge »

tempest_ wrote: post #3

I do wonder when some unforeseen 2008 like crash someone crashes ETFs. I can't really see how it would happen and that I suppose is part of the fun.

A US wealth/unrealized gains tax might trigger it, because it would likely create a cascade of forced selling, with the proceeds of sales getting burned as tax revenue for entitlement programs or debt payments rather than reinvested.

Re: America's pensions can't beat Vanguard but they can close a hospital

#34

Post by triceratops »

budududuroiu wrote: post #20
mr_important wrote: post #9

Earlier quoted context omitted.

Private equity is capitalism. That's the capitalism part of the economy.

Im gonna speculate they were referring to the part of private equity where you buy businesses to load them up with debt to buy more businesses ad nauseum

That's called a leveraged buyout and isn't restricted to private equity.

Re: America's pensions can't beat Vanguard but they can close a hospital

#35

Post by calcifer »

nradov wrote: post #14
OGEnthusiast wrote: post #2

I don't understand why we don't just ban private equity. Seems like zero value-add to the actual real economy.

Ban companies from owning other companies? How would that work exactly? Private equity is a convenient whipping boy for ignorant, low-information HN users who don't understand the basics of how finance works. You can certainly find examples of destructive or unethical behavior if you dig deep enough. What you don't see in the news are all the cases where PE saved companies that would have otherwise gone bankrupt.

> You can certainly find examples of destructive or unethical behavior if you dig deep enough

Dig deep enough? Please. Merely tilt your head slightly upwards, and let your eyes feast on countless examples.

Re: America's pensions can't beat Vanguard but they can close a hospital

#36

Post by toomuchtodo »

vondur wrote: post #4

CalPers, the largest public employee retirement system in the US was not getting the kind of returns that they needed. They were restricted from purchasing stocks in certain industries, such as oil, weapons, etc.. However, they recently switched to investing in private equity funds and now they are getting much better returns, without all the pesky moral issues involved with it.

> However, they recently switched to investing in private equity funds and now they are getting much better returns, without all the pesky moral issues involved with it.

Investors Warn of 'Rot in Private Equity' as Funds Strike Circular Deals - https://news.ycombinator.com/item?id=46380751 - December 2025

Once Wall Street’s High Flyer, Private Equity Loses Its Luster - https://news.ycombinator.com/item?id=46364566 - December 2025

Private Equity’s Latest Financial Alchemy Is Worrying Investors - https://news.ycombinator.com/item?id=44891882 - August 2025

People Are Worried About Private Market Liquidity - https://www.bloomberg.com/opinion/newsletters/2025-06-10/peo... | https://archive.today/wJ3Uf - June 10th, 2025

Private Equity Fundraising Plunges Amid Struggle to Return Cash - https://www.bloomberg.com/news/articles/2025-05-27/private-e... | https://archive.today/hxvzb - May 27th, 2025

Private Equity Firms Hunt for Alternate Ways to Return Investor Cash - https://www.bloomberg.com/news/newsletters/2025-05-14/privat... | https://archive.today/6UzBk - May 14th, 2025

Unlocking a potential US$3.8 trillion opportunity for private equity firms - https://www.deloitte.com/us/en/insights/industry/financial-s... - December 16th, 2024

Re: America's pensions can't beat Vanguard but they can close a hospital

#37

Post by epistasis »

triceratops wrote: post #23
sidewndr46 wrote: post #16

Earlier quoted context omitted.

Pretty sure the first ETF was from around 1993, so I'm not sure how it is possible to happen "many times throughout the 20th century"

Index crashes have happened many times in the 20th and 21st centuries. The fact that index ETFs didn't exist for most of that period isn't relevant. If they had existed they would've crashed because they follow indices.

The point is that the ETF tracks its index, so what does it even mean to say ETF crash? Isn't that just the tracked stocks crashing? The ETF has little to do with it. But if there is some other risk that's warrants the ETF label, that's very very interesting and should be discussed! It would be little known or novel ETF mechanics.

Re: America's pensions can't beat Vanguard but they can close a hospital

#38

Post by [deleted] »

joejoe638 wrote: post #28
groundzeros2015 wrote: post #8

Earlier quoted context omitted.

Banning people from owning business? This is just a boogie man media term. There are good owners/investors and bad.

Private Equity doesn’t “own” business in the sense most people understand it. PE is finalisation of business, its ownership is far more similar to a mortgagee than an owner in every sense of the word.

[deleted]

Re: America's pensions can't beat Vanguard but they can close a hospital

#39

Post by lokar »

epistasis wrote: post #24

> Larry Summers warned against “moral hazard lectures” and demanded SVB depositors be made whole immediately in 2023, months after calling student loan relief inflationary and unfair. Moral hazard for borrowers, bailouts for banks. Not lost on the public. I can't believe I'm about to say something that could be construed as a defense of Larry Summers, but here goes: bank depositors are not engaging in risky behavior,…

One round of loan forgiveness is fine, but it builds an expectation of it in the future. All of the loans, growing larger and larger, just encourage universities to grow fatter and raise costs to students.

If students could not borrow enough to attend, they would be forced to lower costs (not necessarily the very top universities, but all the rest).

Re: America's pensions can't beat Vanguard but they can close a hospital

#40

Post by triceratops »

lotsofpulp wrote: post #31
epistasis wrote: post #24

> Larry Summers warned against “moral hazard lectures” and demanded SVB depositors be made whole immediately in 2023, months after calling student loan relief inflationary and unfair. Moral hazard for borrowers, bailouts for banks. Not lost on the public. I can't believe I'm about to say something that could be construed as a defense of Larry Summers, but here goes: bank depositors are not engaging in risky behavior,…

> bank depositors are not engaging in risky behavior, Because the taxpayers (and all users of USD) repeatedly bail them out. I could define anything as not being risky if I knew taxpayers would bail it out. More importantly, if there is no risk, what purpose does a bank serve? They’re a pretty bloated middleman if their sole purpose is to update a database to reflect incoming and outgoing cash flow. The government sh…

Banking is a basic utility. Penalizing customers of a business for the business going under is bonkers. We learned this lesson during the Great Depression.

Bank shareholders or creditors are engaging in risky behavior and should face the full consequences of bank failures. No bailouts for them.

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