Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Nasdaq's Shame

keubiko.substack.com

Post reply on HN
Print view View original

61–70 of 181 posts

Re: Nasdaq's Shame

#61

Post by igor47 »

michtzik wrote: post #51
Veserv wrote: post #41

To explain the mechanism simply. Suppose you had a index of 100 companys each with a market cap of 1 G$ for a total of 100 G$. You have passive investors owning 20 G$ of that index, amounting to 20% of the total, 20% of each company, and 200 M$ per company. You then rotate out a company for a new one also worth 1 G$. The index is still 100 G$, but to match the index you are contractually required to sell your 20% own…

Who is contractually obligated to buy?

I have an index fund for NASDAQ with my broker. When I bought into the fund, the broker promised me that with my money, they will buy shares in companies traded on that exchange according to the specific formula that SpaceX is manipulating here. My broker is obligated to buy. They could open a new fund that has a contact like "we'll keep doing what we had been doing except for the whole SpaceX thing" but they would need my permission to move the money. And I'm only in this fund because it was recommended by my 401k provider -- I don't know anything about any of this. That's the messed up thing here -- the people being screwed are not sophisticated investors, it's nurses and school teachers who hope to retire.

Re: Nasdaq's Shame

#62

Post by SilverElfin »

Funny how all this rule making happens so quickly for friends and family members and donors of the Trump administration. Just like it recently did for SpaceX when they got approval for launching 1 million satellites. The corruption is so out in the open, but it is happening all the time - and there are other controversies already like the Epstein files, ICE, Iran, etc - so these go unnoticed. Our political system is broken.

Re: Nasdaq's Shame

#63

Post by bagacrap »

siavosh wrote: post #33

Anyone know if vanguards VTI is immune from such practices?

vti is free float adjusted, so not as susceptible. But:

Elon will naturally do everything in his power to pump his stock, as every CEO does, and VTI buys shares in proportion to how successful that is. That is the nature of passive, market cap weighted investing.

If you want to underweight Elon's companies, or, generally, weight companies based on something besides market cap, you have to get into active or factor investing.

It mostly doesn't matter though, because if and when one stock drops, those investible dollars will likely flow into another stock, so VTI doesn't really care.

Re: Nasdaq's Shame

#65

Post by wredcoll »

bryanlarsen wrote: post #46
Veserv wrote: post #41

To explain the mechanism simply. Suppose you had a index of 100 companys each with a market cap of 1 G$ for a total of 100 G$. You have passive investors owning 20 G$ of that index, amounting to 20% of the total, 20% of each company, and 200 M$ per company. You then rotate out a company for a new one also worth 1 G$. The index is still 100 G$, but to match the index you are contractually required to sell your 20% own…

Yes, when SpaceX gets added to the index, it's going to skyrocket for just that reason. The other reason why SpaceX stock is going to skyrocket is because of the "infinite potential". After all, Elon is going to be God-Emperor of Mars, and how much is a piece of that worth? The OP knows this and wants a window to profit from this squeeze. For the general public index owners, the sooner it's added to the index the bet…

Being added to the index is literally the only thing causing "the squeeze" according to this description though so how does that benefit either the author or the index holder?

If the stock was added to the index at a normal period then all the shares would be available.

Re: Nasdaq's Shame

#66

Post by bagacrap »

drgo wrote: post #36

Let them eat foie gras! It was only a matter of time before they started manipulating index funds too.

To be fair, QQQ is not really an index fund. Unless you think that I can make up whatever arbitrary list of stocks I feel like, and call it an index, and create an ETF that tracks it, and still call that an index fund.

Vanguard is probably the most principled when it comes to passive index tracking, and they do not have an ETF that tracks the NASDAQ 100 (or any fund that focuses on a single stock exchange for some inexplicable reason).

Re: Nasdaq's Shame

#67

Post by BoggleOhYeah »

cholmon wrote: post #42
siavosh wrote: post #33

Anyone know if vanguards VTI is immune from such practices?

VTI just tracks the CRSP US total stock index, see https://investor.vanguard.com/investment-products/etfs/profi... The CRSP index itself adds new companies within 5 days of their IPO, see https://www.crsp.org/what-owning-the-market-really-means/ > The CRSP US Total Market Index, by contrast, adds all IPOs ranging from mega caps to small caps—accounting for 98% of the market—within the first five trading days of the s…

[dead]

Re: Nasdaq's Shame

#69

Post by dweez »

bagacrap wrote: post #59
dweez wrote: post #54

So sounds like this will be a great short candidate after the index re-weighting.

What, QQQ or SpaceX? Either way, no, high frequency trading firms are going to beat you to the punch. And shorting elons other company, just because it's over valued by traditional metrics, didn't work out that great for most traders.

This is a slightly tongue-in-cheek way of saying that if you believe a security is severely mispriced then there is a straightforward way to express that opinion.

Re: Nasdaq's Shame

#70

Post by igor47 »

vmbm wrote: post #28
paultopia wrote: post #9

Uh, can someone explain this to me like I’m 5, but somehow still have money invested in index funds? It makes me sound like my invested-in-vanguard-total-market-indexes-and-fidelity-target-date-funds money is going to be mechanically dumped into Elon Stock because of FinanceWord FinanceWord FinanceWord gobbledgook FinanceWord but is that the correct reading?

If you are an index investor, it is probably not worth your time and energy to make any drastic changes because of this particular incident. Space X will comprise a small percentage of the indexes in question, and any impact on your portfolio will likely be imperceptible. And if your holdings are in a taxable account, the tax hit from selling are probably not worth it. Longer term, folks should be aware that Wall Str…

Do you have specific recommendations for particularly well-governed indexes? Is something like ESGV insulated from such manipulation? Or is it time for investors to start building their own direct/custom indexing with something like Frec
Post reply on HN