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Nasdaq's Shame

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Re: Nasdaq's Shame

#71

Post by bagacrap »

dweez wrote: post #69
bagacrap wrote: post #59

Earlier quoted context omitted.

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.

Shorting is really not that straightforward. It is a avery advanced topic because it mandates the use of leverage. Many (most) investors are long-only, especially the ones being taken advantage of here.

Re: Nasdaq's Shame

#72

Post by bagacrap »

wredcoll wrote: post #68
bagacrap wrote: post #64

Earlier quoted context omitted.

Vast majority of index funds do not track NASDAQ 100.

This is the detail I'd really like to know more about

The top 3 most popular index fund ETFs track S&P500, which doesn't really pull this kind of shenanigan. Only QQQ tracks the NASDAQ 100 and it's in 5th place by assets under management.

You should probably read a book about index investing if you are going to invest.

Re: Nasdaq's Shame

#73

Post by IAmGraydon »

Silicon Valley is mostly made up of schemes designed to defraud investors disguised as the hottest new tech startups. Elon recognized this sometime around 2020 (likely starting with his foray into the world of the crypto pump/dump) and decided to skip the formalities and go straight to the fraud, no apologies. That's been his business model ever since. His companies are just a vehicle for this now.

Re: Nasdaq's Shame

#74

Post by bagacrap »

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?

You are fine because you don't hold QQQ.

Re: Nasdaq's Shame

#75

Post by bagacrap »

tartoran wrote: post #7
zug_zug wrote: post #3

Earlier quoted context omitted.

I learned: sell all my Nasdaq etfs prior to June.

The problem is that it's very hard to avoid if you have a pension plan, and millions of Americans will subsidize Elon Musk without knowing. This is really messed up.

What pension plan invests in QQQ specifically?

And "pension" in the US usually implies defined-benefits, meaning you don't actually care what it invests in. If you're talking about defined-contribution retirement plans like 401k, you are very unlikely to be invested in QQQ without consciously making that decision on your own.

Re: Nasdaq's Shame

#76

Post by xrd »

danieltanfh95 wrote: post #48

Really the same mechanics with crypto

I came here to say this, too. I remember hearing "500M market cap!" and then realizing that was because one person created a new token with 1M coins, bought one themselves for $500, and then started screaming "$500M market cap!" Technically it is true, but it really takes the "greater fool" theory to new heights.

Re: Nasdaq's Shame

#77

Post by nighthawk454 »

gruez wrote: post #50
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…

>That is the scheme described: how to short squeeze retirement funds who do not even have shorts for fun and profit. How many retirement funds use the nadasq 100 as the benchmark? The only thing that's really objectionable is the 5x multiplier, and so far as I can tell that's confined to the nasdaq 100 index. If the funds use a sane index without such shenanigans, it won't be affected nearly as much, and the whole de…

Most indexes will be affected. Two of the most common indices - the S&P500 and DJIA - are cross-exchange and include Nasdaq stocks. The biggest market cap companies on the market (MAG7) are all on the Nasdaq exchange and comprise about 35% of the S&P.

Re: Nasdaq's Shame

#78

Post by nighthawk454 »

markisus wrote: post #38

I’m trying to understand the mechanics here. I get that SpaceX and Nasdaq are in cahoots to get SpaceX bundled with a bunch of other stocks (and that bundle is called QQQ?) But why must retail investors hold this bundle? If I’m holding now, I can sell it and buy a different bundle right? And if I’m not holding it now, I can just continue not to buy it after SpaceX gets included.

There's trillions of dollars sitting in indexes that are quite literally 'passively' invested. Virtually everything holds this bundle in one way or another. Passive indexing has both outperformed and overtaken active investing - leading a lot of money into VOO/VTI/QQQ/etc that track the S&P500 or some other index ("the market"). For retirement funds like 401ks, retail contributes money every paycheck that gets routed into these indexes. There may not even be much of a choice - your 'plan' may only let you pick some kind of "Target Date Fund" and then the institution picks what it goes into, usually indexes.

If you fully actively managed your own money and picked mostly individual stocks (not broad indexes) then yeah you could change your allocations. But there's a lot of money already in.

Re: Nasdaq's Shame

#79

Post by nighthawk454 »

bagacrap wrote: post #72
wredcoll wrote: post #68

Earlier quoted context omitted.

This is the detail I'd really like to know more about

The top 3 most popular index fund ETFs track S&P500, which doesn't really pull this kind of shenanigan. Only QQQ tracks the NASDAQ 100 and it's in 5th place by assets under management. You should probably read a book about index investing if you are going to invest.

Yeah, but the S&P500 is hugely concentrated in MAG7, which are all Nasdaq listed. So when they all get sold to buy SpaceX, you can bet your butt something's gonna happen to a S&P500 ETF.

Re: Nasdaq's Shame

#80

Post by aloha2436 »

femto wrote: post #34

Why can't an index fund compute and track their own objective index, thus ignoring any distortion introduced by the Nasdaq?

They don't target something else because they wouldn't be an index fund, that's just a passive fund with their own published strategy. Those exist but aren't as popular, the appeal of index funds is that you're just getting "the market" and "the market" is measured by the index. Public indexes are supposed to be lower-cost and less manipulable, but that was before they got large enough to "wag the dog," which is the ultimate point of the article.
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