Passive investors and retirement accounts are heavily in on automatic indexing.
This deal has been pushed hard to be included prematurely in the indexes to the point that Nasdaq changed the rules.
The accusation is that these changes were made so that index funds will buy this stock automatically far earlier than they would have previously. Given the… uh… astronomical asking price, it looks like SPCEX is meant for Elon stans and institutional index investors to be the bag holders.
> retirement accounts are heavily in on automatic indexing
Majority are not. A minority are, mostly towards the S&P. Most assets remain actively managed, including in retirement assets (which covers 401(k)s, IRAs, pensions, et cetera).
Way outside of my area of expertise, but a quick search suggests that exact numbers probably depend on exactly how you define the question, but it would be broadly reasonable to say that the balance is about 50/50 +/-5%, and trending towards the passive side over time.
Yes. But I’d caution to not conflating passive investing with indexing to a popular index. They sound similar. But most passive assets index to one of a variety of indices, many of them built in-house by various asset managers. (Vanguard, for example, is famous for doing this.)
And just because yesterday's rules were "invest in S&P500" does not mean the governors of many (not all) funds cannot change the rules to dodge such blatant fraud
The managers of huge funds are not complete idiots- far from it- and they will do what they can, most of them, to fulfill their duties
> just because yesterday's rules were "invest in S&P500" does not mean the governors of many (not all) funds cannot change the rules to dodge such blatant fraud
There are no governors. The assets that automatically follow the S&P 500 are like individual IRAs. If a fund has a governing body, they're generally not indexing to a single narrow index like the S&P 500. They're going for a set of total-market funds, or they're building a custom benchmark.
For the assets that do follow the S&P 500, virtually nbody would be expected to react to these kinds of rule changes. If anything, you'd just create a higher-fee fund that anyone who is upset about this can switch into that equal weights or won't include SpaceX. This is what some RIAs I know in the Bay Area have done, and this entire shitshow has just been a moneymaker for them.
> managers of huge funds are not complete idiots
Zero hedge funds automatically follow the S&P 500, or any other public index, like that. That's sort of the point of being a hedge fund–you're delivering something different.
> Do you have any sources to share in support of this claim of malfeasance?
Not here, this is a casual discussion not a scientific seminar.
But use Occam's Razor and modern history
Point 1. Corruption has penetrated the highest echelons of USAnian politics. The president is unabashed in his corruption and has corrupted (is corrupting) the financial regulators (I follow Molly White who has been particularly good on this)
Point 2. Space-X is valuing itself at an astonishing value that is not anchored in its business activities. This has been covered a lot in comments here but also see Patrick Boyle's excellent commentary.
Point 3. The purveyors of these IPOs have been doing their best to get the rules changed (because reasons blah blah blah), the change will mean that managed funds, if they follow their usual practice, will feel compelled to buy in at the offer price - a massive inflow of capital that will make many people incredibly rich.
Putting all this together - a culture of corruption that has reached the pinnacles of the financial system, outrageous valuations and open conspiring to change the rules in favour of the whole scheme leads me to the conclusion that I am looking at the biggest (what is effectively the) fraud in history
I hedge my comments "effectively the" as I cannot be sure that this is conscious theft, or whether it is a confluence of powerful people facing juicy incentives who going with the flow are heading to a massive wealth transfer from working people (via pension funds) to elite capitalists
I do not think that this is not apparent to the governors of these huge pension funds. Those that have not tied themselves to an index following strategy will opt out I am sure - they are smart, studious and dutiful people by and large. So the people perpetuating this fraud may well be unable to pull it off.
But these are very worrying times. Especially for the USA.
>Point 1. Corruption has penetrated the highest echelons of USAnian politics. The president is unabashed in his corruption and has corrupted (is corrupting) the financial regulators (I follow Molly White who has been particularly good on this)
Sure, but indices are really not a heavily regulated space. The government doesn't have any obvious, direct influence here.
But uh, do you genuinely believe that the Trump admin would pull this off without the story leaking? It's an incredibly leaky administration, now supposed to be exerting influence over the most leaky industry in the world.
>Point 2. Space-X is valuing itself at an astonishing value that is not anchored in its business activities
If SpaceX is overvaluing itself, they'll look really silly at IPO! This is a very strange complaint.
>Point 3. The purveyors of these IPOs have been doing their best to get the rules changed (because reasons blah blah blah), the change will mean that managed funds, if they follow their usual practice, will feel compelled to buy in at the offer price - a massive inflow of capital that will make many people incredibly rich.
According to whom? The consensus in serious financial medias seems to be that indices are doing the rule changes to avoid divergence. I've tried to look, but I can't find any reporting suggesting that the "purveyors of these IPOs" had anything to do with this.
These companies are already among the 20 biggest in the US, it's genuinely going to be a big problem for e.g. the S&P500 to keep them out.
>But these are very worrying times. Especially for the USA.
I agree! However, not everything that happens in the USA is related to Trump.
Not if they're index funds. They buy at the price it is, until they've satisfied their holdings represent the appropriate share of the market. Which, pre-IPO and early-days-after-IPO, is likely to not be accurate to the long-term price.
It has been covered extensively. The change of nasdaq rules has been covered by Bloomberg, WSJ, NYT, and most others who have reporters on the Wall Street beat. Columnists at all three of those publications have called it out as a possible play on institutional indexing money. I don’t need to tell you who like it’s some big secret either. It was Elon Musk on behalf of spacex. The changes were openly part of the ipo.
I’m not going to cite sources for a major financial news story that is being extensively covered in the financial and general press.
Here's Matt Levine from Bloomberg saying something along the lines of "lol, obviously the indices have to do this, they'll look like fools if they don't because these will be the biggest companies on the market". He famously spends much of his time making fun of Musk, but seems to reject the idea of his influence here.
That is one of the columns. The headline makes my point succinctly. Your paraphrase of the column misses the crucial point. A Nasdaq index fund doesn’t buy a company unless it is in the Nasdaq. Under the old rules SPCEX was ineligible for listing. Now Nasdaq index funds all have to buy. Index funds by nature do not selectively buy stocks, if the stock is in the index, they buy, that’s their mandate. That’s the game, to be included in as many indexes as possible that force institutional investors to buy. That’s hundreds of billions worth of funds that now have to buy in, that previously wouldn’t have had to if it wasn’t listed on the Nasdaq.
The SP500 did not waive the rules, and that made above the fold news this week, because it is a major blow to the big IPOs happening this month since they are valued so high. It will be harder for them to move stock if the massive index funds aren’t buying automatically. The big IPOs this month are asking for prices that demand hundreds of billions or trillions of dollars of liquidity. Index funds are automatic liquidity, but only if you are on the index.
They didn’t ask them to change long standing rules for shits and giggles.
No where did they say anything antisemitic, but you further diminishing the meaning of that word—just like BB has already—only enables actual antisemitism. I frequently see that label being weaponized, especially against other Jews. I see it be used when people merely report on what the President has said, or against the Pope calling for peace. At some point, I'm inclined to believe people constantly making these false accusations do so knowing it delegitimizes the word.
> I'm inclined to believe people constantly making these false accusations do so knowing it delegitimizes the word.
I’d say it’s 50/50. Half of them try to delegitimise the word while the rest use it to silence dissent against what amounts to be a genocide and a land grab.
In the context of my message it is very clear that they is SpaceX. This isn’t a secret. Nasdaq has said that they are changing the rules specifically for this listing.
It’s clear you aren’t interested in a good faith conversation. Thanks for the discourse either way.
NASDAQ and the NYSE competed heavily for the SpaceX IPO. NASDAQ was willing to do more for SpaceX, so NASDAQ won. One of the concessions NASDAQ made was to put spacex on the Nasdaq 100 index (QQQM) early.
This deal has been pushed hard to be included prematurely in the indexes to the point that Nasdaq changed the rules.
The accusation is that these changes were made so that index funds will buy this stock automatically far earlier than they would have previously. Given the… uh… astronomical asking price, it looks like SPCEX is meant for Elon stans and institutional index investors to be the bag holders.