Author Topic: Passive Investing is Devouring Capitalism  (Read 3341 times)

esskay1000

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Passive Investing is Devouring Capitalism
« on: August 04, 2017, 05:04:16 AM »
Yes, us pesky FIRE folks and our index funds are killing America and opening the door for the commies and socialists. Or is it that this person is just miffed that more folks are wising up and his income from his overpriced and underperforming actively-managed funds has dropped?

https://www.bloomberg.com/news/articles/2017-08-03/singer-s-elliott-hedge-fund-returns-3-5-in-the-first-half


jlcnuke

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Re: Passive Investing is Devouring Capitalism
« Reply #1 on: August 04, 2017, 05:41:53 AM »
Well, to be fair, there are a number of economic problems which would/could occur if all investors (or even a significant majority) shifted to passive investing on major indices only. For one, capital for micro and small-cap ventures would be severely limited. That could hurt growth of the companies most likely to experience significant growth with adequate capital resources. If everyone wants to be in the S&P 500 only, for instance, then there's little to no money for the "small guy" to get going.

Similarly, the voices of shareholders have historically been able to impact changes only when those few with sufficient holdings, or a large number of individuals, all clamor for a specific change in the company. That's one of the responsibilities of being a part owner of a company that many people forget/ignore when that responsibility is doled out to some fund manager on behalf of the thousands of clients they have invested in the fund that owns shares of a company. That fund manager may or may not care to bother with trying to influence the company. For most fund managers, that's unlikely to be a top priority without significant input from investors demanding such a thing (of which I've never heard that happening though I imagine some investors have in the past).

That's all conjecture/speculation, but I can see an argument for how passive investing, with fund managers that need to do little to manage the investments, could result in less shareholder input to companies they are investing in and significantly less capital investment in smaller companies that could potentially benefit the most (and thus help grow the economy as they move from a garage shop to Microsoft for instance).

paddedhat

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Re: Passive Investing is Devouring Capitalism
« Reply #2 on: August 04, 2017, 05:46:13 AM »
Let's review. He has 33 BILLION of other people's money and managed a whopping .4% return in the second quarter, which is probably a loss, if he is charging standard management fees. Then he comes up with this garbage:

On whether the labor market is tight: “Short answer: no,” Singer wrote. Long-term government benefit programs provide strong disincentives for people to work or even seek employment,

Sure.............. here in the socialist paradise of the USA, the government just floods the masses with all manner of entitlements, which totally chills the ole' "incentive to work". Heck, with the free heath care, child care, universal basic income, and free secondary education, I'm shocked that ANYBODY would waste time going to work. Oh, wait, I must of got lost, we Americans actually have none of that............my bad.

IMHO, I wouldn't risk my jar of loose change to this guy's firm. As for his claim that passive investing will destroy the market, just more bullshit from somebody who is trying hard to rationalize performance that falls below savings account interest levels, in a hot market.

« Last Edit: August 04, 2017, 11:54:33 AM by paddedhat »

PizzaSteve

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Re: Passive Investing is Devouring Capitalism
« Reply #3 on: August 04, 2017, 06:05:00 AM »
Or perhaps less input from irrational short term thinking ADD hedge fund CEOs might lead to better corporate decision making as corporate management is able to fiocus on long term sustainable growth (to maintain stock price within the index) vs needing to hit analyst target revenues every quarter (which results in a lot of short term, bad decisions to not get punished and fired for missing a quarter)?

A lot of research suggests that passive strategies are actually better for capitalism as the capital markets encourage a more stable and long term focused set of companies.  Corproate CEOs are trying their best to win.  The idea that they succeed or fail because some idiot like this is `cracking the whip' on them, like some sort of slave master is patently ridiculous. This whole theme of passive investing is dangerous is an elitist attack to protect easy money by skimming the ignorant.  It is a propaganda campaign, as there are not good arguements for him to hold assets in his fund based on performance.
« Last Edit: August 05, 2017, 03:08:40 PM by PizzaSteve »
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Fishindude

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Re: Passive Investing is Devouring Capitalism
« Reply #4 on: August 04, 2017, 08:12:03 AM »
Some truth to this.
Investing in the market, mutual funds, etc. is so common and relatively safe anymore that it probably keeps many from trying new business ventures, taking risks, etc.

inline five

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Re: Passive Investing is Devouring Capitalism
« Reply #5 on: August 05, 2017, 01:40:30 PM »
Passive investing means buying stocks just to buy them hoping most will go up. My concern is over time stocks in general just go up because everyone is buying them.

We've had a ton of foreign inflows this year which is most of the reason for these highs. More money in = higher prices.

PE is the cost to buy $1 in earnings. If you were purchasing a business today, how much would you pay for each $1 in net earnings? Maybe 3x-4x? Yet the markets avg PE is closer to 20. Yes over time profits grow an average of ~3% and that should push that down but not a ton.

Last year I bought into a company valued at $5b. This company had $4b in cash and $1b in annual profits and $0 in debt. Stock price was $4.85 USD. Today it's around $7.20 USD. That sort of thing is a no brainer but no values like that exist in the US market, that company was an ADR listed in Japan.

IMO US markets are continuously overpriced compared to their foreign peers, which is why you saw such huge declines in 2008-2009.

But as they say it doesn't really matter. The game is what it is and it will continue forever most likely, with PEs rising over time as values rise more than profits.
« Last Edit: August 05, 2017, 01:43:44 PM by inline five »

jjandjab

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Re: Passive Investing is Devouring Capitalism
« Reply #6 on: August 05, 2017, 03:15:16 PM »
Articles and comments like this just don't make much sense to me. Most of the money going into passive index funds is coming actively managed funds in retirement acocunts because they have better average returns and lower expenses, not because of any socialist leanings. And a larger and larger portion of the population is managing their own money - having to choose their own 401k/403b/IRA investments - so they want the backbone to be a solid, cheap representation of the market as a whole. When I look at my list of choices and see the lowest cost funds have the best long term returns, why wouldn't I choose them?

Maybe when some active funds start consistently doing well (like the old Magellan fund or something), then folks will think active over passive again.

But I'd venture that most investors, even those that love index funds, still have other investments. I'd bet a relatively low proportion of the population has a strict two or three fund portfolio without any other investments. Many folks have some stocks here and there. Or a little real estate investment or some alternative fund they like. I have a few small REITs and a few small company stocks to fill out my portfolio that I like to play with.

Non of the 401k money from a person working at a regular job was ever going to go start a small business or the like. And there is still a huge amount of money out there that the VCs and even large companies like Amazon and Apple have to invest.

Active fund managers and financial advisors are just mad they aren't fleecing as many "small guys" as much as they used to..

lost_in_the_endless_aisle

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Re: Passive Investing is Devouring Capitalism
« Reply #7 on: August 05, 2017, 04:37:40 PM »
Regarding Singer being butthurt over poor returns, here's a fun fact: Elliot Mgmt has significantly outperformed the S&P 500 since the fund's inception in the 70s.

paddedhat

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Re: Passive Investing is Devouring Capitalism
« Reply #8 on: August 06, 2017, 09:09:08 AM »
Regarding Singer being butthurt over poor returns, here's a fun fact: Elliot Mgmt has significantly outperformed the S&P 500 since the fund's inception in the 70s.

If that's true, then he is way past unicorn status.  OTOH, a 1/20 shot of beating the benchmark, and the fact that 2/3rd of active funds are MIA after fifteen years, are pretty compelling reasons to avoid the whole game.

http://www.marketwatch.com/story/why-way-fewer-actively-managed-funds-beat-the-sp-than-we-thought-2017-04-24

lost_in_the_endless_aisle

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Re: Passive Investing is Devouring Capitalism
« Reply #9 on: August 06, 2017, 09:27:30 AM »
Regarding Singer being butthurt over poor returns, here's a fun fact: Elliot Mgmt has significantly outperformed the S&P 500 since the fund's inception in the 70s.

If that's true, then he is way past unicorn status.  OTOH, a 1/20 shot of beating the benchmark, and the fact that 2/3rd of active funds are MIA after fifteen years, are pretty compelling reasons to avoid the whole game.

http://www.marketwatch.com/story/why-way-fewer-actively-managed-funds-beat-the-sp-than-we-thought-2017-04-24
Elliott is more than merely an actively managed fund--the fund is willing to be highly litigious with respect to distressed assets/debt (famously seizing an Argentinian warship in a Ghanaian port in a dispute over government bond revaluation) and agitates for corporate restructuring, asset sales, or M&A activities. Such activities align with Singer's narrative regarding what is wrong with passive funds from a corporate governance perspective: too much complacency and too little critical oversight of the management of the firms. I think he has a point but the counter-argument is lazy shareholders create the ecosystem where Singer's fund can profitably identify and capitalize on inefficiency through activist stockholder measures.

PizzaSteve

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Re: Passive Investing is Devouring Capitalism
« Reply #10 on: August 06, 2017, 10:57:31 AM »
Regarding Singer being butthurt over poor returns, here's a fun fact: Elliot Mgmt has significantly outperformed the S&P 500 since the fund's inception in the 70s.

If that's true, then he is way past unicorn status.  OTOH, a 1/20 shot of beating the benchmark, and the fact that 2/3rd of active funds are MIA after fifteen years, are pretty compelling reasons to avoid the whole game.

http://www.marketwatch.com/story/why-way-fewer-actively-managed-funds-beat-the-sp-than-we-thought-2017-04-24
Elliott is more than merely an actively managed fund--the fund is willing to be highly litigious with respect to distressed assets/debt (famously seizing an Argentinian warship in a Ghanaian port in a dispute over government bond revaluation) and agitates for corporate restructuring, asset sales, or M&A activities. Such activities align with Singer's narrative regarding what is wrong with passive funds from a corporate governance perspective: too much complacency and too little critical oversight of the management of the firms. I think he has a point but the counter-argument is lazy shareholders create the ecosystem where Singer's fund can profitably identify and capitalize on inefficiency through activist stockholder measures.
I dont want to dive too deep into risk adjusted returns, expected value and value creating activities, but his performance is not really very good when you adjust for fees, taxes, risk and other factors.  For example, his #1 holding right now are puts on QQQ, basically a leveraged play on an industry sector weighted towards small caps. I would love to see the average cap gains and taxes paid by fund holders vs a low churn, similarly leveraged passive index of a similar basket of assets.

So the proper comparison might be a passive portfolio tilted towards small caps and tech, which would have experienced similar returns.  I would need to analyze the beta risks.  You can't really compare funds with different asset classes and leverage rates, then say that this is at all meaningful to compare a good active fund with a good passive fund strategy. It is really apples and oranges.

I read a lot of financial missinformation and misperceptions about capital markets on this site and how companies create value versus what are essentually vulture capitalism entities.

One of my favorite analogies are hunters versus farmers.  Hunters seek weak animals and kill them.  The animal did the work of eating plants to build its biomass, which has organization and value.  The hunter strips the value creating entity and consumes.  Does this activity sometimes have residual value (e.g. thinning the herd)?  Sure.  However, it is far far less value creating than something like farming, which speads seeds, cares for them and increases the overall asset value of the ecosystem.  Farming creates assets.  Hunting consumes assets.  Hunting has far less value, especially if it contributes to a failed ecosystem, or repairs no real imbalance that would not be self correcting anyway.

Normal farming style business value creation has self correcting mechanisms.  Bad ideas fail of their own weight.  A hedge fund might slightly speed up the process, but most arguements i heard throughout my career were really ego driven drivil designed to make guys who basically stripped assets as their business model feel better about themselves as business men.

In my view, what fuels our society best is the steady placement of capital in areas that grow our economy.  For example, a next gen memory plant (which will improve capacity by 64X) will cost about $20B to build (all in).  The engineering, research, land development, marketing, switching devices to the new standard, software development, etc.is a finely orchastrated ballet of dedicated management professionals.  This clown wouldn't understand a first order, simple model of what the issues are for a successful investment.  Yet he holds heavy QQQ plays that have huge +/- impacts from whether the next generation of memory has success or encounters unexpected engineering issues (the technical problems are hitting single electron level behavior issues that are fascinating to resolve...one being issues such as data dependent voltage variations and their impact on reading values from the 'on wire' of the massive micro transistor arrays, which are literally atom level sizes).

Companies like Samsung or Qualcom or Sandisk that make up QQQ (or the S&P500) choreograph the ballet, as do food farmers, dairies, restaurant chains, or consumer staples makers.   They create the real value.  They depend on steady investors to plant the next year's crops.  Guys who swoop in and simplistically think that top down pressure to strip the land for a quick buck will make for a better outcome, are usually very wrong.  They can feed themselves and perhaps their investors, but would have nothing to strip anymore, if left to their own devices.

There is very little real, confirmed evidence to support any of the article author's claims.  They are conjecture.  His fund performance is the result of the sequence of returns on a fairly small number of risky bets.  Many other similar guys have gone bankrupt.   Was he lucky, smart, or even all that sucessuful when adjusted for the risk his investors had of total failure? I personally would love to audit his real after tax, after fee, ultimate returns.  Then compare the net return to investors, after taxes, vs a passive, comparable portfolio, with equal leverage.
« Last Edit: August 06, 2017, 11:08:44 AM by PizzaSteve »
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jlcnuke

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Re: Passive Investing is Devouring Capitalism
« Reply #11 on: August 07, 2017, 05:04:23 AM »
Regarding Singer being butthurt over poor returns, here's a fun fact: Elliot Mgmt has significantly outperformed the S&P 500 since the fund's inception in the 70s.

Not with a fund of equivalent investments they haven't.... lots of funds can beat a given benchmark, if they don't have to invest in anything similar to that benchmark and can have much higher risk investments....

The "funds don't beat indices consistently" data isn't comparing apples and oranges, it's looking at funds that are doing similar investments. Not comparing large cap growth index vs small cap emerging market funds.

lost_in_the_endless_aisle

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Re: Passive Investing is Devouring Capitalism
« Reply #12 on: August 07, 2017, 06:43:04 PM »
I'm not saying Singer is a wizard, just that it's disingenuous to look at his returns for just this year as done above and conclude that he's some sort of pissed off loser. Comparing funds and indexes is outside of my wheelhouse but I'm sure a motivated person with a background in the field could uncover a fair measure of his fund's success (the question I ask myself is: would I like to beat the S&P 500 by 3-4% for 40 years? Yes, I would).

concealed stache

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Re: Passive Investing is Devouring Capitalism
« Reply #13 on: August 07, 2017, 08:11:03 PM »
I think Singer has a point. Unfortunately many previous "gatekeepers" to the market (high fee managers making lazy investments etc) proved unworthy of the role, causing people to vote with their money for a different soltuion (passive investing). In that sense, capitalism is alive and well (people make choices about appropriate allocation of capital). But it does lead to the problem he describes - investing in index funds is an abdication of that same capitalist notion of choosing where capital should be allocated - we leave it to active investors to decide which companies deserve capital and which do not.

As for his fund, they are known for using low leverage, and may be heavy in tech now but have not always been - one might say they perform in line for tech, which is currently doing well, but the skill demonstrated is the switching between different investment styles to be overweight in the next "hot" thing - more often than not they have successfully pulled this off and the fund has changed composition many times.

I kind of enjoy the farm analogy although perhaps see it a little differently - on the surface, yes, the modern farm does produce far more year in, year out, but masks large risks until they suddenly become apparent. When you place all your hopes in one or two crops, drought or disease can destroy your harvest, and the necessity for population clustering that farming requires (relative to a forager/hunter setup) makes it easy for disease to rip through your human population as well. Foraging has a history of many millions of years (going back before homo sapiens) and relies on diversified food sources. Farming is the new kid on the block and it's far too early to say that it will forever prove to be the best solution - it might even be the activity that ends up endinng the species. I realise that I've gone off course a little from the original analogy, but anyway, as such a young idea, widespread passive investing's status as a uniform solution for the majority of the population is far from proven.

Having said that, I too am a passive investor ;-)

PizzaSteve

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Re: Passive Investing is Devouring Capitalism
« Reply #14 on: August 09, 2017, 08:26:15 AM »
I think Singer has a point. Unfortunately many previous "gatekeepers" to the market (high fee managers making lazy investments etc) proved unworthy of the role, causing people to vote with their money for a different soltuion (passive investing). In that sense, capitalism is alive and well (people make choices about appropriate allocation of capital). But it does lead to the problem he describes - investing in index funds is an abdication of that same capitalist notion of choosing where capital should be allocated - we leave it to active investors to decide which companies deserve capital and which do not.

As for his fund, they are known for using low leverage, and may be heavy in tech now but have not always been - one might say they perform in line for tech, which is currently doing well, but the skill demonstrated is the switching between different investment styles to be overweight in the next "hot" thing - more often than not they have successfully pulled this off and the fund has changed composition many times.

I kind of enjoy the farm analogy although perhaps see it a little differently - on the surface, yes, the modern farm does produce far more year in, year out, but masks large risks until they suddenly become apparent. When you place all your hopes in one or two crops, drought or disease can destroy your harvest, and the necessity for population clustering that farming requires (relative to a forager/hunter setup) makes it easy for disease to rip through your human population as well. Foraging has a history of many millions of years (going back before homo sapiens) and relies on diversified food sources. Farming is the new kid on the block and it's far too early to say that it will forever prove to be the best solution - it might even be the activity that ends up endinng the species. I realise that I've gone off course a little from the original analogy, but anyway, as such a young idea, widespread passive investing's status as a uniform solution for the majority of the population is far from proven.

Having said that, I too am a passive investor ;-)
This logic is faulty reasoning.   I wish people would stop saying he has a point, especially after admitting (previous to this post) that they have no understanding of the topic.  It is a completely false premise that active trading has any impact at all on capital allocation and corporte governance. 

Companies have Boards of Directors.  They also need ready access to capital faster than via issuance of stock, via bankers.  Even when they raise capital via stock, it is done through investment bankers, not the market directly.  These ibankers dive deep into the company fundamentals and need to market the new shares to investors with facts. Also, companies have managers that compete like hell for the top job by trying to show superior performance. The internal competition pushes for efficiency much harder than some `activist shareholder' who is likely ignored unless over 10%.  Most top management own more stock than hedge funds.  The way the system is supposed to work is that the Boards watch out for shareholders.  They either fire the CEO or dissolve/merge/sell the company assets when the company is no longer viable. Auditors, bankers, large shareholders (including passive index fund managers like Vanguard), government tax collectors, etc. can all pressure this responsible entity.

All these groups of people are required to publish data quarterly that impact values.  These are the REAL forces that really drive capital to either productive or unproductive uses (also applies to bond markets and bond prices that also have a real impact on equities via disount rates...but that is too complex to get into, but loan access is more important than share price volatility via trading...lack of banker loan support is what killed Enron  and Worldcom, for example).

RESEARCH ACTUALLY SUGGESTS THAT PASSIVE, STABLE SHAREHOLDERS ARE BENEFITIAL TO LONG TERM RETURNS, NOT DETRIMENTAL TO RETURNS.   

Only hedge fund type vulture capitalists try to sell this line that active trading influences Corporate CEOs in a positive way.  It is how they justify breaking up viable businesses to strip their assets for a quick buck.
« Last Edit: August 09, 2017, 08:35:36 AM by PizzaSteve »
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2lazy2retire

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Re: Passive Investing is Devouring Capitalism
« Reply #15 on: August 09, 2017, 09:06:48 AM »
Even Bogle agrees that active investors are required to keep efficiency in the market


“The issue is at what point is indexing making the market less efficient,” said Bogle, 87, in an interview Friday on Bloomberg Television. Indexing, which now controls about 30 percent of the market, “could get to 50 or 60 percent before anything would be noticed.”

Play Video
Jack Bogle Calls Indexing Critics 'Idiotic'

PizzaSteve

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Re: Passive Investing is Devouring Capitalism
« Reply #16 on: August 09, 2017, 03:06:01 PM »
Even Bogle agrees that active investors are required to keep efficiency in the market


“The issue is at what point is indexing making the market less efficient,” said Bogle, 87, in an interview Friday on Bloomberg Television. Indexing, which now controls about 30 percent of the market, “could get to 50 or 60 percent before anything would be noticed.”

Play Video
Jack Bogle Calls Indexing Critics 'Idiotic'
At least a few active investors are needed to help set a price for equity markets.  I agree with Jack Bogle on this point 100%. 

However, this market price setting value has little to do with the mechanisms driving the underlying profits of the companies being bought and sold.  Jack is talking about liquidity of equities, not the value of the underlying companies.

An example would be this.  Imagine a market where you can only buy or sell one time a year (i actually used to hold a fund like this).  That market is not very liquid, so you dont know the value of what you hold on any given day.   On the one day per year, a price is set.  It occurs when any buyers or sellers decide the value and set a price.  This is what active trading does, help set a price.  The assets are unchanged (future earnings of a company). 

Stock market price fluctuations may or may not impact executive decisions and corporate governance, which is what i am talking about.  This is a frequent area of confusion for investors, who see stock price increases as the goal. They dont have much experience with what actually happens within the company to create the earnings that ultimately drive the price up or down.   Earnings creating work is very different from the valuation assessment activities of buyers and sellers.  Its like the difference between setting a price for corn in a Chicago exchange vs actually deciding to plant and grow corn at a farm.

Anyway, i was responding to the notion that hedge fund executives are able to push company management towards being better stewards of shareholder interests.  Do they help set a price, sure. 

Sticking with my example, perhaps a hedge fund could help set a low price for corn and a higher price for farmland by offering bids that impact prices. However, that would mean that the hedge fund must hold a position large enough to move prices enough such that they actually discourage farming activity.  This is very hard to do.  It takes a lot of capital to move a market and capital costs mean you have to close out your positions within a reasonable amount of time (i have some personal experience with this strategy...hedge funds dont farm land or use corn, so to speak).

So in conclusion, I personally feel that is a stretch to say some mechanism the author implies is at work with respect to passive index funds.   My experience suggests that arbitragers have at best a narrow influence on a few weak, specifically inefficient players.  They usually only speed up the inevitable market forces and as often as not destroy value by stripping assets in their haste to profit.
« Last Edit: August 09, 2017, 03:24:18 PM by PizzaSteve »
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Re: Passive Investing is Devouring Capitalism
« Reply #17 on: August 09, 2017, 06:52:08 PM »
This logic is faulty reasoning.   I wish people would stop saying he has a point, especially after admitting (previous to this post) that they have no understanding of the topic.  It is a completely false premise that active trading has any impact at all on capital allocation and corporte governance. 

Companies have Boards of Directors.  They also need ready access to capital faster than via issuance of stock, via bankers.  Even when they raise capital via stock, it is done through investment bankers, not the market directly.  These ibankers dive deep into the company fundamentals and need to market the new shares to investors with facts.

What a strange argument. Who are these investors that they are marketing to again? It's... active investors. Stock issuance price setting (which directly affects the capital that can be raised) is set by active investors in the primary market as well.

I think you are confusing activist and active. I don't disagree there are vultures out there, and certainly some HFs cross that line, but I am looking at the whole universe of active investors, including mutual funds, directors and management, pension and endowment funds, yes even HFs.

PizzaSteve

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Re: Passive Investing is Devouring Capitalism
« Reply #18 on: August 11, 2017, 07:49:41 PM »
This logic is faulty reasoning.   I wish people would stop saying he has a point, especially after admitting (previous to this post) that they have no understanding of the topic.  It is a completely false premise that active trading has any impact at all on capital allocation and corporte governance. 

Companies have Boards of Directors.  They also need ready access to capital faster than via issuance of stock, via bankers.  Even when they raise capital via stock, it is done through investment bankers, not the market directly.  These ibankers dive deep into the company fundamentals and need to market the new shares to investors with facts.

What a strange argument. Who are these investors that they are marketing to again? It's... active investors. Stock issuance price setting (which directly affects the capital that can be raised) is set by active investors in the primary market as well.

I think you are confusing activist and active. I don't disagree there are vultures out there, and certainly some HFs cross that line, but I am looking at the whole universe of active investors, including mutual funds, directors and management, pension and endowment funds, yes even HFs.
I'm not confusing anything, but don't want to argue.  While liquid markets and the ability to mark to market an asset (setting a price for a stock) does have value, it does not drive capitalism.  It is helpful, for sure, but private equity markets and direct methods of raising capital have always existed.

For example a large portion of the economy is privately held.  These companies (including, for example, the assets of the standing US President) are not traded at all.  So are you arguing these companies cant raise capital or generate returns because they lack active traders to 'push them to be efficient?' That`s not logical.  Many many enterprises make plenty of money, pay taxes, generate returns, etc. without any need for traders.  Some argue that removing companies from the whims of uneducated traders actually helps returns.  People cite Buffett, but then ignore his core philosphy of using better management and buying well run companies, and letting them run well by effectively removing them from the influence of short term market trader influences.

In fact every real estate investor on this forum knows that they don't need some active trader (ready to buy or sell their investment property any time, day and night) to make money.  Sure, the real estate market helps set a price per square foot, but this is useful only at the beginning and end of what is usually a 20-30 year business cycle.  No traders (or even real estate agents) are influencing them about how much to rent it out for, how to wisely  manage it, how to pick good tenants, etc.  Tenants dont trade units of housing.  Owners dont need capital markets to raise money to buy a rental property (commercial or residential).  Real estate investors raise capital directly or they go to a banker.  My family has run many businesses and we rely on our own judgement.  Sure REATs exist and are traded, but their dividends are not impacted by the trades, only the price paid for the stream of dividends.

Does that help make my point more clearly?
 
« Last Edit: August 11, 2017, 08:00:20 PM by PizzaSteve »
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Pizzasteve is currently inactive and muted at his own request.  In the event of a rare post, no need to reply as i am not engaging in debates, just posting information or an opinion meant to stand on its own.