Author Topic: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!  (Read 5443 times)

TheGrimSqueaker

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Here's a groaner of an article from The Atlantic.

https://www.theatlantic.com/ideas/archive/2021/04/the-autopilot-economy/618497/

In a nutshell, passive investing in index funds is baaaad because when the exalted fund managers and professional advice-givers don't get to dip their beaks it's Bad For The Nation.

Repeat after me, boys and girls: what's good for the billionaires is good for the nation, and what's good for the handmaidens of the billionaires is good for the nation, but if the little people DARE to exercise a passive investment strategy the way the bil-bils do, it's baaaaaad! It's almost Communism! Flag-flag-eagle-flag! Sound the alarms! It's okily-dokily-peachity-keen if investment firms short-squeeze or actively manipulate the market, engage in insider trading, and con the public into paying exorbitant fees that do nothing but line the pockets of the traders. But for an ordinary person to *profit* from market trends instead of mindlessly funneling their hard-earned dollars into the coffers of the self-appointed elites, it's a threat to national security.

jinga nation

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #1 on: April 06, 2021, 11:53:57 AM »
Piss-poor article.

Quote
The antidote lies not just in fixing passive investment, but in making markets be markets again. Perhaps we could all use a little more of that manic stock-picking energy, not less. 

There isn't anything majorly fucked-up in passive investments, compared to hedge funds.
And who the fuck wants daily stonks mania. Leave my little green army alone, I would like it to march at a predictable cadence instead of constant helter skelter.

Fuck The Atlantic (it has gone to shit in the last few years.)
« Last Edit: April 06, 2021, 11:57:27 AM by jinga nation »

Kimera757

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #2 on: April 06, 2021, 01:38:54 PM »
At least they're not calling it Marxism.

Oh wait. That's one of the titles of the article in question. Could Index Funds Be ‘Worse Than Marxism’?
« Last Edit: April 06, 2021, 01:42:02 PM by Kimera757 »

dignam

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #3 on: April 06, 2021, 02:19:13 PM »
You always know when you're doing something right when billionaire fund managers are crying a river. 

Bloop Bloop Reloaded

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #4 on: April 06, 2021, 07:26:46 PM »
I don't like being guilt tripped.

Consuming and supporting the economy is NOT necessarily good - you are propping up a lot of companies that simply sell shit. This is why I spend as little as possible on goods (like TVs, fridges, most clothes etc) that are not important to me. I don't mind those companies going bankrupt just as I don't mind hedge fund managers going out of business.

scottish

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #5 on: April 06, 2021, 07:30:13 PM »
Here's a groaner of an article from The Atlantic.

https://www.theatlantic.com/ideas/archive/2021/04/the-autopilot-economy/618497/

In a nutshell, passive investing in index funds is baaaad because when the exalted fund managers and professional advice-givers don't get to dip their beaks it's Bad For The Nation.

Repeat after me, boys and girls: what's good for the billionaires is good for the nation, and what's good for the handmaidens of the billionaires is good for the nation, but if the little people DARE to exercise a passive investment strategy the way the bil-bils do, it's baaaaaad! It's almost Communism! Flag-flag-eagle-flag! Sound the alarms! It's okily-dokily-peachity-keen if investment firms short-squeeze or actively manipulate the market, engage in insider trading, and con the public into paying exorbitant fees that do nothing but line the pockets of the traders. But for an ordinary person to *profit* from market trends instead of mindlessly funneling their hard-earned dollars into the coffers of the self-appointed elites, it's a threat to national security.

Funny, that was almost exactly my reaction!

bmjohnson35

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #6 on: April 07, 2021, 10:56:12 AM »

I think some of the points in the article are valid, but I think that our elected officials are more dangerous. Since the bailout toward the end of the Bush administration, both Democratic and Republican administrations have been printing money, building debt and keeping interest rates down. We have all enjoyed this long-term bull run, but I'm afraid it will come at a cost.  They seem to be convinced that they can control the market and our national debt doesn't matter.  Instead of letting it correct and rise naturally, they have embraced an artificially inflated zombie economy.  1.9 trillion in 1st qtr of 2021 and more multi-trillion dollar bills on the horizon.  I suspect the next correction will be even bigger and I'm not convinced the government triage efforts used last year will be as effective this time. Hopefully we can avoid runaway inflation.  Like many others, I'm heavily invested in Index funds.  I don't know of any better options at this point.

dougules

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #7 on: April 07, 2021, 11:59:24 AM »
What seems way more detrimental to me than so much passive ownership would be people trying to pick stocks and time the market when they don't know much or aren't willing to do the homework.  If anything, mutual funds leave the business of setting stock prices to people who have an in-depth knowledge of and solid numbers on those companies instead of people people who are buying and selling on a whim or worse yet think they're an expert when they're not. 

Plus, if passive funds actually were making the markets inefficient, these guys probably wouldn't be complaining because that would give them plenty of opportunities to make money off of those inefficiencies. 

Quote
"The Harvard Law professor John Coates has argued that in the near future, just 12 management professionals—meaning a dozen people, not a dozen management committees or firms, mind you—will likely have “practical power over the majority of U.S. public companies."

This is the one thing that seems concerning to me, although that has nothing to do with whether the fund is passive or active.  If anything the active funds seem more likely to get involved in governing the companies owned by the funds.   

TheGrimSqueaker

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #8 on: April 07, 2021, 12:42:24 PM »
What seems way more detrimental to me than so much passive ownership would be people trying to pick stocks and time the market when they don't know much or aren't willing to do the homework.

You mean, basically behaving like a casino patron who thinks that putting one chip on red and one chip on black balances his or her risk on the roulette wheel? The stock market, and people who make their living by playing it, *thrive* on that person. They always need a fresh crop of starry-eyed "investors" who think that their shrewd business acumen or "system" is going to make them a fortune. Just as the deluded wannabe card-counters at the blackjack tables end up paying for the opulent carpets and free water shows in Las Vegas, the day traders are the ones who typically end up paying for other people's cushy penthouses and bespoke suits.

Bettors come and go, but bookies stay. That's what the system thrives on. Anything that threatens that-- anything that gives large numbers of people the notion that they don't *need* to pay a broker to execute an individual trade for them or an investment planner to provide advice that might or might not be in the customer's best interest-- is a threat to the cushy penthouse and bespoke suit lifestyle.

If an index fund can outperform a bunch of whizbang algorithms and expensive analysts or hedge fund managers who pahked a cah in Hahvahd Yahd, then unless a person has a specific need or desire to own an individual stock or specialized fund, is there any need to pay any of those exalted insiders at all? Unless the cah pahkers can find a way to show that, yes, they DO add value and that their hedge fund really is a hedge fund and not a Madoff-esque Ponzi scheme, their carefully built illusion will collapse like a house of cards. They've been running on hype for so long, they've started to truly believe it. They've also sold so much sizzle that they've forgotten they're in the steak business.

Overall, unless professional fund managers and investment advisors find a way to get relevant again and stay that way, they'll become just as obsolete as the assembly line workers and office support staff they rewarded other people's publicly traded companies for firing. But it's easier to agitate, lobby, grease palms and manipulate public opinion than it is to shift gears or change careers. That's why articles like this one get written.

Kazyan

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #9 on: April 07, 2021, 08:17:38 PM »
If index funds become so much of an investment juggernaut that they seriously put a dent in market efficiency, then hedge funds (i.e. actually trying to spot market inefficiencies) will start working again. But that would be a moot point anyway, because the amount of resources being poured into pure financialization of the economy--moving money around just for efficiency's sake instead of actually making more stuff--is currently huge. Huge enough that it doesn't make sense.

TheGrimSqueaker has this right. Handwringing over passive investing is just that: handwringing.

FIREisCOOL

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #10 on: April 14, 2021, 12:46:54 PM »
...hedge fund managers who pahked a cah in Hahvahd Yahd, ...

Love it. 

eyesonthehorizon

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #11 on: April 20, 2021, 08:35:55 AM »
The point where I started laughing out loud was when the first suggested related article - by the same doomsayer - was titled "Don't Bet On a Quick Recovery."

From last June.

Sanitary Stache

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #12 on: April 20, 2021, 09:24:31 AM »
I couldn't read it all.  So many contradictions. 

Where I stopped, the author seemed to be unaware that companies don't benefit from other people buying and selling of stock shares once on the market or that common stock return dividends or that "bad stocks" represent companies that fail and cease to exist, thereby dropping out of the index.

I am attempting to read "Common Sense on Mutual Funds", it makes sense and still puts me to sleep.  Maybe the author of this article wrote it so poorly to keep her audience mad enough to stay awake.

FINate

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #13 on: April 20, 2021, 10:15:07 AM »
Based on the author's other articles it seems she leans more Democratic Socialism. I don't think Socialism is a bad word or anything, just something to note.

So why then is she crying crocodile tears for hard-core capitalists? My guess: it was hoped that the pandemic would be a catalyst for a massive retrofit of the economy more to the author's liking. Never let a crisis go to waste, that kind of thing. Yet that didn't happen. Many in the middle class, invested in passive index funds, are doing better than before. If the meaty middle is doing relatively well this makes big change a lot more difficult.

Politics makes for strange bedfellows.


TheGrimSqueaker

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #14 on: April 20, 2021, 12:14:24 PM »
Based on the author's other articles it seems she leans more Democratic Socialism. I don't think Socialism is a bad word or anything, just something to note.

So why then is she crying crocodile tears for hard-core capitalists? My guess: it was hoped that the pandemic would be a catalyst for a massive retrofit of the economy more to the author's liking. Never let a crisis go to waste, that kind of thing. Yet that didn't happen. Many in the middle class, invested in passive index funds, are doing better than before. If the meaty middle is doing relatively well this makes big change a lot more difficult.

Politics makes for strange bedfellows.

The US economic system is based on the principle that what's good for the billionaires is good for the nation. Any human being in this situation who does *not* immediately align his or her financial interests with those of the major and institutional investors is taking a serious risk. Owning stock in nothing is economic suicide except for a few start-up or small business owners who do make it big... in which case they are still shareholders.

In the USA, non-shareholding people who do not have any financial stake in the stock market, the bond market, or any other ownership stake in the economy (no matter how small) are the ones who really get it in the shorts. People who spend everything they make are the ones who tend to really be out in the cold in their old age, especially if the work they did was not well compensated.

FINate

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #15 on: April 20, 2021, 12:38:31 PM »
Based on the author's other articles it seems she leans more Democratic Socialism. I don't think Socialism is a bad word or anything, just something to note.

So why then is she crying crocodile tears for hard-core capitalists? My guess: it was hoped that the pandemic would be a catalyst for a massive retrofit of the economy more to the author's liking. Never let a crisis go to waste, that kind of thing. Yet that didn't happen. Many in the middle class, invested in passive index funds, are doing better than before. If the meaty middle is doing relatively well this makes big change a lot more difficult.

Politics makes for strange bedfellows.

The US economic system is based on the principle that what's good for the billionaires is good for the nation. Any human being in this situation who does *not* immediately align his or her financial interests with those of the major and institutional investors is taking a serious risk. Owning stock in nothing is economic suicide except for a few start-up or small business owners who do make it big... in which case they are still shareholders.

In the USA, non-shareholding people who do not have any financial stake in the stock market, the bond market, or any other ownership stake in the economy (no matter how small) are the ones who really get it in the shorts. People who spend everything they make are the ones who tend to really be out in the cold in their old age, especially if the work they did was not well compensated.

Sure, I don't disagree, and this probably in play here as well. But I'm also detecting a sense of disappointment from certain corners that we're likely to come through this crisis without a major overhaul of the system.

TheGrimSqueaker

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #16 on: April 20, 2021, 12:54:07 PM »
Based on the author's other articles it seems she leans more Democratic Socialism. I don't think Socialism is a bad word or anything, just something to note.

So why then is she crying crocodile tears for hard-core capitalists? My guess: it was hoped that the pandemic would be a catalyst for a massive retrofit of the economy more to the author's liking. Never let a crisis go to waste, that kind of thing. Yet that didn't happen. Many in the middle class, invested in passive index funds, are doing better than before. If the meaty middle is doing relatively well this makes big change a lot more difficult.

Politics makes for strange bedfellows.

The US economic system is based on the principle that what's good for the billionaires is good for the nation. Any human being in this situation who does *not* immediately align his or her financial interests with those of the major and institutional investors is taking a serious risk. Owning stock in nothing is economic suicide except for a few start-up or small business owners who do make it big... in which case they are still shareholders.

In the USA, non-shareholding people who do not have any financial stake in the stock market, the bond market, or any other ownership stake in the economy (no matter how small) are the ones who really get it in the shorts. People who spend everything they make are the ones who tend to really be out in the cold in their old age, especially if the work they did was not well compensated.

Sure, I don't disagree, and this probably in play here as well. But I'm also detecting a sense of disappointment from certain corners that we're likely to come through this crisis without a major overhaul of the system.

Agreed-- the odor of disappointment is strong from those corners. Still, did they really expect the billies to do something besides grease both sides in the last election? I'm touched-- won't say where but it made me giggle-- by the author's naive faith in human nature.

reeshau

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #17 on: April 21, 2021, 03:18:59 PM »

Flag-flag-eagle-flag!


I love this thread, just for this.  :)

mm1970

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #18 on: April 30, 2021, 11:41:18 AM »
Piss-poor article.

Quote
The antidote lies not just in fixing passive investment, but in making markets be markets again. Perhaps we could all use a little more of that manic stock-picking energy, not less. 

There isn't anything majorly fucked-up in passive investments, compared to hedge funds.
And who the fuck wants daily stonks mania. Leave my little green army alone, I would like it to march at a predictable cadence instead of constant helter skelter.

Fuck The Atlantic (it has gone to shit in the last few years.)
+1.

We need to "fix" the market.  Um, nope. It's working for me, and I have a financial planner - I don't even have any Vanguard. 

obstinate

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #19 on: May 07, 2021, 09:36:31 AM »
You can take passive indexing from my cold dead hands. If they somehow made Vanguard illegal I'd just replicate my total market index funds with Robinhood or some other low cost brokerage (free trades = you can just buy a little bit of every single stock, and you could do the whole thing via its API).

CJ

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #20 on: May 24, 2021, 11:10:43 PM »
Her argument seems to be that wild boom-and-bust microcycles driven by gossip and tweeting (similar to what we're currently seeing in the crypto-space) is somehow more desirable than steady gains from placing independent investor capital into staid brands?

I do have serious problems with passive investing. The farther we get from barter between two living humans trading goods and services, and the more we get into 'financial instruments' (like mortgage-backed securities...) the more we risk catastrophic fallout from big-scale leveraging caused by elites miscalculating the gravy train. At the very least, I like to choose some investments to support companies which share my values and hold my respect as a way of voting with my wallet...

But she does a piss-poor job of convincing anyone that the tradeoffs of an index-free world (including vast amounts of investment capital taken out of circulation to pay useless money managers who also don't care about the values of the companies they're investing in) are worth it.

 

Wow, a phone plan for fifteen bucks!