Author Topic: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!  (Read 1600 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.


RentingIsPatience

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Re: Oh, boo-hoo-hoo! The hoi polloi have discovered passive investing!
« Reply #11 on: April 14, 2021, 12:46:54 PM »
...hedge fund managers who pahked a cah in Hahvahd Yahd, ...

Love it.