Does this only affect money invested after June 15th, or does this also devalues money invested before this date?
If you don't invest anymore money in the index during the interim rebalancing period refered to by the author, then one should be alright. Right?
It's really expensive to get all your marbles out, I'd rather not do it if I don't have to.
This. If you are invested in a Nasdaq index (e.g. QQQ), it will have to sell some of the tail and buy the necessary weighted percentage of Snake Oil. Apart from you buying snake oil, you will realise some extra capital gains/loses due to the rebalancing.
The mechanism is elegant in its cynicism. Nasdaq changes index inclusion rules to allow rapid entry of low-float stocks. SpaceX IPOs with most shares locked up (low float). Index funds are mechanically forced to buy whatever's in the index at whatever price. Limited supply + forced demand = price squeeze. Insiders wait for lock-up expiration, sell into the artificially inflated demand, and pocket the difference. Retail investors in passive index funds absorb the loss.
This is the fundamental contradiction of passive investing that nobody talks about: the moment index inclusion becomes predictable and manipulable, passive funds stop being passive. They become forced buyers in a rigged auction. And the people rigging the auction are the ones writing the index rules.
The timing with SpaceX's mid-June IPO target and Nasdaq's December rebalancing isn't even subtle. It's gavage — force-feeding overpriced shares to pension funds that can't say no.
Diversifying away from NASDAQ-tracking index as a component of my investments will be extremely tax costly. Maybe more costly than the gavage (as the NASDAQ/SpaceX folks seem to be betting).
And most people won't even be informed that this is happening.
Large markets need to be run in the public interest...
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?
My understanding: It depends on what index the fund is tracking. QQQ tracks the Nasdaq-100 so QQQ is vulnerable. VT tracks the FTSE Global All Cap Index so VT is not directly affected by Nasdaq’s choices but is still exposed to some extent because spacex is likely going to be in the aforementioned FTSE index, Nasdaq’s actions impact spacex’s market cap, and thus Nasdaq’s actions impact spacex’s position in the aforementioned FTSE index which in turn affects VT’s composition (to a smaller extent than QQQ’s).
EDIT: to be clear the above are just examples with two funds (QQQ and VT)
The claim is that Nasdaq is going to artificially admit SpaceX to the Nasdaq-100, an index they control, in order to win their business away from NYSE. If the index you invest in is derived from the Nasdaq-100, that's problematic.
It seems kind of likely that SpaceX would make it into most of the major indices on the merits, relatively quickly (the S&P has a 1-year waiting period), just based on its likely size and liquidity.
Yeah the ETFs have sold off their trust quite a bit in the past year. No longer can anyone with skin in the game trust the stewardship of the fiduciaries. They are simply showing that they are bad at what they do and people should not entrust their future to them.
Pull your money out of the target date funds and into a responsible mix of indexes.
I think you have it backwards. Many (most?) funds underperform the market as a whole, showing they really don't know anything. ETFs that mirror indexes exist exactly because of this... their managers don't make trades based on their insight of the market, they are contractually obligated to mirror the index, period.
The article shows that at least some ETFs -- NASDAQ index funds -- will now be undermined by this SpaceX scam using those contractual obligations to extract money from ETF investors.
Good question. I don't know, but I'll point out that different indexes have different rules, so someone would need to check if a change to the rules for Nasdaq indexes affects the others you mention. (Perhaps they follow what Nasdaq does somehow?)
Transparent enough, just trade it based on the new weightings and price direction of the underlying SpaceX
The index will have cheaper options contracts than SpaceX while disproportionately subject to the same volatility
That’s the biggest and most egalitarian wealth creation engine in history, aside from some government moves this administration with the currency and commodities
This is only controversial because
A) you’re too married to indexing and told too many people to do it
B) you consider indexing to be sacrosanct for some reason, and consider inclusion to be a reward when it means nothing. this is a symptom of prosperity preaching
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.
This is the fundamental contradiction of passive investing that nobody talks about: the moment index inclusion becomes predictable and manipulable, passive funds stop being passive. They become forced buyers in a rigged auction. And the people rigging the auction are the ones writing the index rules.
The timing with SpaceX's mid-June IPO target and Nasdaq's December rebalancing isn't even subtle. It's gavage — force-feeding overpriced shares to pension funds that can't say no.
There are plenty of other funds out there that track other indices from other providers.
And most people won't even be informed that this is happening.
Large markets need to be run in the public interest...
https://www.youtube.com/watch?v=8rS3fTbC7TE
Edit: someone posted it on HN, there's already a thread for it : https://news.ycombinator.com/item?id=47388640
EDIT: to be clear the above are just examples with two funds (QQQ and VT)
It seems kind of likely that SpaceX would make it into most of the major indices on the merits, relatively quickly (the S&P has a 1-year waiting period), just based on its likely size and liquidity.
Pull your money out of the target date funds and into a responsible mix of indexes.
The article shows that at least some ETFs -- NASDAQ index funds -- will now be undermined by this SpaceX scam using those contractual obligations to extract money from ETF investors.
The index will have cheaper options contracts than SpaceX while disproportionately subject to the same volatility
That’s the biggest and most egalitarian wealth creation engine in history, aside from some government moves this administration with the currency and commodities
This is only controversial because
A) you’re too married to indexing and told too many people to do it
B) you consider indexing to be sacrosanct for some reason, and consider inclusion to be a reward when it means nothing. this is a symptom of prosperity preaching
1. Garage 2. Buy SpaceX on Day 1.
gavage American [guh-vahzh, ga-vazh] / gəˈvɑʒ, gaˈvaʒ /
forced feeding, as by a flexible tube and a force pump.