I may be a bit late to the game on this piece, but I thought it was interesting:
Passive Investing is Worse for Society than Marxism
And Cliff Assness’ response (which mirrors my own thinking, but is better argued here):
Indexing is Capitalism at its Best
https://www.bloomberg.com/view/articles/2016-09-02/indexing-is-capitalism-at-its-best
[I thought about whether this should be in Investments or WC, but I figured all the Socialist accusations makes it fit better in WC]
I completely agree Bchad. It is not important if market participants are active or not. The important thing is that there is the opportunity to be active. Worst case scenario… systemic miss pricing due to passive investing. Ok, what makes people think folks aware that price grossly does not reflect fundamentals will just sit there are not take advantage of that fact. People are more greedy than that. Passive investors will become more active because they would lose to much by not doing so. You hand out an inefficient market and it is Christmas for traders, hedge funds, activist investors…
When the market gets lazy and complacent, someone will come in and clean out. Michael Burry did it, MS-13 did it in LA, Trump did it in the primaries, and it’s a repeated theme throughout all aspects of life.
Capitalism, baby.
I like Cliff’s piece.
Those Bernstein guys probably buy quarts of milk without doing a full value chain analysis or any comparisons with alternative technologies and delivery systems.
F-ing Marxist freeloaders.
I don’t know if I disagree with anything here… Both sides seem to believe that *some* active investing is needed, but just the right amount, which is not quantified, nor is any serious policy suggested to address this. This is the equivalent of me just saying “that house is quite blue” or something which is a valid statement, but ultimately has no real meaning.
I couldn’t find the link to the original Bernstein article, which may be behind a paywall. But my impression was that it was a shop trying to goad investors into buying high-fee active products by suggesting they might be unknowingly Marxist by preferring to do low-fee index funds.
(also my last post looked more angry than I really am, it was just a rhetorical device to show how ridiculous it is to say “if you haven’t calculated the correct price of something yourself, you’re a moocher and a leech on society.”)
I assume almost everyone here reads Levine’s daily newsletter. But his coverage of this was interesting. I find the prospect of mutual funds promoting lack of competition in an industry interesting.
Recently when I was in Norway listening to people discuss the evils of capitalism, I saw the iPhone they kept checking. Never struck me before, but seems the global nature of the world results in some paying for the positive externalities others benefit from. Indexing is similar I guess. I cant help but think getting the externalities for free is the most logical action