1808

Children don’t inherit your debt in this country.

1809

That was a joke, Nesrie. Sorry.

1810

You’d be surprised to know how many people don’t know this. There are pond scum companies out there going after the unsuspecting over the debt for the dearly departed but… glad to know that was a joke.

1811

Yeah, I’m dealing with this right now with my dad’s estate.

Another common misconception seems to be just how high the threshold is for estate tax.

1812

Sorry to hear that.

The median individual income here is 27k. Household is 53k. If one person was making 60k here, they’d be in very good shape, and you can do that without working for Google, Microsoft or Facebook.

The problem isn’t really that someone here can’t make 120k. It’s just that their chances of getting an education or training plus an opportunity to take a good paying offer… it’s all heavily staked against people. Many have the leave the area and return after they gain the training AND experience in order for the employers to give them a chance. The employers don’t want to train people. You’ve got one group that can’t understand why the college graduates won’t take their 12 dollar an hour positions and another that swears they can only recruit outside the area because, well see above about not wiling to take on the expense of training.

1813

That article has so much wrong with it. Starting with the fact that the reason Index funds are the preferred vehicle is that the Bond/Savings market (where that money used to go for a nice, safe interest rate) has been stuck at an effective rate below effective inflation for decades.

1814

It also assumes that business use the swings of their stock market price/value to judge the effectiveness of their efforts. I’ve worked at a couple public companies and I can say that is absolutely not the case. The stock price is looked at as this whole other thing, at least somewhat, if not totally, divorced from the day-to-day work going on.

1815

I don’t see how it can be completely divorced from operations when some peg CEO bonus pay to it. I mean… that incentivizes changes that affect the price.

1816

Yeah fair - I never worked directly for a CEO at a public company so it’s possible it just never trickled down to me. But I can say there was never I time that I remember when we evaluated the relative success or failure of something we did based on how the stock price reacted.

1817

I’m sure it’s a factor, at least in some companies, but executive teams usually have a whole set of goals for things like revenue growth, cost savings, customer satisfaction improvement, and so on. The idea is that there will always be a bonus, because it will always be the case that at least some of the goals were met. And if something happens in the world / economy that causes all the goals to fall short? The board treats it as an act of god, beyond anyone’s control, and awards incentive bonuses anyway, on the grounds that the team did a great job managing through such tough times.

Honestly, I don’t remember having stock price as an incentive when I was an exec at a publicly traded company. We all knew about the stock price, and wanted it to go up (we had options!), but it was never one of my goals for bonus purposes.

1818

I’m not really saying all companies do this, but when you tie bonuses to a stock price, even if no one can see it it would just defy common sense to think no one is paying attention to stock prices when millions of money in their pocket is tied to it. I mean don’t know how we talked about the median income at a company, compare it to the thousand x factor the CEO has to that and then also believe the same people are too benevolent to try and pump up that price to get a fat bonus.

1819

Absolutely, there are tremendous incentives to try to drive up the stock price.

1820

Watch what happens when an activist investor takes an interest in your company or god forbid actually manages to get themselves on the board.

1821

Also the very opposite to what that atlantic article was proposing as a problem (passive ETF investing concentrating shareholders)

1822

Yeah it’s two extreme ends of a spectrum of shareholders and both can probably be bad for a company. On one end you have a activist investor who is very knowledgeable and involved in what the company is doing, on the other end you have a passive investor where no amount of knowledge about the company will influence their share buying or selling decisions.

1823

I think the article makes a lot of good points. In fact, I’ve been concerned for years about what will happened to market once Index funds account for 70%+ of the money. Currently they are around 50% (depending on what you are measuring). There is no question that index funds have been great for investors, and bad for money managers, so in that respect that’s net positive for the economy.

The issue is what happens in bear market. In 2009, you had people like Buffett, saying this stock is ridiculously cheap I’m going to buy and hold at this price. Hell I even did the same, with Berkshire and Apple and Realty Inc. But at this point, I’ve thrown in the towel on individual stock picking, because after years of modestly beating the market, I’ve lagged dramatically behind the index the last few years. So at this point, the market is increasingly day (or more accurately millisecond) traders, and index funds perido. The money manager who would carefully analyze XYZ stock and buy with the intention of holding for a few years, or until it there price target are disappearing. I really fear that Index funds are going to make the bear market, far worse than a typical one. Most investors in index funds have zero idea of the intrinsic value of the stocks they own, and I fear will panic sell if the market goes down 30%+.

1824

The index fund isn’t really for buying and selling, aka timing the market. If they sell during a downturn, they’ll lose money but I suspect others will simply take advantage. I don’t see an issue with this.

The bigger issue I have are the ones that are so strapped for retirement savings that they keep their money in too long and don’t have the time to recover. That group panicking is basically setting us up with a population that cant’ take care of itself, sort of what we’ve got now.

1825

I know a lot of folks, many in or near retirement, who sold all or almost all of their stocks in their 401K and IRAs in 2008/2009 and then never bought back. So yes they are setting us up for having to be taken care.

During Covid, there was enough non-index fund money, that market treated the shares of Amazon, Zoom,and Netflix differently than those of United, Hilton, and Target. If index funds hold 99% then all of these shares would have been sold equally, to repay panic investors wanting to get their money. I fear this indiscriminate selling, will feed on itself and make a bear market even worse. The stock market ain’t the economy but they are related.

1826

Yeah I don’t think the general population understands this. I also don’t think they understand the DOW, especially, and some of the other indexes tell you everything you need to know about the state of the economy either. It doesn’t help that the Fed basically speaks in code and very media branch picks and chooses what it wants to highlight as if it is THE message while the politicians just… well politician.

At the moment, i guess I don’t see the real risk with the general public going the index fund routes and dabbling with other market based mechanics and letting the finance people do their thing and the gamblers do it. I don’t think there is a solution for panic selling when it’s low and buying when it’s high outside of general education on these subjects AND trying to get people to feel more confident about their financial situations in general.

Indirectly, if help people feel that things are just more fair when it comes to incomes and stable when it comes to wealth maybe we help people act a little more rationally. It’s just hard to talk to a 60 year old whose house value nose dived in 2008, who saw their retirement account drop around 25% and now they feel like they have to basically gamble to catch-up. It didn’t help that that same person was heavily encouraged to use their house a piggy bank for other things.

Also, I don’t think money managers are going to go away… there will just be fewer of them. I am not sure that is a bad thing, and I support training for anyone who loses out do to market shifts as well. So if they’re not close to retirement, programs!

1827

Don’t get me wrong, Index funds are a great thing. They provide higher returns, lower volatility and much lower expense. Reducing the number of money managers, or “helpers” as Buffet, facetiously calls them is also a great thing. People saving for retirement should absolutely used index funds both stock and bond funds.

The authors and my concerns are purely theoretical at this point. The main argument against Index funds taking over the whole market is that our top MBA schools churn out thousand folks, of mostly men, who believe that they can beat the markets. They get paid big bucks by Wall St. firms to do precisely that, even though most fail. It doesn’t seem like that the supply of young masters of the universe or firms willing to hire them is likely dry up any time soon.