Comment by fluidcruft
1 day ago
It's really concerning given how the indexes are changing rules to fast-track SpaceX being forced into index funds. S&P is also working on updates to S&P 500 to force it down everyone's throats quickly and algorithmically.
I'm usually a Boglehead, with some exceptions, and one exception I'd love is some sort of trade that would eliminate my exposure to SpaceX for the next few years. I'm sure there's some combo of options that would do it.
Probably finding an ESG-focused ETF would do it. ESG basically meant "good governance, we follow laws" which translated into better governed public companies that therefore had better returns, as one would expect. Really weird how it was politicized into something entirely different...
There's an ETF for everything out there. (There are more ETF's than stocks). There'll be a large market for "S&P500 without SpaceX" et al, so it's seems likely somebody will fill it. It probably will have to use a worse name because of the S&P trademark.
P.S. Here's an example of S&P500 without the magnificent 7 https://www.defianceetfs.com/xmag/
A&W 500 (because it only lists companies A-W)
> I'd love is some sort of trade that would eliminate my exposure to SpaceX
You can just short SpaceX of an amount equivalent to its share of your SP500 holdings. You will have to pay borrowing costs though, but on something that liquid it will be very small.
Yeah. For comparison, SpaceX will be maybe half the size of MSFT. MSFT is 7.4% of the SP500 index, so for a $1,000,000 portfolio if you were to short MSFT you'd pay 0.25% on the value of that 7.4%, or $185/year.
So eliminating SpaceX exposure will cost you $100 per million of your SP500 ETF per year, or so.
Shorts have unlimited risk. Buying a put is risk-defined and probably a better strategy.
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> some sort of trade that would eliminate my exposure to SpaceX
I think it's less complicated than you'd think.. just buy LEAPS puts proportional to your exposure.
LEAPS are very expensive.
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I've sold all my stocks. My reasoning is that if AI stocks go bust, they will take the global stock market with them.
One annoying thing is that those "non-standard" ETF variants have much higher management costs than basic S&P500 / All World ETFs.
Dimension funds aren’t bad
Stock markets are ruled by hype and fomo. Good corporate governance has little to do with returns, unfortunately.
Short term gains are hype and fomo, but if you're holding index funds long like I am, then returns have a lot more to do with performance. And given the lack of hype around ESG, it seems like an exceptional time to buy in to it.
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Add Anthropic and OpenAI to the list. Companies that are bleeding money.
Personally, a company should be making money before adding it to the index.
Interestingly, these are the exact rules they're working to overturn: currently, no matter how many stupid accounting tricks you pull off, you need to actually be profitable to be included in the S&P 500.
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This is a fallacy. OpenAI and Anthropic would not continue to make money indefinitely by simply sitting still for the simple fact that their models can easily be distilled by competitors. Their value is contingent on sitting at the top of the leaderboards and staying there such that the marginal value of their AI is better than the mostly Chinese competitors.
And b/c these chinese competitors are open weight, the layer below frontier class AI is totally commoditized.
If there were a recession, the first thing enterprise customers would do is setup Kimi or Deepseek rigs. It would be a race to the bottom and no one would be profitable.
A similar phenomenon happened with rail lines in the 1850s where irrational exuberance led to a massive overbuild of rail lines, followed by a race to the bottom and the bankruptcy of almost all players. In the end, banks ended up absorbing the few companies that survived.
Because they're doing the fancy equivalent of selling $20 bills for $15 and chirping about how high their revenue is. You, me, and everyone else could generate $inf revenue with that strategy, but that doesn't make it a viable business model.
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Really depends on the valuation and P/E they plan to list at, and some estimate of their future revenue story. I love Codex and Claude Code but OpenCode/Kimi is wildly cheaper and 90% as good.
Didn't we have a story just yesterday that Anthropic's run-rate now looks like $49 billion/ year and they might have their first quarterly profit? I would suggest if you have billions of dollars coming in the door and aren't breaking even, maybe you do have a small leak somewhere?
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> Because from where I'm sitting it seems like you're just operating on hopes and feels.
I hate these flippant comments. Similarly, from where I'm sitting it seems you're struggling to disentangle revenue from profit.
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" But they could just not do anything and continue raking in the money."
Hahaha what a fucking bozo.
Log out and dont talk about valuation again.
There is a market for an S&P 500 ETF without those companies. I'll immediately switch over
You probably want an ETF that follows something like the MSCI USA Ex Mega Cap index then: <https://www.msci.com/indexes/index/758086>
Let me know if you find one! I'm at a loss. (And even then, if I switch I have to pay $$$ taxes on capital gains)
You can sidestep this entirely with a total-market fund like VTSAX/VTI, which hold the entire market and should be more resistant to being gamed.
They’re free-float adjusted so entities like SpaceX are valued only by what’s available on public markets. And Vanguard (and its funds) are owned by its investors, which makes it seem implausible that the rules would be rewritten in a way that would damage investors.
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Any of the direct indexing providers will let you blacklist individual stocks from the index. The intended use is to exclude stocks you hold elsewhere (or receive as stock grants) to avoid causing wash sales, but it can also be easily used to make a custom "S&P 499".
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you can buy S&P 500, and short the component companies you don't like, but caution, this will achieve the solvency you want, but you will likely remain irrational
In addition to covering the IPO in general last week, Matt Levine also wrote about this specific question Tuesday[1]:
> Historically index providers were in the business of making these sorts of quality decisions, so that index funds were not forced to buy stocks they didn’t like.
> These rules create some tension between the idea that an index is a list of all the stocks and the idea that an index is a list of all the good stocks. Historically, it didn’t matter all that much: The point of the stock market is to tell you which stocks are good, so a company with a high stock valuation should be a very good company, so it should get a high weighting in both the Index of Good Companies and the Index of All the Companies.
> But SpaceX — and also maybe OpenAI and Anthropic in their coming IPOs — will probably break that link. SpaceX will probably (1) do all sorts of stuff that index funds hate and that index providers have specifically tried to exclude and also (2) be gigantic, because the market loves it.
[1]: https://www.bloomberg.com/opinion/newsletters/2026-05-26/ind...
Apparently, the index funds are based on free float and since the number of free floating shares is limited, the total exposure to the index will be very small.
And accelerating the schedules for insiders to dump shares.
Almost all of the YoY growth in the S&P500 is in a very small number of tech companies. If one of those fast-growing tech companies isn't in the S&P500, the index as a whole becomes obsolete.
The same rules are now affecting other big IPOs. I think Cerebras was confirmed as getting fast listing too even though they’re much smaller. It’s one big act of dumping on retail markets
They learned from the failure of crypto and have found their bag holders.
We're going to witness bigger blast than the great depression, dot com bust and 2008 crisis combined.
These greedy capitalists are after the pension funds + retail investor (ETFs in particular) through IPOs but there's no profitability in sight.
Waiving profitability requirements to join the S&P 500 and trigger auto-buys from index funds is DEI for corporations.
They will only be added to those indexes if they are actually trading at a value that places them in the top 100 or 500 companies in the US. If they fall below that price then they will be kicked out of the index just like any other company.
What exactly is the risk to normal investors if that’s the case? If it’s all a big scam then they will trade lower and they’ll naturally be kicked out of the index.
This is a rule that will apply to all new companies. When Anthropic and OpenAI go public they will also benefit from the rule. Do you think the media/public will be just as outraged when they do it?
The goal of the S&P 500 is to keep the index representative of the US market. They have in fact changed rules in the past when market conditions have changed. These mega IPOs are an entirely new market condition, as private companies have never been this big before listing in history. So large that they immediately fall into the top 100 or 500 largest companies in the country.
There’s also the fact that Nasdaq is a private company and it now has competition from the new Texas exchange. SpaceX is actually dual-listing on TXSE and Nasdaq. Nasdaq needs to keep these giant IPO companies happy because if they don’t they will list on the competitor exchange which would be disastrous for Nasdaq (supercharging their competitor).
These things affect each other as well. Nasdaq wants to make sure they get the IPO on their exchange, so they include them in the Nasdaq 100. S&P 500 doesn’t want to be outdated by missing a trillion dollar company from their index, while other exchanges like the Nasdaq 100 include them.
There’s a real case to be made that this is just self interest on the part of the exchange and the other index providers.