Comment by pryce

> Correction: index funds don't have a choice. They must follow the index, and so must buy the stock.

Maybe, most indexes do not have to follow the index. they just need to match the returns. An index fund manager has choice of what stocks to buy. However an index fund doesn't have enough managers to make many choices and so they normally buy just what is in the index. However all index fund managers know they are large enough that if they change their holdings "instantly" when the index it self changes the market will collapse and so the fund will under perform. Thus index fund managers are always trying to figure out what the index will do so they can start buying/selling stocks in smaller amounts before the change happens.

How each fund handles this is up to the managers. (and "total market" funds have less ability and need to do this)

But surely the managers of those pension funds can see this happening, and will not likely take on the risk of shares that are that young, no? The index funds hands are tied, i agree, but passive retirement funds are largely managed by people who are motivated for them to succeed. If this were not the case, then pension funds could have been looted long ago...

>Correction: index funds don't have a choice. They must follow the index, and so must buy the stock.

Right, if they've advertised as an S&P 500 index fund, they have to robotically follow the S&P 500, stupid inclusions and all. Changing that strategy would require ... a lengthy process involving input from shareholders.

However, someone can still start e.g. a "classic S&P 500" fund that follows the old rules for inclusion, and I suspect we'll see that in response to these recent decision.

Mmmm legalized theft: the new Tech Industry!

Sure, I don't like him either but it shouldn't be about him. It should be about the institutions we trusted to keep our index funds safe. Or was this always based on "vibes"? Was VOO never safe? Was it always possible for the people in charge of the stock market to simply include some money pit into our retirement funds? I feel like the people responsible for these decisions must fear life in prison or this will keep happening.

Twitter was 40 billion ish overpriced purchase and SpaceX is seeking to raise 75billion

Let’s not make billions into a footnote?

"He’ll do anything to move the goalposts and turn his failures into successes. There is no norm he won’t violate, no boundary he won’t cross."

Unfortunately, if you really start digging in to what is going on in the financial world, you will find he has violated no norms here. This is not a defense of Elon; this is a condemnation of the entire financial industry.

The whole thing scares me, honestly. It has never been a clean happy market where lots of honest people get together and are just honestly trying to make a better world for each other, there is no golden past where people were just nice or anything, but damn if computers don't let people build some structures that the robber barons of old could only have dreamt of. I'm really concerned that "index and chill" doesn't just have a "best by" date but that the best-by date could be in the past; I've heard of an awful lot of ways of exploiting it and other retirements schemes we have, this is just one. I find it implausible that these ideas exist but nobody is doing them.

I’ve always suspected the “index funds are the safest investment” system is ripe for exploitation.

Thanks. That's pretty shady and grim :(

See also:

https://www.youtube.com/watch?v=IHD8BDFYyGI

Ya, but this is a proof-of-concept rip-off. The fact that the indexes don't have our back is a huge problem.

A key point to look out for is how much money Anthropic and later OpenAI will go for in their IPO, which will utilise the same (updated) rules.

count me in !

I dunno won't index funds be forced to sell other stocks to buy these IPOs? Won't that possibly trigger a market crash if the IPO stocks loses a lot of value very fast after the IPO on top of investors predicting this fact and selling shares of other companies?

I dunno, the logical explanation makes sense, but markets don't work on logic especially on the short term. People fearing what other people will do and act in anticipation is known to happen.

Thanks for being the voice of reason here. So many people make their investment/allocation decisions on the fly... it's only going to get magnified by these 3 big IPOs. (and their unexpected consequences)

Firms will look at your $600k 401k AUM, Investor Policy Statements, and laugh you out the door. They won't care, you have no say. Your 401k plan is between them and your employer.

Not sure if OP meant literally sell, or just rebalance out of stocks. TBH I've been considering sliding over to all bonds for a time, since there is no tax event if funds stay in the account. But the numbers don't seem that high at the end of the day.

Any advice that confidently ends with "but whether you do A, B, or C, is for you to decide" can generally be safely avoided. This is providing 0 bits of guidance.

class action is the average person's best bet here. You should expect to get $.75 while the lawyers make big money.

> Also some EU pension funds are already in the process of divesting from US markets...

And where will they go to?

I wish we would start paying proportional attention to business news, instead of treating AI (or any other "cutting edge") companies as economy-defining and giving these 50+% of the attention.

It is especially telling if we try to list out all the psychological biases at play:

  - Availability & salience bias - vivid, memorable things feel more important than they are
  - Narrative bias - humans tend to think in stories, and AI tells plenty
  - Recency and novelty bias — new things feel more consequential than established ones (this one already drives like 80% of all HN content btw)
  - Proportionality neglect - people are bad at intuitively grasping what percentages mean, even if they see the stats
  - Social proof and reflexivity - coverage signals importance, and drives more coverage
  - Status quo invisibility - things that work reliably become invisible (surprisingly, HN is really good in terms of working against this bias, I feel like at least 5% of all posts are some niche "inner daily workings" topics)
  - Speculation premium in attention - uncertainty generates more discussion than certainty
  - In-group signaling - cutting-edge things are status markers among influencers

I've recently learned a new finance term, "float", and I want to check if this makes a difference to this discussion?

https://en.wikipedia.org/wiki/Public_float

I hear S&P 500 is weighted on float rather than on market cap, while Nasdaq 100 is based on market cap.

If they go bust won't it likely trigger a massive market crash? Afterall index funds will be forced to sell other US stocks to buy them, bringing their values down. Non-passive investors will predict that and divest even more and so on...

And that is on top of the IPO companies losing value themselves, this seems likely to trigger a doom-loop until the market reaches a low enough value. This will likely trigger layoffs and companies reducing spending and investments further depressing the economy. Added inflation from oil prices and war.

This doesn't seem like one big balloon ready to burst, but more like a house suspended by hundreds of balloons and they are about to be ran over by an airplane.

That's if everyone were acting perfectly rationally, but a world in which those three companies go bankrupt would have everyone panic selling every equity possible like it's the endtimes.

You're not modelling the contagion here. The problem is that while any single one isn't that big a share of the S&P 500, similar companies do make up a lot collectively. Excl some non-tech/AI firms:

NVIDIA Corp NVDA 8.02%

Apple Inc AAPL 6.53%

Microsoft Corp MSFT 4.84%

Amazon.com Inc AMZN 4.01%

Broadcom Inc AVGO 3.36%

Alphabet Inc GOOGL 3.32%

Alphabet Inc GOOG 3.09%

Meta Platforms Inc META 2.23%

Micron Technology Inc MU 1.71%

Advanced Micro Devices Inc AMD 1.19%

Oracle Corp ORCL 0.99%

That's 40% of the S&P 500.

And if anything happens to the AI bubble all of these go down together. While they won't all go to zero and cause a "-40%" overnight, Nvidia's rise is so meteoric that they will trigger a -8% and the rest's valuation has more than doubled since 2023. Even Apple, which isn't much of an "AI company", is still following the AI-tech hype.

If Nvidia eats shit, and the others go -50%, that translates to an overall ~-24% on the stock market.

Before any contagion outside the tech industry is considered. Look at the Dotcom Bubble and a -40% to -50% crash is quite plausible.

They will drag the rest with it.

thank you

You've been told a lie. Productivity has increased every step of the way even as populations shrink and the elderly cohort grows. Most of those productivity gains, i.e. the added value produced by each worker, has gone to shareholders' profits. If we had a reasonable tax system that captured more of that surplus value (which mostly goes offshore and does not in fact "generate more jobs"), then we'd have no problem at all funding the pension systems, and much more.

each few years the pension age rises 69 for me now, but it will likely go up further. much further up is beyond the average life expectancy...

> unless automation taxes pay for it

But this doesn't solve the problem in any way; it simply leads to production drop.

I mean, this is literally the logic of every communist government in the 20th century. They had the same logic that "given the mechanization of agriculture, food practically produces itself; you just need to throw a seed in the ground and give it a couple of tractor rides, and the earth will do the rest. Therefore, we need a tax on such activity, because we have enough resources to feed everyone".

In other words, it's literally a pure tax on automation. The results were mass deaths from starvation every single time.

Originally pensions were created so people who could not work would not be destitute.

The fact it became an all-inclusive all-year-round vacation reward is an anomaly which is getting corrected. Too bad for us we're the generations holding the bag.

I doubt that a FAANG programmer from hacker news has to work till they die. You are doing something wrong.

Current system isnt great but works. Just fear uncertainity doubt here.

You know that short selling is possible? And index funds are traditionally some of the keenest participants to lend their shares out to short sellers in return for a bit of extra return (over the raw index).

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There's lots of different indices with different rules, and lots of different funds to implement these. Pick one that works with your preferences.

If it is actually growing company with growing valuation being a year late is not big deal over say 10 or 20 years. It is actually the smart move.

And when it happens, I suspect we'll end up having to eat austerity to avoid inflation again. Under new leadership from the Responsible Party, whoever that is where we live.

>Why does SpaceX warrant a change of existing trading rules?

They don't, while timing certainly benefits, and potentially was triggered by them and OpenAI and Anthropic IPOs, these rules are not specific to only apply to SpaceX.

FTSE Russell (Russell 1000/2000 etc.) Adopted "fast entry" for large IPOs. Eligible companies (investable market cap above Russell Top 500 cutoff) can join after 5 trading days (previously quarterly rebalances). Also eased float rules with carve-outs.

https://www.lseg.com/en/media-centre/press-releases/ftse-rus...

Nasdaq (Nasdaq-100): Effective May 1, 2026, top ~40 market-cap companies can enter after 15 trading days (previously 3+ months). Adjusted low-float handling.

https://spotgamma.com/spacex-ipo-index-changes-spotgamma/

S&P Dow Jones (S&P 500): Reducing seasoning from 12 months to 6 months for megacaps and waiving the 4-quarter GAAP profitability requirement for large issuers.

https://www.wsj.com/finance/stocks/stock-indexes-are-contort...

Because this time we did learn our lesson is almost 15 years ago? Its a good time to get out of the ride

> Why does SpaceX warrant a change of existing trading rules?

It does not, of course, but when oligarch corruption runs supreme, it is whatever they want.

Because twitter helped elect those who set the rules now.

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Are you sure? It discovers it within seconds following a bad earnings report. It seems hard to know right now whether five days might actually be sufficient or not, seeing as the cat is out of the bag about how unprofitable and debt laden this trillion dollar enterprise is.

> xAI is losing money hand over fist

I wonder how much better Anthropic is doing.

Moreover their filings on the matter basically correctly weight their space launch business and then go "and xAI will obviously be worth a bajilion dollars more".

The whole point of original rule was to have market discover price over time before adding a company.

It is absurd to blame "market" that did not had enough time to settle. "Bankers" are to blame for making this rules change happen.

It is entirely valit to blame people who changed the rules to allow this to happen.

>>If people really don't want SpaceX in their S&P 500 tracking ETF, we should see a S&P-ex SpaceX in short order.

"People" don't know much about finance to put it mildly. ETFs are created by market demand. Even "factors" ETFs are often based on completely irrational things like dividends, P/E ratios and other meaningless metrics. This happens because people are easily seduced by narratives ("solid dividend paying stocks", "low P/E ratio - good returns") which are plainly wrong but tempting to an average person.

Most people realized they don't know anything about finance and would like to pay someone (their fund manager) to make responsible decisions and expose them to wide market while avoiding blatant manipulations. Unfortunately the incentives are misaligned here. The managers' incentives are somewhere else. They are not paid by long term performance of their fund and they are disproportionally penalized for taking contrarian decisions.

People being force feed those mega IPOs losing money on them is bad for others as well - there will be less wealth for productive investments and more in hands of "players" (or scammers if you want to call it out). There might be a crash. Trust in financial market will plummet and hostile regulation might arise which other market participants will pay for even though they are not to blame.

I will not have exposure to those mega IPOs but I am in privileged position because:

-My understanding of financial markets is much better than that of an average person.

-I have quite a bit of time to follow all of it and react in time

-I pay 0% capital gain tax and use a broker with nearly 0 fees which allows me to rotate for free (almost)

-I know where and how to move my money so I don't lose advantages of wide market exposure

It took me a lot of effort to set it all up like that. An average person falls short on all of the above and is not in position to avoid donating part of their pension fund to Musk and Altman though. It is still bad for me for reasons mentioned above.

So then, why change the rules?

What's really clever is that Musk could pull his Nazi salute at the inauguration of the president he bought, and the ensuing 'voting with your dollars' against him doesn't matter because he was able to orchestrate forcing people to pay him by cutting them out of the loop. I mean it's absolutely evil, but it's pretty clever - his team proved they can't run a country (they probably could, but don't want to), but they're incredibly adept at stealing.

I wonder if Musk chose rocketry solely because of the ability to use it to drain money from government?