Comment by JumpCrisscross
1 day ago
The amount of misinformation around this topic was absolutely nuts over the past few days. Good rule of thumb: if a YouTuber or other influencer was pitching doom and relaying this rule change by S&P as a fait accompli, stop following them.
(It was a common misconception on this thread: https://news.ycombinator.com/item?id=48364055.)
Contrarily, you can interpret the doom pitches as a necessary political backlash whose degree of panic and whose quantity prevented the change from ending up as a fait accompli.
Public decisionmakers do this sort of thing all the time. They "float an idea", "test the waters", "put up a trial balloon". They see what they can get away with. When the decisionmaker has a strong desire for the change, it may only get rolled back if powerful and widespread public dissent makes itself known, as it did in this case. When they don't really care about the issue, they might cancel it at the first sign that anyone has an issue. We can't know their degree of insistence just based on outcomes in these cases.
> the doom pitches as a necessary political backlash
It was totally misinformed, came well after the public-comment period had ended and had zero net effect other than maybe generating some commissions and management fees for rando managers.
There is bona fide hatred for these companies and their managers. Influencers twisted the facts to channel that for views.
What's the urgency to bend the rules? It is not like SpaceX is banned for good. It will be included as soon as it meets the requirements.
> What's the urgency to bend the rules?
If you’re buying into a tech-marketed fund like the NASDAQ 100 and it doesn’t include a large chunk of the tech market, you’re no longer passively investing in tech. You’re investing in an actively-managed fund.
Historically, companies like SpaceX would have gone public earlier and grown into the index. Recognizing that has changed with multiple $1+ trillion IPO contenders makes sense; as it turns out, I think both NASDAQ and S&P decided correctly.
Yeah, but is SpaceX actually worth $1T or does Elon just think that because of how Tesla investors value Tesla?
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“ Historically, companies like SpaceX would have gone public earlier”
Could woulda shoulda. Mate they didn’t. Moreover if they had, the existing investors would’ve got a shittier exit.
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> You’re investing in an actively-managed fund.
Nitpick: It’s still a passive fund, just that the index constituents are decided actively by a committee rather than by a simple criterion. As you no doubt already know, S&P500 isn’t just taking U.S. companies publicly traded on an exchange, sorting them by market cap, and then truncating the list to the first 500.
Not really. The underlying rules for Nasdaq has changed.
The preexisting ruleset was used by investors to gauge their portfolio balance.
Now investors have to revaluate their portfolio based on the new ruleset as their fundamental risks have changed.
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> You’re investing in an actively-managed fund.
I see others are listening to the Money Stuff podcast ;)
What was the common misconception?
> What was the common misconception?
That the rule change was a done deal. The pitch was some shadowy financial cabal forcing everyone’s retirement savings into SpaceX (which would not have been true even if S&P voted to include, but that’s a separate topic).
The top comment and most of its subthreads are run-of-the-mill alarmism.
> The top comment and most of its subthreads are run-of-the-mill alarmism.
Worth considering:
* https://en.wikipedia.org/wiki/Prevention_paradox
And the rules for the NASDAQ 100 were changed, as were MSCI and CRSP:
* https://www.schwab.com/learn/story/some-indexes-accelerate-e...
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It seems to me like there's a fair amount to be concerned about, I wouldn't consider myself an expert on finance by any means so if you have some explanation of why it's not that bad I'd love to hear it.
Two other indices changed their rules to allow these companies specifically. Pensions and retirement funds rely on these indices to have continual, stable growth. Often the people whose money is being invested don't even have control over its allocation into these funds.
Coupled with the precarious state of the economy due to all the money already flowing through AI, changing the rules to throw retirement fund money into brand new extremely highly valued stocks with P/E ratios in the hundreds seems like a recipe for disaster. It reminds me of subprime mortgages.
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I mean S&P had actually drawn up a lot of the changes, regulations, and paperwork for entrants, so it wasn't a done deal, but they absolutely were considering it, and it was a very real "risk".
>> What was the common misconception?
> That the rule change was a done deal.
What are you talking about? The rule has already been changed in the NASDAQ. That makes it a done deal.
Anything changed can always be undone, but to be clear it has already happened. That makes it a done deal.
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Wrong.
HN has been speculating on how wealth would be extracted from 401k and IRAs at least since the November elections in 2024.
Far before any influencers even thought this would be a thing.
I thought forced cryptocurrency funds, but it turned out to be something else.
S&P wasn't fait accompli, but the NASDAQ 100 was
> S&P wasn't fait accompli, but the NASDAQ 100 was
Sure. Nobody was properly making this distinction in social media, including on HN. Particularly with respect to the differences in scale and purpose between the NASDAQ 100 and S&P 500.
The fact that a fast track was even considered is controversial IMHO. People flipping out, especially if their retirement is tied up with those indices, is to be expected. No one wants to be a bag holder for billionaire insiders.
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I would't be surprised if the freak-out reaction to SpaceX being on the nasdaq100 and even being considered for the s&p500 was a strong factor in S&P saying no; if so than the histrionics were worth it.
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Do you think that all the alarm had any effect on the blocking of the rule change? Is the right time to complain about a possible change is after it has been decided?
> Do you think that all the alarm had any effect
Nope. S&P management probably wanted the rule changes passed.
I don't think doom and gloom on HN had any effect, no.
It was much broader then HN
>if ... YouTuber... stop following them.
Great advice.
Oh come on Jump, how can you deny it's not shady?
I could kind of agree with the argument that "well these companies stay private longer so they are more mature" but the float exemption with the seemingly arbitrary calculation to figure out weights completely belies that argument.
> how can you deny it's not shady?
It wasn't. It's dumb. But that's different from shady. At the end of the day, the market never priced in the S&P making this decision because the default understanding was a public consultation by S&P goes nowhere. Influencers ran with a consultation being a fait accompli and now anyone saying otherwise is licking billionaire balls.
Not really seeing the issue you are raising. Seems like a pretty nuanced thread.
Yes, I think given that misinfo this was probably the right decision by S&P, everyone would be saying I told you so and screaming about providing exit liquidity.
My prediction is that this will overall end up costing index holders money though. They will ultimately get a worse entry price for SpaceX and the other mega IPOs. Only time will tell.
They might but changing the rules for a highly controversial company would do more harm in lost trusts than gain for investors.
Exactly. There is this undercurrent of The End Times everywhere, that this is it. This is the end of ... everything that was. When in fact it is not the end times, and the people at those indexes want to exist longer than SpaceX.
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> given that misinfo this was probably the right decision by S&P
The misinformation was almost certainly not taken into account, and it shouldn’t have been.
> everyone would be saying I told you so and screaming
Influencers will scream regardless. It’s what they’re paid to do. The NASDAQ 100 made these changes and is doing just fine.
> will overall end up costing index holders money though. They will ultimately get a worse entry price for SpaceX and the other mega IPOs
There are lots of indices. S&P largely targets those built around mature companies. If you want a total-market index, those exist and tend to rapidly incorporate IPOs.
lol what
You can just wait for the price to drop post ipo as it usually does if you actually want to invest.
This comment was flagged, it does not contain anything that could possibly deserve that. Shame on you people.