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Passive Investing "Worse Than Marxism"
08-23-2016, 09:23 PM
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#1
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Recycles dryer sheets
Join Date: Mar 2005
Posts: 161
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Passive Investing "Worse Than Marxism"
How about this for an article published today on Bloomberg.com: Bernstein: Passive Investing Is Worse for Society Than Marxism - Bloomberg. The article is about a note written by the research and brokerage firm Sanford C. Bernstein & Co., LLC.
Here's a quote from the article - "In a note titled "The Silent Road to Serfdom: Why Passive Investing is Worse Than Marxism," a team led by Head of Global Quantitative and European Equity Strategy Inigo Fraser-Jenkins, says that politicians and regulators need to be cognizant of the social case for active management in the investment industry."
The author of the Bloomberg.com article does have fun with this entire thought process. For example he ends his article by writing - "While the question of whether the rise of passive investing is an existential threat to capitalism remains an open one, Bernstein's team acknowledges one uncomfortable truth: it certainly looms as a major downside risk for the livelihoods of people who produce sell side equity research."
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Well, Helen; shall we just go home?
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08-23-2016, 10:27 PM
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#2
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Recycles dryer sheets
Join Date: Jan 2014
Location: San Jose
Posts: 80
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From John C. Bogle
Founder and Former Chairman, The Vanguard Group
to the
Washington State University
Pullman, Washington
April 13, 2004
https://personal.vanguard.com/bogle_...p20040413.html
Our introduction of First Index Investment Trust was greeted by the investment community with derision. It was dubbed "Bogle's folly," and described as un-American, inspiring a widely-circulated poster showing Uncle Sam calling on the world to "Help Stamp Out Index Funds."
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"Always do right. This will gratify some people, and astonish the rest." --Mark Twain
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08-23-2016, 11:00 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Nov 2013
Location: Twin Cities
Posts: 3,927
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Sounds like a Bankster missed his fee-laden bonus.
Sent from my iPad using Early Retirement Forum
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08-24-2016, 04:10 AM
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#4
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Thinks s/he gets paid by the post
Join Date: May 2014
Location: Utrecht
Posts: 2,650
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Darn those commies, undercutting us, depriving us from our well-earned commissions and passive fees.
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08-24-2016, 07:49 AM
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#5
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Thinks s/he gets paid by the post
Join Date: Feb 2013
Location: Toronto
Posts: 3,320
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File this under 'Your Morning Smile'.
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08-24-2016, 08:07 AM
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#6
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Recycles dryer sheets
Join Date: Dec 2013
Posts: 174
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OMG! As a long time indexer I had no idea I was destroying our country..........NOT!
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08-24-2016, 10:32 AM
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#7
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Moderator Emeritus
Join Date: Feb 2005
Location: San Diego
Posts: 5,267
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This....this is troll bait, it's got to be. This doesn't pass the smell test, even with a cursory glance and a moment's thought. I expect the freaking CEO and board of the fortune 500 companies in my index fund to "direct capital to its most productive end". My uneducated butt is going to invest more wisely than the C suite at Google/Alphabet?? Ugh, the invisible hand reference has it completely backwards! By indexing you are literally allowing companies to stand on their own merits, not chasing the latest fad and inflating a stock past it's fundamentals - at least more than anyone else's. Ugh!What's that thing about patriotism being the last refuge of a scoundrel?
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08-24-2016, 12:07 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2011
Posts: 8,359
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I'm not sure if I got the whole point here, but if I read it correctly, I'm wondering if the same argument might have been made at the advent of mutual funds?
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Living well is the best revenge!
Retired @ 52 in 2005
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08-24-2016, 12:16 PM
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#9
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,580
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Quote:
Originally Posted by laurence
This....this is troll bait, it's got to be. This doesn't pass the smell test, even with a cursory glance and a moment's thought. I expect the freaking CEO and board of the fortune 500 companies in my index fund to "direct capital to its most productive end". My uneducated butt is going to invest more wisely than the C suite at Google/Alphabet?? Ugh, the invisible hand reference has it completely backwards! By indexing you are literally allowing companies to stand on their own merits, not chasing the latest fad and inflating a stock past it's fundamentals - at least more than anyone else's. Ugh!What's that thing about patriotism being the last refuge of a scoundrel?
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+1
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08-24-2016, 07:22 PM
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#10
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Administrator
Join Date: Apr 2006
Posts: 22,971
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I would like to welcome all of my new comrades.
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Living an analog life in the Digital Age.
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08-24-2016, 08:10 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Jun 2007
Posts: 2,657
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I would call it more FUD (fear uncertainty and doubt) than troll. It is circulated by investment people who are desperate for ways to convince investors not to index, because indexing cuts revenue at full service firms and active funds.
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08-24-2016, 08:38 PM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
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I think the active managers should strive to get on the S&P board that decides what a company gets on the various indices, and what gets kicked out. That's where the power is.
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
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08-24-2016, 08:40 PM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
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From the article:
Quote:
"A supposedly capitalist economy where the only investment is passive is worse than either a centrally planned economy or an economy with active market led capital management," they write.
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That's accurate, in a strict sense. But we've never seen a market that is "only passive." Indexing, as we know it, absolutely relies on active investors to seek out value and, yes, allocate their investments where they are likely to produce the greatest return. Without these active investors, indexing cannot work.
But the article is ridiculous because it's not a binary choice. Active and passive exist together. Yes, at some point if the vast majority of investing was passive, the markets would grow inefficient. And then, active investors would be well compensated for their research and would have the last laugh at the expense on indexers. This has been studied a lot, and we're not anywhere close to the point where indexing poses a risk of distorting the markets.
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08-24-2016, 08:57 PM
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#14
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Thinks s/he gets paid by the post
Join Date: Jul 2011
Location: The Bay Area
Posts: 2,736
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Quote:
Originally Posted by samclem
From the article:
But the article is ridiculous because it's not a binary choice. Active and passive exist together.
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Yep, otherwise there wouldn't be any suckers active investors for index investors to take advantage of.
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You may be whatever you resolve to be.
100% x 10% > 10% x 100%
Small pensions & SS cover essentials
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08-25-2016, 05:14 AM
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#15
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Thinks s/he gets paid by the post
Join Date: May 2014
Location: Utrecht
Posts: 2,650
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Quote:
Originally Posted by Gumby
I would like to welcome all of my new comrades.
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Can we institute a standing committee and 5-year plan now?
We could use one, for more glorious community of FIRE.
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08-25-2016, 05:25 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,003
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This thread Bogle's my mind.
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Numbers is hard
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Geez - What Is It With Bloomberg.com and Index Funds Being Marxism/Communism?
08-25-2016, 08:14 AM
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#17
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Recycles dryer sheets
Join Date: Mar 2005
Posts: 161
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Geez - What Is It With Bloomberg.com and Index Funds Being Marxism/Communism?
Yesterday another Bloomberg.com columnist wrote about this same subject, only this time the title of the column is "Are Index Funds Communist?"
Link: https://www.bloomberg.com/view/artic...unds-communist
It seems to me if one has to use extreme outcomes to make a point then either the logic is flawed or the point being made is not valid.
Of course I realize the headlines are merely 'click-bait' for the author and the web site, but still, one would hope that reputable individuals and web sites do not need to stoop to such tactics to gain readership.
__________________
Well, Helen; shall we just go home?
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08-25-2016, 09:14 AM
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#18
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,198
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Quote:
Originally Posted by jdmorton
one would hope
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But one would be bitterly and continually disappointed.
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08-25-2016, 09:26 AM
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#19
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Thinks s/he gets paid by the post
Join Date: Jul 2011
Location: The Bay Area
Posts: 2,736
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Well, I just want to point out that it IS a little RED book.
Plus, he clearly points out in the subtitle that we should be 'guaranteed our fair share'.
I don't know about you all but, I think this guy's clearly a Commie!
__________________
You may be whatever you resolve to be.
100% x 10% > 10% x 100%
Small pensions & SS cover essentials
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08-25-2016, 01:03 PM
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#20
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Thinks s/he gets paid by the post
Join Date: May 2014
Location: Utrecht
Posts: 2,650
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You might be on to something, these guys also say passive investors should be almost everyone, and are best off in an index fund.
https://www.amazon.com/Intelligent-I.../dp/0060555661
It's also red !!
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