How will Australia's younger generation get ahead?

[luutzu]

That stuff is already happening inside listed companies.

but you have to compare oranges with oranges, if your argument is that other asset classes will out perform listed companies, then invest in those other assets class, but if you think that as group listed companies will deliver sound returns then invest in them, and for most people the best way to do that with be index funds.



Investment dollars do get spread across all asset classes, no one here is saying all investments dollars should go to the Stockmarket and all other asset classes should be ignored.

What I am saying is that low-cost index funds are a sensible way for people to access the stock market, they can still invest other dollars where ever they like, but its a good idea for a certain portion of that to go into the stock market, and index funds are a sensible way to do it.

thats only happening on the fringes, its not like BHP will be in the index this week, and next week its back out and then its in again.

Absurd? it seems like common sense to me.

If you had several trillion dollars to invest, do you really think you could beat the market?

At a certain point you will be spread across the market to such an extent that you just become an index fund, however all your trading as group would make sure your investors underperform due to your fees and running costs.

Give me those trillions to manage and find out

We were discussing Index funds and its management. So the asset class we, or at least me as I define it, are discussing are business enterprises.

Investment in business do not necessarily have to be in established, publicly traded ones.
While it's true, as you say, that listed corporations do invest in R&D, do have seed and angel funds... But by comparison to their revenue or their profit, it is very little, as it should be when you have markets to corner and massive bonuses needing certain "performance" hurdles to be met.

That and with constant, massive, stream of forced savings flowing into the funds. And fund can't just sit there else it rust... certain companies will have their stock price inflated for no other reason than optimism from management with plenty of cash looking for a home.

-------------
Companies getting listed or remove from an index don't always happen to "fringe" companies. Some large and well established ones do get knocked out when the sector gets hated enough.

A recent example would be those engineering/mining services companies. Take MND... I think it's one of the best managed companies out there. Have no debt, good margin, never made a loss (as far as I could remember). Yet its share price crashed from $20s then $5.50s not too long ago. Stayed below $10 for a good part of two years and being knocked out of the top 200 [or 100?].

A fund whose management aren't on auto-pilot might take advantage of that kind of opportunity.

Maybe an index fund generally does better than most managed fund have a lot to do with the fact that it kicked the current losers off its list then add the rising ones on. Since its performance/value is marked to market, it will just do better than those who actively managed and want to hang on to out of favoured ones. Who knows... maybe someone should do a thesis on it. One that will be quoted by all under-performing active managers.

 

[luutzu]

Think of it like this, the entire USA stock market is about $20 Trillion dollars, now imagine we dividend it between rumpole and I (inactive) and you and, Basillo (active)

Rumpole and I took 50% of every company and just held, and you and Basillo divided the other 50% equally between yourselves and attempt to trade between you to secure above average returns.

If we all just sat on our holdings and didn't trade, we would all get the market average return of 7%.

So Rumpole and I sit on our $10 Trillion and earn 7% - so at the end of the year we earn $700 Billion ($350 Billion each, while I am at Disneyland and rumpole worked on his stamp collection)

However you and Basillo want more than $350 Billion each, so you attempt to trade with each other regularly hoping to secure an edge.

but between you, you will only have the same $700 Billion profit rumpole and I split, all the trading you are doing is simply trying to reshuffle the deck so you get more of the $700 Billion and Basillo gets less.

Also, because of all the activity, there isn't really $700 Billion available to earn on your side anymore, because fees and transaction costs ate into it, so you really only have $600 Billion to share.

Sure Basillo might come out on top with $450 Billion, giving him a 9% return, so he beat the average, but that only leaves $150 Billion for you, so you only earned 3%, grossly under performing.

So as a group you're underperforming our inactive group simply because of all the transaction fees, its actually impossible for you two as a group to beat us, even if transaction and running costs were zero you could never beat us, the best you can ever do is equal us, but every transaction cost you face reduces your return as a group further below rumpole and I's idiot proof earnings.

I read that from Buffett too.

It make sense on an intellectual, academic way where you assume that everything beside what you're saying remains equal.

In reality, one action will impact another and nothing will remain the same the moment a big enough decision is made.

So let say Bas and I took control of half the world's corporations while the other half belong to you and Rumpole who will just hold on to it.

For my part, I'll first go and fire all the top level management. Remove all their golden parachutes and ridiculous pay packages.

Will then put management a few level below up to the top; pay 1/10th the price.

Those hundreds of billions, if not trillions, in savings I'll raise workers' wages, put more into R&D, buy few handful of politicians and point them to companies you own that aren't pulling its weight on taxes, environmental protection and saving the children.

With wage increases my employees are happier, more productive, spend more... and you will be forced to match my wage increases or watch the brain drains away. Since you're too busy with Mickey and Minnie, your board and directors aren't going to vote their wages down... so it'll add more costs.

With new massive investment in R&D, poaching university professors and graduates; funding a few dreamers working in their garages... I'll take over the world.

With the few left over I'll also take over Disneyland.

 

[Value Collector]

For my part, I'll first go and fire all the top level management. Remove all their golden parachutes and ridiculous pay packages.

Will then put management a few level below up to the top; pay 1/10th the price.

Those hundreds of billions, if not trillions, in savings I'll raise workers' wages, put more into R&D, buy few handful of politicians and point them to companies you own that aren't pulling its weight on taxes, environmental protection and saving the children.
.

Rumpole and I will automatically benefit from any improvements you make at the companies, because we hold the other 50% of the shares.

But again you are not comparing apples with apples, the idea is simply that on average, holding the index will out perform the average return of all those people that try and actively trade the market to beat the average.

 

[luutzu]

Rumpole and I will automatically benefit from any improvements you make at the companies, because we hold the other 50% of the shares.

But again you are not comparing apples with apples, the idea is simply that on average, holding the index will out perform the average return of all those people that try and actively trade the market to beat the average.

Or I privatised good companies, asset strip them then float 'em back to the market where you indexer will just buy it because it's on the index. The higher the price I put on the thing, the more you'll buy because that's what the index tells you.

But true, if funds just invest in listed/indexed companies they will do worst than the aggregate performance of those companies by virtue of that head i win tail you lose fee structure.

But if those funds were to also invest in private enterprises; set aside a small portion, but serious nominal cash pile, for those angel funds to take advantage, proper advantage, of brilliant people with little to no business or high-finance experience... They can do well above the listed/index average.

I think the reason not enough fund do this is because it's harder to measure "performance". As the guys at AMP recently showed, it's better to just charge people fees for doing nothing (just don't say you're doing nothing. Look busy doing nothing).

 

[Value Collector]

Or I privatised good companies, asset strip them then float 'em back to the market where you indexer will just buy it because it's on the index. The higher the price I put on the thing, the more you'll buy because that's what the index tells you.

Again you are talking about a completely different thing.

However, the global index I mentioned is made up of the worlds largest businesses, you wouldn't be able to privatise the vast majority of them.

The smallest company on the index is $4 Billion, even thats a huge bite for any investment group, but makes up only 0.002% of the index, so I doubt you will make a dent.

Not to mention that such a strategy doesn't automatically guarantee you will beat the index, plenty of buy out firms go bust, or deliver their investors sub par returns.

but if you think you will be privatising the likes of Apple, Berkshire, Microsoft, Exxon mobil, Amazon, McDonalds, Google, Nestle etc etc I think you should head back to the drawing board.


I think the smallest Aussie company on there is flight centre, at a $6.3 Billion market cap, 0.006% of the index.

 

[kid hustlr]

.

VC,

this is off topic but whilst you are around.

I (really) like the cut of your jib and feel I subscribe to your view about 'hold long term, buy good companies, and if the market collapses just buy more' however can I ask what your experience is in this area? Where you actively long all through the GFC?

I guess I wonder occasionally whether I'll be able to stick to my plan when the world is falling over and wondered if you had experience in this area.

 

[luutzu]

Again you are talking about a completely different thing.

However, the global index I mentioned is made up of the worlds largest businesses, you wouldn't be able to privatise the vast majority of them.

The smallest company on the index is $4 Billion, even thats a huge bite for any investment group, but makes up only 0.002% of the index, so I doubt you will make a dent.

Not to mention that such a strategy doesn't automatically guarantee you will beat the index, plenty of buy out firms go bust, or deliver their investors sub par returns.

but if you think you will be privatising the likes of Apple, Berkshire, Microsoft, Exxon mobil, Amazon, McDonalds, Google, Nestle etc etc I think you should head back to the drawing board.


I think the smallest Aussie company on there is flight centre, at a $6.3 Billion market cap, 0.006% of the index.

I thought we're under that imaginary, but really awesome, scenario where Basillio and I own half the world's stocks/companies?

If a person own a company outright, they already privatised it.

Or were you referring to owning only half of all the world's companies?

BUt even then, an active investor owning half could easily control the entire company's management. I mean, the other owner/s are passive and away on holidays right? Murdoch and Packer control "their" various empires owning a whole lot less than half.

 

[luutzu]

VC,

this is off topic but whilst you are around.

I (really) like the cut of your jib and feel I subscribe to your view about 'hold long term, buy good companies, and if the market collapses just buy more' however can I ask what your experience is in this area? Where you actively long all through the GFC?

I guess I wonder occasionally whether I'll be able to stick to my plan when the world is falling over and wondered if you had experience in this area.

It's called being a "stuck-holder"

But I found that during the downtrend, holding onto good companies paying decent dividends... and if the company allow divy reinvestment... such as MND... it tend to work out very well. As long as you don't need the cash from those stucks until it's good and ready.

 

[Value Collector]

however can I ask what your experience is in this area?

I have been invested since 1996,

Where you actively long all through the GFC?

Yes, I made lots of good buys during the GFC, during the GFC is where I adopted my current value approach, I read and watch alot of Warren Buffett etc during the GFC, and it just made sense to me, and have been working at it ever since.

I guess I wonder occasionally whether I'll be able to stick to my plan when the world is falling over and wondered if you had experience in this area.

All I can really say is to focus on the shares you buy as being pieces of businesses, and think about the businesses, not all the market noise.

 

[Value Collector]

I thought we're under that imaginary, but really awesome, scenario where Basillio and I own half the world's stocks/companies?

If a person own a company outright, they already privatised it.

Or were you referring to owning only half of all the world's companies?

BUt even then, an active investor owning half could easily control the entire company's management. I mean, the other owner/s are passive and away on holidays right? Murdoch and Packer control "their" various empires owning a whole lot less than half.

My example was My side owned 50% of all the shares of companies listed on the Market (eg 50% of each company), and your side owned the other 50%, and traded among yourselves.

Not talking about other assets classes, venture capital, buy outs etc, just two common but different strategies used to they and profit from the companies listed on the market.

you claimed seemed to be that passively owning an index of all the companies on the market was irrational, my point was that it is not irrational, but intact is one of the most rational (and profitable) approaches.

For most people, the market average return is where they should be aiming, because most people that try and beat the market average end up paying their helpers a big fee, for results that are below average.

 

[luutzu]

My example was My side owned 50% of all the shares of companies listed on the Market (eg 50% of each company), and your side owned the other 50%, and traded among yourselves.

Not talking about other assets classes, venture capital, buy outs etc, just two common but different strategies used to they and profit from the companies listed on the market.

you claimed seemed to be that passively owning an index of all the companies on the market was irrational, my point was that it is not irrational, but intact is one of the most rational (and profitable) approaches.

For most people, the market average return is where they should be aiming, because most people that try and beat the market average end up paying their helpers a big fee, for results that are below average.

Did you just rigged the rule of that imaginary game where you will obviously win?

It's not that hard to beat the market. Some people say that with a larger pool of fund it gets harder to beat the average... and that is true so far as it's harder to find opportunities at that scale.

To beat the market with small funds is a whole lot harder. Small as in below $100K to $500K.

If a fund manager has, say, ten million at his fingertip... he could invest in a few "OK" companies that return, at the most optimistic estimates, say 10%. With the rest he make bigger bets on those rare opportunities that provide above average, way above, returns.

With smaller funds, an investor can't really "risk" putting their cash into average companies that returns, say 10%. And that return isn't bad either... But with small cash you'd want to wait for that big massive opportunity and ignore the average ones to make every penny count.

And if you make a mistake... or if the market doesn't agree with you long enough... it'll throw your performance metrics out.

In summary, having more money is always better than having little. Worldly wisdom right there.

 

[Value Collector]

Did you just rigged the rule of that imaginary game where you will obviously win?

The game just demonstrates the point I was making from the start.

It's not that hard to beat the market. Some people say that with a larger pool of fund it gets harder to beat the average... and that is true so far as it's harder to find opportunities at that scale.

Again, my point is simply that drivers on average are not better than average.

So if every one sets out to beat the average, the majority mathematically have to fail at it, and considering the additional costs, they will perform worse.

So it makes complete sense that a large portion of invested funds should be passively invested across the entire market and not traded.

If a fund manager has, say, ten million at his fingertip... he could invest in a few "OK" companies that return, at the most optimistic estimates, say 10%. With the rest he make bigger bets on those rare opportunities that provide above average, way above, returns.

You aren't really getting it.

I am not saying its impossible to beat the market, its guaranteed that some people will just through luck, and Warren Buffett is evidence if can be done through skill and the right emotional attitude.

But, what is possible for some is mathematically impossible for the group as a whole.

Your original claim was that index funds are poor methods of investment, I am simply saying that they aren't they are actually a very rational approach.

With smaller funds, an investor can't really "risk" putting their cash into average companies that returns, say 10%. And that return isn't bad either... But with small cash you'd want to wait for that big massive opportunity and ignore the average ones to make every penny count.

I disagree, a small disinterested investor should stick strictly to a broad based index, focus on earning money in the line of work they have an advantage, and accept the market return on their investment dollars.

 

[luutzu]

The game just demonstrates the point I was making from the start.

Again, my point is simply that drivers on average are not better than average.

So if every one sets out to beat the average, the majority mathematically have to fail at it, and considering the additional costs, they will perform worse.

So it makes complete sense that a large portion of invested funds should be passively invested across the entire market and not traded.


You aren't really getting it.

I am not saying its impossible to beat the market, its guaranteed that some people will just through luck, and Warren Buffett is evidence if can be done through skill and the right emotional attitude.

But, what is possible for some is mathematically impossible for the group as a whole.

Your original claim was that index funds are poor methods of investment, I am simply saying that they aren't they are actually a very rational approach.





I disagree, a small disinterested investor should stick strictly to a broad based index, focus on earning money in the line of work they have an advantage, and accept the market return on their investment dollars.

I wasn't referring to passive/disinterested investors.

Your points are correct if we play within your definition. i.e. actively managed funds can only invest in publicly listed companies, thereby only trade among each other on the same group of stocks.

I was pointing out that if, IF, fund managers were to go outside listed companies; go directly into privately-held businesses, or set up their own, or fund new start ups etc. They'd do a whole lot better than merely investing in listed stocks only.

Your point that if they actively only invest in listed stocks they'll perform poorly, or poorer than just index and go fishing.. Doesn't that also support my point that performance would be better outside of the index/listed only option?

If fund managers are serious about their obligation, wanting to both make their clients money and improve the world, they'd be doing more than just buying listed stocks; or invest in bonds and other assets derived from those company's assets.

That's why Buffett have that double barrel approach where he hang onto his cash and wait for the opportunity - both listed as well as privately held corporations. He doesn't do startups and other risky venturse, which is smart... but as you alluded to, somebody got to do it. Maybe it's best that gov't use taxspayers money to fund those geniuses, then the moment they make money it's floated and bye bye to taxpayers potential windfall from risky investments.

 

[Value Collector]

I wasn't referring to passive/disinterested investors.

.

That is who holds the bulk of the billions and trillions of dollars you were referring to

Your points are correct if we play within your definition. i.e. actively managed funds can only invest in publicly listed companies, thereby only trade among each other on the same group of stocks.

Again, it was the funds invested in the listed companies you were talking about.

There is whole industries based around investing outside of the market, however you were referring to the funds invested on the market, and saying that index funds was not a smart way to do that.

I was pointing out that if, IF, fund managers were to go outside listed companies; go directly into privately-held businesses, or set up their own, or fund new start ups etc. They'd do a whole lot better than merely investing in listed stocks only.

They can do that, and the hedge funds that Warren bet against were involved in that, and the index still beat them.

Your point that if they actively only invest in listed stocks they'll perform poorly, or poorer than just index and go fishing.. Doesn't that also support my point that performance would be better outside of the index/listed only option?

No, my argument isn't that the companies listed on the market are bad investments, as I group I think they are good investments, it's the "Gin Rummy" style of trading that product the poor performance.

If fund managers are serious about their obligation, wanting to both make their clients money and improve the world, they'd be doing more than just buying listed stocks;

They do, and they still have trouble beating the market.

Keep in mind that a company that chooses to invest outside of the listed companies, isn't going to necessarily going to find it easier to start a better phone company than Apple or film studio than Disney or fast food chain than McDonalds or aircraft company than Boeing etc etc etc.

The Companies listed on the market are not three legged donkeys.

Many have amazing businesses, so their "average return" will be hard to beat by the "average return" of unlisted companies.

That's why Buffett have that double barrel approach where he hang onto his cash and wait for the opportunity - both listed as well as privately held corporations.

He doesn't trade the unlisted companies either.

You will find his strength is simply buying good businesses and and holding them, not playing gin rummy to try and beat the market.


Watch this video at the 3.00 mark, Buffett currently thinks the listed businesses are better value than the unlisted businesses.

 

[luutzu]

Not sure why "we" (as in you) are arguing over points we agree on.

Yes, for the passive/disinterested investor, I too agree that putting their cash in an Index fund and grow with the (favourite country) or the world is probably the best way to invest. Invest here mean letting other people run the business and not you yourself manage it.

The point I was trying to make, one that got me to owning half the world's stock... was that if professional fund managers, instead of investing only in listed/established stocks, ought to do both private and public investing... take more initiatives and thinking. Maybe invest in those (potential) game changer, invest a lot more in R&D - directly, not through ownership of established corporations. etc.

Yes, there are private companies that aren't as valuable as listed ones; listed companies can be quite exceptionally good in what they do and what they gain for shareholders and the world.

Just that with billions of dollars and as much brainpower as you need... it'd be better to invest further and wider than just the public companies or its derivatives.

That's not saying invest recklessly or just throw money around. But invest more consciously, with aim towards that nation-building project kind of stuff.

There are many ways money can make more money. Stock buyback, paying politicians, bribing their kids, some R&D, not paying taxes and getting away with it, exploiting labour, screwing up the environment and get away with it....

Just saying that if those billions and trillions could be invested more intelligently, with longer term thinking... could change the world.

Take Apple... it literally has more cash now then it knows what to do with. What does it do with the cash? Stash it away in offshore shelters... Got Icalhn a bit titsy he tells them to do sharebuybacks.. and they did. The world's biggest buybacks ever.

Why borrow to do buyback? Tax code says it's a good idea.

Why buyback in the hundreds of billions? Make their stock owners richer.

When's the last time Apple came out with any technological leap? The past decade have seen them playing around at the edges of their products. And why not I guess, as long as it makes money.

But what if they give their employees - no, not the executives - the labourer a pay raise? Better lives for them, more iPhone could be sold too.

 

[Value Collector]

Why is it called "employer contribution"?

Employers simply take waht they would otherwise pay to the employee and send it off to the smart money.

Its called the employer contribution because it is paid by the employer, it is not deducted from the employees wage.

eg. If you earn $20 / hour, your employer must pay you $20 / hour plus an additional $1.90 to your super, the $1.90 isn't deducted from your normal pay, its an additional amount contributed by the employer.

When Super was first introduced, people didn't get a pay cut in their take home pay of 9%, Employers just had to start contributing an additional amount equal to 9% of the employees wage into a super account.

 

[Value Collector]

Not sure why "we" (as in you) are arguing over points we agree on.

Yes, for the passive/disinterested investor, I too agree that putting their cash in an Index fund and grow with the (favourite country) or the world is probably the best way to invest. Invest here mean letting other people run the business and not you yourself manage it.

The point I was trying to make, one that got me to owning half the world's stock... was that if professional fund managers, instead of investing only in listed/established stocks, ought to do both private and public investing... take more initiatives and thinking. Maybe invest in those (potential) game changer, invest a lot more in R&D - directly, not through ownership of established corporations. etc.

What you actually said was this.

With the fees being paid and the billions and trillions they're responsible for, it's pretty reckless and stupid to just mechanically follow these indexing style of managing other people's money

And what I have been pointing out is that using the indexing style isn't reckless, in fact its been proven to be the best method for the bulk of funds.

Just that with billions of dollars and as much brainpower as you need... it'd be better to invest further and wider than just the public companies or its derivatives.

Nothing is stopping people investing else where, but of course the large listed companies is a suitable place to invest, there is no need to abandon the large listed companies they are generating billions of dollars for investors every year, and the indexing method is good low risk way to access it.

When's the last time Apple came out with any technological leap? The past decade have seen them playing around at the edges of their products. And why not I guess, as long as it makes money.

you could say the same for mcdonalds, I am pretty sure they have almost never had great technological leaps, however they generates billions of dollars for their owners, why not have them as part of your portfolio?


Again, no one is saying not to invest out side of the market, you can invest where ever you like, and plenty of mutual funds, hedge funds and venture funds do, even the listed companies are investing outside the market.

But just because its possible to invest elsewhere doesn't mean it's irrational to invest in the market, and if you do decide to allocate some funds into the market, indexing is a very rational approach.

 

[luutzu]

Its called the employer contribution because it is paid by the employer, it is not deducted from the employees wage.

eg. If you earn $20 / hour, your employer must pay you $20 / hour plus an additional $1.90 to your super, the $1.90 isn't deducted from your normal pay, its an additional amount contributed by the employer.

When Super was first introduced, people didn't get a pay cut in their take home pay of 9%, Employers just had to start contributing an additional amount equal to 9% of the employees wage into a super account.

You know that while it's technically, legally, true what you're saying... employers don't actually do that, right?

I know because whenever I pay my brothers their wage, it's whatever they brought in after all other costs incurred. i.e. If the company need to pay super, it pays super then whatever's left is their wage.

Just to show that I am not cheating my brothers, one recently got a small contract where the lead contractor offer two options... going through us, or going thru their company as short-term employee. The employee rate is whatever after super, PAYG etc. is. It's not the case that if he were to be their employee they'll add super on top.

 

[Value Collector]

You know that while it's technically, legally, true what you're saying... employers don't actually do that, right?

I know because whenever I pay my brothers their wage, it's whatever they brought in after all other costs incurred. i.e. If the company need to pay super, it pays super then whatever's left is their wage.

Just to show that I am not cheating my brothers, one recently got a small contract where the lead contractor offer two options... going through us, or going thru their company as short-term employee. The employee rate is whatever after super, PAYG etc. is. It's not the case that if he were to be their employee they'll add super on top.

If you employee one who's award hourly rate is $20, you have to pay them $20 for every hour they work, and then pay $1.90 into their super.

Super is always an additional amount added on top of what ever their wages are.

What you do in your family business is your business I guess, but when dealing with outside employees, if you offer them $20 / hour, you don't deducted super from that, you pay super onto of that.

eg. if the minimum wage is $10, the person will earn $10 + $0.90 super. its always additional.

 

[luutzu]

What you actually said was this.

And what I have been pointing out is that using the indexing style isn't reckless, in fact its been proven to be the best method for the bulk of funds.

For a typical passive investor, yes I did agree that Index fund is probably their best chance for a good return if they want to expose their portfolio to the market/general economy.

I was referring to the professional money managers who simply invest in Indices, or closely track the index. I did say that yes, their non-work work generally beats the more "active" fund managers... but that's the scary bit. To do nothing and beat other more active smart money "pro".

I didn't say that stocks or publicly listed companies are all bad or not worth investing in. Me pointing to other options beside publicly listed stocks just mean those who are supposed to be smart about these things, charging crapload of money for their geniuses... maybe they ought to do more than track the index or actively play with only publicly listed ones.

Then, imagine the kind of returns they, and their clients, can achieve if they take good opportunities wherever it's found (private or public, depends on the quality and price etc.)... That and not having to automatically buy or sell out of holdings when it's added or dropped from an Index.

You know, wait for good opportunities then act. Else go fishing.

The other ways I suggest was that those entrusted with these billions and trillions... instead of just looking at stocks or established companies, put aside a portion of their portfolio to other projects, new industry, new tech.

Nothing is stopping people investing else where, but of course the large listed companies is a suitable place to invest, there is no need to abandon the large listed companies they are generating billions of dollars for investors every year, and the indexing method is good low risk way to access it.

I agree with you there.

I mean, why do you think I'm only invested in stocks? With my five bucks I couldn't even own a parking space in most businesses. Yet through stock holdings, I can point to Santos, Rio, Sirtex etc. and say that I "own" it. Which I do, proportionately.

So stocks, publicly listed companies... it's the best way to make money I reckon. So comrade, we are of the same faith there

you could say the same for mcdonalds, I am pretty sure they have almost never had great technological leaps, however they generates billions of dollars for their owners, why not have them as part of your portfolio?

The world could do with a lot less McDonalds.

Again, no one is saying not to invest out side of the market, you can invest where ever you like, and plenty of mutual funds, hedge funds and venture funds do, even the listed companies are investing outside the market.

But just because its possible to invest elsewhere doesn't mean it's irrational to invest in the market, and if you do decide to allocate some funds into the market, indexing is a very rational approach.

I never said it's irrational to invest in the stock market. I said it's reckless to only invest in the market and only buy or sell according to an index.

Too much of anything is not good for you, right?