Index funds are Communist

[moXJO]

All the whinging in the "biatch about general chat" thread did bring up an interesting subject.
Index funds and passive investing.

I have to admit that I haven't been that interested in trading the local market that much.

I came across an interesting article:
https://www.bloomberg.com/amp/view/...dex-funds-communist?__twitter_impression=true

A claim from sanford c Bernstein:

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.

"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.

The article touches on some interesting points and future direction.
It will be interesting when AI becomes superior to other returns.

 

[luutzu]

All the whinging in the "biatch about general chat" thread did bring up an interesting subject.
Index funds and passive investing.

I have to admit that I haven't been that interested in trading the local market that much.

I came across an interesting article:
https://www.bloomberg.com/amp/view/...dex-funds-communist?__twitter_impression=true

A claim from sanford c Bernstein:



The article touches on some interesting points and future direction.
It will be interesting when AI becomes superior to other returns.

AI will not improve investment management. Neither does active "professional", completely capitalistic "head I win, tail you lose" money management.

How the smart money and their high fees does for investors we already know.

Most might not be aware of how often AI/Algorithm came close to crashing the global financial market. They're at the centre of all the crashes dating back to 1987 - a few years after computing power was unleashed on Wall St.

And socialism is not the same as communism.

 

[sptrawler]

All the whinging in the "biatch about general chat" thread did bring up an interesting subject.
Index funds and passive investing.

I have to admit that I haven't been that interested in trading the local market that much.

I came across an interesting article:
https://www.bloomberg.com/amp/view/...dex-funds-communist?__twitter_impression=true

A claim from sanford c Bernstein:



The article touches on some interesting points and future direction.
It will be interesting when AI becomes superior to other returns.

Well most people's super, is tied up in market linked passive investment, so I guess everyone is caught up in it.lol

 

[sptrawler]

AI will not improve investment management. Neither does active "professional", completely capitalistic "head I win, tail you lose" money management.

How the smart money and their high fees does for investors we already know.

Most might not be aware of how often AI/Algorithm came close to crashing the global financial market. They're at the centre of all the crashes dating back to 1987 - a few years after computing power was unleashed on Wall St.

And socialism is not the same as communism.

You are right on to it.

 

[Smurf1976]

My view on index investing is that it will come to be regarded in similar vein to 1990’s .com stocks and 2000’s subprime US mortgages.

I’m not predicting an imminent market crash but it’s inevitable there will be a decent downturn at some point. That’s just how markets work.

I expect that the next proper bear market, whenever it comes, will be blindingly fast compared to all before it.

With index funds and algorithmic trading now accounting for the overwhelming majority of share trading volume in major markets (notably US), it raises a very serious question.

When the tide turns, the algorithms start selling and we see money flowing out of index funds then who, exactly, are they going to sell those stocks to?

Who do you sell to in that situation?

Who?

And what exactly does occur when the index funds must sell, due to net redemptions, and the only buyers are offering token prices? Will the trade even go through?

The situation is an incredibly volatile one in my view. All good so long as no fire starts.....

 

[luutzu]

You are right on to it.

No one take my investment insight seriously in real life. I think it's because they don't see me being at all rich or something

That and maybe they have an image of me being good at labour so I cannot possibly know what the heck I'm talking about when it come to the higher art of investing... that and I drive around in a Suzuki freakin Swift.

Seeing a fair number of bad decisions, I told my wife that... you know, we'd be really rich if we had some money.

She was chuckling too much to appreciate the insight of that one too

 

[luutzu]

My view on index investing is that it will come to be regarded in similar vein to 1990’s .com stocks and 2000’s subprime US mortgages.

I’m not predicting an imminent market crash but it’s inevitable there will be a decent downturn at some point. That’s just how markets work.

I expect that the next proper bear market, whenever it comes, will be blindingly fast compared to all before it.

With index funds and algorithmic trading now accounting for the overwhelming majority of share trading volume in major markets (notably US), it raises a very serious question.

When the tide turns, the algorithms start selling and we see money flowing out of index funds then who, exactly, are they going to sell those stocks to?

Who do you sell to in that situation?

Who?

They sell among themselves. Front running each other, margin calling one another all the way down in a real hurry. Then some human intervention took place to stop the computer from an infinite loop.

Even a guy like me is starting to notice it in a few stocks I happen to looked into. There's been about five stock [not the market, individual stock] crashes that I witnessed past two years.

Hikma, Piersons, McColls in the LSE.

Sigma, Sirtex, Santos a few years back...

Might present great opportunities now and then though. So hurrah for AI.

 

[sptrawler]

No one take my investment insight seriously in real life. I think it's because they don't see me being at all rich or something

That and maybe they have an image of me being good at labour so I cannot possibly know what the heck I'm talking about when it come to the higher art of investing... that and I drive around in a Suzuki freakin Swift.

Seeing a fair number of bad decisions, I told my wife that... you know, we'd be really rich if we had some money.

She was chuckling too much to appreciate the insight of that one too

You're sharper than a thai chilli, I just find the posts don't really seem to help someone looking for guidance, but maybe that is the desired result. .

 

[luutzu]

You're sharper than a thai chilli, I just find the posts don't really seem to help someone looking for guidance, but maybe that is the desired result. .

People seek investment guidance from internet forums? Why?

Whatever happen to AMP, CBA advisors?

 

[sptrawler]

People seek investment guidance from internet forums? Why?

Whatever happen to AMP, CBA advisors?

Nothing, they will bounce back when silly billy gets in and stops people investing their own money, because they will be penalised for investing in their SMSF.
The last thing Billy wants, is people looking after their own money, much better having the union looking after it and he can't be seen to be favouring so the retail funds will mop up also.

 

[luutzu]

Nothing, they will bounce back when silly billy gets in and stops people investing their own money, because they will be penalised for investing in their SMSF.
The last thing Billy wants, is people looking after their own money, much better having the union looking after it and he can't be seen to be favouring so the retail funds will mop up also.

He does? Fund Managers have unions?

Sounds like he's just looking after Martin Place.

That and people shouldn't start believing that they too can lose their own money like a pro.

 

[sptrawler]

He does? Fund Managers have unions?

Sounds like he's just looking after Martin Place.

That and people shouldn't start believing that they too can lose their own money like a pro.

Or spend it it like a loser, instant gratification hit, with welfare safety net.

The only problem, it makes you feel a bit sick, spending money just for the sake of it. It really is a sad World.

 

[PZ99]

He does? Fund Managers have unions?

Sounds like he's just looking after Martin Place.

That and people shouldn't start believing that they too can lose their own money like a pro.

Other way round. Unions have fund managers. For example LUCRF super is owned by NUW.

For decades the unions had EBA's with exclusive deals where your super was compulsorily directed to a fund owned by that same union. You couldn't choose your own fund. So even if you weren't a union member you were still sponsoring them (and therefore the ALP) with super fees etc.

http://workplaceinfo.com.au/payroll...hoice-of-super-fund-apply-to-enterprise-agmts

Of course, they're not index funds as per the topic but they work the same way. I'm all for union membership but there has to be freedom of choice. Not Kommy deals like the above.

 

[PZ99]

PS: In case the link is paywalled...

Spoiler

Does ‘choice of super fund’ apply to enterprise agmts?

By Paul Munro on 22 March 2013
If an employer has a specified industry super fund under its enterprise agreement, does this override the choice-of-fund provisions in the Superannuation Guarantee legislation?

This question was recently sent to our Ask an Expert service.

Q Our company employs the majority of employees under an enterprise agreement.

The agreement stipulates a specific industry superannuation fund into which employer contributions will be made as required under the Superannuation Guarantee (SG) legislation.

The agreement was approved by Fair Work Australia last year.

An employee has approached management insisting the SG employer contributions must be made to the superannuation fund of his choice, which happens to be a different compliant industry superannuation fund.

He claims he is entitled to choose the fund because of the choice-of-fund provisions prescribed by the relevant SG legislation.

He also stated that his right of choice had been complied with by the employer with respect to all his previous employment.

Does the relevant SG legislation override the provisions of our enterprise agreement?

A A contribution to a fund by an employer complies with the choice-of-fund provisions under the Superannuation Guarantee (Administration) Act 1992 (Cth) (s32C) where a contribution, or part of the contribution, is made in accordance with certain industrial agreements.

One such agreement that is exempt from the choice of fund provisions under the relevant SG legislation is an enterprise agreement made under the Fair Work Act 2009. This is considered one of the advantages in having such a term regarding superannuation in an enterprise agreement.

In this case, because the employer is complying with the terms of an enterprise agreement approved under the Fair Work Act, the employee does not have the right to choice-of-fund provisions with respect to SG employer contributions.

Other agreements exempt

The relevant SG legislation also refers to the following agreements as exempt from the choice-of-fund provisions under the SG legislation where the employer contributions are made in accordance with the terms of the applicable agreement, including:

• a workplace determination issued under the Fair Work Act
• an Individual Transitional Employment Agreement (ITEA)
• a collective agreement
• a notional agreement preserving state awards (NAPSA), and in respect of salary or wages paid before 1 July 2006
• a preserved state agreement
• a state industrial award
• an Australian Workplace Agreement (AWA)
• a pre-reform certified agreement
• a Div 2B state instrument
• an old IR agreement

 

[moXJO]

And socialism is not the same as communism.

Just went with a clickbait title.

The rise in passive investing is obviously affecting managers bottom line. Given they like the fees active trading brings, it's no wonder they are having a cry.

As for AI it will change the market, as will quantum computers (when they iron out the kinks).

The options market had a decline in australia. It was tradeable early 2000 and then seemed to dry up. I'm not sure if it has come back at all recently. They did change parcel size from 1000 to 100 lots.

 

[luutzu]

Just went with a clickbait title.

The rise in passive investing is obviously affecting managers bottom line. Given they like the fees active trading brings, it's no wonder they are having a cry.

As for AI it will change the market, as will quantum computers (when they iron out the kinks).

The options market had a decline in australia. It was tradeable early 2000 and then seemed to dry up. I'm not sure if it has come back at all recently. They did change parcel size from 1000 to 100 lots.

Yea, brokers and active fund managers don't like lazy investors much. The "active" managers don't like AI much because a computer is way faster, and better, at apportioning large chunk of cash all over the place.

I wouldn't say ever, but AI could never make intelligent business investment.

They're unbeatable when it come to number crunching, pattern recognition and making sense of big data etc., but from what I understand of investing... there are just too many individual, company specific facts, accounting definition, managerial interpretation etc. that a super computer's power become pretty much useless.

 

[luutzu]

Other way round. Unions have fund managers. For example LUCRF super is owned by NUW.

For decades the unions had EBA's with exclusive deals where your super was compulsorily directed to a fund owned by that same union. You couldn't choose your own fund. So even if you weren't a union member you were still sponsoring them (and therefore the ALP) with super fees etc.

http://workplaceinfo.com.au/payroll...hoice-of-super-fund-apply-to-enterprise-agmts

Of course, they're not index funds as per the topic but they work the same way. I'm all for union membership but there has to be freedom of choice. Not Kommy deals like the above.

That's kommy-capitalism

 

[Tisme]

As for AI it will change the market, as will quantum computers (when they iron out the kinks).

This is where we are going to see a situation similar to social media, with algorithm programmers creating filters to handle bubbles created by other proprietary AI algorithms, products that create echo chambers and others that counter that with more filters or logically alternate/opposing views.

Presumably govts will insist that AI investment has adequate protections for investors and funds, which means it must cater to social expectations and by extension social media.

I will make a prediction here and suggest that when AI gets going there'll be farcebook accounts set up for each product and they will start arguing the toss amongst themselves, eventually garnering an admiration league of SJW types who want marriage equality for cyber bots.

 

[SirRumpole]

This is where we are going to see a situation similar to social media, with algorithm programmers creating filters to handle bubbles created by other proprietary AI algorithms, products that create echo chambers and others that counter that with more filters or logically alternate/opposing views.

Presumably govts will insist that AI investment has adequate protections for investors and funds, which means it must cater to social expectations and by extension social media.

I will make a prediction here and suggest that when AI gets going there'll be farcebook accounts set up for each product and they will start arguing the toss amongst themselves, eventually garnering an admiration league of SJW types who want marriage equality for cyber bots.

Should index funds be banned in that case ?

 

[Tisme]

Should index funds be banned in that case ?

Deep machine learning still relies on patterns and decision making to reduce the determined degree of error, through aggregation of many partial truths or falsehoods to a achieve a desirable setpoint. The hard truths need to be established to measure the magnitude of partial truths and as we see here in ASF one person's truth is another person's lie and so essentially the closer AI gets to human intelligence the more a logical truth guess becomes a punt.

I see this in automation, where I identify a desirable outcome and utilise fuzzy logic instead of, say, a one input variable algorithm employing proportion, integration and/or derivitives to solve an error. The questions that need to be addressed are complex e.g. is the magnitude of error exponential, harmonic or linear, is it repeatable, is it of consequence;

worse is it entropic that will honour the laws of chaos and lead to maximum disorder and randomness = will it become idiotically human?