They are, but SpaceX is trying to get rules changed. They want the index to buy at a multiple of the float, so they release say 5% but get bought as if they had released 15% float. They also normally wouldn't be eligible for index inclusion for ~1 year, after showing multiple quarters of good stewardship, etc. They're trying to bypass all that
It has plenty of useful control plane features out of the box. Nothing much you _couldn’t_ do yourself but you don’t have to. Or with Headscale as the self-hosted open-source version
Yeah, that’s the idea. The loans get bundled up and resold to insurance companies, pension funds, and retail bond investors.
Funds are plenty willing to lend other peoples money to get guaranteed dividends and fee payments and not be left holding the risk. Retirement funds are the bag holder - but they won’t realize till later.
There’s structural pressure to buy from PE because insurance/pension is designed as fixed payout requiring say 7% yield forever. In a world where investment-grade bonds pay 4% and demographics are shifting from net-inflow to net-outflow, liquidity is _tight_. Meanwhile PE was promising 10% a year or whatever (someone call Madoff…) so that was preferable to the hard conversations of the funds failing. At the cost of kicking the can down to the road and making it worse in the future.
If this sounds like 2008 that’s because it is. But bigger and worse, and happening in wayyy more than just mortgages this time.
It's worse than that, because S&P500 and Nasdaq100 share stocks. Like all of the MAG7 stocks. So if mag7 stocks dip because they're being structurally sold to buy SpaceX, then the S&P500 goes down too.
Arguably even worse because at least Nasdaq100 would have SpaceX in it that's getting bid up to offset the losses in other stocks. S&P won't have SpaceX right away. So it just goes down.
And the more those stocks go down, the lower their market cap - which means next rebalancing date they potentially get re-weighted again causing a bit more selling, etc. Presumably the companies that can will counter this with more buy-backs to keep their share price propped at an acceptable level (?).
Yeah, but the S&P500 is hugely concentrated in MAG7, which are all Nasdaq listed. So when they all get sold to buy SpaceX, you can bet your butt something's gonna happen to a S&P500 ETF.
SPY is somewhat concentrated in mag7 (or the other 93 stocks in QQQ), but only a small percent of mag 7 are owned via QQQ, which has 400B aum. (Mag 7 is 19T.)
The bottom line is all this fuckery is a tiny blip for most investors. It's far more concerning to me the societal harm that will come from further enriching Elon.
There's trillions of dollars sitting in indexes that are quite literally 'passively' invested. Virtually everything holds this bundle in one way or another. Passive indexing has both outperformed and overtaken active investing - leading a lot of money into VOO/VTI/QQQ/etc that track the S&P500 or some other index ("the market"). For retirement funds like 401ks, retail contributes money every paycheck that gets routed into these indexes. There may not even be much of a choice - your 'plan' may only let you pick some kind of "Target Date Fund" and then the institution picks what it goes into, usually indexes.
If you fully actively managed your own money and picked mostly individual stocks (not broad indexes) then yeah you could change your allocations. But there's a lot of money already in.
QQQ is problematic because it’s influenced by strange back room dealings with Space X, if the article is to be believed.
VTI is different. It literally tracks all public stocks, weighted by market cap so no such manipulation is possible.
If a bunch of people will be forced to buy Space X (QQQ holders), active investors will short the stock in anticipation of market correction and money will flow from those who were forced to buy. I’m sure there are other ways to take advantage of a forced buyer situation.
Total market will be unaffected, assuming efficient market hypothesis / no arbitrage.
QQQ is not in isolation. It’s just a bundle of stocks. Rebalancing that will affect the prices of its constituent stocks, which include some of the highest market cap stocks. Those same stocks are also in many of those other popular market-cap weighted indexes (VTI, VOO, SPY, etc). Price action originating from Nasdaq 100 rebalancing would affect everywhere else those stocks are held. Which is a lot of places.
Except those other indexes won’t have SpaceX. Suggesting any index price moves would be … asymmetric at best.
Now it’s being reported that they’re angling to get SpaceX in the S&P 500 index as well [1]. Maybe if all the indexes get it then it balances out everywhere, who knows. This whole event would be in beyond unprecedented territory.
Are you saying that this forced rebalancing will be large enough to cause a large price drop on other stocks?
Let’s just think about any stock in particular, eg stock ABC. If I am an active investor, I have an opinion on ABC and its net present value. When ABC dips below that value, I buy. Wouldn’t I prepare some cash in anticipation of this large ABC sell off at discounted prices? And thus the ABC price would not move from its fair price.
Most indexes will be affected. Two of the most common indices - the S&P500 and DJIA - are cross-exchange and include Nasdaq stocks. The biggest market cap companies on the market (MAG7) are all on the Nasdaq exchange and comprise about 35% of the S&P.
Is this grey cause it's wrong? They are all on Nasdaq; and also around 35% of S&P. What am I missing? Is it that the "Most indexes" part is wrong (cause there are more than a few thousand ETF)?
Nasdaq, Inc. is a company with a stock market ("the NASDAQ") and an index "Nasdaq 100"). They want SpaceX to be listed on their market, because they like having more things on their market for all the usual reasons. They are, apparently, offering to manipulate their index to win the listing.
Accordingly, anything that uses or tracks this particular index (Nasdaq 100), such as the QQQ fund, will potentially have to pay for this manipulation.
Anybody not holding or indexing to the Nasdaq 100 index contents will not particularly care and will not really gain or lose any more money than on an ordinary trading day. In particular, this will have zero effect on stocks that merely trade on the NASDAQ exchange.
Indexing to the Nasdaq 100 is pretty uncommon, outside of QQQ, so most people will not care.
What?! This absolutely affects more than Nasdaq 100 / QQQ.
The index is just a function of the stocks. It only moves if the underlying stocks move. Rebalancing Nasdaq will cause selling in the 100 companies that aren’t SpaceX. And those stocks are held elsewhere too…
The Nasdaq 100 shares 79/100 stocks with the S&P. So if those stocks move (probably down because they’re being sold so SpaceX can get bought) pretty sure that's gonna affect anyone exposed to those companies. Whether that’s directly or through other index ETFs. Many of which have a huge concentration in Mag7 right now, for example.
What you're saying is 100% correct, I fail to see how people are not aware of it.
We're talking about a $1.75 trillion (as per the article) company that is about to enter (a part) of the most important capital market in the world at a distorted price, of course that the market as a whole is going to become distorted, money and capital (and the accompanying money and capital signals) are one of the most "liquid" things in a modern economy (if not the most liquid), once you start putting a wrong price tag on them then those accompanying money and capital signals will for sure start doing their thing, imo that was one of the main lessons we should have taken from what happened back in 2008-2009.
Sorry, a lot of the comments around this have been really badly written and it's been hard to tell what they're actually arguing.
I countered a different argument (which does appear elsewhere in this thread). You are absolutely right that there will be general price distortion from this mess. I disagree that it will be extremely bad, but I do agree that it's a problem and needs attention. It's just been difficult to tell that this is what some comments have meant to discuss, instead of the more basic issues others have been talking about.
I don’t see that in the article. The only thing I see is about S&P is where they mention that the S&P 500’s rules would prevent this manipulation if SpaceX were added to that index. But that’s not being proposed.
Index funds divvy up money into stocks, in this case weighted by market cap. More market cap = bigger slice of the pie.
SpaceX wants to instantly jump near the top of the pie - capturing tons of the money in index funds for itself, and also therefore taking it away from other companies stocks.
SpaceX (and others like OpenAI, Anthropic)'s private market cap valuation is so high that if they IPO they would instantly jump to the top of the entire stock market. This has never really happened before. By the rules, funds would have to suddenly start buying a huge weight of SpaceX stock - and sell NVDA/AAPL/GOOGL/everything else - to achieve the new balance.
Normally there are rules on how fast a new company can get included in the index. You usually have to be on the market for some time, demonstrate consistently high valuation, etc etc. SpaceX wants to skirt this and jump straight onto the index (near the top).
Further, the rules also usually weight you according to how much of your stock is actually on the market. If you only sell 5% of your company, you only get weighted at 5% of your market cap. SpaceX wants a bonus multiplier so even though they'll only make 5% of their stock available for sale, they want to be weighted in the index as if it was say 15% available. Aka over-bought / boosted price.
This creates both mechanical forced buying and artificially constrained supply. Likely sending the price to the moon, not based on fundamentals but based on gaming the index rules.
Then, once insider lock-up periods are over in a few months, SpaceX can choose to release even more shares - say jumping the available shares from 5% to 100% - which will unleash their full market cap (now even further inflated) and thus capturing even more of the money in index funds.
Index funds being 'passive' guarantees there will be buyers for SpaceX employees and executives to sell their shares to, likely at exorbitantly over-valued prices. At which point they wash their hands of the valuation and your retirement account becomes the new bag holder who has to worry about whether SpaceX is actually worth what you just paid for it.
> Just buy everything you can on day1 and go along for the ride?
What does adding demand to something with a very limited supply do to the price? You won't be subverting anyone's plan here - you're just hoping for a greater fool[1] will buy from you later, if you buy at inflated prices on day 1.
Maybe use your lunch money to buy day 1 and sell just before the lockup period expires? And rebalance your actual retirement accounts into funds that will not get forced into this game.
So the next question becomes: is there anything out there that’s like an almost-index? Like something that acts like a passive index fund, except when acting like an index fund would be obviously idiotic (for e.g. if following the rules suddenly becomes “invest everything in Elon Musk and pray he doesn’t bankrupt you with a tweet), the person in charge has the discretion to say “doing that would be stupid, no?”
reply