54 sats \ 1 reply \ @sb 24 Jul 2022
"Everyone knows that “past performance is not indicative of future results”, but nobody believes it. In the case of index funds, it has been indicative. Index funds are a reflexive asset: because US funds have attained consistent returns, retirement money pours in, driving asset inflation and more buyers."
This is beautifully written.
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driving asset inflation
Indices driving asset inflation has pretty much been debunked:
  • If it was true we should se a cliff in valuations compared to profits between S&P500 and 501-1000. But there is none
  • It also makes no sense. When markets become less efficient (which would be the case from index distortion) the incentivization to arbitrage these inefficiencies away becomes greater.
  • index ETFs are insignificant for price action compared to active hedge funds or banks moving in/out of individual stocks.
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