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pale_blue_dots t1_j2z9wa8 wrote

Reply to comment by TrueBirch in 2022 Asset Return [OC] by rosetechnology

I'm not arguing against that necessarily. Sure, that is good to do and know as an option. It's also good to be aware of the other mechanisms and functions that may be at play.

At the bottom of this comment is a research paper that speaks to the importance of having a robust, honest, factual, accurate corporate voting system if you're interested. If we don't have that, then (as you can read from that paper), companies can be entirely destroyed or "forced" to do things that the majority do not want done/performed. It goes against the very foundation of democracy and voting.


TrueBirch t1_j32zfjo wrote

That was an interesting article. From a corporate governance perspective, it's very bad. I look at things like Apple's multi-billion dollar headquarters and wonder why they didn't shave a billion off the cost and issue a dividend instead.

For typical people with a few grand in the bank, using a broker and an index fund remains good advice. Especially when you can get a tax benefit (401k, HSA, 529, etc).


pale_blue_dots t1_j3347uz wrote

In some ways, maybe, sure. But people need to understand that shares held with a broker means you don't really own them - they don't have your name on them and, subsequently, they can (and, statistically, will) be used in convoluted schemes by the army of quants/greedy psychos/"kids"/algorithms/naïve/etc... working at hedge funds, investment banks, and the like - such that value is lost and consolidated in fewer and fewer hands.

When there's talk about "wealth inequality" this and that and "rich getting richer" and "CEO pay has risen X amount while workers' wages have remained flat" - these are some of the major, key mechanisms by which that is happening.

The problem with "phantom shares" born of lending, shorting, and failure-to-delivers isn't only relegated to corporate governance and voting as you may/are thinking. It means companies can be destroyed or dubiously changed -- that means lives, livelihoods, families, pensions, retirements, and more are destroyed, changed, malformed, and so on.

Average shareholders think their company has XYZ shares, but really there are XYZ10 shares - as such the value has been unjustly (and sometimes illegally) degraded.

If you didn't see it already, this speaks to the issue, as does this, and here, too which is a little more specific, but laid out in pretty easy to understand terms.


TrueBirch t1_j334r8g wrote

The real question is how people can invest who would otherwise keep extra cash in their savings account. An index fund exacerbates some bad behaviors, but it preserves value better than keeping cash, which is how most people are taught to save when they start working.


pale_blue_dots t1_j33eteu wrote

You mean enticing people to invest that otherwise would not / who are just putting it in savings?

Aside from that, yeah, I don't disagree that index funds are good in many respects.

Within context of this discussion, they would be performing better for individuals and the pensions and so on without all the legal and illegal lobbied-for loopholes that result in skimming and manipulation. It could be effectively argued through the links here and a few others (and, for example, a book titled Naked, Short, and Greedy that lays a lot of this or very clearly, in both data and abstractly) that the middle and lower classes have been... robbed... of billions and billions and billions (and billions) of dollars over the past decade alone.