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re: Michael Burry calls passive investments/index funds a bubble
Posted on 9/6/19 at 11:21 am to LSUtoOmaha
Posted on 9/6/19 at 11:21 am to LSUtoOmaha
quote:
Maybe he simply means that people have no real regard for what they are buying?
I agree with this. I've posted on here, and there are many articles reporting this, that 14% of the companies in the S&P 1500 are considered "zombie" companies - basically a company that can't make it's debt obligations without taking on more debt. That's a massive percentage of the index especially considering the FAAMG stocks is such a large portion of the market at this point...
The fact is people are disregarding earnings, debt levels, corporate governance, etc in order to buy the indexes. There is no regard for the underlying fundamentals - only that "if you'd have bought the index 50 years ago your returns would be better than 80% of actively managed funds." I can see how that will sting in the next real downturn when indexes have to unload their MSFT and AAPL because, well, they have to sell.
1
Posted on 9/6/19 at 4:23 pm to UpstairsComputer
quote:I don’t understand your argument here. There there is plenty of people, funds, money, etc. who are not doing any of this, like it’s been done forever. Unless the growth trends, market cap distribution is somehow different than the fundamentals would suggest historically, then what basis do you have for this?
The fact is people are disregarding earnings, debt levels, corporate governance, etc in order to buy the indexes.
Furthermore, how exactly does someone investing in the broad indexes, impact anything within the market, between the individual stocks?
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