> ...the fact they are losing money to climate change is pretty irrefutable evidence.
Insurance prices risk. If risk goes up, so do prices. They will not lose (much) money (or not for long) [1], your insurance will just get a lot more expensive, maybe to the point you can no longer afford it. If the government tries to control prices, then insurers will just exit the market, or the only entrants will be severely under-capitalized, merely providing the veneer of insurance (e.g., because your mortgage lender requires it). This is already happening in Florida and Louisiana [2]. These insurers will simply go bankrupt in the event of a catastrophe, and you will be stuck with the loss.
[1] Technically, in a competitive environment, many insurance companies will operate with a (small) underwriting loss, but they make up the difference by investing the float during the time between when they collect the premiums and when they pay out on claims. They will not operate with an unbounded loss.
How do you price in whole mountsin regions beeing in for repeatet flooding events basically forcing continuous rebuilds and thus having way overpriced houses? How do you price insurrance on objects that shouldnt exist ?
> To this day, I am still kind of confused with that move.
I do not think that this was that confusing. People [1] looked around at the beginning of the 2010's and saw
1) Mobile usage was growing exponentially and desktop was... not [2].
2) Every mobile OS shipped their own browser by default, or even went so far as to prevent other browsers from being used at all (iOS) [3].
3) Because Android and iOS both had non-trivial marketshare, neither could be called a "monopoly" so there was no way to use anti-trust law to get Firefox on devices as was done with Windows (not that this would have been a compelling strategy even if it were possible).
People took that set of facts and concluded Mozilla needed its own mobile OS in order to stay relevant.
What they underestimated was the amount of investment needed to make such an OS and get it on devices and the amount of time it would have to exist in a state of not being very good before it could compete with the established players (who were not standing still... people forget how bad Android was in the beginning). But if you look at the actual world we ended up in, with no mobile OS from Mozilla and a total Firefox marketshare that is less than desktop Safari's, it is hard to say that initial conclusion was incorrect.
[1] Full disclosure: I was a Mozilla employee at the time, though not involved in any of these decisions.
[2] I would say "desktop was shrinking", but to everyone's surprise it actually remained fairly steady in absolute numbers, although it did become a smaller slice of a much larger pie. In 2010 everyone expected it to shrink, though.
[3] Mozilla did ship a re-skin around mobile Safari to try to get some brand presence, but was still at the mercy of what web standards Safari chose to implement, and you could hardly call it a first-class experience. Eventually iOS loosened their rules, but no one could have predicted that back then.
> 3) Because Android and iOS both had non-trivial marketshare, neither could be called a "monopoly" so there was no way to use anti-trust law to get Firefox on devices as was done with Windows (not that this would have been a compelling strategy even if it were possible).
I don't think its true that there was no way but rather there was no will.
Thanks for the explanation, and thank you for your work at Mozilla. I guess what I'm saying is that I wish Mozilla could have just focused on the browser.
Any multimedia project trying to support a large number of formats, whose usage in the wild differs by orders of magnitude, is going to have code of varying quality (although quality is not strictly correlated with usage: age and complexity are also big factors, among others). GStreamer puts plugins into different categories (-good, -bad, etc.) based on things like the maturity of the code, which helps you judge what risks you are taking. With FFmpeg it is harder to know which formats are more likely to have issues. Of course GStreamer can use FFmpeg, in which case you will also have all of FFmpeg's problems.
In both cases you are best off restricting things to what you actually use.
> I found S&P 500 Equal Weight to be pretty attractive.
The rebalancing required to maintain equal weights means constantly selling your winners and buying more of your losers. That creates volatility drag. Stock returns are highly skewed: only about 4% of stocks outperform the market, and are responsible for most of its gains. By keeping your allocation to those stocks small through constant rebalancing, you are missing out on a large part of their gains. The vast majority of stocks underperform.
Maintaining the equal weighting also requires constant trading, which generally means higher fees. A market weighted fund, in contrast, naturally maintains its desired balance in response to price movements, without any trading.
Also, the equal weighting ignores the amount of outstanding float for each company. If the fact that NASDAQ has not (historically) been float-adjusted (a common anti-SpaceX talking point) gave you concern, this is even worse, due to the multiple orders of magnitude difference between the largest and smallest companies in the S&P. If enough money enters the equal-weight index, this can spark large amounts of buying in (relatively) small companies that is divorced from their economic performance.
The equal-weight index has outperformed the market-weighted index in some periods (not in recent memory), but with higher volatility (so worse risk-adjusted returns). That outperformance can mostly be explained by factor tilts implicit in the equal weighting (e.g., a higher allocation to mid-cap value stocks).
You would probably be better off with a mix of market-weighted funds explicitly designed to give you the factor tilts and risk exposure you want.
This isn't financial advice, but if they dropped 40-50%, things like consumer staples would go up. In fact, they did this Friday, when everything else melted.
The best defensive stock for those situations is WMT, but you can think of other similar names as you reason through the why. That's where I'd go. There are many ETFs such as VDC (Vanguard Consumer Staples).
If you don't want to be so defensive, you could go VTV which is basically "large cap value stocks" so it still includes some Tech like Intel but it's way more diversified into other industries.
Gold is more inflation-related, so I wouldn't go there, at least not for the 40-50% draw down scenario you're describing.
I think a tricky thing is names like WMT, COST, TJX already have high p/e ratios.
You could usually try utilities or energy but those are also high due to AI buildout & Iran.
I think gold could make a come back since it's beating down a bit this year. Treasuries or just a reasonable hedge with puts against your holdings may be the best bet.
Of course none of this is financial advice & is just open discussion looking for thoughts.
Yeah, that all makes sense, great points. I agree utilities and energy are already high. As usual, the answer is probably that diversifying a bit to get exposure to all of the above is likely the right move, but that depends on one's appetite for risk and personal views on when the downdraft risk materializes
Small cap value did well in the 2000 tech crash and SP600 (small cap) doesn’t have many direct datacenter or AI exposed names compared to large and mid cap indexes. But given the scale of capex across the US they aren’t immune from secondary effects.
I think there are no safe harbor investments at this time. Even gold is unpredictable.
Personally I went 80% world excl US and 20% equal weight S&P500 to hedge against what I think is an AI bubble. But if the market decides to adjust Nvidia's valuation 20% downward next week, I expect there to be ripple effects throughout the economy.
(Like the .com bubble, I think the tech is genuinely transformative and here to stay, but the valuations are just ridiculous.)
I think you're missing the feature of equal-weight index that your parent comment is attracted to—which is a sense that the market generally is out of balance toward AI investment at the moment and that there's a correction coming, which the equal-weight index will have less exposure to.
Your concerns sound valid provided things continue on as they have (I'm not a financial advisor and this is not financial advice) but the commenters above you are specifically worried that it's not going to do that. In which case, the disadvantages you point out of the equal-weight index will be handily outweighed. If an AI bubble popping causes the market-weighted funds to suffer, it doesn't matter that we've avoided trading fees along the way.
Company performance doesnt follow a uniform distribution where each company is as likely to overperform as any other. Selling companies that are run well because their stock went up is a great way to miss out on a lot of money.
> If AI tokens were so magical in creating new value in developing software applications generally, they wouldn't be selling tokens directly.
If hardware were so magical in creating new value generally, TSMC would be designing the chips instead of selling fabrication as a service.
That is what US chip companies used to do, by the way (back when there was silicon in Silicon Valley, before they got their lunch eaten by Taiwan). If TSMC had to design all of the chips they fabricate now, they would be doing a lot less business. Conversely, if any other company that wanted to design a chip had to build their own cutting-edge fab first, NVIDIA would not exist.
It is not just the passive money. Many active managers are benchmarked against those indices, and you do not want to try to explain to your clients that you lagged in performance because you did not buy these stocks when your benchmark did. Sitting out would be taking a huge risk (of losing your job, which is important to you, as opposed to losing your clients' money, which is less important if your benchmark also lost money).
As of January, TSLA was somewhere around 2.3% of the S&P [1]. Because SpaceX will have so little float available, it would be somewhere around 0.7% if included.
It's only a problem for the ones left holding the bag. I'm at an all-time low allocation percentage in the US stock market and considering pulling more out still. Full on casino vibes at this point.
It's doubled in five years while inflation's gone up by 30+ percent. Where exactly is there to hide? Not gold - that peaked and went down a lot. Let's not talk about BTC, either.
Real estate? You've got taxes on that in the US, it's how our governments can pretend to not tax us as much as in Europe while still taxing us as much as in Europe (property tax goes to schools)
I mean, gold is up significantly more than then broad market since Trump took over, but that doesn’t mean you should gamble on it continuing.
I don’t trust real estate either. Seems like anything with a middleman is setting record levels of grift right now. I don’t trust the industries reports. No one is regulating or checking numbers.
I shifted into more bonds. Probably a bit early, but I’m not a pro. I’ve just lost trust in the market which no longer seems tied to reality or at least my limited understanding of reality. Staying in it just feels yolo atm.
> The fact that the indexes don't have our back is a huge problem
how could an index fund possibly have anyone's back? It's in index of the top 500 publicly traded companies. that's all. If SpaceX or Tesla or Anthropic or anyone else fall out of the top 500 then they fall off the index by definition.
I think a lot of these comments are coming from extreme emotions associated with AI and Elon Musk and not so much the way things work and will play out.
No, that's not all. They had additional criteria that they changed right when big-name companies wanted to get added. Now, if they had historically gone by pure market cap, and these companies met that, then you'd have a point.
We solved pensions. People have defined-contribution plans now. I would expect insurance float to dwarf pensions as a source of PE funding.
The real reason PE exists is because it charges high fees. The financial industry does not make products to serve customer needs, though by happy accident that sometimes happens. It makes products to charge fees. Index funds removed a big chunk of the fees that active mutual funds used to charge, so financiers went looking for a replacement.
Even if you snapped your fingers and all remaining pensions (and insurance float?) disappeared, PE is aggressively going after individual retirement accounts, now. Most insidiously, trying to work their way into the "target date" funds that are the defaults for most plans. So "solving pensions" will not make PE go away.
...no. It doesn't even matter what the rest of the words in the question are. Just no, lol.
> They need to be paid out somehow.
No they don't. Lots of pensions, especially the not-gilded ones, go bankrupt.
In fact, that's precisely what happens to pensions of companies that are acquired by PE. The company gets stripped for parts, it goes bankrupt, and PBGC covers a fraction of the affected pensioners' payouts.
In other words, with or without PE, bloated pensions ultimately end up being the taxpayer's burden.
I find this characterization offensive. Who is to judge if the defined benefit pension if a primary school teacher or fireman, for example, is bloated? It's part of the negotiated pay package, nothing more or less.
At least here in NYC, a large part of a NYPD officer's pension is calculated based on a 3-year look back from their retirement date, so there is a huge incentive to work as much overtime as possible in order to bump that number in your last few years of service. There are lots of stories of NYPD handing out easy overtime in massive numbers for each other, particularly when they are about to retire.
Teachers are the easy ones to point to, it is hard to be mad at an underpaid teacher who receives a reasonable pension for life. We certainly can be mad at NYPD scamming the system to get $100-200k/year for life.
At least in my union defined benefit pension it specifically excludes overtime since that obviously is ripe for abuse. It's just your basic calculation: average of your best 5 years of salary at 2% per year of service.
Is that not the case for police unions in the states?
FTA: "Although paying for excess hours can cost less than hiring new cops, overtime contributes to future pension costs.
“If your last few years before you retire, you work 300, 400 hours of overtime and bump up your pay by $40,000, that all goes into the salary that your pension is based on,” said Ana Champeny, director of city studies at New York’s Citizens Budget Commission."
So yeah, it seems like a bad idea to be able to scam the pension system like that.
Why are we mad at someone who has worked their whole life and is getting a decent retirement, when the article is talking about PE management fees being extracted from essential services at enormous rates?
And yes, pensions are a major part of the PE funding, but not all of it. There are a bunch of incredibly rich people who are also profiting from all of this at exorbitant rates. Can we be mad at them instead?
All seem trivial compared to the money sucked up by billionaires, who seem to do little good for society. I'm not going to get angry at a police officer trying to maximize their retirement when we live in a society that celebrates people like Elon Musk, Jeff Bezos and Mark Zuckerberg.
Those billionaires are not hoarding cash like a dragon in a lair, their wealth is mostly in stock in productive (FB is debatable at this point) companies many people use.
Boomers (only people I know receiving pensions) use pensions to fund lavish lifestyles without having build major companies.
Yeah. How dare they… give you one-day delivery of anything you might want like magic for the first time in human history and help use fewer fossil fuels to prolong your planet’s life while also providing ubiquitous connectivity anywhere on the planet’s surface. The selfish scoundrels.
My mom's a teacher. She would get a pension if the state could actually fund its pension program, which it can't now, and certainly won't when she retires in a few years. The government ones tend to actually have, yknow, morals and stuff.
Nothing personal here. It's possible for some pensions to suck and not others. It's also possible for a pension to suck and its beneficiaries to not suck.
Looks like about 18 percent, although I would assume there's a particular demographic where this might be higher.
Do they have to be paid out in full, though? I remember cases in the past where a company went bankrupt and had to renege on some parts of pensions, so maybe you'll see that again?
> Why are more and more utility providers charge based on ‘infrastructure cost’ or ‘fixed platform fee’ instead of usage fee?
Because unlike many commodities, electricity, once generated, is hard to store, yet supply must match demand in real time. You need to meet peak demand, even if normal usage is not as high. If you pay purely for usage, that might not send enough price signals to ensure that you have the necessary capacity when you need it. https://www.canarymedia.com/articles/enn/explainer-how-capac... has a more detailed overview of how markets are being structured to provide capacity, separate from actual generation.
Hmmm, if you take a brick and mortar store, they have fixed costs to renovate and decorate the store, and they likely have capacity of the store that is not used during non-peak period as well. They charge for item sold, to cover for all costs they incurred for capacity of the store even during non-peak period as well. Is this an equivalent comparison? Don’t businesses generally roll in the fixed costs into their price and charge per unit still?
And also lose $50 of tax revenue. I do not see how the government is any better off here.
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