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Comment by di4na | Hacker News Reader

Part of that is due to the fact that most of the market is now passive investment. Being pension funds, endowment, etc etc.

The latest numbers i have seen is that 80% of the market shares is controlled by institutional investors.

That is a looooot of the market tied to a set of investors that cannot bet on anything else than up due to their own long term problems. At this point, the market is better viewed as a gigantic retirement fund/saving account than as a way to decide on price.

Once you look at the market that way, a lot more of the behaviours make sense.

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Why do institutional investors undermine price discovery? This comment doesn't make sense to me.

> The latest numbers i have seen is that 80% of the market shares is controlled by institutional investors.

Institutional investor != passive investment.

As long as trades are happening, there is some sort pricing mechanism.

I'd guess there is there is too much money in it due to the fact that central banks killed interest rates and started buying government bonds as needed - where pension funds would hold those they now need to search positivie returns and there's just not enough good bets there - would explain why the valuations are sky high

You've confused cause and effect.

Declining expectations for NGDP growth/uncertainty lead to funds searching for yield in the credit markets, leading to declining yields.

Bond yields declined prior to Fed intervention [0]

[0]: https://fred.stlouisfed.org/series/DGS10

more due to the fact we massively move retirement payments to market investment instead of redistribution and at the same time boomer begun retiring.

Basically we moved back to a renting society.

> As long as trades are happening, there is some sort pricing mechanism.

Sure but my concern is that pricing now looks less about fundamentals and more about the meta game of what other traders are gambling at the moment. What do you think about the price discovery mechanism for Bitcoin for example?

There is no such thing as "fundamentals," value is in the eye of society - so pricing is also in the eye of society.

Bitcoin is operating under a great deal of uncertainty about its future prospects/the prospects of blockchain.

https://www.themoneyillusion.com/richard-rorty-and-the-effic...

Because their goals are not price discovery. Price discovery needs taking risk. All of them are not allowed to reduce the principal.

They would better reduce return than touch the principal.

This is a rent market. Not an investment one.

Rent market are more comparable to land value than to investment markets. Thibk of the use of corn as a relatively bad economic choice for profit but great for rent stability as an example.

That is what something like retirement and endowment need.

Not just the market, property to. There's this giant floating pool of money thats looking for anywhere to grow.

How about reinvesting back into the people and infrastructure.

We're talking about private parties here, trying to grow their wealth for the future. What exactly are you proposing they do?

Government should embark on major public infrastructure projects and issue bonds tied to some collateral or benchmarks like for example a portion of property or sales tax in some area, for some limited period.

That's a great idea, let the private markets front the cash for infrastructure projects and let local gov bodies set the rate of return over a set period (using the tax fund). This means a small portion of tax money can go towards repayment and states/counties get their infrastructure upgraded faster. Can anyone weigh in on why this is a bad idea? I have no idea why this isn't already the case.

A lot of infrastructure is funded via bonds already, but the interest rate is fixed instead of tied to a percentage of property tax revenue.

This idea would have more uncertainty for the investors, so they'd want a higher return than for a fixed bond. Taxpayers would be less likely to vote for the measure because it would have to raise their taxes even more than a standard bond.

(that being said, bond measures often take the form of "a 0.2% property/sales tax is to be levied for the next 20 years to pay off the bond", which is actually pretty close to what is being proposed by the GP. The difference is who is left holding the bag if tax revenues don't meet projections)

Most of those bonds would be bought up by banks as usual, inflationary pressure would be caused by those bonds because of the temptation to print money to make up for the inevitable shortfall

A rising tide lifts all boats. If the majority of the money in the market is on autopilot then why not fluctuate it?

Theoretically the disconnect from reality will eventually catch up you and the whole system will suffer from a major correction.

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