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Comment by RayVR | Hacker News Reader

I just can’t take this person seriously. Clearly written by a non-expert and the questions/ideas are, as a result, well-trodden ground without anything original to add.

Take this representative quote “It’s Jerome Powell’s world: never before have I seen markets move so erratically in response to a once-boring Jackson Hole conference. Actually, the first time I ever heard of this event was this year since some acquaintances of mine were trying to ‘trade’ it.”

So, essentially, this person had no clue what Jackson Hole means in the financial world but makes a huge judgement on past events, then says immediately they know nothing of the past and just learned of them this year. No analysis of market volatility around these events, just a blanket statement that makes them look foolish.

Basically they are now opening their eyes to the huge role central banks play in the economy.

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While I try not to comment to 'defend my views' because it's a bit lame, I have to plainly say I am not "just opening my eyes to the huge role central banks play in the economy." I have been following markets many years, both as an investor and because I enjoy reading about economic history (also as part of my study).

My whole point with that sentence was - did you ever pay attention to a Jackson Hole conference before say 2022/2021, which was previously a relatively bureaucratic non-event? I certainly didn't, and now suddenly so many people around me were trying to trade it and the S&P500 moves 5% a day on it. That's the only point of that sentence, but you seem to be extrapolating much more from it... including whether or not I even deserve to write.

And are you really saying that not knowing of a Jackson Hole conference is indicative of 'not knowing anything about the past?' or whatever it is you meant there. Either way, that's just ridiculous gatekeeping of knowledge of financial markets and history based on a useless, pidgeonholed criterion - like whether or not someone is familiar with Jackson Hole.

If you didn't like the article, that's totally okay, but don't be so arbitrarily dismissive.

Are you the writer? In what way was the rise of Vanguard driven by cheap credit?

You can't say 1:1 directly that cheap credit = rise of Vanguard, but index funds have gotten really popular since 2008. The near-zero interest rate was the environment, and that environment was built on the Fed's policy goal of the Wealth Effect (belief of growth of assets boosts demand & spending). So, given that you could pretty much throw anything at the dart board among the giants and it would go up, indexes performed exceptionally well and capital poured into them. They were also initially seen as 'safer' post 2008 meltdown, but I think as the years passed it became less about this

But their growing concentration (esp. regarding Vanguard) has also worked to naturalize some of the largest companies as a 'group.' This kind of frame became sort of unavoidable amid all of them rising, so it's hard to separate the 'cheap money' environment from Vanguard's influence growing - especially since this macro environment also allowed for their entry into other ballooning assets like real estate w/ their ETF (which has been controversial)

The problem with this growing concentration is that, as Vanguard becomes a major holder of every top stock, then all those grouped assets are going to start moving more and more in lockstep the further the concentration grows. And that's less and less of a market to me, and more just a artifice unrelated to actual profitability. In all, this is another child of the post-Great Recession cheap money environment, although how directly you want to tie them together is debatable

Hmm, I guess I missed the point you were trying to make and assumed you were suggesting the rise of Vanguard was a result of it managing all of the investments for many of these companies prospering from all of this cheap credit.

"Index funds are a sure way to get stock-like returns with low volatility!"

When cost of credit < index fund return, it just makes sense to borrow and invest in those until the gap is smaller

I don't think that's the issue - if you expect returns in a healthy economy to be below the cost of capital then we have bigger issues.

If it helps, they weren't talking to you.

As soon as you put something out there in the world people are going to have conversations about it, with their own temperaments, that they'd never have with you.

You can take that personally, or realise that their comment really has nothing to do with you nor is meant for you to read it.

Yeah, that’s a good point. Thanks for mentioning it

Just yesterday I commented something about the disconnect between huge parts of the population (or at the very least those on social media and the internet) and just how the basic, underlying things in our society work. Seems this submission is just another, great example for this.

The recipe is always the same: lack of basic understanding of things (economics, law, finance, supply chains, medicine, science,...), a certain level of eloquence, full certainty to be able to work out everything based on first principle, no curiosity or intention to do some basic research into topics and a huge drive to look smart / proof to the world how smart you are. Easy to spot so, for example by sentences you pointed out.

Apart from the ad hominem, what is your actual, informed rebuttal then?

As someone semi familiar with this stuff, it is fairly notable how rates are moving markets right now.

Say the payroll number misses consensus by 5%, meaning there’s a fraction of a percent less chance of a 0.75% rise in rates vs 0.5%. The stock market then rallies by 2% or a few hundred $billion in market cap.

Surely that isn’t a healthy market when changes in fractional rate expectations create so much volatility.

> As someone semi familiar with this stuff

Your comment suggests the opposite.

Expectations for a fraction of a percentage interest rate move should not be the dominant narrative and driving volatility to such an extent. Positive GDP growth and falling unemployment used to be a good thing, this year they are deeply bearish.

But is his conclusion wrong?

He's right in one sense, that the implications of Fed policy for the last decade are truly astounding, but I'm not sure he actually understands why he is right.

It’s a discussion that’s been had countless times and written about almost as often.

maybe I’m gatekeeping a bit but I also think the amount the average person understands about share buybacks and their relationship to ceo compensation packages, interest rates, and corporate tax law is lacking and this person has not improved that situation and probably hurt it through their own ignorance.

That’s just one of many issues with the article.

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