Wednesday, November 23, 2016

Matt Levine in index funds and monopolies

Index funds are an artificial channel in the stock market.  That is, if your channel coder stares at the sequence, it discoverers gaps, index funds sequencesae bunchedm up, detectable.

This came up years ago when I was doing Huffman encodes on the SP500.  I mentioned that it was a nmatter of detcting gaps in then yield curve, due to artificial market structure. I was constructing, and matching to Fibonacci at the time.

But, smoothing the index fund lumping is what hedge funds do, they drain nickels from folks too busy to handle their own bit error. Hedge funds keep the bit error stuffed back into the channel, force the pit boss to be more accurate. They are like the connected dealer networks which can absorb sudden shifts by the wealthy.

Bloomberg: So, fine. Those who think that diversified stock ownership is an antitrust problem -- that cross-ownership of multiple firms in the same industry by big diversified investors really pushes up prices and harms consumers, as those investors care only about high overall industry profits and don't want competition within the industry -- also think that it's a bigger economic problem than the problem of restructuring index funds to be smaller.
Trading pits, smart cards, and ethereum will eliminate almost of the artificial monopolies and rigs.   All of this small change we lose, the billions everyday? We lose it because brokers in NYC like to agglomerate for lunch, and write letters to daddy.  All that creepy delusional crap is going away.

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