Sunday, May 7, 2017

Jack Bogle and his index worry

"If everybody indexed, the only word you could use is chaos, catastrophe," warned Jack Bogle, 88-year-old founder of Vanguard, at the Berkshire Hathaway annual meeting on Saturday.

That would be the extreme boundary condition.
“There would be no trading,” Bogle told Yahoo Finance editor-in-chief Andy Serwer“There would be no way to turn a stream of income into a pile of capital or a pile of capital into a stream of income... the markets would fail."

Hawking radiation again; no flow, no quantization.

“Now, what are the chances of everybody indexing? It’s zero.”Currently, Bogle notes, about one-quarter of the U.S. stock market is currently indexed. In his view, indexing could account for 50% of the market “easily.”

How much indexing is too much? 
Too much is when you create a loop.  The money managers estimate consumers, finds possible gains to monetize, moves the loans, discovers all the indexers were customers of the new products.  For example, the money managers cannot bet inflation, as the indices suddenly make it gone; we get oscillations.

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