All Hail Vanguard?… The Facebookization of Markets and Everyone in the Index Clowncar

Bigly things are happening in financial markets right now, but before I get started… in the ‘I suck at marketing’ story of the day the SEC is investigating a hedge fund that that promises no losses. This guy must have taken the hedge fund marketing class at Trump University


There is Vanguard and there is everyone else…

Of the $5 trillion in index funds today, $4.2 trillion is controlled by Vanguard. More astonishing may be that Vanguard is growing faster than all its competitors together . Here is an excerpt:

The Vanguard trading floor is the epicenter of one of the great financial revolutions of modern times, yet it is a surprisingly relaxed place.

A few men and women gaze at Bloomberg terminals. There is a muted television or two and a view of verdant suburban Philadelphia. No one is barking orders to buy or sell stock. For a $4.2 trillion mutual fund giant that is still growing rapidly, it occupies a small fraction of the space of a typical Wall Street trading hub.

You can barely hear the quiet hum of money being invested — money in scarcely imaginable quantities, pouring into low-cost index mutual funds and exchange-traded funds (E.T.F.s) that track financial markets.

In the last three calendar years, investors sank $823 billion into Vanguard funds, the company says. The scale of that inflow becomes clear when it is compared with the rest of the mutual fund industry — more than 4,000 firms in total. All of them combined took in just a net $97 billion during that period, Morningstar data shows. Vanguard, in other words, scooped up about 8.5 times as much money as all of its competitors.

Why should you care?

While Vanguard is accelerating, the amount of public companies is in rapid decline. This is further pressuring the downward spiral of investment fees. The rise of roboadvising and the surge in information access (I would add a huge rise in misinformation) are the other big themes that rule the markets.

Sadly, only Trump can stop this stock market and he seems up to the task.

Trump and his crackpot clan are taking credit for the surge in the US averages since election night. Despite the huffing, puffing and flip flopping by Trump, just 43 percent of stocks are above their 50 day moving average, the lowest since the election:

charliebilello shared a chart on StockTwits

As for data, what will get Trump re-elected is GDP growth (don’t get me started on how outdated/lame we are at measuring GDP in a digital and software eats everything world). The GDP is why Trump has switched to war mongering so quickly. The actual planning that would be needed to create jobs outside the military is not going to happen under a Trump administration.

Elsewhere in Trump trends…

Gold is at it’s highest price since the night of the election. This seems obvious in light of the fact that Trump has been hoarding gold furniture and drapes at the White House since the day he moved in. I am happy with my digital proxies for gold (Bitcoin and Ethereum).

The Mexican Peso is at it’s highest price since the night of the election. This is not something Trump will brag about but it shows how little weight or fear the words of Donald Trump carry. Unfortunately, the bombs that we handed over to him carry too much weight.

charliebilello shared a chart on StockTwits

Back to index investing…

The trade is crowded. Indexing is creating some new problems. At minimum you should take it as yet another wake up call to know what the hell you own and why you own it. It’s a great reason for not allowing the ETFization of everything. I’m glad the SEC shut down that Bitcoin ETF idea for example.

The other day I was writing about the markets and moods and Josh had this post up on called ‘cognitive clownshow‘ that puts an exclamation point on what I call the ‘Facebookization‘ of the markets. Moods matter in markets more than ever, even fake moods.

One of the most interesting trends that I continue to read up on is international stocks. Factset has reported that 30 percent of all S&P 500 revenues came from international markets. We all own international stocks now.

I own my first Indian Stock ($MMYT) and a few Chinese stocks (Ctrip and Tencent). I talked about India on March 1 back on the blog and bought $MMYT soon after on March 9th.

(I sold a little after this big run last week)

This weekend I read this New York Times piece on Uber in India and it’s a reminder that the world has shrunk and become more investable in a digital world. That does not mean eyes and ears and your feet do not matter more than ever.

I saw this today which was interesting. If you think Fox news and CNN are making us cranky today…by the year 2100 the average age of everyone alive will be 42. It was 24 in 1950.

Finally – Netflix reported their numbers tonight. On the surface, they missed ‘estimates’. The joke is that people get paid to game this stuff with straight faces. Netflix is a cult stock at this point. Someone pointed out today that they have global product market fit. Every human loves endless good content and Netflix has $14 billion set side to please humanity. Every dip is being bought because nobody wants to miss the next Amazon or Priceline even though Amazon and Priceline may be the only next Amazon and Priceline’s.

Also published on Medium.