Thread by @profplum99

1/n So apparently we're doing this again... @EricBalchunas @JSeyff @psarofagis @business @TheTerminal

2/n It's one thing to have your fundamental errors pointed out (repeatedly) and adjust. It's another to double down. You have to ask, "What's the agenda?" at some point

https://x.com/profplum99/status/1783527343526404303

3/n So let's evaluate their headline analysis -- "the most passively owned stocks have underperformed" (including the claim that the R2000 is "more passively owned). It relies on this type of analysis:

4/n I get errors buried in the data... only so much time in the day and no one is going to trade on this, so ¯\_(ツ)_/¯. But to not even bother looking at your highlighted "most passively owned" is appalling. The 59.2% comes from adding Pacer, Vanguard, Blackrock and Dimensional

5/n Pacer as a firm is NOT passive. They are quant. Yes, they "track" indices, but with attempted (no judgement) alpha overlay

6/n Specifically, 25% of CENT is owned by the $CALF ETF, which is TRANSPARENTLY active

7/n And even within this flawed example, we can find importance of "flows" which is the primary driver of "passive dominance." Note that 2023's rally in $CENT almost perfectly tracks Pacer's buying and selling which coincided with a flow of funds into $CALF

8/n The rest of the piece is equally dubious. Let's look at their analysis of $WMT, supposedly the "least passively owned" in the Dow.

9/n $WMT is heavily owned by insiders, so float-weighted indices (a change adopted in 2004 after the low-float DotCom debacle) will own less. But the implication that this is "therefore owned by active" couldn't be more wrong... and even a cursory glance demonstrates it. The first "active" allocation would be Fidelity at #10 with 0.79% ownership.

10/n BUT even this is wrong... because 0.76% of Fidelity's 0.79% is held in two INDEX FUNDS!

11/11 So I will ask, as always, "Why are you reading this now?"