<instructions>Your goal is to analyze the following comment and estimate how highly it will be upvoted by the Hacker News community.</instructions><comment><author>ptero</author><text>I will try to interpret, but obviously it is just my interpretation (and personally I mostly agree with many theses Burry gave). First, he does not really talk about being a &amp;quot;good citizen&amp;quot; or not. His points are for &amp;quot;greedy citizens&amp;quot; who, in his view, should be worried (about his pocketbook) if he is heavily invested in passive index funds.&lt;p&gt;This is due to his &amp;quot;bigger and bigger crowds, same exits&amp;quot; analogy: individuals easily move through doors at will; but if a crowd rushes out through the same door, injuries happen.&lt;p&gt;His premise is that many stocks that index funds invest in have low liquidity (small door): half of stocks in SP500 trades less than $150M a day. This is tiny (he quotes total market cap of indices of $150 trillion). What happens if there is a small, but synchronized outflow for any reason? If customers ask for 1% of index funds to be sold, index funds &lt;i&gt;have&lt;/i&gt; to sell 1% of their holdings in the exact ratios defined by the index, including stocks with low trading volumes. Which is a problem, as there may be no one to sell them to, so prices of those stocks may crash and create a big panic causing additional sales of index funds bringing down bigger chunks of the market.&lt;p&gt;That is the gist of it I think.</text><parent_chain><item><author>markbnj</author><text>Not knowledgeable on these matters, so my money is in index funds. Obviously a lot of other people are in the same category as myself. The article seems to be saying we&amp;#x27;d all be better financial citizens if we put our money into actively managed funds, or did our own investing. The latter is out of reach for most people, and with respect to the former it&amp;#x27;s somewhat puzzling that managed funds can&amp;#x27;t consistently outperform index funds (&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.cnbc.com&amp;#x2F;2019&amp;#x2F;03&amp;#x2F;15&amp;#x2F;active-fund-managers-trail-the-sp-500-for-the-ninth-year-in-a-row-in-triumph-for-indexing.html&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.cnbc.com&amp;#x2F;2019&amp;#x2F;03&amp;#x2F;15&amp;#x2F;active-fund-managers-trail-t...&lt;/a&gt;), and so the managers of those funds in a strict sense don&amp;#x27;t earn their fees. So what is the average person with a couple bucks to invest supposed to take from this? The market is in peril because not enough money is flowing to people who do a poor job of managing it?</text></item></parent_chain></comment><story><title>Why Index Funds Are Like Subprime CDOs</title><url>https://www.bloomberg.com/news/articles/2019-09-04/michael-burry-explains-why-index-funds-are-like-subprime-cdos</url></story>
<instructions>Your goal is to analyze the following comment and estimate how highly it will be upvoted by the Hacker News community.</instructions><comment><author>drelihan</author><text>Imagine there was a cookie market made up of two types of cookies, tasty and meh. An active investor in cookies would spend time determining which cookies are likely tasty and which are meh. They would pay more for the tastier cookies so they can savor the flavor and less for the meh ones they can binge eat in the shower when no one is home.... A passive investor comes along and says, I don&amp;#x27;t want to do all this research, I&amp;#x27;ll just assume the market was able to price these accordingly and buy any cookie at the market price. At the beginning, it is great. They just sit back and buy baskets of cookies, some tasty, some meh... but they always pay the higher price for tasty and lower price for meh, so it is fair. Over time, more people start buying baskets of cookies rather than spending time&amp;#x2F;money figuring out what to pay for them. At some point, no one is left to figure out which cookies are tasty vs meh, so the price of all cookies converge to a single price. Cookie manufactures notice this and figure might as well just make meh cookies as no one can tell the difference until after they buy them... and then we are stuck in a world with meh cookies. With some critical mass of active cookie investors, prices could be set fairly for all cookies. Too many active investors, and there is a drain on the system as there is likely a lot of duplicated work among the investors ( each one has to have a research team, back office cookie trading systems, etc, etc ). Too little and prices become less accurate.</text><parent_chain><item><author>markbnj</author><text>Not knowledgeable on these matters, so my money is in index funds. Obviously a lot of other people are in the same category as myself. The article seems to be saying we&amp;#x27;d all be better financial citizens if we put our money into actively managed funds, or did our own investing. The latter is out of reach for most people, and with respect to the former it&amp;#x27;s somewhat puzzling that managed funds can&amp;#x27;t consistently outperform index funds (&lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.cnbc.com&amp;#x2F;2019&amp;#x2F;03&amp;#x2F;15&amp;#x2F;active-fund-managers-trail-the-sp-500-for-the-ninth-year-in-a-row-in-triumph-for-indexing.html&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.cnbc.com&amp;#x2F;2019&amp;#x2F;03&amp;#x2F;15&amp;#x2F;active-fund-managers-trail-t...&lt;/a&gt;), and so the managers of those funds in a strict sense don&amp;#x27;t earn their fees. So what is the average person with a couple bucks to invest supposed to take from this? The market is in peril because not enough money is flowing to people who do a poor job of managing it?</text></item></parent_chain></comment><story><title>Why Index Funds Are Like Subprime CDOs</title><url>https://www.bloomberg.com/news/articles/2019-09-04/michael-burry-explains-why-index-funds-are-like-subprime-cdos</url></story>