James Helliwell argues that ETFs have concentrated voting power in the hands of BlackRock, Vanguard, State Street, and Fidelity, weakening individual shareholders' influence over corporations. With more ETFs than stocks now, he says this creates a systemic problem that goes beyond lower fees, and urges investors to reconsider passive ownership.
Just this week I saw an article that was published on Bloomberg saying that there are now more ETFs than there are single stocks. And that just goes to show how saturated, how insane this whole passive investing thing has become. When you buy Apple shares, for example, as an individual, and you just buy on the stock market, you get voting rights. Now of course, for a company the size of Apple and pretty much any company in the S&P 500 or wherever, looking at the MSCI World Index, one individual is realistically not going to be able to move the needle when it comes to a voting decision at a board meeting, right? But if everybody thought that way a little bit like dropping litter in the street or not dropping litter, as I should say, then the stock market or corporate America would be the equivalent of walking down the street in name your Indian city. I've traveled through India. It's bloody filthy to use a litter analogy, right? So if we begin to do our bit, whether it's not dropping litter or whether it's recycling or whatever, if every individual acts with a sense of ethics or responsibility, a sense of duty, then as a collective we can begin to shape things. When you own shares in Apple and of course all of the other companies in say The S&P 500, Microsoft, Nvidia, everyone else, right, via an ETF, the ETF provider, whether it's BlackRock, Vanguard, State Street, Fidelity, so on, they're the ones that purchase the shares on your behalf and therefore retain the voting power that you don't get to determine things like board member compensation and director changes and so on. Given that the majority, more than half of all of the money invested in the stock market is now via an etf, rather than active investors owning single stocks, it means that the majority of corporate America is controlled by ETF providers like BlackRock, Vanguard, Fidelity, State street, so on, it's all well and good saving fees, it's important. But really now, think about the future, think about the direction and also think about the here and now. This control, this influence, this ownership. People fret about state influence, let's say the defense sector, the military industrial complex, where let's say the US government with its huge budgets, and of course the magic, the power of the pen is able to direct billions and billions and billions and billions, to quote Trump, into a pocket or handful of beneficiaries in corporate America. Everybody's running around like they heads on fire about stuff all over the Internet, paranoia, conspiracy theories, and yet it's staring us right in the face. Nobody's talking about it, though, it's hiding in plain sight. All of you dickheads who are incessant in their pursuit of passive investing over even contemplating owning stocks directly need to realize this and ask yourself whether you're contributing to a bigger problem that's going to fuck society as well as us as investors, we fellow investors. There's more I could go into about ETFs beyond fees and the usual argument of settling for average rather than seeking out performance beating the market. But honestly guys, this is a big one that I wanted to get off my chest. It's been on my mind all week. We're now more ETFs than single stocks. It's gone beyond the tipping point, and now I think it's just become madness.
