Core Viewpoint - The sustainability of Social Security is being questioned by prominent economists, with some likening it to a Ponzi scheme due to its reliance on current workers' payroll taxes to pay benefits to retirees and others [2][4][7]. Group 1: Economic Perspectives - Milton Friedman described Social Security as "the biggest Ponzi scheme on earth" in a 1999 article, highlighting long-standing concerns about its viability [1][2]. - E.J. Antoni, appointed by President Trump, has echoed similar sentiments, stating that Social Security is not sustainable [1][2]. - Charlie Munger defended Social Security, emphasizing its role as a transfer payment from productive individuals to those beyond their productive years, suggesting a societal obligation to support retirees [3]. Group 2: Structural Concerns - Social Security currently serves around 70 million beneficiaries, funded through a trust that collects payroll taxes from current workers to pay benefits [6]. - The system is at risk of insolvency if the incoming payroll taxes do not meet the outgoing benefits, with projections indicating potential cuts to benefits as early as 2034 [7][8]. - The Committee for a Responsible Federal Budget warns that failure to act could result in a 23% cut to benefits for all retirees within eight years [8]. Group 3: Policy Implications - Trump's campaign included a pledge to eliminate federal taxes on Social Security benefits, which could accelerate insolvency by three years, moving the timeline from 2034 to 2031 [9]. - The One Big Beautiful Bill Act introduced a temporary increase in standard deductions for seniors, but this could lead to faster depletion of the Social Security fund [10]. - Policymakers are under pressure to address the looming insolvency of Social Security, with the cost of potential solutions estimated at $1.48 trillion [8].

Inigo Fraser Jenkins once warned that passive investing was worse for society than Marxism. Now he says even that provocative framing may prove too generous https://t.co/7ymvZM01TX ...

The inconvenient truth of passive investing is that it's too big to proxy, says @johnauthers. But the alternative is divide and rule (via @opinion) https://t.co/YjZ1LHuhz9 ...

Investment Philosophy - Passive investing has become excessively popular [1] - Passive investors may lack the knowledge to make informed voting decisions [1] Industry Trends - Technological innovation is transforming the investment landscape [1]

Core Insights - The Inelastic Market Hypothesis (IMH) suggests that for every $1 of capital flows, the market's aggregate value changes by approximately $5, indicating significant market volatility compared to underlying fundamentals [2][3] - The Federal Reserve's quantitative easing (QE) and the rise of passive investing have created inelastic demand in the market, distorting price signals and leading to misallocated capital [5][8] - The current market environment is characterized by a high level of kinetic energy due to concentrated capital flows into U.S. indexes, which poses risks of sudden market corrections [11][13] Market Dynamics - The price elasticity of demand in the stock market is relatively low, meaning that price increases do not significantly dampen buying demand, while price decreases do not substantially increase demand [3] - Passive investing has become a dominant driver of equity prices, with estimates suggesting that for every $1 of passive inflows, the market's aggregate value increases by approximately $3 to $8 [8] - The market is increasingly acting like a casino, with a proliferation of leveraged ETFs and options trading, which adds volatility and risk to the investment landscape [9][10] Investment Strategy - The company employs a valuation-disciplined investment process that is highly price elastic, allowing for aggressive buying during market downturns and risk shedding during periods of greed [4] - The strategy focuses on diversifying portfolios by mixing potential energy (value) with kinetic energy (momentum), particularly in sectors like healthcare and materials that offer attractive free cash flow yields [18][21] - The company has identified Amazon as a compelling investment opportunity due to its strong balance sheet and potential benefits from AI, while exiting positions in companies like Expedia due to emerging competitive threats [21][22] Performance Overview - The ClearBridge Value Strategy underperformed its benchmark, the Russell 1000 Value Index, during a period of subdued returns for value stocks [17][24] - Stock selection in the healthcare sector contributed positively to performance, while the financials sector detracted from returns due to declines in specific holdings [19][20] - The strategy continues to find opportunities in undervalued stocks with high free cash flow yields, particularly in sectors that have fallen out of favor [18][24]

It’s a quirk in the booming world of passive investing: Famed tech fund QQQ is the most profitable offering in the ETF industry, but Invesco earns virtually nothing from running it. Now the asset manager is asking shareholders to change that https://t.co/QlModOzZJM ...