Learning who to ignore in an increasingly degenerate economy

 “The arc of the moral universe is long, but it bends toward justice.” – Theodore Parker

It’s easy to forget just how much has changed for the individual investor over the past decade (or two). We’ve gone from a world of high costs, information scarcity and limited option to one of 24/7 frictionless trading. For a long time it seemed like things were only getting better.

The Onveston Letter has a great post up reminding us what it was really like to invest back in the 1990s. Whether it was access to real-time stock quotes, high trading commissions, the availability of company research, or access to investment it’s clear that the world has completely changed. The question is have investors benefited? They write:

The playing field has been elevated for everyone, but whether it has been truly leveled remains a subject of a different debate. What once required significant wealth, specialized knowledge, and professional relationships is now accessible to anyone with a smartphone and internet connection.

A long time ago (2012) I noted how things had already gotten way better for individual investors. And in a lot of ways the trends that were place then have continued. Ben Carlson writing at Fortune in 2019 noted these trends as well and noted how they had changed the market for financial advice and the dynamics of the markets themselves.

A lot of what have described is the elimination of frictions. You no longer need to call a broker to place a trade. You no longer need to pick mutual funds in your 401(k) account. Ready access to leverage is available at the push of a button. And now you can bet on sporting events and elections on your phone. The question is whether the elimination of friction is an unalloyed good.

The late Jack Bogle of Vanguard was publicly (and loudly) against the introduction of ETFs for Vanguard clients. He felt it would them more likely to transact, which by and large is a bad decision. History has largely not borne that out. ETF investors in standard, index ETFs are pretty well behaved. However Bogle was correct on another front. John Rekenthaler at Morningstar wrote:

Bogle was correct in his secondary attack on ETFs: Their taste for high-volatility strategies. In the same interview that began this column, Bogle also criticized ETFs’ investment strategies, which, he argued, provoked shareholders’ baser instincts. By indexing specific segments of the stock market, or even—God forbid—owning commodities, ETFs tempted investors to speculate.

That was written in 2023. In the two years since then the ETF industry has exploded. Not only do we now see way more actively managed ETFs. We now see all manner speculative vehicles like leveraged single stock ETFs. Admittedly there is a lot of interesting developments in the ETF space. The problem is that it is getting harder to sort the wheat from the chaff.

When I wrote this piece ‘Keep ETFs Weird‘ in 2017 I had no idea that both the regulatory framework and industry zeitgeist would change so much. Dave Nadig earlier this year wrote about how the world, and specifically, asset management had changed. We are now in a dizzying world where traditional notions have been uprooted and it’s ever harder to tell the good guys (white hats) from the bad actors (black hats). Nadig writes:

Put another way: if you buy something and something bad happens, you will simply have lost, or will have to mount your own lawsuits. Nobody cares about “brand damage” or “reputational loss” anymore. Those are quaint notions from a time when companies actually stuck to their guns when the wind changed. Very, very few companies in your investment chain are proudly claiming the white hat anymore.

Maybe we should have seen this coming from miles away. Howard Lindzon has for some time been talking about the rise of the degenerate economy. Howard has been highlighting the companies that have benefited from this desire to get online, speculate, and stay awake with caffeine and nicotine. Speculation has become a global pastime. Prediction markets are now ubiquitous. Unfortunately it seems that degeneracy works in only one direction – towards more degeneracy.

For a long time it seemed the arc of financial markets was bending towards the interests of the individual investor. One could easy argue that arc has shot off in another more degenerate direction. Fortunately that trend has left in place for investors some great things like zero commissions and super low cost ETFs that cover the investment universe.

That being said, you are most definitely on your own. While it is now infinitely easier to put your money to work in an efficient manner. there is a growing counter-movement working against your best interests. So the challenge today isn’t in putting your money to work, it’s in knowing who (and what) to ignore along the way.

https://abnormalreturns.com/2025/08/20/learning-who-to-ignore-in-an-increasingly-degenerate-economy/