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Comment by dude_abides | Hacker News Reader

More accurately, Sarbox is keeping 96% of Americans away from some crazy volatility -- they are missing out on MSFTesque price appreciation as well as potential bankrupcy of countless new public companies.

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That's what gets lost in this, in my opinion. Certainly there is a big upside that is missed out on, the article makes a good point. But at the same time, SOX burdens companies to have to meet very strict reporting policies, which ultimately is good for the average investor(s) (in my opinion). Not to beat a dead horse, but how did Enron work out for the average Joe/Jane?

Scott's point is that Enron was a giant, long-established public company. Sarbox may have helped prevent the next Enron, with an unanticipated side effect of all but killing IPOs and growth in the public market. It's like passing a law to prevent the next giant cruise ship from hitting an iceberg, and accidentally killing rowboats in the process.

Erm, have you guys heard of things like index funds? There are plenty of ways to play the game and not take too much risk from one company.

Have delayed IPOs really moved the needle on index funds? Not a rhetorical question; it's possible they have. The markets being indexed are so huge I'm somewhat skeptical that companies IPOing later will make any difference in the returns of a passive index investor, though. And that's even assuming that earlier tech IPOs would outperform the rest of the market; they might make the index funds perform worse if that's not true!

Number of US public companies in 1997: 8800. Number today: 4100. Total stock market index fund return adjusted for inflation between 1997 and today: 0%.

How do you figure 0%? S&P 500 has increased 124% since 1997, not adjusted for inflation.

Google finance graph: http://bit.ly/1d7JXnm

Total returns would actually be almost double that, since that graph doesn't include dividends, which historically account for just under half of total returns.

A 2% dividend wouldn't even remotely come close to doubling the 124%x S&P return since 1997. It's a nice booster shot, nothing more.

Most common price measurements have increased by 100%+ since 1997 (in many cases a lot more), from housing to commodities. There's a very strong case to be made that the real rate of inflation has just about wiped out all stock market returns since the mid to late 1990s.

I don't know if it's 0%, but even 20% inflation adjusted over 16 years is a very bad return.

And let's not forget you pay taxes on those nominal dollar capital gains.

And if you add the year 2003 to those two cherry-picked years, do you still see a correlation between total stock-market returns and number of public companies?

Agreed. Here's the data in chart form, it looks nothing like total stock-market return (the 2008 collapse and subsequent rebound is nowhere to be found, etc):

http://blogs-images.forbes.com/sageworks/files/2012/05/Publi...

Don't know, I'm focusing more on the non-existant IPOs than the spare handful of eventual, delayed ones. That's where the terrible damage has been done.

Looking at Facebook and Microsoft helps to quantify a very small portion of the total damage, but for many it'll be more convincing that the not visible per se absence of IPOs.

"Erm," IPOs aren't usually added to index funds till much later.

Total market funds pick them up quickly.

That's why I said "things like index funds", and many NASDAQ index funds would or could be IPO company origin weighted.

It's the principle; at the opposite end, put your money for this sort of thing into 12 or 20 companies. OK, with a minimum reasonable investment of 100 shares that's a lot of money, but individuals can still do it.

I wonder if such a fund would actually outperform other sectors.

FPX does seem to have a good record compared to S&P 500. http://bit.ly/1aeNQee

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