People's QE, valuing Buzzfeed and Vox, and John Authers on the perils of index investing

Episode Summary

Executive Summary: The episode covers three major themes: how index providers like MSCI and S&P now shape rather than simply reflect markets, the case for Jeremy Corbyn’s “people’s QE” as a targeted form of monetary stimulus, and how digital media startups such as Vox and BuzzFeed are being valued and funded like tech companies. The discussion emphasizes the power, risks, and unintended consequences of market benchmarks, central bank intervention, and platform-driven media economics.

Main Topics: Index providers as market-shaping forces (Priority: 5/5): John Authors explains how big index compilers like S&P Dow Jones, MSCI, FTSE Russell, and bond index providers have become so influential that their benchmarks can move capital flows, affect valuations, and amplify bubbles rather than merely describe markets. China A-shares and index inclusion (Priority: 5/5): The discussion uses MSCI’s decision not to include Chinese A-shares as a vivid example of index power: anticipated inclusion had already influenced investor positioning and market behavior, while exclusion helped trigger a reversal in sentiment. Passive investing, market efficiency, and systemic risk (Priority: 5/5): The segment argues that the rise of passive investing and benchmark-following active managers can reduce genuine price discovery, create herd behavior, and push money toward the most overvalued assets. People’s QE and targeted monetary stimulus (Priority: 4/5): Matt Klein explains Corbyn’s idea that the Bank of England could buy bonds issued by specialized public institutions for infrastructure or social investment, effectively funding spending off the central government’s balance sheet. Distributional effects and central bank boundaries (Priority: 4/5): The conversation weighs whether central banks should directly shape the allocation of stimulus, noting existing precedents such as mortgage-backed securities purchases, funding-for-lending, and ABS programs, while acknowledging concerns about politicizing monetary policy. Digital media valuations and new business models (Priority: 4/5): Shannon Bond discusses NBCUniversal’s investment in Vox and possible investment in BuzzFeed, highlighting the rise of branded content, distributed video, and audience growth as reasons digital-native outlets are attracting tech-like valuations.

Key Arguments: Index providers have become economically powerful because huge pools of money track their benchmarks, giving them the ability to influence capital allocation and market outcomes. The MSCI A-shares episode shows that index decisions can affect investor expectations, market timing, and domestic policy incentives, especially in emerging markets. Canada’s chronic underrepresentation in major developed-market indexes has helped shape its stock market by limiting foreign institutional ownership relative to economic size. Market-cap-weighted indexes may systematically channel more money into the most expensive stocks, reinforcing bubbles rather than disciplining valuations. Bond indexes are especially problematic because debt issuance itself can increase an issuer’s index weight, creating pro-cyclical incentives and potential conflicts of interest. Passive investing cannot become universal without damaging price discovery; active managers also increasingly mirror benchmarks because they fear underperforming peers more than they seek to beat the market. People’s QE is presented as a more direct and potentially more effective way to stimulate demand than standard QE because it pushes money toward entities that are likely to spend it. The idea has intellectual precedent in mainstream central banking debates, including proposals by Adam Posen and existing central bank practices that already target specific asset classes. Traditional media companies are under pressure, while digital-native outlets are gaining value by combining advertising, branded content, platform distribution, and strong editorial hiring. The valuations of Vox and BuzzFeed suggest investors see scalable media brands with social distribution and diversified revenue streams as more valuable than legacy print-era business models.

Data Points: S&P indexes benchmark share of U.S. open-ended fund assets: 34% - John Authors cites the scale of S&P’s influence in the U.S. fund industry. U.S. open-ended fund assets benchmarked to S&P indexes: $4.35 trillion - Used to illustrate the dominance of major equity index providers. Bond assets benchmarked to Barclays indices: almost exactly $3 trillion - Shows the scale of Barclays’ influence in bond markets. SPDR license fee for S&P 500 tracking: just over 3 basis points - Example of how index providers monetize benchmark dominance. MSCI A-shares possible impact on emerging market index: almost half the entire emerging market index - If included at 100% market cap, China’s A-shares would have become a massive portion of the benchmark. Russell 2000 benchmark effect: annual reconstitution day is regularly the single most active day of trading in those stocks - Demonstrates the trading impact of index inclusion/removal. BuzzFeed profit in 2013: $7 million - Shannon Bond cites BuzzFeed financials leaked to Gawker. BuzzFeed revenue in 2013: $64 million - Used to support the company’s rapid growth narrative. BuzzFeed profit in first six months of 2014: nearly $3 million - Shows profitability growth over a short period. BuzzFeed revenue in first six months of 2014: $46 million - Indicates strong revenue trajectory. BuzzFeed editorial budget: $10.5 million - Compared with under $1 million a few years earlier, showing a major expansion in editorial spending. NBCUniversal investment in Vox Media: $200 million - Described as a major investment at a roughly $1 billion valuation. Possible NBCUniversal investment in BuzzFeed: $200 million to $250 million - Reported talks for a future round in BuzzFeed. Possible BuzzFeed valuation in NBC talks: about $1.5 billion - Indicates investor confidence in BuzzFeed’s growth potential. Pearson stake sold in The Economist: 50% stake exited - Pearson sold its half stake to existing shareholders.

Pivotal Quotes: "very difficult to see how they can avoid leading the market rather than just reflecting it" — John Authors: On the growing power of index providers in financial markets "The phenomenon of the power of the index becomes that much greater" — John Authors: On how passive investing shapes active managers’ behavior "People's QE ... is one of the truly good ideas that Corbyn has" — Matt Klein: A characteristically cautious endorsement of the policy concept despite broader skepticism about Corbyn

Implications: Listeners should expect benchmark providers, central banks, and digital platforms to keep exerting outsized influence. The episode suggests future instability, policy experimentation, and a continuing shakeout in media and asset management.