The gratitude that comes from Index buying

In my opinion. efficient and fairer valuations on the ASX has been adversely impacted by the increased influence of the Index weighted accumulation of leading shares by giant funds

listening to Phil King (Regal) at a function recently, he makes some great observations

Look at the valuations of CBA (compare it with Lloyd’s of London), CSL and some of our largest sector stocks (like Northern Star) … and wonder, who is going to buy these companies shares when the inevitable pendulum turns and the Index Funds may be forced to sell?

The Boards of these types of big companies in the various ASX sectors probably bath in the gratitude of the addition support their companies see, if they just get bigger … and they don’t get punished if the increased size was created by a rather dumb corporate decision..

For example, let’s just assume for a moment that Northern Star may be in a cyclical commodity industry.

Let’s also assume that the commercial setting of gold mining in Australia may also be influenced by global exchange rates and geopolitical tensions worldwide.

At some stage in the next few nervous years there may be a reversal of the $US/$A exchange rate and $A gold prices, which may even retreat as quickly as they have risen.

$A gold prices $4728
$US gold price $2986

Maybe Donald Trump stops all the wars in the world, or maybe he creates a few new ones .. but we will probably find this all out over this current term of 3/4 years whilst DEG is being built

The Board of NST have agreed to buy the most expensive (is it over valued?? expert says yes) undeveloped gold deposit in the world.

Whilst that mine is being constructed, what happens if we see global restraints in engineering supply, and delays with commissioning, etc etc … maybe during a period the commodities and markets are reverting back to a norm?

Who is going to buy out all the index fund owners of these stocks (like NST) who will need to be selling at whatever the price is?

In the current environment, I suspect Boards are in space where they probably spend more time dealing with compliance and woke type institutional issues than they do measuring long term share holder return performance against their peers.