IndexDecoded

Index analyst. Global macro, markets
& geopolitics through a data lens. ETFs, indices
& thematic investing — what you actually buy
when you buy passive

[IndexDecoded @IndexDecoded]

Every index fund has a methodology document.

It decides your returns more than the market does.

Most investors have never read one.

I'm going to change that — one thread at a time.

Follow to learn how indices, ETFs, and thematic investing actually work.

[IndexDecoded @IndexDecoded]

@LanceRoberts Higher oil raises transport costs, which raise goods prices, which raise core PCE with a 6-month lag.

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@JavierBlas Prices fell because stocks are full. Screwworm hits cattle, not corn. El Niño changes planting windows in Brazil and Argentina

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@PeterSchiff @saylor @fundstrat MSTR issues convertible debt at 0% to buy Bitcoin. BMNR issues preferred shares at 9.5% to buy Ethereum. The structures are different

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@chigrl China can import less because its economy is slowing, not because it lacks refining capacity

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@DIYfuru $SPXL is 3x leveraged S&P 500 it resets that leverage daily.

Over a single day it does what it says. Over months, volatility decay
eats into returns even if the S&P goes nowhere.

A 10% drop followed by a 10% recovery leaves the S&P flat.
SPXL is down ~9% after the same moves.

[IndexDecoded @IndexDecoded]

1/3
Every ETF has a methodology document.
It's public. It's free. Almost nobody reads it.

That document decides your returns more than the fund manager does,
except there is no fund manager. Just rules.

[IndexDecoded @IndexDecoded]

@DIYfuru $XLE tracks the Energy Select Sector Index market cap weighted,
no stock cap.

That means Exxon and Chevron together are ~40% of the fund.

You're not buying the energy sector. You're buying two companies
with energy sector packaging around them.

[IndexDecoded @IndexDecoded]

Most investors think ETFs trade like stocks.
They do, but there's a second market underneath that one.

When an ETF trades below its NAV, an authorised participant
steps in. They buy ETF units on the exchange at the cheap price,
hand them back to the fund house, and receive the underlying
stocks in return. They sell those stocks at full market value.

That gap is their profit. The cheap ETF units disappear from
the market, supply drops, price recovers.

Above NAV it runs in reverse, they create new units by
depositing the underlying stocks, then sell those units
on the exchange until the premium closes.

No regulator coordinates this. No fund manager intervenes.
Authorised participants do it because the arbitrage pays them to.

That mechanism is why your ETF price tracks its NAV as
closely as it does, even on days when markets move fast.

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@Akshat_World Is it job displacement collapsing consumer demand? Is it AI-driven trading amplifying volatility? Is it a bubble in AI stocks deflating?

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@KobeissiLetter MSTR is not a company. It is a leveraged Bitcoin ETF with a software business attached.

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@hsinha1445 The 2007 peak at 1.94 preceded a crash. The 2024 peak at 1.83 preceded a correction. Both times, the ratio fell because market cap fell

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@SahilKapoor China cut imports by 50% from December. December was a pre-tariff stockpile month. Comparing to a normal month shows a 15-20% cut, not 50%.

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US corporate law, SEC enforcement, and shareholder rights sit inside a legal system where property rights have compounded for 250 years without confiscation. An Indian investor putting capital into Google or Microsoft owns a share backed by that legal architecture. That gap in institutional quality is why the USD CAGR difference between Nifty and S&P 500 has persisted for 15 years.

[IndexDecoded @IndexDecoded]

$SOXX tracks the ICE Semiconductor Index: market cap weighted,
but capped at 10% per stock to limit concentration.

The thing most holders miss: it rebalances quarterly back to those caps.
When Nvidia runs hard, SOXX mechanically trims it.

You own semiconductors, but the methodology actively fades your winners.

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@zerohedge The RBI burned $70 billion in FY2025 defending the rupee. The government is now trying fiscal incentives because monetary tools are exhausted. But foreign investors do not buy Indian bonds for tax efficiency. They buy them for yield after hedging

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AVGO's 10.8 billion AI revenue is custom silicon for Google and Meta. NVIDIA's networking is InfiniBand and Ethernet for everyone. The comparison is not product to product. It is captive to open. AVGO grows 143% because two customers ramp orders. NVIDIA grows 50% because the market ramps orders. The 200% Q3 guide is a customer pull-in, not a demand surge. The2.3 trillion vs $5.2 trillion makes sense if you believe custom chips eventually replace GPUs.

[IndexDecoded @IndexDecoded]

@krishan_sharmaa The ₹10.4 lakh crore drop is not a decline of foreign money. It is a rotation. The real story is that domestic SIPs absorbed the selling without prices collapsing

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@saxena_puru Crypto just feels it first because it has no cash flows to anchor the price. The FOMC hawkishness is a catalyst

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75 billion at135 per share implies 555.6 million shares. SpaceX has roughly 1.3 billion shares outstanding. The 4% free float is the real story. The 1.77 trillion valuation is a math exercise on illiquid paper. The IPO raises75 billion for a company that burns $3 billion annually. The cash lasts 25 years at current burn, burn will keep rising

[IndexDecoded @IndexDecoded]

Letters of credit and documentary collections mean payments and receipts are synchronized within 90 days. But FPI outflows are not trade. They are capital account items. The RBI sells dollars to fund those outflows. The $550 billion reserve is a liquidity buffer for capital flight

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@Sam_Badawi The drop is because AI revenue growth decelerated from 40% to 25%. The custom chip business is lumpy