The Greatest Regime Shift of our Generation*
* Until the Next One!
“A Meme is worth a Thousand Tweets” - Le Shrub 🌳
Back in December 2024, we proclaimed the beginning of the Golden Age of Grift™️aka GAG™️:
At the time, people thought we were exaggerating.
Today, people are telling us we were too “conservative” in our expectations…
…while the Media finally woke up to it (though Bloomberg forgot to give us thanks!).
However, “Grift” was always part of the Markets, as was “Stupidity”.
Today, while people are losing their mind about the grift and irrationality prevalent in the Markets, in reality history is just repeating itself with nothing new under the Sun. For example, the current “AI Bubble” brings memories of the 2000 Dotcom Bubble, and so on and so froth.
However, there are elements in today’s Market that go beyond the simplistic “History repeats itself”, which are the outcomes of entire Regime Shifts.
These Regime Shifts are what we are here to highlight.
Passivication ™️- The Shift to “Passive” Investing
Assets in US Passive Funds & ETFs now exceed those in Active Funds (source).
A smart operator can “game” the system by marking up a private company to a stupid valuation in the Private Market (“Mark-to-Monkey”), to then IPO it at an even stupider valuation in the Public Market and sit back as the “Passive” funds support the stock price with their “mechanical” buying.
The Passivication ™️of the US Equity Markets is now a feature of the system and a key enabler for the Mega-IPOs we are now seeing…
…it is also the reason that when a stock gets kicked out of the Index, it risks sliding into obscurity, since there are no natural buyers for it.
For the kids at the back, here’s the meme-xplanation™️(i.e. the Meme that explains it):
So far so good. By now everyone understands the impact of Passive Investing.
But there are new forces that have just emerged that will further exacerbate the “concentration” of a handful of stocks in people’s portfolios…