1/ In the podcast referenced below, @profplum99 makes the excellent point that passive investing is having an outsized impact on price discovery; distorts it, and results in these seemingly blind v-shaped market recoveries (if I may paraphrase). https://twitter.com/Paul91701736/status/1287470957918068736?s=20

2/ We agree with Michael on this subject and have had conversations w him about it. Still we all need context around the amounts in question. Passives have a role for sure, but don’t underestimate how much money is sloshing around in the hands of idiots (RobinHODLr’s).

3/ Pick your source, but the Fed estimates total US household financial assets to be in the neighborhood of $90 trillion.

4/ Included in that is about $30 trillion in retirement assets (of all kinds), about $15.0 trillion in deposit accounts, $26-ish in equity securities, $5 tr in debt, and the remainder in insurance assets.

5/ So how do passives fit into that brew? Let’s break down the $90 tril just focusing on equities. Total US Equity Market Cap today is $35 tril. Ish.

6/ According to Yardeni Research, $26 tril of total equities is split with 15 in directly held equities, 11 “indirectly” held (funds).

7/ That corresponds to Goldman's breakdown here. I will not match dates/numbers perfectly here, but you’ll get the drift. According to Goldman, at the end of 2019, there was about $10.5 tril invested in ETF’s and mutual funds, split almost evenly between passives and actives.

8/ Of that 10.5, equity focused mutual funds and ETF’s associated with retirement accounts were 3.9 tril (according to ICI) which means 6.6 tril in total fund and ETF assets were held outside of retirement accounts.

9/ Let’s break down the $30 tril retirement mkt. About 8 tril are defined contribution plans, 5.6 is 401k, 0.5 is private DC, 403b is 1 tril, 457 is 0.3 and TSP (govt) is 0.6. That’s about 16 tril right there. Then there is 9.5 in IRA’s and 3.2 in private def. benefit plans

10/ Right now, 3.9 tril in equity funds and equity ETF’s are slightly more than 10% of the total retirement market. About 80% of the 401k market is equity funds (very few select fixed income), and about half of the IRA market is equity funds.

11/ $35 tril in total US equity market cap is owned about half in direct equity shares (Yardeni), and about 30% in indirect holdings (funds; $10.5 tril) with the remaining 20% owned by other entities. Of the $10.5 tril indirect portion, only 3.9 tril is from retirement accounts.

12/ A couple of mid-thread conclusions: with $15.0 tril in deposit accounts and $16 (ish) tril in directly owned shares, RobinHODLr’s can have an impact. I was surprised by how much money AWAY from retirement assets is sloshing around.

13/ Fund assets have almost tripled in ten years from about 3.5 tril in 2011 to 10.5 tril today. And Passives have gone from 42% of total fund assets in 2011 to 50% today. That could continue but it doesn’t necessarily have to. Investor appetites could change.

14/ Add to this mix, and it will bleed into multiple categories above, is about $3.0 tril in hedge funds. I would probably put these assets into the active bucket and probably half are equity funds.

15/ So as far as what discretionary money exists to be whipped around inside that $35 tril in US equity market cap is $16 tril directly owned, 3 tril in hedge fund money, and 10.5 tril in funds, only 30% of which are retirement related.

16/ Then there’s the 15 tril pile of cash, doubtful anything but a portion of that is ever really used for stock investing but I’m just guessing on that.

Point is in a big market, discretionary retail yahoos can move the needle. They could be almost half of the total fund market, that’s obviously being generous, but some of these non-captive buckets are large enough to matter. And as we know, idiots are everywhere. $KODK, $HTZ