Michael Green

Green states that passive strategies act as a "systematic algorithm" where "did you give me cash? If so then buy everything in proportion to its market capitalization." He notes that 85 cents of every retirement dollar now flows into these strategies. Because these vehicles receive "ungodly amounts of cash" daily (Vanguard raises Simplify's total AUM every week), there is a persistent, price-insensitive bid under the largest market-cap stocks. As long as net flows are positive, the indices are mathematically forced to drift higher. LONG the S&P 500 (SPY) to align with the dominant mechanical flow of capital. A reversal in flows (net redemptions) would trigger the algorithm to sell indiscriminately ("passive sell pressure"), though the trigger for this was asked but not answered in the provided text.

The 30-year US Treasury bond yielding approximately 5% provides a rare retirement income opportunity, meeting the 4% withdrawal rule without equity risk. The market is mispricing bonds due to passive investing mechanics, not credit concerns. In contrast, forward equity returns are below 2%, making bonds far more attractive. He recommends selling other financial assets (particularly equities) to buy long-term Treasuries, including 30-year TIPS with real yields approaching 3%.

Green notes that commission-free trading is funded by Payment for Order Flow (PFOF), stating, "I believe Citadel pays about $4 billion a year to Robin Hood so they can see what the Robin Hood retail traders are doing." With retail trading now comprising 17-20% of the market (up from 10% in 1995), the "facilitators" of this volume are the primary beneficiaries. Robinhood monetizes the user base regardless of whether the users make money. LONG. The business model is validated by the massive checks written by market makers like Citadel to access retail flow. Regulatory changes to PFOF or a decline in retail trading participation.