Mike Green: Why A 1987-Style Crash Is Now Almost Inevitable — Here's the Math

Watch on YouTube ↗  |  May 07, 2026 at 14:00  |  38:29  |  Julia LaRoche Show
Speakers

Summary

Michael Green argues that passive investing, driven by 2006 regulatory changes, has made the US stock market unstable and likely to crash. He explains the mechanics behind rising passive share, the overvaluation of the S&P 500, and fragile earnings quality of companies like Nvidia. The discussion also covers generational wealth inequality, housing dynamics, and policy suggestions.

  • Passive investing share currently at 55% and rising 4% per year.
  • Market crash becomes inevitable between 65% and 80% passive ownership.
  • S&P 500 overvalued by more than 75% on a discounted cash flow basis.
  • Nvidia's earnings growth driven by unsustainable margin expansion and vendor financing.
  • Boomers hoarding assets (houses, stocks) contributes to housing shortage for millennials.
  • 2006 Pension Protection Act is the key regulatory driver of passive adoption.
  • Parallels drawn to 1987 crash and the XIV/VIX volatility event.
  • Policy recommendation: shift taxation from labor to wealth to reduce inequality.
Trade Ideas
Michael Green Portfolio Manager, Simplify Asset Management 0:00
S&P 500 crash inevitable near 65% passive.
The US stock market (S&P 500) is approaching a critical threshold of passive ownership (65-80%) where a 1987-style crash becomes almost inevitable due to inelasticity and mechanical flows. Currently at 55% and gaining 4% per year, the window is 2.5 years out. Also, traditional DCF shows market overvalued by >75%, implying S&P below 2000.
SPY HIGH
Michael Green Portfolio Manager, Simplify Asset Management 22:30
Nvidia earnings unsustainable, vendor financing circular.
Nvidia's extraordinary earnings growth is primarily driven by margin expansion (from 40% to 75% gross margins), facilitated by vendor financing using its appreciated stock. This is similar to Cisco's model in 1999 and is unsustainable. The circularity between stock price and earnings quality makes it fragile.
NVDA MED
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This Julia LaRoche Show video, published May 07, 2026, features Michael Green discussing SPY, NVDA. 2 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Michael Green  · Tickers: SPY, NVDA