‘Passive Is The New QE!’: One Bank Admits We’ve Entered A ‘Black Hole’

‘Passive Is The New QE!’: One Bank Admits We’ve Entered A ‘Black Hole’

Everyone gets it. QE, the price-insensitive bid from SWFs, debt-funded buybacks, and passive investing are all the same damn thing. It's all one trade. It's "Heisenberg's Wave Paradox." No one can distinguish between making a good decision and a decision turning out good by virtue of your having made it. When everyone falls into that trap, it's no longer possible to distinguish between riding the proverbial wave and creating the wave you're riding. This is a self-fulfilling prophecy - a
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5 thoughts on “‘Passive Is The New QE!’: One Bank Admits We’ve Entered A ‘Black Hole’

  1. Interesting but at the end of the day, it just means that everyone will be even more heavily lopsided on the same side of the boat, which in the end has always proven to be poorly positioned as eventually there’s no more buyers. You cannot repeal the laws of physics or supply & demand.

    In addition, there are still many ways that good managers can deliver alpha so IMHO the premise of the article, while making an interesting and valid observation, isn’t entirely accurate in its implication. At least not within the context of the global asset mix. For example, the FX market isn’t hostage to passive investing and the size of the global FX market dwarfs the size of the global equity market by orders of magnitude.

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