re: Michael Burry calls passive investments/index funds a bubble

quote:

---

He’s saying it’s a bubble because there is no more price discovery. It’s much like in economics when demand shifts right the price increases, but it’s always trying to find that market or equilibrium price. There’s no price discovery because you are buying every stock within that index at a percentage. Let’s say ITOT has MSFT underlying at 3.61% and has JPM at 1.23%. With price discovery each of these underlying shares would fluctuate independently to seek the market price. With indexing they are all evenly funded driving up the share price of some underserving underlying stocks.

---