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

quote:

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"A proliferation of index funds, though accounting for ever-increasing amounts of investment monies, would lead to an inefficient market. A stock’s price would become more a function of the monies flowing into index funds than a reflection of its investment merits. The efficient market hypothesis would be dead."

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Written by director of research at Chase to the Wall Street Journal editors on December 8, 1975.

Stocks rose and fell prior to the creation of the index fund and they rise and fall today. We've been through the dot com bubble and the subprime mortgage bubble and crash. I'm not worried.

Also, if you look into Burry's actively-managed Scion Asset Management fund he says he focuses on small-cap value stocks because they are not common index components. However, if you look at his fund's most recent Form 13F you'll see large allocations to names that are very prevalent in major indices. Almost half of his stock capital is exposed to stocks of major indices. He also had almost 10% of his capital in Alibaba a favorite stock among China-related indexes.

If there is any contagion, I'll use it to buy, and guess what people will do with the capital they took out of index funds? Eventually reinvest. Actively managed funds suck, and indices are efficient in putting these shysters out of business.