Gasem says:

I read an article over the weekend. The market is now 60% index funds. It’s also 20% robot trading. The remainder is split between active funds and brokers. Nobody knows what this means. Index funds have been purchased by people inexperienced in the market. They are used to a market that goes up. The market is 90% overvalued compared to the long term trends. Part of the mantra is buy and hold. People are also over-leveraged. They think nothing of holding a 90/10 portfolio like that’s somehow rational. Are inexperienced investors who own 60% of the market and over leveraged going to hold in a downturn? Robots and active funds trade with the tape meaning they can go short. The robots are agnostic. They are simply algorithms dedicated to maximizing profit based on trends. On the upside they add to upward market action on the down they accelerate market losses exacerbating both gains AND losses for the indexer. Active funds do the same they will trade in a way to not fight the tape and either go short or go to cash either trade will increase volatility. Index funds are not index funds, they are index tracking funds, a basket of stocks weighted to track the index. VTI is not 3000 stocks, last time I looked it was 180 stocks not sure what it is today. In a downturn those 180 (or so) stocks are what will get sold increasing their volatility and the index and the fund price will become distorted so VTI will appear to no longer trade at par but below par. You gonna own a fund trading below par in a crash?

Your guests quack about indexes as if they are safe because they hold some diversity and are easy to own without a lick of knowledge. Yes precisely. Easy to buy like a Rebel without a clue. Going to be interesting when the mean reversion happens.