How Passive HODL-ing Of Stocks Leads to Extreme Crashes | Mike Green

Mike Green, portfolio manager and chief strategist at Simplify Asset Management, joins Forward Guidance to make sense of the market turmoil that has caught investors off guard so early on in 2022. Green tells Jack Farley why he thinks the rotation from growth stocks to the so-called “inflation-trades” (energy, industrial, and commodity stocks, for example), might have gotten ahead of itself. Green examines the mechanics of how passive flows distort price discovery and cause tendencies for the market to drift steadily higher while also raising the risk of extreme downward price movements. He explains how options overlays can take advantage of this environment and discusses his decision to bring those products to investors in an ETF wrapper. Green also discusses Simplify’s new credit hedge ETFs, AGGH and CDX. Green argues that inflation will relent soon, and that the future rate hikes priced into the bond market likely overstate how far the Federal Reserve will actually raise rates. Mike Green on Twitter @profplum99 Simplify on Twitter @SimplifyETFs Jack Farley on Twitter @JackFarley96 Blockworks on Twitter @Blockworks_ __ BCB is Europe’s leading provider of business accounts and trading services for the digital asset economy. With a dedicated focus on institutional payment services, BCB Group provides business banking, cryptocurrency and foreign exchange market liquidity for some of the world’s largest crypto-engaged financial institutions. BCB Business Accounts allow businesses to load fiat currency and cryptocurrencies for payments, operations and trading purposes. BCB’s clients can trade FX and cryptocurrencies quickly and at scale, with market-leading value. BCB’s BLINC network is the European crypto industry’s first instant settlements network and one of the first real-time payment networks of its kind to allow free, real-time transactions across fiat and digital currencies. For more information, please visit https://www.bcbgroup.com/jack __ Two papers Green discusses: Xavier Gabaix & Ralph S. J. Koijen, “In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis”: https://www.nber.org/papers/w28967 Lasse Heje Pedersen, “Sharpening the Arithmetic of Active Management”: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2849071 _ If you like this episode be sure to subscribe to our newsletter at https://blockworks.co/newsletter