If markets no longer price value, then what’s actually setting the price?

Raise Your Average hosts Pierre Daillie and Adam Butler sit down with Michael Green, Chief Strategist and Portfolio Manager at Simplify Asset Management, for a deep dive into the passive investing thesis he has spent over a decade researching, defending, and stress testing.

Green argues that trillions of dollars flowing automatically into index funds via 401(k)s, RSPs, and defined contribution plans have created a market where price no longer reflects judgment about value. He walks through the mechanics of the “inelastic market hypothesis,” the outsized role of leveraged and levered sector ETFs like SOXL, the Grossman-Stiglitz framework and why its core assumptions no longer hold, and why active and value investing have become structurally disadvantaged in the current regime.

The conversation also covers the 2026 macro backdrop of a US-Iran conflict, an oil shock, and equities at all-time highs despite it, the risk of a passive “end stage,” and where genuine diversification (like managed futures) still fits. It’s a candid, occasionally combative, and consistently illuminating discussion for anyone trying to understand why markets are behaving in ways that don’t match historical patterns.

Chapters

00:00 – Introduction: has the market stopped pricing risk?

08:00 – Welcome to Michael Green; setting up 2026’s contradictions

09:00 – The 50-year shift into “all equities all the time”

10:00 – How ETF mechanics reduce market elasticity

12:00 – Why pod shops and passive flows ignore fundamentals entirely

13:00 – Leveraged sector ETFs (SOXL) aren’t really passive

15:00 – Echoes of the dot-com bubble: 1999 vs. today

18:00 – Circular funding and Mag Seven earnings

41:00 – Momentum, autocorrelation, and portfolio construction under passive dominance

44:00 – Pushback from the Financial Times and mainstream finance media

44:30 – Malkiel’s Paradox of Skill and the Grossman-Stiglitz framework, unpacked

47:00 – Why the “equal endowment” assumption is false

49:00 – The large-stack player sets the terms of the market

50:00 – The Inelastic Market Hypothesis (Gabaix and Koijen) and Green’s updated multiplier estimates

52:00 – Facilitators vs. correctors: why Citadel and Jane Street are thriving

55:00 – The Newtonian vs. quantum physics analogy for market scale

57:00 – GameStop, Michael Saylor, and self-liquidating vehicles

1:13:00 – Market cap concentration data and transaction cost asymmetries

1:15:00 – Why cap weighting has flipped from historically losing to structurally winning

1:17:00 – Stein’s Law and the coming correction

1:18:00 – Why value investing is a “negative selection criteria” right now

1:21:00 – Where active investors can still add value: becoming facilitators

1:22:00 – Managed futures as liquidity provision and portfolio ballast

1:25:00 – Capacity constraints and closing thoughts

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