Oh, look at that. Another 'widely circulated working paper' has drifted down from the ivory tower to tell us what any sentient being with a pulse and a brokerage account already knew in the pit of their stomach: The game is rigged, the board is on fire, and we are currently fueling the flames with our own indifference. The premise of the latest academic scream into the void is simple, terrifying, and hilarious. It suggests that passive investment—the holy grail of the 'set it and forget it' middle class—is actively inflating a stock market bubble so large it makes the Hindenburg look like a child’s birthday balloon.

Let’s be honest about what passive investment really is. It is the financial equivalent of a lobotomy. It is the collective decision by millions of investors to stop thinking, stop analyzing, and stop caring about value. Instead of doing the hard work of discerning which companies are actually profitable and which are just three raccoons in a trench coat, we have handed the keys to the kingdom over to algorithms. We buy the index. We buy the bucket. We don't care what's in the bucket—it could be gold, it could be radioactive sludge, it could be the liquified remains of the middle class—as long as the line goes up and to the right, we keep buying. And because we keep buying the bucket blindly, the price of the sludge inside goes up. This is the definition of a self-fulfilling prophecy, or more accurately, a Ponzi scheme where the new investors are just our future selves making automatic payroll deductions.

This working paper points out the obvious flaw in this utopian vision of 'efficient markets.' If everyone is passive, nobody is driving the bus. We have created a market that has completely detached from reality. In a functioning economy—a mythical concept that hasn't existed since perhaps the Neolithic era—prices are supposed to reflect information. If a company burns down its factory and insults the customer’s mother, the stock should go down. But in the era of the Passive Bubble, that doesn't matter. If that company is in the S&P 500, the index funds *must* buy it. They have no choice. It is a mandatory consumption of garbage. The 'Invisible Hand' of the market has been amputated and replaced with a robotic claw that just grabs everything in sight, regardless of quality or price.

This creates what the academics politely call 'inelasticity.' I call it 'financial constipaton.' Money flows in, but it doesn't flow based on merit. It flows based on market cap weighting. The bigger a company is, the more money it gets, which makes it bigger, which gets it more money. It’s a perpetual motion machine of stupidity. We are bloating the valuations of the largest companies not because they are innovating, but because they are there. It is the participation trophy mindset applied to global finance. Apple and Microsoft don't need to actually cure cancer or solve energy crises; they just need to exist inside the index so that your Vanguard fund is legally obligated to throw money at them.

And who benefits? The grifters, obviously. The C-suite executives whose compensation packages are tied to share prices that are being artificially pumped by mindless robot-buying. They look like geniuses as their stock soars, but they are just surfers riding a wave of liquidity generated by your fear of poverty. Meanwhile, the active managers—the vultures who claim they can beat the market—are crying foul, not because they care about market integrity, but because it’s hard to hustle a mark who isn't even looking at the table.

The delicious irony, of course, is the inevitability of the pop. Bubbles built on enthusiasm are fragile; bubbles built on structural mandates and algorithmic laziness are catastrophic. When the flows reverse—when the Boomers finally start liquidating their hoards to pay for hip replacements and climate-controlled bunkers—there will be nobody on the other side of the trade. The passive funds don't buy on the way down; they just exist. We have built a market designed exclusively to go up, stripped of the shock absorbers of human judgment. We removed the 'price discovery' mechanism because it was too volatile, and replaced it with a numb, blind accumulation of assets.

So, yes, the working paper is right. We are inflating a bubble. But don't expect anyone to do anything about it. To fix this would require effort, discrimination, and the admission that 'average' is not a strategy. And if there is one thing the modern human detests more than losing money, it is the burden of actually having to think about where that money goes.