Michael Green: The Stock Market Is Now A Giant Ponzi Scheme

There is a mechanical force that pushes asset prices higher as capital flows passively into the market every month.

As more money flows in, it must be used to purchase assets, at whatever current price they're trading at. That valuation-insensitive purchasing results in higher and higher prices.

Today's guest refers to this current system as the "giant mindless robot".

And, in his view, has deformed our financial markets into a gargantuan ponzi scheme of unprecedented scale.

One that someday must go bust, as all ponzis do.

For all the details on this, we'll spend the next hour with Michael Green, portfolio manager & chief strategist at Simplify Asset Management.

#stockmarket #assetbubble #ponzi
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[DavidHall-vbcu]

“When the going gets tough, the guys in charge change the rules.” I love it Adam! 😂

[Offon_A_Boondoggle]

Adam, I am NOT an affluent follower; not even close. I was wiped out twice between 2006-2008 and became an “employee” from then on. I never even came close to recovering financially to the level I was before the crash. I have since retired at an income level 80%+ LESS than I was making in 2021 when I retired. You hit the nail on the head about heading outside the country to live. I spend 3-4 months a year in Michigan living on a 1979 Endeavour sailboat I bought in 2023. The remaining 8-9 months I travel to Central America, South America, or like this year to SE Asia. I can live extremely well in dozens of countries outside the US on 2/3 of my social security; some on 1/2 of it. It is what it is; you do what is necessary and at least now I can actually start to save and invest small amounts of money.

[calebplumleeoutdoors]

"Is NOW a pozi scheme??"

I mean... it has ALWAYS relied on new money coming in banking on returns.

Basing our entire economy on literal gambling has been fkn insane since the beginning

[kylewatson]

"The Stock Market Is Now A Giant Ponzi Scheme"

It's been that way for awhile, welcome to the party.

[gregs]

This was probably the best zoom-in--1X-2X-5X-10X--on demographics, politics, and finances I've ever watched. And a wonderful exposure of democracy as it really is--a plutocracy. Thank you both.

[TitleCaseMike]

100% have him back! He's a direct communicator and this stuff needs more sunlight!

[BoBear]

This was truly one of the most sobering conversations I've ever heard about market mechanics and the very real dangers lurking in plain sight!

[JoshuaSchallert]

“Doing everything they can to keep the spice flowing” … nice reference 🙂

[mathematrucker]

In early 2018 Tan Liu published an excellent book comparing the stock market to a Ponzi scheme: "The Ponzi Factor: The Simple Truth About Investment Profits". During interviews Liu is fond of touching the ends of his forefinger and thumb to represent the intrinsic value of stocks. After reading his book and thinking about the subject a lot, my conclusion is that while his observation is correct, all it does is re-frame something we already knew, namely, that stock market crashes are a feature, not a bug.

[Lee-inng]

Honestly I feel like I'm on the Truman show. Everyone's gone mad

[manus]

Michael is exceptional. I don’t care about whether he’s been wrong about his call - there’s too much of that on fintwit as it is. It’s his description of the mechanics of passive investing that’s captivated me. Never considered it until I found his work.

[RobWilliams]

Just heard Scott Galloway talk about this exact thing - working for one of these big companies like Google or MSFT, you get compensated highly and maybe get shares that go to the moon and you may be mediocre at your job but another person is a superstar at a smaller company but just because of where they worked, it makes all the difference.

[jamesgoodman]

Michael is one the most intelligent guest going around on the online podcasts. I alway enjoy listening to what he has to say.

[nacetroy]

Mike is incredible, one of the few guys who really seems to have a caring vision for the benefit of all of society.

[yannick]

Another amazing interview of Michael, thanks a lot for inviting him again!

[BogdanRotman]

Mike Green, is, literally, the smartest guy in the room!

[jivepatrol]

The original idea of buying the index was one developed by Jack Bogle among others. It was pure genius at the time but one unanticipated issue with it is that inflows for a finite group of assets (around 500 stocks) that MUST be purchased each month actually drive prices higher. The aggregate value of the S & P 500 should theoretically be the present value of future cashflows. With interest rates going up, there was an initial pull back in 2022 followed by a big rally while rates went higher. Index funds have overall been insensitive to interest rates. This doesn't make sense other than for people conditioned to "buy the dip" through index funds and and staying the course of mechanically investing a portion of their salaries each payday. This drives prices even higher. Very good interview and points - thanks to both!

[calr]

Being old enough to remember the 50s and 60s, folks who retired then bought stocks and bonds for dividends and interest. You retired with a pension and shares of AT&T and Northern Pacific. The feeding frenzy for stocks came when companies started giving lump sum distributions as an option for retirement.
That’s when the “free meal” at the local steakhouse included an “investment seminar”. Variable annuity anyone? Big commissions and fees.

[dtruscott]

I normally just skim for the highlights but this was a really hard-hitting piece, and I listened to all of it. Some scary possibilities (certainties?) but sounding with a ring of truth. Michael is absolutely brilliant.

[originalfred]

Summary: When money stops flowing into the market, stocks will go down.