"The entire story of the market can be told in the record low correlation. No higher low divergence was made... perhaps we can go for negative implied correlation. In 2010, we experienced implied correlation above 100%. Maybe 2026 will be our mirror." -Mike Green @profplum99 @t1alpha

A dollar of net inflow into Nvidia raises its market cap by roughly a hundred dollars, according to Michael Green. His conclusion: stock prices have almost nothing to do with fundamentals anymore. @profplum99, former portfolio manager and chief strategist at Simplify Asset Management and now Founder and CIO, Tier1 Asset Management, spent years running macro strategies at Peter Thiel's hedge fund before building the research that made him one of the most cited critics of passive investing on Wall Street. His argument is not that passive is bad for the average saver. It is that the entire market has quietly stopped functioning the way most investors think it does. Here is how he explained the math on my podcast: "The average impact of a dollar into the market was five dollars. That's five hundred times more than what the original theory predicted. My estimate is that for the largest, most inelastic stocks, those multipliers are now approaching one hundred. A dollar into Nvidia is raising Nvidia's market cap by about a hundred dollars." Every dollar that lands in a 401k on payday gets allocated by formula, not judgment, into whatever index the target date fund happens to hold. Nobody is asking if the price is fair. They are buying because the paycheck arrived. As passive share grows, there are fewer active investors left to sell into that flow and correct the price, so the same dollar moves the stock further than it used to. Green's own trading has adapted to this: not asking what a company is worth, but tracking where the flow is forced to go next. The market has not stopped pricing risk. It has started pricing something else entirely, and most investors are still reading the old map. We’d like to thank @AlphaSenseInc for sponsoring this episode! Full episode below 👇 piped.video/5i3TIaEHn6A

It's good to be back. Even better to share a collaboration between @t1alpha and @weareintropic in my first return post. Please checkout the analysis.

Gone are the days of picking stocks on valuation and ideas alone - you need to risk manage The Machine's flows, or The Machine risk manages you

I literally just got off a call with an industry friend talking about the importance of novel data. Relatively small shops like CBB or @cerulli_assoc or @t1alpha are going to be much bigger winners on a relative basis than big data firms. Novel, and First. Thats what counts.

The @profplum99 piece "A Semi-Theory of Almost Everything" is a must-read look under the hood at the The Machine's engine.

@Do_Trading it's more of a concentration issue via super high vol assets.

Even though implied correlation indices like COR1M are borderline useless here, Spot/Vol beta is right in the sweet spot. In other words, our old friend the $VIX is probably your best gauge for equity risk at the moment.

At this point, implied correlations only rise 1 of 2 ways. Either single-name vol compresses hard, which is unlikely given the concentration in semis, or $SPX vol catches up. And if the whole signal is just $SPX vol catching up, you might as well just watch $SPX vol directly.

Can't help but think about this NAV slippage between $SPX and $SPY/ $VOO/ $IVV during the Russell reconstitution last month. The biggest single-stock driver of the tracking error was $AAPL, which saw a style shift from 100% growth to 54% growth and 46% value.

Third largest MOC imbalance on record for $SOXL.

4/ In other words, this isn't broad dispersion, it's extreme return concentration. At this point, we are comfortable saying the implied correlation indices are essentially broken, or at the very least, no longer representative of their intended purpose.

We’ve been covering this in-depth for several weeks now in our daily reports. AUM in these funds, specifically $SOXL, means the notional MOC imbalances has entered unprecedented territory. More importantly, it’s the swaps that count more than the fund itself.

What a wonky day. $MU +15%, $SPX breadth positive, cash index flat. One bad $AAPL literally spoiled the bunch.

$SPCX will become eligible for CRSP indexes after today’s close, meaning its first passive index inclusion could come as soon as next week. This will directly impact the 401(k) market given their Total Market Index is the benchmark for $VTI and $VSMPX in Vanguards TDF series.

85% downside day following Warsh's debut as Fed Chair. Clearly, the blue tie was the wrong choice. In all seriousness, bad spot for realized correlations to pick up. Luckily, semis were able to avoid the worst of it, which has been the key contributor to the rally since April.