2026Q1 Random Topics

401k "Puts", Passive ETF Shenanigans Inbound, and Manufactured Spend Free $$

Every quarter there is a handful of random topics that I want to write about, but don’t feel like they deserve a full post of their own. I enjoy these posts as they are a little smorgasbord (a word I hear and say often but is always funny to see written) of useful info, neat little oddities, or funny anecdotes.

This quarter’s random topics do share a theme - passive ETFs and the market.

If you have been around the substack and twitter for a while, you probably have heard a rumbling or two from ol’ F’er about passive ETFs - namely about how they are fundamentally changing stock markets.

In the past, I have mentioned that as more people move to just passively buying the ‘whole market’ because ‘90% of active managers underperform the index benchmark’, it seems like we are ripe for a reversal where active managers start outperforming again.

Markets tend to humble people. And it is when ‘everyone knows, that everyone knows’ something is true, that suddenly the narrative ceases being true.

Everyone has heard of the ‘shoe shine boy who was giving stock tips and made some Wall St. guy realize the market was going to fall’ so he sold out the day before Black Monday crash.

Well, when everyone is telling you to just buy ETFs, is it a similar canary in a coal mine?

We have also gone over how prices are set on stocks (actually set) and how ETFs create a lot of noise that can hide the signal of what a stock is valued.

And of course, the substack also hit on another issue with the standard ETF advice - not realizing that ‘buying a few ETFs’ is just naive diversification under a layer of fog.

And the above all may seem like I am anti-passive-ETF-ing.

Not true.

Passive ETFs have proven to be great. They allow people with a relatively small amount of money to still get diversification. They allow unsophisticated or uninterested people to participate in the same returns as the broad market. There is a laundry list of positives about passive ETFs.

I just find it immensely intriguing that the huge inflow to passive ETFs is fundamentally changing the market (in my opinion) and there seems to be a lack of conversation around the long-term (or even short-term) implications.

We just get the continuous prattle of ‘Buy VOO and chillllll man’.

So today’s random topics will cover a little foundational info on passive ETFs change to the market, and how it may be a good thing for now. And then a pretty crazy example of how at least one index is looking like it might transfer massive wealth from retail to institutions.

It honestly is brazen af.

Impressively ingenious.

Easy enough to understand, but just below the surface enough that it won’t ever make it to the mainstream.

And if it goes through successfully, will absolutely change the passive ETF value forever as others copy it.