GOLDMAN SACHS: The stock market stops working when there are too many passengers!

https://finance.yahoo.com/news/goldman-sachs-stock-market-stops-193912448.html

Well, the promise of active investing is that they’re going to deliver performance net of fees better than the benchmark, whatever the benchmark might be for the US, global, or Europe. It’s been a difficult seven years for active investors because the markets have risen so consistently and persistently higher. So most active managers have net of fees underperformed the benchmark. So it led back to this debate about whether or not the fees that you pay for active managers are worth it. And there’s been simultaneously a great shift towards passive investing because it’s cheap, and you would get all of the market returns, net of five or 10 basis points.

The problem for passive is that its size, at a certain point, may be too much for the market to handle. And it’s also all on autopilot. So in terms of the size, a market needs both active and passive investing because if everybody’s a passive investor, there’s no one to buy from. So there’s no one … your beta is my alpha and vice versa. So you need a balance in the market. And if passive becomes a certain oversized percentage of the market, the market doesn’t function.

The other problem with passive, of course, it’s all on autopilot. And when you get to periods of misvaluation, over or undervaluation, you need active decision-makers. Because valuation always matters in markets, and investing.

Good to know, this is why I am buying commodities which are hated right now, don't threaten me with cheap commodity stocks, Ill buy them all day lol