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Back in October, JPMorgan Chase analysts Eduardo Lecubarri and Nishchay Dayal warned that the $7.4 trillion of global assets parked in passive funds could "exacerbate a rout" during the "next recession."
Well, they were half right: We're not in a recession.
But the escalating sell-off - especially in the highflying, index-leading big-cap stocks - is weighing heavily on passive investors.
"Weighing heavily," as in, passive investors are losing lots of money just about every day.
Active investors and traders, like us, have options. We can hedge, we can get short, trade puts, even go to cash - there are moves we can make.
Passive investors? Well, they could become active in a major way just about any day now. The panic would be legendary.
If that happens - and we are getting close to market levels that could turn passive investors into very active panic-sellers - a crash may not be far off.