Kontrarian Korner #155 - Mike Green

Passive investing and leveraged ETF mechanics are structurally distorting bond and equity markets, compounding wealth concentration and generational economic hardship.

• Bond indices are pro-cyclical: Market-cap-weighted bond indices overweight premium bonds and underweight discount bonds, so a 50-cent bond gets one-third the buying support of an identical 150-cent bond, exaggerating long-end selloffs during hiking cycles (Austrian century bond fell from 225 to 4).
• Leverage creates endogenous flow: 3x levered ETFs must rebalance daily (e.g., $100 into SOXL becomes $130 equity/$200 debt after a 10% rise, requiring $60 more buying with no new investor money), and Mike Green says this explains almost 50% of semiconductor moves in a 2025 period.

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