Interesting read overall. What I don't get is this. >I suspect that what we are seeing here are some of the effects of passive index investing. Increasing num

Interesting read overall. What I don't get is this. >I suspect that what we are seeing here are some of the effects of passive index investing. Increasing numbers of investors and traders aren't buying or trading individual stocks at all. They are just buying or trading index ETFs like SPY or sector ETFs like the Industrial Select Sector SPDR Fund (XLI). When all the stocks in the index get traded together, they all end up with the same valuation levels. This is not how index funds work. Index is passively adjusted to whatever the active investors decide the proper price distribution is few times a year. If some stock is not valued it's share in the index drops and drops and drops. Index funds can skew up the pricing between the stocks temporarily relative to those who are outside the index, but not within the index. Eventually lowest performing stocks are switched to other stocks even in the index. Professional investors are salesmen and badmouth index funds without any logic behind it.