Jim Bianco of Bianco Research says the following:
“Money management just crossed the Rubicon.”
We’ve heard the language before. The belief being that an arbitrarily set parameter has triggered something. What has been triggered? We don’t really know since it hasn’t been defined. The lack of a specific claim is intentional since it leaves it open to any interpretation. When we look at the prior claims along the same lines, we can see why there is little in the way of what this rise in “passive money” really means.
From the above November 1997 article:
“While Wall Street paints 401(k) members as indifferent to short-term swings, the evidence of a few days in October suggests the opposite. They appear far more attuned to the ebbs and flows of the market than the experts realized.”
Likewise, the further you go back the more we see the same worry about new money entering the market.
This from Richard Russell’s Dow Theory Letters dated April 12, 1995:
“With stocks clearly overvalued, the funds move into the very liquid big-cap Dow type stocks (the “safe” stocks) and the Dow plows higher.”
What is implied by crossing “the Rubicon” is that a big crash is coming because dumb money is coming into the market regardless of values.
Welcome to the nature of markets for thousands of years. A Rubicon hasn’t been crossed, instead, we should expect more of the same from markets which is merely a reflection of human behavior.