The Inelastic Market Hypothesis

Benny & The Squirrel: Episode 21 with Mike Green.

Benny (Capital Misallocation) & The Squirrel sit down with Michael W. Green of Simplify Asset Management. Recorded Thursday 29th January 2026. Link to recording below.

I know that many of you may be familiar with Mike’s thesis on the impact of passive management on equity markets. Even if you are, please don’t miss this conversation.

We do cover Mike’s legendary XIV short-volatility trade and how it crystallized his thinking on passive investing and inelastic markets. He explains passive flows as a simple cash-in/buy, cash-out/sell algorithm that drives concentration in cap-weighted indices and amplifies the dominant dispersion trade in markets.

We go on to discuss broader declining market elasticity, post-earnings drift, index-inclusion gaming, and the “Costanza market” where fundamentals-based shorting is punished. We then extend the framework to commodities, options-driven gamma squeezes in gold and silver, and credit/high-yield dynamics, before closing on systems-thinking, POSIWID, and how policy and structure jointly create market instability.

You can follow Mike via Twitter, his excellent blog and via Simply Asset Management.

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