@naufalsanaullah @LJKawa 1) So a tweet storm is a tough place for this, but I’ll try. This selloff so far has all been active mgr driven. There is “algorithmic” flow, but it’s largely been dark pool utilization by active mgrs handling redemptions, risk reduction, etc.
@naufalsanaullah @LJKawa 2) If you were at Vanguard or Blackrock, your flows have been uninterrupted. My hypothesis is that we’ve seen 2-3 different waves in this cycle. Sep-Oct was a botched rebalance (IYK, growth-value, US-RoW), Oct-Nov was largely oil, Dec we’re seeing credit and Boomer redemptions
@naufalsanaullah @LJKawa 3) The SMART index has major flaws. It looks at point changes rather than % changes so it can go negative if drawdowns happen at higher prices. It also subtracts overnight price action. Pre-2013 this was dominated by dividends, so was negative. Post-2013, buybacks dominated
@naufalsanaullah @LJKawa 4) a more properly constructed “Time of Day” analysis highlights this behavior. The gray line is “Institutional” money, which tends to trade 10-4, orange is systematic passive flows (eg 401K) which executes on open, blue is overnight 
@naufalsanaullah @LJKawa 5) All of the selloff is contained in the gray line (institutional), down 40%+. As Naufal points out, there has been zero passive selling (excluding trading vehicles like SPY). Again, look at shares out for Vanguard’s SPY equivalent, VOO
@naufalsanaullah @LJKawa 6) We don’t know what happens if passive selling appears. The good news is that Boomers are large (65%+ of assets), but have low passive penetration at ~15%. Millennials are almost 90% passive, but still small. The net balance between the two has kept passive flows positive
@naufalsanaullah @LJKawa 7) What could flip the balance? Millenial job losses. I think we’ve turned this market hyper procyclical. I think there’s a very real chance that the economy does NOT go into recession, active selling abates and a vicious price rally ensues (eg 1998). If not, grab your ankles.
