It’s not as if stock pickers have no choice. On the contrary, they have many opportunities to hunt for bargains if they, like Burry, believe that indexers are overpaying. The difference in valuation between the Russell 3000 Growth Index and the Russell 3000 Value Index, as measured by their P/E ratios, is higher today than at any point since 2000. The same is true between the Russell 1000 Index, which tracks large and midsize companies, and the Russell 2000 Index, which tracks smaller firms.

But shopping for cheaper and smaller companies would mean straying from popular broad-market gauges like the S&P 500 Index, which are dominated by larger firms and packed with expensive growth stocks. Few managers have the stomach for that because clients get annoyed when those gauges soar and their portfolios fail to keep pace. As legendary money manager Barton Biggs reputedly warned, “Bullish and wrong and clients are angry; bearish and wrong and they fire you.”

Burry is probably right that many U.S. stocks are too expensive, but that’s no fault of index funds. There’s plenty of blame to go around, starting with the stock pickers.
This article provided by Bloomberg News.

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