Reverse De-Equitization: The Shrinking Public Float Thesis

The idea that public equity is being quietly consumed — retired by corporate treasuries, absorbed by private sponsors, and cornered by index vehicles — has drifted at the edge of macro discourse for a decade. It is now hardening into a testable thesis. Reverse de-equitization, as Blind Squirrel Macro has framed it in response to a pointed critique from Dario Perkins of TS Lombard, argues that the supply side of the equity market is contracting faster than most flow models acknowledge. If correct, the implication for valuation is not incremental.

The mechanics are straightforward and largely uncontested. S&P 500 gross buybacks have run at close to a trillion dollars annually. Private equity dry powder continues to fund take-privates at the smaller-cap end. IPO issuance has been anaemic for three years. Passive vehicles absorb a growing share of what remains in float. Each channel on its own is well-documented; the Blind Squirrel thesis is that stacking them produces a regime — not a cycle — in which the marginal share is structurally scarce.

Where the argument gets sharper

Perkins's critique, which prompted the fuller exposition, sits in the orthodox camp: shrinking float is a symptom of weak animal spirits and cheap corporate debt, not a valuation floor. Once financing conditions tighten and issuance normalises, the mechanism unwinds. That is the honest disagreement. The Blind Squirrel counter is that the buyer of last resort has shifted — from retail and active managers to corporate treasuries and index inflows — and that this shift is durable across cycles because it is embedded in capital structure decisions and 401(k) plumbing, not sentiment.

The related episodes in the series — on China risk, on the perpetuals-versus-exchange venue question, on whether a market low has printed — orbit the same organising idea: market structure is doing more of the work than macro narratives credit. That is a claim macro professionals should engage with rather than dismiss, if only because the null hypothesis (flows are noise, fundamentals are signal) has performed poorly against post-2020 tape. The dossier here is one-sided by construction — a single author's thesis and its critic named but not quoted — so readers should treat this as an argument to stress-test, not a consensus to import.

The dossier offers no quantified macro forecasts to arbitrate. The one operationalisable claim on the table is prosaic but revealing: whether Blind Squirrel Macro raises its annual subscription from 360 to 450 dollars by mid-2026, which the author flags as likely. That is a bet on the durability of independent macro publishing more than on reverse de-equitization itself — but the two are not unrelated. If the structural-flows lens continues to explain price action better than DSGE-flavoured (dynamic stochastic general equilibrium — the workhorse academic macro model) frameworks, the market for the analysts who wield it will tighten in exactly the way the equity float has.