[SnakePlissken]

I believe the argument is along the following lines:

The more money that is placed into passive indexes (funds that merely attempt to track the performance of something like the S&P500 by owning a proportional, market cap weighted amount of each stock in the index), the less that is being actively managed by a human being or algorithm with the affect of price discovery.

With less 'players' in the game acting on their competing investment theses, inefficiencies are expected to widen. In other words, if AAPL is at price X on any given day, that price is the sum total of all buy and sell orders being placed. One can assume that even with a large portion of passive buying today, most involved in trading AAPL are trading on their own assessment of the true value of Apple's stock. If at some future point the majority of money in the market is simply passive/buy-and-hold, the price of AAPL (or any stock/wider index) will be less "efficient" because of the distortion in supply & demand created by an increase of mindless buy orders.

Some market watchers have attributed the abnormally placid bull tear of 09-present, at least in part, to this consistent buying. Josh Brown called it the relentless bid [0] and explained how the increased popularity of dollar cost averaging, scheduled index fund purchases, etc could be a major factor.

[0] http://thereformedbroker.com/2014/03/05/the-relentless-bid-e...