[peteretep]

This is confused

> All the passive investors want is for their cookies (and new-cookie acquisitions) to be properly priced.

No, they want the cookies they purchase to be under-priced, and consumed once their price has gone up. The cookie analogy fails here, but passive investors are exclusively seeking return, not an efficient market.

> No matter what, they have an average distribution of cookie-quality in their holdings.

That's not how passive investing works. The classic model is investment in an index -- say the FTSE 100 -- which attempts instead to maximize the quality of holdings, not the most accurately priced.

> It is hard to bilk a passive investor

Yes, but that doesn't mean it's hard to make money off one.