A comment I left on Josh Brown’s post about value managers complaining about getting scalped by high frequency traders:
I suspect that HF traders overstate the extent to which their algorithmic trading provides any liquidity or price discovery benefits to the broader market. On the whole, it seems like an enterprise which throws a lot of brain and computing power into a rat hole as far as everyone else is concerned.
On the other hand, to run with your metaphor a little, the traditional, buy-side value dinosaurs are already choking on the comet dust of a secular bear market, and they’re lashing out at the proto-rats as if they were the cause of it.
Value investing, at its heart, was a calm contrarianism — Graham buying broken-down net-nets when no one wanted to touch stocks during the Great Depression. Today it seems like every value investor thinks of himself as a contrarian, without realizing the extent to which value investors have become the market. If they’re all contrarians, none of them are. And if we’ve got another decade of secular bear market ahead of us, there are going to be a lot fewer value guys left standing at the end of it.
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