If true, this is going to hurt a lot of traders I know

Mssr. Chance and friend: “hey, whadda we know?”

Mark Cuban: trading is shifting to a macro-view.

Over just the past 5 years, the market has changed. It is getting increasingly difficult to just invest in companies you believe in. Discussion in the market place is not about the performance of specific companies and their returns. Discussion is about macro issues that impact all stocks. And those macro issues impact automated trading decisions, which impact any and every stock that is part of any and every index or ETF.  Combine that with the leverage of derivatives tracking companies,  indexes and other packages or the leveraged ETFs, and individual stocks become pawns in a much bigger game that I feel increasingly less comfortable playing. It is a game fraught with ever increasing risk.”

Personally, I’ve blamed the phenomenon of  micro-second trading for the death of the buy and hold investment strategy, and seen traders make billions short term while the world slowly erodes just beyond their vision, but what do I know? I’m no trader. But I do know a lot of traders, and some of them display no knowledge of history, economics, philosophy (it’s still relevant, long term) or current events beyond what flashes across their Bloomberg screens. Hell, they couldn’t even name the vice-president of Iceland! (joke).

Will knowledge regain its role in determining who succeeds and who fails on Wall Street? I’m skeptical, because regardless of what they may know about events happening beyond their trading desks, these people are super-smart and fiercely determined to win – they’ll figure out a way to (continue to) make a buck on ignorance.

4 Comments

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4 responses to “If true, this is going to hurt a lot of traders I know

  1. Is That All?

    just changes the winners of the game

  2. Like rolling the dice in Vegas

    It’s disappointing that the quick fingers of a day trader are rewarded more handsomely than the dedicated talented hands of a surgeon.
    What is changing the future is that those possible surgeons are attracted to pursue the quick finger financial career.

  3. Ernie

    The market has become driven by trading and the concentration of monies in hedge funds. These funds “move in packs” and place their bets on what they believe will be the outcomes of macro events occurring around the world at any point in time. They then place their bets and once they believe the trend has run its course (whether in months or years), they they move on to the next big trade. As such, it becomes a self-fulfilling prophecy in which traditional investors get whipsawed. That is why hedge funds charge so much to become part of the “club” which is akin to being the “house” in a casino or a foreign exchange dealer sitting at a trading desk.

  4. Anonymous

    He is broadly correct. You can still invest in this market with a long term view but short term trading is becoming more and more difficult, and this will have negative repercussions for many of the high fee hedge fund strategies, as they will be less able to differentiate themselves in the market.