I’m just going to leave this here:  Because here is my historical observation/reflection:

  1. In the 1990s, all the big stock exchanges had finally gone electronic, and we discovered algorithmic trading.
  2. Until the crashes in the late 90s, where we realised that bad algorithms are bad.
  3. And then we invented high frequency trading (HFT), and the HFT portion of the trade pie has been increasing like made since the late 2000s.
  4. Today, most trades are algorithmic.

And here is my question: are there any value investing algorithmic/high-frequency traders?

Perhaps. But they would make no sense to me, because you only really need speed for momentum investing. For value investing, you need everyone else to be wrong about the fundamentals at this point, and then you need them to change their minds (ie. to “shift” the momentum against the current trend).

The trouble is: I’m not sure how you shift momentum if almost everyone is a momentum trader.

Although Carl Icahn does do his level best with letters to Tim Cook, etc.

So the market kind of feels out of balance.

Anyway, it’s just a thought/concern that I thought I’d share.

Happy Wednesday

Rolling Alpha posts about finance, economics, and sometimes stuff that is only quite loosely related. Follow me on Twitter @RollingAlpha, or like my page on Facebook at www.facebook.com/rollingalpha. Or both.