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Changing nature of the marketplace - macro/HFT


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Interesting WSJ article about the high levels of correlation in the market place these days due to a larger number of participants taking on macro strategies and HFT. Have always suspected this was the case i.e. "worry top down, invest bottom up", but couldn't put words to it, or couldn't find the time to do the research.




If you're an orthodox Buffett/Graham then you may be agnostic to this, however I have certainly noticed that the market place doesn't provide as much deviation for smaller stocks these days, or stocks that may seem 'out of sample'.


Interesting Einhorn quote:


"For years I had believed that I didn't need to take a view on the market or the economy because I considered myself a 'bottom-up investor,'" said hedge-fund manager David Einhorn of Greenlight Capital last year. "The lesson that I have learned is that it isn't reasonable to be agnostic about the big picture."


I gather that this is a function of the composition of participants in the market place:

Hedge funds are moving in the same direction. Last year, 184 new macro hedge funds were launched, compared with 203 funds started by traditional stock investors. By contrast, in 2005 there were 894 new stock funds and 244 new macro funds.


HFT Funds are also larger participants in the market place.




I don't ignore the macro these days, but I don't make predictions based on them either.

Just be aware how the markets change through the years when you're investing, that's all.

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