I view what’s going on right now as part of market structure being fundamentally broken. It’s passive flows, and other people who are investing money mostly care about price, not value. They don’t have an opinion about value. And so things become untethered from their actual value, and that creates a fundamentally risky situation.
. . . Many of these companies are trading for far more than they can conceivably be worth. And it does seem that over some probably long period of time — or maybe much sooner than everybody expects — things eventually tend to revert towards value.
Things were better before:
You know, if the idea of markets is to allocate capital and the idea of investing is to buy undervalued things, things that are worth more — not a view on price, but actual undervaluation —[then] your investment is actually contributing to market efficiency.
When I go back in my career, the big money — the important money, the money that was driving the market . . . was a bunch of people sitting at long-only institutions saying, ‘I think this.is worth a per cent more than where it’s trading today’. And that didn’t mean it was a value stock. It could have been whatever the most exciting growth stock was at the time, it could have been Coca-Cola, you know, which was the leading stock in the 1990s . . . It might take them 10 years to be right and make the S&P 500 plus two . . .
That investor has now been fired. That person does not exist. There are no committees that are doing these things. It is a tiny portion of the actual trading volume.
