Passive Investing is Hurting Active Managers
David Einhorn, President of Greenlight Capital is whining about the millions of passive investors out there. They’re mucking up his returns! How dare they!
(Greenlight) It is no longer going to pay 10 times earnings for a stock expecting earnings to get 15% better and receive a 13-times-earnings multiple allowing Greenlight to make 50% over a year and a half. That’s because with the rise of passive investing, “there’s nobody who is going to pay attention to notice the earnings were 15% better … if nobody notices, nobody’s there, nobody’s going to buy, nobody’s going to care,” Einhorn said. - via Marketwatch
Ha! In other words their old strategy of stock picking isn’t working anymore!
This cracks me up because passive investing into index funds is so easy, low cost, and you get decent returns. Why would anyone want to pay for your hedgefund with high fees? Hell, look at Cathie Wood’s ARK ETFs, they didn’t perform as well as the Nasdaq 100 did.
That said, if everyone is doing passive investing (me too), then it might make sense to get active again, but in a highly selective set of stocks. It might make sense to be a momentum/trend trader to earn greater than the average returns.
Make your money trading NVDA (or whatever the flavor of the month is) and then passively invest the profits. LOL.