Mark Cuban had some very interesting thoughts on Friday regarding the changing landscape of the investment world and the way it’s becoming more and more of a macro world:
“I started actively trading stocks in 1992. I traded a lot. Over the years I’ve written quite a bit about the market. I have always thought I had a good handle on the market. Until recently.
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.”
He’s right about a much of that. The world is changing in big big ways. It’s becoming a much smaller place as technology and globalization makes global problems everyone’s problems. Companies are becoming increasingly diversified as they adapt to this world. And Wall Street is evolving with it and their products are becoming increasingly representative of this globalized world we live in.
I think the biggest change in my investment approach has been this shift towards an ever more macro understanding of the world. And it’s been a big part of what’s fueled my interest in the monetary system and the institutional design of so many of the world’s monetary systems. I think it’s becoming increasingly difficult to understand the micro if you can’t understand the macro. Now, that doesn’t mean there aren’t opportunities or that the risks have necessarily increased. It just means the game is changing as times goes on. And you either adapt and survive or remain stuck in the past and die.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.