In this case, who needs yellow ties, suspenders, slicked back hair and excessive fees? Say hello to my little friend...
And it may, in fact, be the case that the capital markets will be increasingly driven by algorithms and the servers who love them. They will be cheaper and their returns will be similar if not always better.
But it is worth noting that those who embraced high speed trading have already discovered that returns are declining as more and more competitors adapt the same technologies, just as their predecessors discovered the hard way, during the Long Term Capital Management unpleasantness back in 1994 when econo-technological theory came face to face with reality.
So, one should pay careful attention to the fact that yes, computer algorithm investing kicked butt in 2014, but only after losing the previous three years. The data, as they say, are noisy. The result could be because the 'robots' are superior. Or it could be because a lot of conditions have changed so that the strategies employed by the techies are now better situated to outperform than their competitors are. For now.
Rather than draw any long term conclusions, it might be more prudent to simply acknowledge that new forces now need to be incorporated into one's strategy. Until the next change. JL
Lawrence Delevigne reports in CNBC:
Computer algorithm-led investing produced stellar returns, beating most gut-driven human managers and dramatically recovering most of their losses from 2011, 2012 and 2013.