Small-cap investors everywhere and value investors in the US (though not in Europe or the UK) have been suffering persistent underperformance for quite a while now.
In my view, value is about asymmetry in information. In markets where information is difficult to collect, value persists. In US equities, there’s almost no value left because of the rapid transmission of information.
"In the long run we are all dead." -- John Maynard Keynes, "A Tract on Monetary Reform", 1923.
Keynes used the phrase to argue against restoring the gold standard, stating that while some believed it would stabilize currency in the long run, it ignored the immediate economic hardships and inflation people faced in the present. The quote highlights Keynes's core belief that economic policy must address immediate problems (the "short run") because waiting for theoretical long-term adjustments ignores real suffering and instability. It's often misunderstood as nihilistic, but it's actually a pragmatic call to action, urging policymakers to focus on current conditions rather than abstract future equilibrium.
Really good post. I suppose you could argue you get paid for the risk/mispricing because the timing and magnitude of the payoff is so irregular and unpredictable as to exhaust patience.
In my view, value is about asymmetry in information. In markets where information is difficult to collect, value persists. In US equities, there’s almost no value left because of the rapid transmission of information.
Here’s an example of a market where I argue value persists because of structural reasons https://open.substack.com/pub/perf12/p/how-to-collect-part-1?r=31rxjj&utm_medium=ios&shareImageVariant=overlay
"In the long run we are all dead." -- John Maynard Keynes, "A Tract on Monetary Reform", 1923.
Keynes used the phrase to argue against restoring the gold standard, stating that while some believed it would stabilize currency in the long run, it ignored the immediate economic hardships and inflation people faced in the present. The quote highlights Keynes's core belief that economic policy must address immediate problems (the "short run") because waiting for theoretical long-term adjustments ignores real suffering and instability. It's often misunderstood as nihilistic, but it's actually a pragmatic call to action, urging policymakers to focus on current conditions rather than abstract future equilibrium.
Really good post. I suppose you could argue you get paid for the risk/mispricing because the timing and magnitude of the payoff is so irregular and unpredictable as to exhaust patience.
some things just dont jibe no matter how 'longrun' the factor in isolation.
exhibit A: automatically buying more of the largest companies because of index flows
exhibit B : buying thousands of unprofitable smallcaps because some of them will have amazing growth
even bond rates eventually stopped going down.