Einhorn Says Markets Are ‘Broken.’ Here’s What Data Shows
- Rise of index-tracking money seen driving value-investing woes
- Yet valuation and return data are in line with historic norms
David Einhorn
Photographer: Kholood Eid/BloombergThis article is for subscribers only.
David Einhorn put it bluntly: The valuation-be-damned boom in passive investing has “fundamentally broken” markets as it proceeds to crush the time-honored hunt for cheap-looking stocks across Wall Street — year after year.
In the telling of the renowned hedge-fund manager, the explosion in index-tracking flows is putting so many active investors out of business that the halcyon era of Warren Buffett and Benjamin Graham championing undervalued companies is no more. And that undermines everything from price discovery to corporate governance. “Passive investors have no opinion about value,” Einhorn said on Barry Ritholtz’s Masters in Business podcast back in February.