The Price is Right


Michael Price is a titan on Wall Street, and a legendary investor. For years we savored his appearances in Barron’s Roundtable series. He is not shy about sharing his investing experience with others, and how he assesses value to assets in general, and stocks in particular. Why would he be? Typically the stuff he buys is the stuff everyone else is selling; I learned much about value investing from watching him (and I even backed up covering his account at Instinet in the 1990’s). So, When Michael sits on a trading desk and opines on how much more difficult trading has become in even his type of value names due to high frequency trading, one can’t help but take notice. Think about it: if it is hard even to buy what everyone else is selling…

One can only hope the NYSE and the SEC are taking notice to his comments over the weekend to the venerable publication, Institutional Investor. Michael answered Five Questions on Problems at the NYSE, and he is angry at the SEC and NYSE for selling out investors and the best capital exchanging system in the world to conflicted interests. Please read the article! Some teasers here:

When you go down on the floor to execute some size, you get creamed these days, absolutely creamed. Between the high speed trading firms and the algorithms and the brokers, it makes it really difficult. High frequency trading has really hurt. In many ways it’s invisible but it hurts. I’m on a trading desk every day trying to get decent size done….. But it’s got a cost. It’s much harder to execute.

It comes from the multi-year trend of the [New York Stock] Exchange and the SEC ignoring what I feel that their obligations to investors are. The SEC and the New York Stock Exchange have left the markets in shambles. They really made a huge mistake allowing these computer-driven, super high speed order systems to front run orders; to anticipate larger orders to take offerings in front of an order, and then re-offer it up a penny or two, to scarf a penny or two. That was a total dereliction of duty on the part of the SEC and the NYSE.

They have all these experts who are basically paid by the interested parties testifying to the fact that high speed trading increases liquidity. That’s nonsense. Liquidity is worse. They are all academicians who are getting paid by people who profit from it.

Unfortunately the New York Stock Exchange has dirty hands. Not only are they selling out to a foreign competitor, which is a joke, but they’re allowing these trading systems to hurt their customers. Their customers are individuals in mutual funds. They’re not protecting their customers the way Dick Grasso did. Looking back over my career, looking back over a long period of time, the New York Stock Exchange has abdicated in the last four or five years its duties to investors in a huge way. That’s why you’ve had lower volumes.

How many more venerable investors (McCaughan, Munger, Cuban, Robertson, Cooperman, Price) do we need to speak out before the SEC owns up and corrects the damage it has allowed the for-profit exchange structure to do to our markets?