Let’s talk exclusively about the financial aspect of wealth. Just this once, and without setting a precedent. Let’s focus solely on stock market investments and the future – which is more uncertain than ever – that investors are facing.
The current market landscape is, and will remain in the coming years, more turbulent than ever. And in the times ahead, it will be very common to see meteoric rises in various forms of investment (sectors, strategies, management styles, trading techniques…), as well as spectacular crashes and the failure of funds and managers who prove themselves incompetent in the face of the a new world (which we already warned about in 2007) of the investment. And that makes sense, since you have to stoke the fire to see flames. Whilst some achieve consistently good results (for example, in unit trusts) or stand out as outstanding investors (such as Buffett), many others must remain mediocre, whilst still others must be wiped off the map as the multi-bubbles – which will be created by the massive injections of money thrown into the fray – burst here and there.
Over the next few years, we are going to see the harsh reality demonstrated by the Monte Carlo simulation and that only the truly great manage to outperform consistently over time. The shortcomings caused by the widespread availability of funds managed by incompetent people will be laid bare, as every small bank and non-bank fund manager has, in recent years, set up its own investment funds using «the cream of the crop» from its limited staff. 
Managers who shone somewhat during the boom years but are limited in ability and experience (some of them, not all), and whose shortcomings will be painfully exposed in the complex times that lie ahead. All of them with loaded guns in their hands which, in some cases, will wipe out the savings of those who placed their trust in the false glamour of their mediocrity during these crazy last 20 years (comparable to the Roaring Twenties). It is no surprise that almost all bank customers have at some point heard their bank manager say things along the lines of: The fund you’ve asked me about is on a different platform to the one we use (either it’s not available, or the fees are too high, etc.), but we have another one that’s just as good or even better – you’re going to love it..
The rise of self-made, self-taught investors; the flood of courses and publications; investment training and pseudo-training of all kinds; and the globalisation of all this via the internet – whilst it has brought benefits in a few honourable exceptions – has done, and will continue to do, the rest. The medium-term result of this phenomenon: the ‘Best’ – with a capital ‘B’ – will triumph, those who possess the top managers stable with a distinguished track record, rigorous, cycle-proof methodologies, agility and brilliant intuition. Only the truly Great – in the broadest sense of the word – will be able to remain in their respective top quartiles over the coming years. And that universal law of continuity sustainable in the long term in the first quartile, will be more enlightening than ever in a turbulent situation such as the one we are facing.
The past belonged to them and, above all, the future belongs to them. But to all of them? No. The world has changed in many ways, and there are also various reasons to expect that the core future success changes hands more often than might be expected. For example:
- The rise in popularity of ETFs, which is leading to the homogenisation of the stock market performance of large, medium and small companies. This chart provides a clear example of the so-called «me-too» strategy: iShares Russell 1000 Index (IWB), iShares Russell 3000 Index (IWV), iShares S&P MidCap 400 Index (IJH), iShares Russell Midcap Index (IWR) and finally iShares S&P; SmallCap 600 Index (IJR).
Supply and demand: When institutional investors and ETFs focus on large-caps, it is more difficult for stock pickers «author's»to achieve success in having their value recognised. It is, at the very least, a slower process, although, on the other hand, large value funds with a stock-picking strategy are also becoming more popular.".- Results and systems are becoming shorter-lived due to the globalisation of information. We could say that market inefficiency decreases in proportion to the widespread adoption of screenings or the largest number of Dow Dogs (Dogs of the Dow). Although I would prefer to think that it is precisely these and other popularised theories that make the market inefficient when it comes to the proper search for value. Which came first, the chicken or the egg?
- A depressing environment could reduce (or at least delay) the chances of success for those who achieved it through a strategy buy and hold during periods of economic expansion.
- On the other hand, a prolonged economic recession could well be an ideal scenario for the search more competent Value.
In short, social changes that are affecting the world of investment. But it seems clear that globalisation is creating more and more uncontrollable disruptions to traditional, purist systems. Whoever can weigh up the most unpredictable factors, whoever can navigate best amidst the chaos, will hold the future in their hands. But in a minefield such as the one before us, it is better to go hand in hand with one of the Greats than to follow a mediocre figure to whom Monte Carlo granted a moment of glory before the summer of 2007.