Henry Blodget explains why the world’s greatest stock picker stopped picking stocks:
First, in the seven decades since [Benjamin] Graham wrote Security Analysis, the stock market has gone from being a playground for amateurs to a battlefield dominated by full-time professionals. One result is that pricing errors that once might have gone unnoticed for months in Graham’s day are now discovered and exploited instantly. Second, the amount of information available about the most obscure stock today dwarfs what was available about even the bellwethers a half-century ago, making it harder to dig up information that other investors don’t know. The moment the information is released, moreover, it is dissected, discussed, and debated by thousands of analysts, until most reasonable conclusions that can be drawn from it have been. Today’s technology also allows even part-time investors to screen tens of thousands of stocks in dozens of markets in the time it would have taken a Graham-era analyst to compute the “net current assets” of a single company.Third, inside information that used to be quite valuable is now illegal to trade on. And, finally, the establishment of research centers such as the Center for Research in Security Prices (CSRP) has allowed analysts to study markets and investing in ways that the young Benjamin Graham could only have dreamed of — and, in so doing, to assemble a body of knowledge that makes much of the “investment wisdom” of the early 20th century seem as primitive and unscientific as bloodletting.