In late March, Michael Lewis, author of best sellers such as Moneyball and The Big Short, released his latest book, Flash Boys: A Wall Street Revolt. Corresponding with the book’s release, Lewis appeared on 60 Minutes to claim, “The United States stock market, the most iconic market in global capitalism, is rigged . . . by a combination of stock exchanges, the big Wall Street banks, and high-frequency traders.” Immediately, the financial media was sent into a tizzy, with the Wall Street Journal thrusting controversy-baiting headlines atop its front page and CNBC moderating debates between screaming “experts” on both sides of the issue. We have not yet read Flash Boys, which is likely a compelling read based on Lewis’s track record, but we do understand high frequency trading strategies and we can tell you that the market is not “rigged.” Lewis’s press tour, along with the media’s response, is simply an effort to sensationalize a non-story. While high frequency trading contributes to intra-day market volatility and may add de minimus trading costs to retail investors’ transactions, it is not an issue for patient, long-term investors. The book may be interesting, but there is no cause for alarm and, as always, we take what we hear in the media with a grain of salt. The U.S. stock market is not “rigged” and remains one of the most highly regulated markets in the world.

Read Full Investor Letter >>