What is an 'efficient' versus 'inefficient' asset class?
An efficient and inefficient asset class. Now, here's an example: With an efficient asset class, basically if the CEO of a company sneezes, everybody knows about it. That means that information travels very, very quickly. If something happens, everyone knows about it, and they all know about it instantly. The example they use is Microsoft. There are thousands of analysts looking at Microsoft, reviewing their numbers on their quarterly earnings calls, looking at all of the different things and markets they're going into. Everyone knows everything they possibly can about Microsoft. That's an efficient asset class - if something changes, everyone is going to know immediately. The flip side to that is an inefficient asset class. With an inefficient asset class, they can be developing products and strategies that people won't know about, or might not know about for weeks or months. Information travels very, very slowly. So the advantage with an inefficient asset class is that you can learn something that a lot of other people don't know about. Once you have that information, you can capitalize on it and take advantage of it by investing in that company. Whereas a big, large company - efficient asset classes - you think you might know something that no one else does, but you don't - everyone else knows it.
