Howard Lindzon came out with a post this weekend, I Would Like to Hire a Few Lobbyists…and Thanks Stevie Cohen for This Tipping Point in Securities Law Reform!.
There is definitely a sarcastic/sad tone to the article. The people have always moved faster than the ability of regulators to catch up. They are still working on social media, almost 5 years later (this was semi resolved). Regulations create loopholes that require money to get through and increase barriers of entry. I won’t get into that but instead I want to the talk about the evolution of financial information and how it affects trading.
The key word is distribution and there are more channels than ever (Bloomberg just added twitter streams). There are many people who have built up audiences and influence. There are some really great writers, researchers, and data finders out there. It has never been easier to share, produce, and consume financial information. But what exactly that data means is getting harder to disseminate. That is always true in times of low market participation. And there is a need for every tick in the market to be rationalized. Nothing more annoying than, the “Market is on its highs because of X” headlines.
Why I hate Europe
Nothing against Europe but your news flow is ridiculous. So many rumors and officials saying one thing and almost in the next sentence contradicting it. I have never seen leaders of countries and banking systems through each other the bus like that. I think this puts somewhat of a bid around US markets. Why is Europe news sometimes ignored or short lived, one is because that is the type of market we are in and the other is because you can’t trust anything over there. To borrow from the Chicago weather cliche. If you don’t like the news in Europe, wait 15 minutes or vice versa.
When we see something we don’t always say something
Writing for almost 3 years now, one of the things you start to realize is that there is a lot of things out there that you thought was common knowledge. Then 6 months later it shows up in the media and gets a lot of attention. That is why distribution matters so much. I think Stocktwits has done a pretty good job of letting the good information flow to the top (they have the most robust network of distribution including Bloomberg, CNN Money, Y! Finance, etc). Keeping the stream as free from manipulation as possible. People like Josh Brown, Barry Ritholtz, Abnormal Returns, The Kirk Report, Real Clear Markets, Global Mail, etc lend their audience to people who have something smart to say.
Timing is important
Most people can look at a chart and see where it can go. But reacting (timing and sizing), the execution, is always more difficult. We are in a time when you have to time the market and be aware of the impending news bomb. This of course has always been the case but before very few people had the info and it made it way to distribution. Now there is so much information that we all have access and than we have to wait till someone with distribution makes it “important”.
From a trading standpoint, news hurts but it also helps (there is a tendency to privatize that gain). Be aware of releases, speakers, etc. Understand the big stories and the ones that aren’t big yet. The market corrects just like the news always comes to light but news can stay irrelevant longer than you can stay solvent, ALWAYS protect yourself.
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