20th June 2012: ETF Investing

Investing

 

Strategic investing using exchange trade funds (Reading The Markets).

 

The party indicator for investors (The Reformed Broker).

 

Wall Street

 

The goodwill tour to Wall Street of US Senator Chuck Schumer (The New Republic).

 

Media

 

News Limited makes $A1.97b bid for Consolidated Media (ABC).

 

Journalists as media-owners (Core Economics).

 

Post-literary metal (Roy Christopher).

 

Politics

 

Julian Asssange seeks political asylum in Ecuador (Wired, The Guardian, The Atlantic Monthly).

 

Iran nuclear talks downgraded (The Guardian).

 

US cyber-attacks on Iran nuclear weapons development program (Washington Post).

Wikinvest

Parker Conrad and Michael Sha launched Wikinvest in 2006 to gather user-generated security analysis. The project collates wiki profiles on investment concepts, fundamental analysis of companies and technical analysis of market price movements. It also appeals to MBA students with sections on personal investing, investment concepts and funds management. Conrad and Sha have graduated from Harvard dorm day traders to Web 2.0 knowledge entrepreneurs.

Claire Cain Miller’s New York Times profile makes the obligatory link with Wikipedia, the online encyclopedia. Conrad and Sha go into some detail of their verification process for data and public sources. Actually, the wiki has some specific applications for the pooling or crowdsourcing of investor insights. Sell-side analysts in the research departments of investment banks can have dual allegiances if the underwriting departments incentivise their research products to drive sales revenues. The best will gravitate to portfolio managers, dynamic asset allocation and hedge funds that use event/risk arbitrage and short-sell strategies. An investor wiki could provide a counterbalance to these influences through a broader snapshot of investor sentiment, and strategies to delimit analyst biases and groupthink. A side-effect however is that investor views are more likely to converge to a mean, and the market efficiencies may thwart value investing strategies that require information asymmetries.

In fact, the Wikipedia analogy has some limitations because analysts, traders and portfolio managers all structure and use market information in different ways to online encyclopedias. This was one of wiki creator Ward Cunningham‘s insights when he devised the Portland Patterns Repository in 1995: the value of a repository to capture domain knowledge and processes, and to codify them from tacit to explicit form using a methodology such as design patterns or object oriented programming structures. If it stays within Wikimedia’s online encyclopedia model then Wikinvest will be suited to fundamental analysis and introductory investing topics. However, it could evolve into a different form if it adopts insights from behavioural finance and tactical asset allocation into the wiki process. These areas augment Cunningham’s original schema with strategies to deal explicitly with how information quality and source selection can affect investor decisions, judgment and verification. Even these vary depending on the end-user, their self-awareness, the intended contexts of use, and what potential outcomes may occur (a normative stance on the superiority of user-generated content over ‘traditional’ media is not sufficient alone to address the concerns that these processes are meant to anticipate and solve). The pressure to change and evolve may come from sell-side brokerages which now use Wikinvest as a cost-efficient data source for market commentaries. Alternatively, it may come from Wikinvest’s end-users as the wiki gains more public prominence, and attracts a range of investor styles with knowledge of asset classes, inter-market volatilities and global dynamics. If this occurs then Wikinvest and other wikis could have a pivotal role in the democratisation of finance beyond London, New York and Chicago.

Just don’t be surprised if Icahn Reports maven Carl Icahn (video) launches a wiki raid.