Why Social Information Becomes More Important to Investors
June 22, 2009
Few people in Harrod’s Creek, Kentucky, pay much attention to the publishing flow from financial services and its related service industry. Most of the puffery gets recycled on the local news program, boiled down to a terse statement about hog prices and the cost of a gallon of gasoline. The Wall Street Journal has become software in the last two years with about 20 percent of the Friday edition and 30 percent of the Saturday edition devoted to wine, automobiles, and lifestyles (now including sports). I am waiting for a regular feature about sports betting, which is one of the key financial interests in Kentucky.
Asking your pal at the local country club is not likely to get you a Bernie Madoff scale tip, but there are quite a few churners. Each is eager to take what money one has, recycle it, and scrape off sufficient commissions to buy a new Porsche. As the deer have been nuked by heavy traffic in the hollow, zippy sports cars are returning to favor. A Porsche drivers fears no big bodywork repair by smoking a squirrel.
I read with interest “Washington Moves to Muzzle Wall Street” by Mike Larson. I think Mr. Larson puts his photo on his Web site, and he looks like a serious person. Squirrels won’t run in front of his vehicle I surmise. He wrote:
he Obama administration revealed a sweeping series of new proposed regulations and reforms — all designed to prevent the next great financial catastrophe. The plan is multi-faceted and complex. Among other things, it aims to increase the Fed’s power, regulate the derivatives and securitization markets more effectively, protect consumers from the potential harm of complex financial products, and more. It’s been a long time in the making, with input from key policymakers, consumer groups, academics, and others.
After the set up, Mr. Larson reviews the components of the Administration’s plan. He observed:
I’m hopeful we’ll see meaningful action this year. More importantly, I’m hopeful that policymakers who are empowered to take new actions to police the markets and protect consumers actually exercise them. That’s the key to making any of this stuff work. It’s unclear exactly when these provisions will start to impact the disclosures you get when you take out a mortgage, or when you’ll be able to protest to the new consumer protection agency should you get shafted on a financial transaction.
His story trigger my thinking. One angle that crossed my mind was that the information generated about the US financial circus may get sucked into the gravitational pull of this initiative. The reason is that money is a form of information. Regulate the money, the information stream is affected.
One consequence is that the type of information generated by social networks, Web logs, Facebook posts, and other “off the radar” sources is likely to become more important. If I am right, the value of companies that can make “off the radar” available or better yet in a form that makes sense of many data points will go up.
My first thought is that if the Wall Street crowd gets muzzled to a greater degree, then the underside of reportage–bloggers like me–may become more important. Just my opinion, of course.
In the months ahead, I want to noodle this idea. My thoughts are exploratory, but I have decided that my preliminary musings will be made available as a PDF which you can download without paying for the information. Keep in mind that the editorial policy in the “About” section of this Web log will apply to free stuff that I am not forcing anyone to read.
Stephen Arnold, June 22, 2009
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