Can You Get Investment Knowledge from Twitter?

twitter wsjYes and no.

Here’s what I get from Twitter:

I try to gain wisdom from my interactions with knowledgeable traders, analysts, field experts, practitioners, advisors, VCs and executives.

I try to get a feel for how market participants are reacting to news, data and events in real-time.

I liaise with the journalists, reporters and other assorted media machers who are literally shaping the news and how the markets will ultimately interpret it.

I try to pay attention when smart people are talking or even arguing over a topic about which I want to learn more.

I try to keep up with the most interesting trends by tapping into the nerve center of where these things actually originate.

What I’m not doing is following traders into stock ideas and paying attention to their exits, entries, track records, boasts and brags, hissy fits, bitchfights or posturing.

The traders and investors whom I follow are the guys and gals talking about their craft, about process and best practices and lessons learned. They are rock stars, adding value every day, and I’m sure I’m getting more from them than they’re getting from me on the stream. I learn something new every week, especially from StockTwits where the real players are.

I’m not paying much attention to the traders who claim to be crushing the market each day or offering stock tips for a price. There’s nothing wrong with that, it’s a free country. And I’m free to not believe in magic.

When people ask me “But Josh, aren’t stock tips from Twitter suspect?” my answer is that, yes, they are. And stock tips are also suspect when they come from magazine articles and Barron’s interviews and TV segments and golf courses and conferences and newsletters and Seeking Alpha articles and anywhere else.

Stock tips can be fun and entertaining or costly and dangerous, depending on whether they’re used and how. A trading idea found on Twitter or StockTwits can be the starting point for one’s own research process or it can be a smoking shotgun hole blown through the side of one’s IRA – that’s going to be up to the tipee to decide, the tipster will be oblivious to the way in which his information was used.

The Wall Street Journal has an interesting piece out this week about whether or not there are worthwhile investment insights to be gleaned from the Twittersphere. The answer is yes – but only if you’re looking for the right thing in the first place.

The Journal’s story focuses more on traders getting ahead of market-moving tweets or aggregating chatter into data-points. I suppose it’s possible, but I don’t think anyone’s really doing this yet in an effective way.

In fact, I’m not sure it can be done yet even if you came up with a workable product. There’s too much noise, too much sarcasm. The medium is too new for us to even know what pure Twitter signal even is, let alone how to react to it.

So while I’m flattered to see one of my “market-moving” tweets featured in the story (see graphic at left), I’m a bit skeptical that the pursuit of this kind of thing is worthwhile for investors at this point.

Be on financial Twitter to become a better investor, not because you think the guy tweeting stocks at you has a clue.


Tools Help Investors Wade Through All the Chatter on Twitter (WSJ)



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