On the Destructive Potential of Online Editorial Content

In August, 2013, a large majority of the U.S. population maintains a connection to the internet. Most of these internet connections are in an “always on” state. So online editorial content can now be be used by product marketers to influence human activity, at least here in the U.S., in a big way. Unfortunately, when online editorial content is applied to topics specific to financial investments, and, further, to stock trading, the results can be very destructive.

Stocks with a high volatility index are usually watched very closely by investors. Most of the time these investors are vigilantly monitoring news feeds to digest important developments as soon after they occur as possible. In theory, the first investors to get word of these changes will gain an advantage to buy, sell, or hedge positions.

But today everyone gets the same information nearly simultaneously over the internet. Twitter is particularly useful as an information distribution medium. Over Wednesday, Thursday and Friday of the week of August 12th, 2013 we watched the tweets for one equity, “MNKD”, Mannkind Corp. The stock moved up and down over 45% over merely these 3 trading days. The correlation between tweets and changes in MNKD trading price were very tight.

Who’s monitoring the accuracy of these tweets, many of which include links to blogs with longer posts devoted to topics specific to stocks like “MNKD”? Unfortunately the answer is “nobody.” When we read a number of them, and blog posts on related topics, we noted lots of inaccuracies and distortions. So the destructive power of this type of editorial content should not be underestimated.

We don’t see this condition changing anytime soon. We hope the writers producing the content are making a fair share of the profits some of the investors purport to be making for themselves. In the meantime, investors of all types will continue to maintain a rapt attention to these postings, which can only lead to more demand for this type of editorial content.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

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