Trading On Secrets

By: ispeculatornew
Date posted: 05.15.2014 (3:00 am) | Write a Comment  (0 Comments)

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secretAs much as I love technology and in many ways it makes my life easier, there are also some challenges and grey zones that comes with it. One of my favorite podcasts these days is the Stratechery podcast which discusses tech news. In last week’s edition, they talked about Secret, one of the more hyped apps these days. Basically, this app makes it possible for users to write secrets which their friends will be able to see, share, etc. It is done in an anonymous way which in theory (and in practice) means users are willing to say things they wouldn’t on sites such as Twitter and Facebook.

The app is growing in popularity, especially in places such as Silicon Valley. As you would expect a lot of noise/crap has come out including rumors about new Apple heaphones, etc. It’s easy to get away with stuff like that when it’s unlikely to ever be traced back to the user. However, there has been a lot of “useful” information to come out as well.

For example, a couple of weeks ago when Nike announced it was laying off its Fuelband staff, the news had been shared on secret before being announced.

Future Of News?

If news is now more than ever coming out “new media” such as Twitter and Secret and you often have no way to know if a story is just a rumor, fake or actually true, then how would you ever know if you were trading on “material non-public” information? It’s increasingly challenging to determine what “insider trading” is and I personally think it will only get harder.

A few years back, having material non-public info required talking to a highly ranked executive. These days, thanks to social media, a very large number of employees with sufficient information are able to get the story out anonymously. One of many challenges for potential traders of course is figuring out the value in such stories and the odds that they are accurate.

Do you agree with me that these anonymous apps will make life very difficult for investors, corporations, regulators, etc?

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