Buy that stock! Someone important winked.

I love the high-tech industry.  There is always someone somewhere working on something to automate some task, to make it do more, to perform faster, and produce something more accurately than can be done manually.  So here it is December 23rd and wouldn’t you agree that this is a pretty good day to choose to forgo paying attention to the news?  It’s probably a safe bet that two days before Christmas, most of North America is too preoccupied with checking out of work and getting into family mode to bother with noticing anything important announced in the news.  With that in mind, and I don’t know what it says about me, I tripped across an article published in today’s New York Times about  computers trading on news, a development that has the potential to significantly change the stock trading industry and the expectations of investors.  I can imagine the various exchange regulators will be scheduling a few conference calls early in the new year. 

On the surface it makes perfect and logical sense to allow computers to take over a complex task that humans have struggled to perform without much success. With no informed alternative, for decades we’ve relied on analysts to help us make stock trading decisions. They had access to the right information.  They had time to focus on clarifying the obscure and distilling vast amounts of data points (modern tea leaves) to arrive at the best-informed decision possible.  We trusted them to make those decisions because they were highly educated, well-paid, and experienced researchers who had the right balance of cynicism and optimism to tell the difference between truth and fluff.  

Now comes this computer process that can ascertain business trends based on signals it gleans from words in a news story or from the content of blogs and tweets.  I suppose it had to happen given the avalanche of information to read and consider.   It does make me wonder though.  What’s going to happen to those researchers now that we have software that can tell us to buy a certain stock because it noticed an interesting pattern of emoticons in the tweets of some very important insiders?