Chris Camillo knows a few things about making a good pick or two, having turned $20,000 into $2 million over three years in 2007. Today, he’s hedging with social information arbitrage, using chatter on social networks to help determine where to invest —or not. We asked Camillo, author of Laughing at Wall Street and investor in financial information startup HedgeChatter.com, to explain social chatter, and how to determine what should we be listening to, and what’s just, as we suspected, noise.
“Social media in terms of its impact on investment analysis would fall under two general categories. The first would be under financial chatter or financial-related social. And the second would be non-financial chatter. Financial chatter is anyone chatting about companies or stocks through a social channel, whether that’s Twitter or a derivative of Twitter like StockTwits.
There’s an incredible amount of social chatter and you have to decipher what is and is not meaningful. There is a lot of noise. But some of it is not noise. Chatter put out by Carl Icahn is not noise. We can all agree on that. There is a lot of social chatter that no one listens to, and so it has no meaning on the stock. What is interesting is what falls in between. The winning platform is the platform capable of deciphering the noise — and that has the potential to move a security and bring meaningful information.
Whether or not you trade on that information is almost irrelevant. You want to understand. As social chatter evolves, whether or not you buy into why a stock should be moving, and whether or not you agree with it almost becomes irrelevant. At a minimum you want to be able communicate to a client why the stock moved.
I firmly believe social information analysis is as important a fundamental as technical analysis, and in some cases more important. It increases the speed of data dissemination and allows someone to go to source of information rather than wait for someone to disseminate information. That is incredibly powerful.”
