information overload

Making Sense of the Data Flood

© Can Stock Photo / SergeyNivens

In the 21st century, information seems to be a thousand times more abundant than we could have dreamed of just a few decades ago. An insight into the olden days may be the best way to illustrate this.

When I first became qualified to work with investment securities, I would maintain a list of topics to research. It might be a specific company or an investment product, or some aspect of the economy. Day by day, new items would go on the list.

Every other week, I spent a morning in the library. Stock reports from S&P Marketscope and ValueLine were available there, in large binders. The financial newspapers and other reference works were available, too. I would chew through the items on my list all morning, then make telephone calls that afternoon and evening to report my findings.

No internet, no email, no cell phones.

Now, of course, we interact with economists and research analysts and portfolio managers in real time via webinars, Twitter, and conference calls. Research on thousands of companies is at our fingertips. Data and analysis subscriptions supplement the expert resources made available by LPL Financial and our other institutional partners.

Instead of writing research topics down in a notebook to be studied in the library days later, we often can respond to client inquiries almost instantly, and always quickly.

The key element in our approach is not the flood of information available. By itself, that flood would drown anybody. Instead, it is in the experience and knowledge we bring, in order to understand the narratives and themes lurking in the data. Context and perspective is vital.

When you have read thousands of pages of research, annual reports, and SEC filings, you develop an understanding of what is pertinent, and what may be disregarded. Greg Leibman, in his ninth year here, does a lot of the heavy lifting.

We are fortunate to be alive in this day and age, able to take advantage of the opportunities to operate more effectively on your behalf. Clients, if you would like to talk about this or anything else, please email us or call.

The Information Age is Over

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An Italian philosopher has identified the great paradox of knowledge. The tidal waves of data and information coming at us every second are more likely to drown us than empower us. Gloria Origgi believes we are moving towards the Reputation Age, in which information has value only when it has been filtered by a trusted source.

To illustrate, we recently sought to find the reason behind a rise in the stock price of a company in which we are invested. Turning to Google, filtering to see only news from the last 24 hours, we found a blizzard of information – but nothing related to our quest. None of the search results was from a news source we recognized. Here are the entries we found, with our interpretations and judgement:

1. A tiny investment manager sold some of its shares, an insignificant 0.02% of an average day’s trading volume. Worthless.

2. A press release about one day’s trading action from last July. Worthless.

3. The third entry was of an increasingly common type. Apparently written by a robot, it recites the percentage change in the stock for the prior day, month, and year to date. It also included average analyst ranking and statistics about the stock price and volume of trading. Worthless.

4. All of the remaining entries on the first page of the Google news search were similar in form to the third, with variations in the statistics cited. Two had proprietary technical scales or indicators, one included Bollinger bands, none had actual news about the company. Worthless.

Fortunately, we invest in proprietary subscription-based investment services which include breaking news about the companies in which we invest. A quarterly earnings report is due out within a few days, so we concluded that changing sentiment about that report was probably behind the stock move.

This anecdote demonstrates Dr. Origgi’s concept. The quantity of raw data available is staggering. But only when we to turned to our trusted sources did we find what we wanted in an efficient fashion. How did we know to look there? Reputation.

The Reputation Age. It’s here. We strive to earn a place in it when you are looking for guidance about your plans and planning and wealth issues.

Clients, if you would like to talk about this or anything else, please email us or call.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

Stock investing involves risk including loss of principal.