Why Barron’s Gets it All Wrong On SeekingAlpha And Anonymity

A few days ago The Wall Street Journal wrote about a recent academic study done on SeekingAlpha content which proves that quantitative traders can utilize their content to help predict both stock price returns and earnings surprises. 

SeekingAlpha has been in the news quite a bit recently. David Einhorn from Greenlight Capital recently went to court to sue SeekingAlpha into forcing SeekingAlpha to give up the identity of an anonymous blogger using the name Valuable Insights who supposedly publicly identified a position of Greenlight’s in a post. The suit hasn’t been resolved yet. 

Today, Barron’s writer John Kimelman penned a piece which attempts to skewer SeekingAlpha for their continued support of anonymous bloggers, and for that matter, the relatively open policy of who they allow to contribute on their site. 

The multitude of misguided, backwards, and anachronistic views in one article from a well respected publication is, well….actually not that surprising. I’ll get to the individual examples in a second, but let’s just set the stage here. 

Barron’s has recently struggled to maintain its readership as the amount of financial content on the web has exploded. They continue to stick to their guns on hiring good writers with financial experience, who write relatively well researched pieces with little to no imagination or original thought. Their analysis is often reactionary to market and industry cycles and god forbid a stock trades above a 15 P/E, jesus christ that’s the end of the world for them, short it (i’m exaggerating, but not much). 

Barron’s as a publication relies on its reputation of being a place where you are always going to read well researched content, every article, with little to zero bias from its writers (except the investment style thing). 

So it’s not hard to imagine that the SeekingAlpha model of allowing a ton of people to contribute writing to their platform is extremely disruptive. SeekingAlpha has a ton of content, some of it is very very good, and a bunch of it is crap. 

Kimelman begins his piece by noting the academic study. Then basically spends the rest of the article telling us why his anecdotal observations and one off examples should trump peer reviewed academics doing a statistical study. This is yet another example of old media flailing around attempting to hold onto anything it can against an onslaught of its business model. Thank you John for being the head scout in Moneyball. 

Kimelman goes on to malign the use of pseudonyms by SeekingAlpha authors calling into question the validity of their ideas, their bias, and even the quality of their writing. 

Kimelman believes that this is a “problem for SeekingAlpha”. Not only is this not a problem for SeekingAlpha, and many other financial content and data platforms like StockTwits and Estimize, it is in many ways the root of why the content posted on these platforms is so valuable. 

Pseudonymity in financial content is used primarily by buy side traders, analysts, and PMs to convey information to the market without having to fight a zero sum game. We all know that crowdsourcing works, but it works on an individual level for buy side professionals because when they contribute in an anonymous way they don’t lose anything, there is no alpha leakage, they and their firm can not be gamed by the market. For a very long time buy side firms have held their data and analysis to themselves for fear of this zero sum game. When you deal with big money the market can become a you against them scenario, traders can get squeezed out of positions even if they have the fundamental thesis correct. Pseudonymity allows for the financial markets to collaborate so that there is a better understanding of expectations, both in terms of data and analysis. This benefits everyone, especially the buy side professionals who need to manage risk around their own expectations in relation to their peers on the buy side. 

Yes, there are a few bad apples who will attempt to use anonymity to screw with markets. So what. We might as well not let anyone drive because some people also drink at the same time, right? 

Kimelman and his ilk attempt to paint all pseudonymous content in a bad light by pointing out anecdotal evidence for its issues, but they just look like luddites afraid that their hallowed journalistic gardens are going to be disrupted (they are). 

Yes, there is a lot of crap on SeekingAlpha these days, god knows they need a better system for elevating the good stuff and basically hide the bad stuff. But Kimelman’s assertion that non pros and students should not be given the time of day because they are not credentialed is patently ridiculous. Not only is it ridiculous to assume that anyone needs a college degree these days in order to give a quality opinion, but a recent report from the quantitative research group at Deutsche Bank which looked at Estimize data (will be released next week) proves that the non pro contributors on Estimize were on average more accurate than the professional contributors on Estimize from both the buy side and sell side. 

Chew on that.

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