/r/wallstreetbets

Scraping

It looks like what Matt Levine suggested – scraping /r/wallstreetbets – is a viable business (FT). If payment for order flows (Wiki) from retail is desirable as a measure of overall market sentiment, scouring /r/wallstreetbets is a few steps removed from that (both in space and time).

However, it seems that this source of 3rd party data is fairly vulnerable. Like, when we usually talk about alternate data sources [[efficient-markets-and-data]], we’re thinking more about credit card transactions or satellite imagery, which in theory could be gamed, but there’s a direct relationship there with the data and some business. I guess this is more like going on Twitter and doing either overall market sentiment analysis (or tracking single stocks).

Currently (FT), it does seem like all they do is track sentiment (and volume of chatter) of particular stocks. I guess twitter sentiment is rarely ever this concerted, and this is the first mass hysteria of its kind (though it does feel like we’ll see more of it). In which case, the stakes are much higher, but that also means it’ll attract bad actors trying to a) push their own agenda (stocks), and b) trick the scrapers into some action.

Investor Meetings

I just have to share these hypothetical investor meetings from Matt’s column.

In theory:

Analyst: I think the market [undervalues]/[overvalues] XYZ and we should [buy]/[short] it.

Portfolio manager: Why?

Analyst: [Gives cogent reasons relating to the business and market environment.]

PM: Okay but what’s the catalyst for the market to realize that we’re right?

Analyst: [Lays out compelling story about what will change and when.]

PM: Great, but why do you think we have any edge here? Why are we smarter than anyone else?

Analyst: [Points to the fund’s proprietary data sources, advanced analytics, industry relationships or some other source of edge.]

PM: Good job, let’s do it.

Recently:

Analyst: I think the market overvalues GameStop.

PM: Ahahahahahahahaha come on man, of course.

Analyst: So we should sell some out-of-the-money call options.

PM: This is the most nightmarish thing I’ve ever seen, the stock doubles every day, why would we sell calls? What is the catalyst for it to settle down?

Analyst: I’ve been reading Reddit and I think a lot of them have poop hands.

PM: I don’t know what that means but it sounds bad. But you are just reading Reddit, right? Anyone can do that, and everyone does right now. What is our edge here?

Analyst: Our edge is that no one else is dumb enough to be in this trade.

And:

Portfolio manager: We have a repeatable investing process based on deep expertise that delivers reliable alpha in all markets.

Client: This sounds good, this is what we want.

PM: Also we were up like 100% last quarter.

Client: Ooh that’s even better.

PM: Because we gambled on GameStop at the top, YOLO.

Client: Wait what.