“Information Is Cheap,
Meaning is Expensive”
– George Dyson
I have been registered in the securities industry for over 25 years and interested in financial markets since I can remember. One constant that has occurred each and every year is the amount of information flow. Trying to get information in the early days of my career was laughable and hard to come by – like water dripping from a leaky faucet. Today we (both professionals and traders) have to deal with a virtual fire hose of information on all asset classes 24/7.
Also, another observation I like to make on information is how it was disseminated. Early in my career those in the security business were the high priests of information flow. We had it, no one else did. An economic rent was charged to gain excess and trade on information. The public was shut out. As Gordon Gekko stated in the movie Wall Street (1987), “ The most valuable commodity I know of is information”.
The internet is changing the financial business like all other businesses it touches.
Today, financial information is everywhere. Information is cheap. It’s ubiquitous. Does anyone have any real advantage regarding legal information flow? The consumer/customer now has access and can consume more financial information than the so-called professional. Which piece of information is relevant, which is not? How is one to interpret the information?
So how can we (both professional and individual traders) lasso this information and make sense of it? And if we can harness say, equity information, can we make quality buy and sell decisions; in other words give information flow meaning.
Enter Model Price/Facebook/Application (http://apps.facebook.com/modelprice/index.php)
When I saw this math, some 15 years ago, I got it right away. An equity valuation model that determines the value of a company through an analysis of its balance sheet and earnings under a given interest rate environment. The robustness of the model stems from its underlying principles, which are based on a theory of the economic process that relates economic activity to the economic structure of a company.
Hopefully you will too.
There are two products that I am delivering. The first is the tool (application) itself called Model Price. Place a ticker symbol in the box and have the company analysis appear through a graphical interface. Two logarithmic graphs are illustrated one showing weekly bars (right chart) going back months and the other monthly graphs going back years (left chart).
There is NO opinion on these graphs. We import volumes of third party data, use our algorithms, and export results. Some would say elegant, others confusing. But irrespective of which camp you’re in the math gives you a way of thinking about each company you are either interested or invested in. The most important function of this application is the integrity of the process. To us this is a giant calculator that produces results free of individual biases and or manipulation. Some people will be happy with the results others will cry foul.
The second application is Model Price Guy Blog. This is me. I will add comments and write blogs about the math. Showcase, analyze, and give credit to the good, boo the bad. However I do want to make an important distinction of what I am trying to do. I will NOT be recommending stocks. “As in buy XYZ here, sell it there”. Nor will I answer questions on “What should I do”. I will leave that to others. After sometime with the tool you should with the help of the community make these judgments independently.
My goal is to make transparent our in house research tool –Model Price, and editorialize about it in such a way to give a perspective that is math based, and as I have said earlier, based on a theory of the economic process that relates economic activity to the economic structure of a company.