As Keith McCullough writes today in his market update, the use of twitter has changed the way we think and act. As a result, the markets are extremely fast, and efficient with short-term, knee-jerk moves.
- Watching the US Equity futures trade this morning captures the essence of how short-term the group-thinking associated with the Type 2 Player in this game has become:
- At 4AM EST, I jot down in my trusty notebook “China down -3.3% to down -16.9% YTD, testing October lows”
- At 6AM EST, headline hits “China cuts reserve requirements, 50 basis points”
- The S&P futures went from down 8 points to up 8 in a nanosecond of what could be best described as media panting about point #2 on Twitter.
- Twitter, you see, is replacing what Old Wall Street calls “the tape.” On Wall Street 2.0, tweeters with analytical competence not only capture the China like headline “news” in real-time but have it synthesized within seconds.
Just this weekend a horse at (if my memory serves) Mountaineer was trading as the favorite at betfair at around 5-2. In several flashes (just like the S&P this morning), he was 6-1. What's up? Three minutes later he was scratched by the track vet. Someone (probably at the track, or with a keen eye to the simo screen) knew, someone acted, and someone wanted to profit, all within a few minutes.
The funny thing? On the tote, pari-mutuelly, while this was happening, he was still the chalk.
Sometimes it works the other way. A horse in the gate acts up, the price surges, and he wins.
Not only do you need 2.0 information, you need a 2.0 way to expose it, and profit from it. Regardless, quick price changes are happening and will continue to, due to conduits like twitter and betfair.
At the track it is not like that - yet. I was at Woodbine not long ago and a 4-5 shot warmed up terrible. Bettors were not watching; they were looking at TV screens. One person, a long time friend, was, and he alerted me to it. We both faded the horse in pick 3's and 4's and in exotics, making a little bit of scratch. The horse was 4-5, got everything his own way and came 7th. In simulcast land people were perplexed. If the race was on betfair he probably would've been 5-2 or even higher, but it wasn't.
As most serious players know, chucking out a 4-5 shot who will not hit the top three and taking a huge swing, can make your entire year.
Long, long ago, Pittsburgh Phil would profit from being at the track and charting the horses. It was easy to make a buck from the unsuspecting public if you were there, and if you were betting something that no one else is looking at. In 2011 - with virtually everyone paying attention to speed figs, four screens, or constructing tickets on copious exotics - almost the exact same thing is being done on track, only in a slightly different way. Just make sure the tweeters and the betfair users don't get hold of the information first.