Create better consumer products, make more money with Quirky

crowdfunding

Listen to this episode on Stitcher and on SoundCloud.

Creating a new consumer product used to be a somewhat solitary process.

But what if you could throw thousands of your closest from around the world into a virtual room to harness only the best ideas for the names, designs, and functionality for really cool, new consumer products? And (here’s the kicker), what if you could get paid for your contribution?

Quirky is a community of hundreds of thousands of passionate people from around the world who enjoy ideating, designing, and producing novel consumer products — collaboratively. Quirky’s Nethaniel Padgett, Community Director, joins us, David Stark and Zack Miller, to talk about how developing products and making money selling them has changed forever — on this episode of the ThisWeekinCrowdfunding Podcast.

During our News segment, we discuss whether we’ve reached peak crowdfunding. Are you being hit up to contribute to all your friends’ weddings via crowdfunding? Co-host David Starkup Nation is and he’s pretty sick with it.

Lastly, we review Kicktraq, an analytical tool backers and project owners use to determine strategies to optimize their campaigns and participation.

Listen to the FULL episode

Resources mentioned in the podcast

Predict the next M&A – with Arye Schreiber

M&A crowdsourcing

By most account, the M&A process is fundamentally flawed.

Incentives aren’t aligned — from advisors to bankers to CEOs. All want more M&A, not more successful deals.

This week’s guest on Tradestreaming has created a crowdsourced model for investors to help predict the next successful merger and acquisition. Arye Schreiber, founder of Merjerz,  has created what he feels is a better model to align incentives, encouraging fundamentally more successful M&A activity.

And investors can be first to know.

Listen to the FULL episode

About Arye Schreiber

Arye is the founder of Merjerz. His previous experience has been in corporate law, advising multinational companies on M&A.

Continue reading “Predict the next M&A – with Arye Schreiber”

Dueling investing apps: How to best forecast earnings

P2P Lending's Developing Debt Market

In investing, earnings drive stock prices. The thing is, though, for many higher growth firms, it’s really hard to determine just how likely a firm is to hit its stated targets.

An earnings miss — or even a hint of one – can be disastrous to share prices.

So, investors spend a lot of time listening to this analyst and that pundit explain his expectations for earnings.

The truth is, very few of these guys get it right.

A better way to get earnings estimates: crowdsource ’em

Most of the time we use analyst consensus earnings — an average of all the different Wall Street opinions.

The problem with using an average is that earnings estimates on certain stocks diverge pretty significantly and taking the average isn’t an entirely accurate way of trying to gauge earnings.

There are a couple of ways to do this better/smarter right now.

Continue reading “Dueling investing apps: How to best forecast earnings”

Lunch price inflation: 8 strategies to profit in the age of social media

With the 24/7 nature of financial news, commentary and data,there are no more free lunches for investors.  In fact, given that access and dissemination have improved tremendously, lunches have gotten a lot more expensive. It’s harder and harder to cut through all the noise.

Financial content sites like Seeking Alpha and Stock Twits provide a window into long tail investment content.  Expert investment communities like Covestor and Wealthfront take this up a notch and provide real-time access to the tradestream — the collective flow of real, audited trades of investment advisors.

With these platforms, we no longer have to lose our lunch money.  We can play smarter by following the truly exceptional investors with well-documented, long-term investment returns.  Why recreate the wheel when you can copy others who are so successful?

I discuss these mimicking strategies at length in Tradestream.  In short, there are eight different types of investment mimicry, from cloning top hedge fund managers’ stock picks to identifying and piggybacking the next Warren Buffett.

  1. Blog bigwigs: The financial blogosphere has created a virtual stock research bonanza and enabled top researchers to strut their stuff.  These investment bloggers provide institutional-grade advice at the fraction of the cost.  How is $0 for your own, personalized stock research team?
  2. Present-day gurus: While most investors underperform, there are those few who are exceptional (for those interested, check out Forbes editor Matt Schifrin’s new book, The Warren Buffetts Next Door).  While you and I may not be gurus, Warren Buffett is.  Eddie Lampert is.  Seth Klarman is.  These superinvestors exhibit great long-term performance.  We can win, as well, by strategically  following their moves and tools like AlphaClone help a lot.
  3. Undiscovered experts: Thousands of people manage virtual and real portfolios, competing against one another for top performance.  As time elapses, expert investors emerge from the rabble.  Previously unknown and unsung top performers bubble up to the top.  Following their moves can lead to the promised land of profits.
  4. Rumor mills: Strategies can be developed to harness the information — or disinformation — inherent in most rumors.  Monitor these in real time or view them in the aggregate.  The information here is important even if you don’t trade on it.
  5. Insiders: Corporate insiders are notoriously good investors in their company’s stock, even when they trade legally.  And they should be: Given access to sales forecasts and operational metrics, these investors have a knack for buying low and selling high.  They too can be followed and followed profitably.
  6. Historical gurus: Stock screening allows investors to sort quickly through thousands of stocks for those select few that exhibit specific criteria.  Mimic screens allow us to search for the same parameters historical investors like Peter Lynch and Benjamin Graham used in their hunt for great stocks. Validea has created a whole business around helping investors do just that.
  7. Crowds: There is a lot of predictive power in the wisdom of the crowds.  Crowdsourcing can be used to locate good investments.  Here, changes in sentiment can be an investor’s key in determining the next winning investment.  Piqqem has made a lot of strides here and new firms like RecordedFuture (hear my recent podcast where I interview them)
  8. Co-lateral information: Not all tradable information is purely investment related.  Much of it exists in other forms.  Learn to recognize valuable resources that can be gleaned to aid our search for investing profits.  Google search data is just one example.

Some of these forms of flattery have been studied closely while others are so new that they’re just beginning to inspire research.  Regardless, all have been inspired by the sheer transparency that today’s Internet provides.

Crowdsourcing vs. Piggybacking: An ongoing debate

Just returned from a mini-tour for Tradestreaming which ended with an editorial of mine appearing on CNNMoney.

CNN’s editors thought the tension between investing alongside guru investors (what I call, piggybacking) and following the crowd (which devalues individual expertise) was worth exploring (in 800 words or less).  It was a great topic and one that I didn’t give enough verbiage to in the book.

Part of this was laziness, part of it was in effort to keep the text short, and part of it was that crowdsourcing investment ideas is still really in its infancy.  While we can essentially clone hedge fund portfolios (with great tools like AlphaClone or great resources like MarketFolly), crowdsourcing tools are still finding their footing (I like Piqqem).

Here’s the crux of the matter:

So while it’s premature to say whether crowdsourcing can act as a standalone strategy, it may make sense for investors to tap the wisdom of the masses in addition to the other strategies they use to generate investment ideas.

The Internet and social media are truly changing the way we acquire information, research investments, and manage our portfolios. The playing field is more level than it’s ever been, and that’s a good thing. Happy tradestreaming.

You can read the whole article on CNNMoney , Follow the smart money — and the crowd

Photo courtesy of futureshape

Yahoo Finance getting in on the real-time game

who will buy Yahoo Finance?

Thanks to the ever-vigilant Felix Salmon (he’s a hawk, actually) who tweeted a job opening at Yahoo Finance.

From the job posting:

We’re looking for an experienced, versatile, high-motor blog editor specializing in business news targeted at both sophisticated and mass-market audiences. The successful candidate will write and report his or her own stories, as well as hire and manage a small team of professional bloggers to curate and create original content for the largest audience on the Web. This person will set the strategy for and oversee the publication of financial blog content for programming on Yahoo! Finance, the Yahoo! network and consumption on the Web at-large.

The move in context

So, like Forbes which recently announced its intentions and strategy to unload its Investopedia property and embark on a more real-time blogging/curating model, Yahoo Finance is moving towards its own real-time financial content aggregation model.  Whether you agree with Fobes’ decision or not (and Paul Carr most certainly doesn’t calling it the “death of a thousand hacks”), Yahoo Finance’s move is different.

Forbes and Forbes.com have always been about content.  Forbes has always employed professional editors in a mixed outside-inside model for content, blending its own staff reporters with content contributed from asset managers and thought-leaders in their field.  Never known for its ability to break stories, Forbes really was about highlighting interesting opinions from experts in their verticals.

But Yahoo is different than Forbes

Yahoo Finance is a different animal.  While Yahoo Finance hasn’t changed much in the past 10 years (much to my chagrin), this move changes its tack.  Remember, Yahoo Finance, as a giant financial portal, has always been about aggregation of both data and information, taking feeds from tens of information and content providers.  By the way, check out ValueCruncher’s CEO’s, Mark Clare, great breakdown of Yahoo Finance, its past, its business and potential to disrupt providers like Bloomberg in the future.

Yahoo Finance is still the 800-lb gorilla in online finance as evidenced by its majority of traffic in the online finance category (see graph to the right). What’s made Yahoo Finance so strong was an early-mover advantage and a site that just worked quickly and had enough information on it to act as a proxy for a research terminal (Why Google Finance still sucks at its news offering is beyond me).  With a deal it consummated with Seeking Alpha in 2007, Y! Finance dipped its big toe into the wild and woolly financial blogosphere.  Now, with the job posting mentioned above, it appears that Yahoo Finance is changing its strategy.

How this may play out

This is a risky strategy.  In essence, the financial portal is pitting itself opposite all its content partners — many of whom pay the portal for the firehose of traffic it throws off.   I’d be less willing to partner with a company that is introducing a product to compete directly with mine.  And this is a common problem with channel marketing for any platform — and Yahoo Finance is certainly a finance platform — in that the platform, given where it sits in the whole matrix of supply-demand, can always just mimic other offerings that are working.  This is the fear of developing any tools that work on Twitter of Facebook – that the social media platform can quickly just put you out of business.

Such is the life now for Yahoo Finance content partners.  If (and this is a big IF) the Yahoo Finance offering is a combination of serious, professional editorial oversight with smart curation with a good understanding of what’s important to Y! Finance readers (a-la Abnormal Returns) with thought-evoking and decision-supporting articles, Yahoo Finance can evolve itself from a financial resource to a must-see, must-read site for both individual and institutional investors.

What if it doesn’t work

If, however, Yahoo Finance doesn’t do this right and takes a half-assed, half-baked approach, the results could be pretty serious: both for the company/site and for content, in general.  As Steve Lubetkin argued with me yesterday in the comments on PRNewser’s article Is Steve Rubel the Future of Forbes, aggregation using free, contributed — outside content — risks turning everything into an “echo chamber” where the biggest voices (those voices appearing everywhere) drown out newer, more creative content by people who take content creation really seriously.  If Yahoo Finance’s own content offering isn’t managed well, it could cause other partners to leave the site, taking their money and their contribution to the estimated few hundred million dollars in annual revenue Yahoo Finance generated.

What this all  means for aggregation sites?  We’ll have to see how it plays out.   There’s most likely room for multiple aggregators if they end up focusing on slightly different readerships (a retirement investors reads different content than a day trader).

What is Tradestreaming: Crowdsource your Portfolio

The wisdom of the crowds has been used to better predict world events, elections, and the outcomes of sporting events. It’s now being used for more accurate forecasting of stock prices. Instead of following experts, crowdsourcing investment ideas seeks to assess what the masses think about a specific stock. The crowd is frequently more accurate in its predictions than top analysts?.

Enter Social Media

But with the onslaught of investors publishing their thoughts on stocks and the market on Facebook and Twitter, it’s hard for investors to monitor all the noise. Determining what the crowd thinks about a specific investment is tricky. Therefore, we’ll also explore different ways that investors can effectively plumb the wisdom of the crowds to build a portfolio populated with stocks the crowd thinks are going up.

What if there was a way to leverage the collective knowledge of all investors out there and use it to make a profit? What if you could build a portfolio that took investment ideas from the throngs of day traders and couch-potato investors, firemen and police officers, lawyers and doctors—a population of millions of investors? Figure out where the herd mentality thinks profits are and damn the experts.

Tradestreaming is that way.

<– Previous: Following the Insiders I Next: Screening 2.0 –>

Part 1: What is Tradestreaming

This is part one of a series that takes a birds-eye view into the concepts I develop in my book, Tradestreaming.  Readers should also subscribe to my newsletter to stay on top of all news, posts and share in some of the ideas I’ll be developing.  Subscribe here.

The Problem: Too much info

Does your head spin with the vast amount of financial information on the Internet?

Are you bombarded with numerous talking heads, each one purporting to have developed a better system, a better mousetrap, for investors and their long term performance?

With the reams of data and discussion on the Internet and 24/7 cable channels talking about the markets and every move upward or downward, it’s become almost impossible for an investor to find his way.  Every get rich schemer plays into this frustration with promises of quick profits and little risk.

Tradestreaming: A Better Way

Tradestreaming is all about using the Internet (and in particular, social media sites like Twitter)  to make better, more accurate — more informed — investment decisions.

Let’s face it: most investors struggle to beat the markets.  We make great stock picks but we also buy losers and don’t sell them soon enough.  The research shows that individuals (and many professionals) struggle to keep up with (let alone, beat) the stock market.  That’s a fact.

By plugging into the massive amount of profitable information online — the collective Tradestream – investors can piggyback on the successes of others and their time-tested strategies to build better portfolios for the long term.

I hope you’ll stick around for the ride.

Next => Part 2: What is Tradestreaming

Photo by Nestor Galina

Crowdsourcing investments: it’s all about chosing the ‘right crowd’

We’ve spoken a lot about piggyback investing (mimicking the moves of top fund managers) and crowdsourcing ideas (using crowd sentiment to generate trading ideas) as two ‘new ways’ investors can devise profitable strategies.  The Internet is producing tons of information – the tradestream – that investors can plug into to get at this type of data.

But investors keep asking me, “Well, who do we follow?”  And they’re right – the Web continues to provide more and more insight into the daily trading activities of some of the brightest performers but with this onslaught of informational smog, we’re still left with the decision of who to track, who to follow, which crowd to source.  In Surowiecki’s book, in fact, he delves into the difference between smart crowds and not-so-smart crowds. 

TrimTab is one of the leading providers of capital flow information around which it creates trading strategies.  Last week the firm published a whitepaper (.pdf) outlining a contrarian ETF strategy that makes use of this aggregate data and actually bets against the dumb-money — in this case, the average retail investor.

In “Using Equity ETF Flows as a Contrary Leading Indicator” (.pdf), TrimTabs found the following:

  • Monthly  equity  ETF  flows  (as  a  percentage  of  assets)  and  the  returns  of  the  S&P  500  one  month  later  are negatively correlated to the tune of 21.4%. 
  • The  negative  correlation  rises  to  45.6%  for  a  two-month  period,  and  to  52.4%  for  a  three-month  period.  

With this in hand, the research firm created a system that goes long the S&P when money is flowing out of ETFs and sells it when money is moving in.  The results are amazing:

trimtabsperformance

The researchers suspect 2 reasons behind this performance:

  1. they believe that ETFs are typically really liquid and used primarily by retail investors whom TrimTabs believes are the least-well informed investors out there. Or better put, the ETF liquidity “allows investors to make poor decisions any time of day.” Or, as MarketWatch put it, “Simply put, ETF investors are impressively wrong in both directions.”
  2. hedge funds trade ETFs when liquidity dries up in individual stocks. 

Whether this works or not or is just backtested data (it works until it doesn’t), I don’t  know.  But it does drive home the importance of following the ‘right’ crowd or the right guru.  Otherwise, we are just part of the investing noise, not rising above it.

Crowdsourcing stocks, Piqqem adds missing link for investors

2009 saw crowdsourcing — as a movement — making big strides in practice and PR in a variety of different fields.  For investors looking to purely crowdsource stock ideas, Piqqem has been on the forefront of helping investors tap the wisdom of the crowds.

Having users rate stocks on a variety of different factors — much like The Motley Fool’s CAPS program — Piqqem has been producing sentiment indicators for thousands of stocks over the past couple of years.

I’ve written about Piqqem rather favorably in the past.  Here is a short interview I had with them in late 2008 and here’s a recent BusinessWeek article about crowdsourcing in general in which I was quoted.

My stance had always been that while what Piqqem was doing was cool — literally, getting crowdsourced ratings on a slew of stocks — it was never clear that this was actionable information.  Meaning, can an investor make sense in a change in sentiment towards Apple (AAPL) leading into an earnings period?

Investors looking to utilize this information should be a lot happier after Piqqem’s launch yesterday its new Sentiment Trading Simulator.  In short, the trading simulator allows investors to create rules (buy when sentiment rises above 50, sell when it sinks below) and back test them on stock performance.  This is absolutely the missing link needed to help make crowdsourcing stocks more widely accepted.

With the simulator in hand, investors can attempt, via trial and error, to create certain strategies that work for them.  The tool was just launched and as such, is relatively crude.  I expect that the startup will continue to hone the tool.

Right now, the tool allows users to:

  • Create new strategies
    • by creating buy and sell rules pegged to Piqqem’s sentiment ratings
  • Rub a simulation of those rules
    • on single stocks or multiple stocks
    • over different time periods (bull/bear markets)

Users can see how their rules fared over specific time periods and tweak timing, rules, and stocks analyzed to optimize strategies.  When I say the tool is somewhat rudimentary, I mean that outside of hitting correctly via trial-and-error, I’d like to see the system help with identifying optimal strategies.  In fact, I’d bet people would be willing to spend something to access these rules.

I think this launch is a huge step in bringing crowdsourcing to the broad investor community.  I’m interested in hearing what you think.  Let me know in the comments below.