It has been said that control of information is power. If true, then the people have finally seized power.
Today’s information environment is filled with vast points of distribution and access. Twitter users notified the world of President Obama’s reelection ahead of CNN’s broadcast, smartphone apps provide near real-time stock prices, and anyone can tap the Federal Reserve Economic Data (FRED) system to uncover trends on everything from historical inflation to jobless claims. Meanwhile, bloggers are engaging in such high-level analysis that many attribute the revitalization of nominal GDP targeting as an idea originating from economist circles online.
Information -- the driver of the capital markets -- is, in a word, decentralized. The entire life cycle of trading is electronic, and the tape is now social; social networks (most notably, Twitter) are the new trading pit of the capital markets. These are no longer consumer- or retail-oriented networks. Hedge fund analysts and desk traders are already signed up (though largely anonymously), and the rapid feel of the markets is now conveyed via Twitter stream.
Traders tweet real-time resistance levels on AAPL in volatile markets. Analysts share research on the term structure of CDS pricing. Experts stream ideas to trade China at far more depth, and to many more people, than quick sound bites on CNBC. And bloggers debate potential Keynesian impacts on economic growth. (Self promotion: follow me @henrychien for ideas.)