The Minefields Of Stock Market Content

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 |  Includes: TST
by: Roger Nusbaum

Summary

Reports say authors may have been paid to write favorable articles about micro/small cap biotechs.

Plenty of people contribute content who clearly don’t know what they are doing.

The writing world has gotten flatter.

by Roger Nusbaum AdvisorShares ETF Strategist

There was an interesting series of writeups last week looking at articles posted at Seeking Alpha, TheStreet.com and Forbes where authors may have been paid to write favorable articles about micro/small cap biotechs and where Seeking Alpha was concerned, articles were published anonymously. While Seeking Alpha has a robust policy about anonymous authors, someone who is hellbent to deceive won't be deterred by website policy, robust or otherwise, and so it is believed that articles were not honestly written and were published without truthful disclosures.

There were at least two writeups on this story. Barron's took Seeking Alpha to the woodshed for allowing anonymous contributors in what read like an editorial, but of course Barron's could be viewed as protecting the shield on this one. Fortune had a lengthy news article covering many (maybe all) facets of the story.

It is unclear to me why so many of Seeking Alpha's contributors are anonymous in terms of why that many writers want anonymity and why SA allows it. I am certainly not owed any explanation, but I don't have to understand it either.

I do not have first-hand knowledge of Seeking Alpha's process for allowing writers to contribute on their site but as one of the above links notes there is a lot of content from do-it-yourselfers and college students, and some of these folks have great insight or are on a path to developing great insight, and so it is a positive that SA provides a platform to publish and an opportunity to make money if their comments are interesting enough to create a following. It is very democratizing.

There are also plenty of people contributing who clearly don't know what they are doing. As far as posts that might be dishonest one way or another, if a headline is spammy or obviously about a micro-cap I don't read it.

When I was hired on at TheStreet, I was favorably referred by one of the staff writers, had a job interview, submitted a writing sample and presumably my blog was reviewed by someone there. I also brought some good chops in terms of my blog winning an award and some TV appearances. I am unfamiliar with how their process for bringing new folks has evolved, but I do know there have been many changes in the last nine years.

I got the impression from the Fortune article linked above that TheStreet allows more contributors than they used to.

So the writing world has gotten flatter, but to the extent there are dishonest people infiltrating the world of stock market information, there of course have always been dishonest people in the world of stock market information. There is no getting rid of them, dishonesty is as old as humanity.

Internet chat rooms are no longer what they once were so maybe publishing articles at financial websites is the next step. Just as not all chat rooms' participants are dishonest not all writers of articles are dishonest. In percentage terms it is probably very few. A reader's odds of stumbling across a bad actor or two probably increases dramatically if they read a lot of articles about lottery ticket-biotech stocks written by anonymous authors.

It is appropriate that I disclose the nature of my relationships with Seeking Alpha and TheStreet, but I am putting it here at the end as I suspect most people won't care.

I was one of the first outside contributors to Seeking Alpha. My first article was posted on December 4, 2004, and I believe it was one of the first 100 on their site (it looks like there were a lot of articles that were double published in the early days so first 100 is an estimate). I don't recall ever getting paid once they started paying contributors so if I did get paid it would have been a very small amount like less than $100 and only one time. My experience with Seeking Alpha has always been positive.

I have been a paid contributor to TheStreet.com since 2005. I was brought in as the ETF guy and have stuck with that for the most part. I might guess that out of almost 1000 articles, 900 of them were about ETFs. My experience with TheStreet has been a little clunkier than with Seeking Alpha but TheStreet paid me well over the years.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.