Confidence in Confidence

Can investors be confident that the game isn’t rigged?

Source: St. Louis Federal Reserve

Consumer spending constitutes 2/3rds of the economy. When consumers stop spending, the economy goes into a tailspin. So naturally, anything that can predict consumer spending is of interest.

Every month the University of Michigan conducts a survey of consumer sentiment that many investors find useful. When confidence changes dramatically, this can indicate that changes in consumer spending—and the economy—are coming.

So it came as no surprise last year when the Wall Street Journal reported that some traders pay for early access to the data. After all, the University isn’t the government. They’re free to sell their data to whoever wants it. Reuters paid them to be the survey’s exclusive distributor, and they charged investors to get the results a few seconds early. Who says you can’t make money reporting the news?

The New York Attorney General took a dim view of the practice. He called it “Insider Trading 2.0.” So he started an investigation. Yesterday the University announced that Bloomberg will be the distributor. They’ll post a news story at the same time that the University puts the results on their web-site. Bloomberg says it will not charge a fee for early access to the data.

Paying for early access to market-moving data is legal but unethical. If you’re an investor and develop your own predictive information, fine. But paying for early access to a public report threatens the market’s integrity. When investing becomes an insider’s game, everyone loses.


Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
Leave a comment if you have any questions—I read them all!

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