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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By |2017-07-17T12:23:17+00:00October 8th, 2014|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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