This post is by Socialware Practice Management Director Pedro Barreda, CFA.
What’s Twitter worth as a tool for traders and money managers? Potentially millions of dollars.
Not enough of them see it this way. I once asked a hedge fund manager friend of mine if he used Twitter to listen for news that might impact his markets. “Twitter?” he responded, “That’s what my 12 year old daughter uses. Lady Gaga tweets, right?”
I responded, “Yes!” And so does the USDA, the FDA, and 180 million folks from all walks of life and every part of the globe. In fact, the FDA operates 10 separate Twitter feeds. The FDA Twitter feed @FDArecalls has more than 268,000 followers listening, while the @USDAFoodSafety Twitter stream has more than 280,000 people listening.
Mad Cow Disease Reported on Twitter Before Major News Sources
In late April, the USDA press team tweeted a link to a video press conference in which the USDA Chief Veterinary Officer presented the USDA’s Q&A about the discovery of a cow with Mad Cow Disease in California earlier that day. By the time that USDA tweet hit Twitter, the price of cattle futures had dropped more than 2 percent in two hours. But the tweet from the USDA wasn’t the first of the day to mention a cow with the disease. A handful of news sources had already mentioned Mad Cow Disease, as you can see in the timeline below:
The important story here is that the BBC, Wall Street Journal, Bloomberg, Reuters, CNBC, and the Associated Press were not first to tweet about the news. That honor belonged to Evan Stanley, who tweets with the handle @CornFutures. Stanley’s mention of Mad Cow Disease came at 12:27 PM — an hour and 27 minutes before the first major news agency’s earliest tweet mentioning Mad Cow, and before cattle prices accelerated their downward trend.
Twitter as an Early Warning System for Markets
Twitter now numbers over 180 million users, and there are Evan Stanleys in every country and every industry. These industry insiders and locally plugged-in people share news before the rest of us see the news reported through CNBC, the Associated Press, Wall Street Journal, Reuters, and Bloomberg.
What is it worth to you as a trader or money manager buying and selling financial instruments in financial markets to hear about a piece of market-moving news an hour and 27 minutes before your competitors? You need to understand Twitter and figure out how to make it a part of your market early-warning system.
There is value in receiving the early Tweet!