Tuesday, November 01, 2011
I love FinViz. Great charts. Free data. Well-architected. Industry and sector groupings and drilldowns. Great screener with functional groupings. Thin-client with fast GUI and slick heat-maps. ADRs, dual-listed coverage as well as ETFs and futures (along with spot FX and metals). And continuous charting for 24hr markets. Copious ,well-summarized financial data, ratios, both historical and estimated, as well as their first derivative, along with links to income statements and balance sheets, as well as detailed news, insider transaction history, and I am sure I've left a few things out. And that is just the "free" part for which one seemingly pays by watching a few banner ads. What more could you ask for? Watch out Bloomberg.
Yet something bugs me, for a comprehensive, apparently free, reasonably bug-free offering (which itself is not to be taken for granted in the world of financial software). I am surprised though, that people...users...as well as machiavellians aren't asking some questions, for we do not know who they are, nor what they are doing with the our (yours and mine) usage data, which in aggregate is potentially valauble to the nefarious and the data-crunching opportunists.
Like the Olympus fiasco of my past three posts, when one sees inexplicably weird and sub-optimal corporate behaviour, one's bullshit detectors should be cranked up several notches. In Olympus' case, the question was: Why would they do something like this? And the answer could only be one of two: either they are stealing or have stolen (for whatever reason) OR its a ruse obfuscating the truth. That's it. One could rightly ask yours truly why CDT sub-optimally and seemingly irrationally refuses banner ads or paid links. The answer, which doesn't stretch credulity, is simply that I enjoy writing (despite my piss-poor editing), and find it a [selfishly] useful to have a structured and disciplined way to work through my thoughts and expose them to the rigour of scrutiny by others, including those who do not agree with me. Indeed, if self-promotion were at the root, I certainly wouldn't write anonymously, and if traffic and money were my motivation, I would trade links and conjure-up daily drivel to drive traffic, however irrelevant.
But back to FinViz. They (unlike CDT) are delivering real data, which costs real money. They must have a small army of programmers to insure integrity, along with a serious set of servers and distribution agreements to technologically deal with what is worldwide popularity. The data vendors rarely provide this quantity of data for redistribution without a pound of flesh, in order to discourage people who, like FinViz might just do it better and cheaper. We do not know how many premium subscribers they have, or their ad revenue, but even with the network effect, I wonder aloud whether these revenues are sufficient to support the aforementioned cost structures for what is essentially US-only data.
What do we know? They are hosted in Eastern Europe - Slovakia I think. No one, rather surprisingly, takes credit for what is a very well-engineered product. Go and try to find out about it, and get back to me. Even Tyler Durden of the inexplicably popular ZeroHedge has (apparently) been unmasked by the NY Post, such is the desire of people to know who or what is behind the curtain. But we do not see FinViz in the list of anyone's Private Equity portfolio (as far as I know). There are no contacts. No marketing (other than through affiliate sourcing paid via Paypal). Why?
Admittedly, they could be taking some sort of long view. Give it away. Get users hooked. Drive traffic, and then perhaps, like Google, Facebook or Linked-In, worry about revenues later. But then one might ask: why the secrecy? Why not drum up publicity and hype? Give interviews. Attend conferences. That of course would generate untold free advertising. And why only the US market? There is another possibility - one from the dark side. Perhaps, a cynic might suggest, it is a so-called Honey-pot. Imagine the treasure-trove of information gathered from screening user activity and instrument quotes. Imagine the potential edge that a data-miner could achieve in correlating this private information to short-term market moves, in a way similar to the airlines' pricing algorithms that modulate prices according to not demand, but enquiry traffic. A large Doctor's convention in Nassau might elicit initial enquiries without bookings giving the airlines vital information to adjust prices upwards and maximize revenues at the customers' zero-sum expense without being "picked-off". Look at it, and it moves. Like a carpet dealer in the souk, "Oh, you like it? The price is ____" (which is price times 2). In the world of trading, this information could at its darkest, empower a form of speculative front-running, or merely allow an HFT market-maker to shade quotes and quantities in the correct direction. Of course, Bloomberg and Reuters have the same opportunities, but they have far too much to lose by compromising their integrity. But an anonymous eastern-european website would not have the same integrity cost function. What if it were actually - in part or whole, in collusion or in partnership - a large HFT/Market-maker such as Citadel, Getco, Timber-Hill, Susquehanna or Spear-Leeds Honeypot, funded at arms length even in exchange for vital real-time access to what is not far from pre-trading interest and information. Conspiracy theorists let loose your inner imagination and recall the elaborate Honeypot setup in The Sting, where the punter was enticed into placing bets where the racing results and therefore the odds were known in advance!
And then, there is the little chestnut of the backtesting information derived from their backtester. Imagine for a moment having an army of unpaid but highly-motivated researchers - some daft, others savants, but all generating "strategies" with more or less complex heuristics, but all with objective measurements: estimated P&L. And you have the results individually, and in aggregate by classes of undertaking. This is like having the bore-hole results from prospectors, for free, without paying for the work or with royalties, and the ability to dig in the same place and spot without filing for, or paying for a mining concession. Of course Bloomberg could do the same. But FinViz is anonymous. There are no attestations or representations as to what they may be doing with the wealth of information gathered from the site. No mention or warnings about conflicts of interest. Perhaps there is more binding contractual detail in the fine print of the Elite subscription. This I cannot say.
As I began this missive, I adore Finviz. I use it regularly and often. Quality kit. I just wish they were more forthcoming, and, until such time that the veil is lifted, I will remain both curious and cautious.