TCS Daily

Show Me the Money

By Dominic Basulto - March 29, 2006 12:00 AM

Two major initiatives -- one by Google, the other by the SEC -- promise to level the playing field for retail investors by making information more readily available and easier to discover than ever before. The big news, of course, was the splashy debut last week of Google Finance, which will now compete head-to-head with Yahoo! Finance as a destination Web site for financial market news, commentary and analysis. The other initiative, just as important, is a plan by the SEC to embrace "interactive data" and greater transparency in how public companies and mutual funds disclose financial data.

While the new Google Finance site lacked the "Wow!" factor of other Google product launches such as Google Maps and Gmail, by the end of the week there was grudging acceptance that Google was on to something. For one thing, Google has made it easier to search for information about a specific stock -- even if you don't know the ticker symbol for the stock. Even Yahoo's Jeremy Zawodny acknowledged that Google has finally developed "a ticker search that doesn't suck."

Not only that, but Google has also developed a news overlay for its stock price charts, enabling investors to see very clearly which news events are moving the company's stock price. Instead of relying on TV talking heads to describe the impact of events on a company's stock price, retail investors now have access to annotated historical stock price charts on their desktops.

While Google Finance is currently heavily dependent on commoditized financial information (i.e. price quotes, business news from Reuters), the site is unique in that it places blog posts in a prominent position on the page, right under traditional news items. If you check out the Google Finance page for Starbucks, for example, there's a Starbucks-related blog post from "A Thought Over Coffee" next to a Reuters news story.

The SEC move, while not as splashy, has much of the same logic behind it -- making information about companies and mutual funds easier to understand and easier to find for investors. The new initiatives, encouraged by new SEC Chairman Christopher Cox, are part and parcel of a regulatory philosophy that "financial markets armed with information can discipline companies better than any government regulator." In the Wall Street Journal, Mr. Cox outlined his views: "Modern technology -- specifically interactive data -- has the power to tap the awesome number-crunching and analytical power of today's computers to make SEC reports vastly more useful to investors, analysts, companies and, not least of all, the SEC."

For example, the SEC is exploring the use of "tagging" to make data more visible and easier to understand. By giving companies incentives to disclose financial information in a way that "tags" various pieces of data -- such as revenue, profit margins and reserves -- the SEC hopes that investors will be better empowered to compare companies versus each other. In addition, the SEC is pushing for powerful new software packages that can analyze financial information, better disclosure of items such as mutual fund performance, and electronic delivery of information (e.g. proxy materials) to investors.

Taken together, these moves by the SEC and Google will do a lot to revolutionize the way that investors use and interpret financial information. What could result is a virtuous circle that ends up aiding the individual investor: the SEC makes more information available and easier to search; Google develops new ways to discover and make this information available to amateur investors; these amateur investors then find new ways to combine, analyze, aggregate, and tag this data. While the idea of placing blog posts side-by-side with news items may be too ripe a temptation for short-sellers and speculators, it's clear that adding user-generated content on the Google Finance site is a sure way to make the financial markets more accessible to the layperson. Just wait for the first Google Finance mashup to appear.

If the SEC really does embrace initiatives such as tagging, investors might be able to search out and find other investors who have a similar investment style or who follow similar stocks. Using data from Google's prediction markets initiative; these investors might even be able to "predict" the future of a company's stock price and then discuss this within Google Groups. How about being able to type in a query like "Who are the five largest shareholders of company XYZ?" without ever knowing how to read a 10-Q or 10-K?

According to some estimates, approximately 50 percent of Americans now own stocks. As Wall Street becomes increasingly demystified thanks to companies like Google and regulators like the SEC, the U.S. could be one step closer to becoming a true ownership society, complete with transparent access to information and a vibrant community of well-informed amateur investors.

Dominic Basulto is the editor of the FORTUNE Business Innovation Insider blog and writes about technology, business, and finance for TCS Daily.


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