Tuesday, August 10, 2010

The Unseen Hand

I think the market itself is an honest game. There are just too many marbles being pushed around to allow even the big boys to put their faces on the ebb and flow for very long.

That doesn't mean they don't try. Thousands do, I'm sure. But I'm even surer that there are thousands more who suspect and believe that miscreants are not only trying, but succeeding in manipulating markets constantly to the detriment of us, the small and meek. It happens all the time, they say. They can see it in their charts. A practice so vile that it is referred to only by its initials: MM.

Now, I'm an unbeliever in these matters, but now and then I sense a pattern in the movement of a stock I own that suggests the action of an unseen hand, be it Yahweh, or some hedge fund in New Jersey, I'm not sure. I had that feeling, last week, with ATPG, the thinly traded oil stock I own.

ATPG, a Gulf driller, has had its problems of late and, at the end of July, the stock was foundering in the neighborhood of $10.50. Then, it started off August with an unsuspected gap up to $11 at the open, followed by a gradual drift up in the direction of $12. That was August 2 and it closed around $11.50. On Tuesday, it began a steady rise to $12.31, then settled back to just under $12 at the close. I watched these events with increasing interest. Clearly, the stock was breaking out, but at whose behest, god or devil, I couldn't say. On the fourth, it opened up a dollar, near $13, and continued inexorably to the middle of fourteen.

Then, as the faithful were rejoicing, the stock began to swoon with as much purpose as it had shown on the ride up. The gas went out of the ATPG balloon, ending two days later with a big raspberries, on the floor of $10.46, a dime lower than its price at the month's beginning.

Everyone on the ATPG Message Board began to scream "MM" to each other and themselves. These abused innocents, suckered in once again, can be likened, in their belief, to the astrologers of old who beheld divinities in the heavens. They saw them in their charts.

But I remain skeptical, convinced as I am that only one force has both ability and desire to pull a trick like that. I sense the hand of Yahweh. I hear divine laughter. It's his MO.

Saturday, August 7, 2010

What are we going to do with Uncle Google?

Let's say Google has a monopoly in search. At some future point in time. Not 65% share, but 95%. The remaining 5% will all be Apple fan boys, and may be disregarded. So, Google has 100% of all searches that mean anything. What then?

Antitrust tools are mostly blunt instruments for breaking up monopolies. But, in this case, the monopoly is vested in the Algorithm. You can't split up the Algorithm and parcel pieces of it out to Google competitors. It is a singularity. What competitors would want is access to Google's proprietary database, but that would be like giving away the family jewels. Google wouldn't want to do that. Or would it?

In a way, Google does this now. They give access to the second derivative of their data by letting anyone buy keywords and see the demographics that they produce. This is a valuable service and Google invented it. By rights, the stock should be much higher than it is now, but I digress.

As a monopoly, the antitrust people would ordain that search be set up as a public utility which would then be allowed to collect all the data, even from the Apple fan boys. And the data would be made available to anybody, pretty much as it is now, by purchasing keywords in order to gain access to aggregate demographics, which they could use as they please. Of course, the business would continue to be one of placing advertisements as purchased by the advertisers. So you see, it's not the data that other companies need, it's the function to which they are applied. Google provides this function now, better than anybody else can, for prices which are set by the going rate. However, as a public utility, the profit that Google will make for providing these services will be regulated by the government. Fair and square. That should settle the hash for all search wannabes who think they are smarter than Google.

Of course, that won't happen any time soon, so Google has ample time to make zillions for its patient shareholders. But, when it does happen, Google will finally have to come up with other ways to make obscene amounts of money.