Twitter Beats the Stock Market

Hedge Funds look at all sorts of data to gain an edge over the market. The ideal market insight tool you might imagine would be some sort of micro-blogging platform, where millions of people would express how they are feeling at any point in time. ie. - Twitter.

It seems Derwent Capital have done just that. Using a paper that came out of University of Manchester and Indiana University, which found a correlation between mood and Twitter.

The number of emotional words on Twitter could be used to predict daily moves in the Dow Jones Industrial Average. A change in emotions expressed online would be followed between two and six days later by a move in the index, the researchers said, and this information let them predict its movements with 87.6 percent accuracy

The Derwent Capital algorithm specifically looks at the level of calmness on Twitter.

Their results showed that rises and falls in the number of instances of words related to a calm mood could be used to predict the same moves in the Dow’s closing price between two and six days later, with a fall in these “calm” words being followed by a fall in the index. The other moods did not have the same predictive quality, the paper said.” Specifically, it looks for words like “alert,” “happy,” and “vital,” adds Financial News’ Michelle Price. “Derwent Capital scans a selected 10% of available tweets at random and will then categorise these messages into one of a range of mood states.

It is only in its first month, but the fund has already considerably beaten the market average. If some sort of feedback loop could be added (which can lead to dangerous spirals), or as various tweaks are added, this could rise considerably. Stay tuned - we’ll let you know.

Warren Buffett’s Best Ever Investments?

Warren Buffett said buying a home was the third-best investment he ever made. The first? Wedding rings he bought for his first wife (Susan Thompson) his second wife (Astrid Menks). Buffett wrote to shareholders of his Berkshire Hathaway

For the $31,500 I paid for our house, my family and I gained 52 years of terrific memories with more to come.

Not a bad return - and a reminder for us to keep what makes us truly happy the goal we should try to reach.

[Bloomberg]

Costing Your Ideal Life

Tim Ferriss - author of the Four Hour Work Week - has a strange writing style it is true, he manages to prick your suspicions with his glowing, problem-free solutions to life’s biggest problems. But his logic is nearly always perfect, and his ideas are inspirational. In this post he talks about how close you might already be to your ideal lifestyle - all you need is to cost it, and see how much it is. It is unlikely to be too far from your current situation.

From my own experience, I’ve also found this to be true. Traveling in Europe - seeing the best sights in the world, eating in great restaurants, and traveling from country to country on a whim, I always marvel how I’m spending the same or less than just being at home working. The devil truly is in the details.

Have you read this article? What did you think, too good to be true?