Automated News Crawling Evaporates $1.14B 546
cmd writes "The Wall Street Journal reports that Google News crawled an obscure reprint of an article from 2002 when United Airlines was on the brink of bankruptcy. United Airlines has since recovered but due to a missing dateline, Google News ran the story as today's news. The story was then picked up by other news aggregators and eventually headlined as a news flash on Bloomberg. This triggered automated trading programs to dump UAL, cratering the stock from $12 to $3 and evaporating 1.14 billion dollars (nearly United's total market cap today) in shareholder wealth. The stock recovered within the day to $10 and is now trading at $9.62, a market cap of $300M less than before Google ran the story." The article makes clear that Google's news bot only noticed the old story because it has been voted up in popularity on the site of the South Florida Sun-Sentinel newspaper. The original thought was that stock manipulation may have been behind the incident, but this suspicion seems to be fading.
Holy crap. (Score:5, Insightful)
When you're talking about numbers like that then there is definitely a responsibility somewhere to try to prevent it happening again.
Re:It's clear. Automated trading programs are moro (Score:5, Insightful)
Never happen.
Every brokerage house in the country is increasing their presence in "Automated Trading". The majority of these companies income is now made on small percentage point fluctuations brokered very fast. With the automated systems pulling in that much more money than the traditional ones, and with more algorithms being designed (and held as proprietary info), what would YOU do?
Ridiculous? Yes. Not going away? Also Yes.
Might as well vote to bring back the horse drawn carriage since the price of gas has risen so much lately.
A lot of people's fault, mostly NOT google's (Score:5, Insightful)
Re:Holy crap. (Score:3, Insightful)
How about outlawing automated trading programs?
sounds like a solution to me.
Re:Holy crap. (Score:5, Insightful)
If the interactions were truly due to automation and not active stock manipulations, then I think the responsibility lies in the investor who was stupid enough to use automation and "triggers" to place their trades. That said, I am sure anyone who day traded today made a bundle of money if they hit the swings right. The market has become emotional, and often lacks reason. A lot of it comes from things like "lack of research" and making the market a pure number / target / trigger driven game that the hedge fund can sell you in their little black box.
Wild. That's all I have to say.
Re:Holy crap. (Score:5, Insightful)
Yes, but I don't think the main responsibility is with Google. Google can make mistakes. It's all the other news organizations and stock selling software should be blindly following Google's news bot.
A lot of dumb people probably lost a lot of money, while a lot of smart people probably made a lot of money over this.
GIGO (Score:3, Insightful)
Cautionary tale for the Web 2.0/semantic web or whatever they are calling it now.
Re:What if Google evaporates itself? (Score:5, Insightful)
Re:Holy crap. (Score:4, Insightful)
Unfortunately, automation/stock triggers ("sell when X", etc) are the only way for the common-man trader who isn't an on-the-ground insider member of one of the stock exchanges to make a timely trade.
The stock market is itself a pretty asinine setup; a large number of insiders (the only guys allowed on the floor) are allowed to run around trading back and forth, "increasing" the wealth of themselves and the people who hire them based on a relatively arbitrary stock valuation number at a given time. The rest of the world has to work through intermediaries to make a stock transaction and invest in various companies/funds, and pay a brokering fee (further enhancing the wealth only of the lucky-enough-to-get-in brokers) each step of the way.
End result: those who are NOT in the loop (e.g. the little guy) gets screwed, those who ARE in the insular center keep getting wealthier.
legal perspective (Score:5, Insightful)
So who gets sued? (Score:2, Insightful)
I wonder who gets sued for this. Obviously Google's Crawler was at fault, somewhat, but that one error shows a flaw in a lot of other news site handling of information (or misinformation as this was), especially Bloomberg - all for lack of actually double checking sources and dare I mention, actual facts, before running a story.
In a day and age where everyone is automating news feeds, I'd like to believe that someone out there should be responsible for approving posts - much like how I do syndicated posts on my wordpress blog...of course, asking for someone to take responsibility for anything in America is asking too much anyway...
Re:Holy crap. (Score:3, Insightful)
They actually lost more on this day because of that, and that's probably the worst thing that happened. Now people are going to be less likely to believe in those systems, and could end up losing 100% of their life savings if it isn't a boy crying wolf next time.
Re:A lot of people's fault, mostly NOT google's (Score:5, Insightful)
From the article:
"the UAL story began circulating widely via a posting by research firm Income Securities Advisors Inc. that was made available to users of Bloomberg L.P., the financial-news service widely watched on Wall Street."
Some analyst at a research firm made a big deal about the outdated article, after seeing it on Google news. THAT PERSON is the point of failure.
If you blame Google for this, you might as well blame Google for anyone posting any erroneous information they found after doing an internet search.
Maybe if (Score:5, Insightful)
Maybe if the industry you were in wasn't on the brink of an economic disaster for the past 7 years an old story being dug up by Google News wouldn't have had such a drastic impact.
Re:Holy crap. (Score:4, Insightful)
No one should lose 100% of their life savings due to one stock going wonky. If that's true, they're dumbasses for not diversifying.
Artificial Intelligence vs Natural Stupidity (Score:5, Insightful)
I wonder who gets sued for this. Obviously Google's Crawler was at fault, somewhat
How do you figure that? It's doing what it's supposed to. The problem wasn't the crawler, it's the people who thought the crawler was some kind of magic AI that could find relevant stories for them.
Re:Holy crap. (Score:5, Insightful)
Abso-fracking-lutely.
Along with the right to a free press comes the responsibility to be right. Most newspapers ignore the responsibility while hiding behind the right.
Re:Holy crap. (Score:5, Insightful)
Why is outlawing them even remotely necessary? It is the responsibility of the investor to make sure their tools are functioning properly, and noone elses.
Holding a single stock is ... unwise ... (Score:5, Insightful)
It's gambling, it isn't investing.
Re:Holy crap. (Score:5, Insightful)
"Program trading" only sometimes refers to anything automated. The name doesn't imply "computer program", merely a set of rules to be followed upon certain events. Computer automation adds little to the problem - people reacting to the news flash with orders to trade on such news will screw up just as badly, and almost as fast.
Being the first to react to news has *always* been a way to make money in the stock market, and in todays world where news speads at internet speed, staying ahead of the public spread of fresh news requires acting before there's time to use any sort of judgement.
If your not comfortable with this sort of crazy BS, investing in individual stocks is not for you. IMO, investing in individual stocks is a mistake for anyone tht doesn't do tht full time, and most who do (to judge by the track records of most indivdual money managers, hedge funds, and even mutual funds).
Re:big bad bot battle (Score:2, Insightful)
Almost as sad as the first one...
(If this doesn't get modded Insightful, I'm going to question the sanity of those who enjoy Shia LaBeouf's acting.)
Great. Let's use mod-points to fuel a popularity contest based on who likes what movie. Super cool.
A butterfly flaps . . . (Score:3, Insightful)
You're kidding me, right? Stockholders entrusted their assets to managers who entrusted their assets to tradebots. The tradebots/managers made bad decisions. How can the tradebots/managers/stockholders now blame anyone else for their incompetence?
Anyone who sells something of value based on a rumor this thin deserves what they get. As for those who didn't sell and still lost value, anyone who has been in the stock market for very long knows that you sometimes get what others deserve.
Re:Holy crap. (Score:5, Insightful)
How about letting stupid people lose money? Sounds like a better solution to me.
Re:Holy crap. (Score:5, Insightful)
Forbes has a better writeup (Score:5, Insightful)
This smells like a case of the Frankenstein complex to me. Although Google News may have linked the article in its recent results because of the fresh link on the Sun Sentinel home page, both the WSJ article and the Forbes investigation [forbes.com] make it very clear that the problem was a human editor who misinterpreted the original article and posted it as new information (with a freshly written headline) in a by-subscription-only investor information service that is carried on Bloomberg trading terminals.
A human saw the story, failed to check the date (there was no date line at the top of the article), refreshed it with a new headline, and republished it on a trading service that was believed to be a source of credible journalism by its readers.
Re:So who gets sued? (Score:3, Insightful)
I wonder who gets sued for this.
I'd think the people at fault (traders who have stop-loss orders because they're essentially gambling instead of investing in companies that they've researched properly) have already lost their money.
Re:Holy crap. (Score:3, Insightful)
That's why buy and hold was invented...
Re:Holy crap. (Score:5, Insightful)
That's not investing, that's gambling (aka speculation).
-JS
Re:Holy crap. (Score:4, Insightful)
Re:Holy crap. (Score:5, Insightful)
If you're in it on a "timely" basis, you're doing it wrong.
The playing the margins crap only works if that's your job. Otherwise you need to diversify, pick decent stocks, and stick to time windows of at least a week.
And I'll tell you this for free. People who are wealthy aren't playing the stocks minute by minute. They're wealthy because they play the long game. Right now they're picking up bargains whenever the market drops, and they're holding on to them for when the market evens back out. It's the scrubs who are panicking and losing their shorts selling stocks based on rumor.
"article makes clear" (Score:2, Insightful)
No, what the article makes clear is the way the stockmatket is run now has nothing to do with "investing" in a company because you think they offer good products or services so they will grow and prosper in the future, and everything to do with it being it a big stupid gambling casino that has zilch to do with traditional investing. A congame run by charlatan conmen to take advantage and leech off the suckers. Goes hand in pickpocketing hand with those big financial "industry" thieves who are quick to grab megaprofits when they successfully con people into taking their toxic waste pieces of paper, and right there with those same hands out taking tax payer bailouts when they run up against serious losses because of their overwhelming greed being the most important aspect to their "busy-ness".
Re:Holy crap. (Score:5, Insightful)
And what? Require traders to fill out a captcha every time? Or would you protect people from themselves by -- penalizing them/putting them in jail/making them pay large fines -- for using trade automation? How could enforce such a law anyway? It's not like Ebay can even stop all the automated third-party sniping tools that are being used on its site?
Besides, everyone can blame the evils of trade automation, but hysteria can still happen without trade automation. And may be it did in this case. I certainly know a relative or two who would make immediate trades based on unverified little blurbs they might have happened to catch on TV. Trade automation only makes hysteria more efficient. Outlawing it wouldn't solve the root of the problem. And may be, this decision should just be left to the individual investor/trader who decides to take the risk to use it -- or not.
Re:BEHOLD.... (Score:2, Insightful)
I'm crying lots of tears for the pension destroying shareholders of United Airlines. Boo. hoo. hoo. *sniffles*
Re:Holy crap. (Score:5, Insightful)
Investing SHORT TERM in individual stocks is a bad idea. Buying a reasonable stock and holding onto it long term isn't so dangerous.
I do wish I'd heard about this sooner though. What a great opportunity to triple an investment.
Modern Times (Score:3, Insightful)
Anyway, one interesting thing this story brings up is our over-reliance on automated systems... Googlebot picks up the old story, a financial firm's automated query systems sees the story as a recent one, the system spreads the story to its feeds, and it winds up as an alert in Bloomberg (the trading software, for those who've never worked with a trading firm) and other financial systems.
It's such a very fragile structure, wherein a single word can irrevocably alter the fate of a company, or even events around the world (butterfly effect, and a company like UA is a big butterfly). In the end, machines won't have to enslave mankind to take over the world. We've gladly handed them the keys and gone on vacation in the Bahamas...
Re:Holy crap. (Score:3, Insightful)
Re:Holy crap. (Score:5, Insightful)
Seriously, this is a case of a lot of stupid people making stupid mistakes. If you have a system that dumps all stock based upon a bad headline, then that's how you choose to play the stock market. Nobody can honestly say that it isn't risky to trade in stocks.
If they need something, perhaps going after those companies for artificially deflating the stock's value would be the best course. It's not like this couldn't have happened with humans.
Re:Holy crap. (Score:4, Insightful)
I think this has a LOT more to do with the the price of oil, subprime and the liquidity problems at investment banks than automation. I think investors are real worried about a 1929/1987-style market collapse and will dump anything they think is crapping out in a New York minute.
Plus, the airline industry as a whole has been in the shitter forever and $100+ barrels of oil don't help, so the story itself has a certain plausibility to it that "GE declares bankruptcy" doesn't. But I think general jitter on the markets explains a lot more than automation problems does.
Re:Holy crap. (Score:3, Insightful)
just suck it up as part of the price they pay for being publicly traded?
Bingo. Publicly traded companies hide behind that for all sorts of things, with personal liability being a big one. Let them eat their cake, too.
Re:So who gets sued? (Score:2, Insightful)
I wonder who gets sued for this. Obviously Google's Crawler was at fault, somewhat
There was a publicly available link on the Sun-Sentinel's website to a six year old undated news story. That's not Google's fault. If a human had found the story and emailed the link around the same thing may have happened, just slower.
Re:Holy crap. (Score:3, Insightful)
How about outlawing automated trading programs? sounds like a solution to me. How about letting stupid people lose money? Sounds like a better solution to me.
As long as we make sure than when the stupid people loose money, the government doesn't replace it. This might be too drastic for government these days.
Re:Holy crap. (Score:4, Insightful)
Sorry, but most online "newspapers" just republish other web content. There may not even be a human involved.
Ask yourself, how long could Slashdot go with an automated submission editor? Without it being noticed?
Re:Holy crap. (Score:4, Insightful)
Why would we need to outlaw something that has a built in mechanism to discourage its use (i.e. getting burned in a deal like this). It's a perfect system.
Re:So who gets sued? (Score:3, Insightful)
It's nothing to do with Google. If a bunch of idiots don't want to check their facts before they pull the plug on their portfolios, more power to 'em.
It's just a sign of the economy. News of a bank or an airline tanking is plausible enough to set off a panic, and people do stupid things when they panic.
Re:Holy crap. (Score:3, Insightful)
End result: those who are NOT in the loop (e.g. the little guy) gets screwed, those who ARE in the insular center keep getting wealthier.
The little guy DAY TRADER may get screwed. The little guy INVESTOR is making money just fine. Instead of worrying about trading triggers, why don't you buy stock in a company worth holding for years?
Stock Trading School (Score:2, Insightful)
I think a few day traders missed class that day.
Re:Holy crap. (Score:3, Insightful)
I fail to see how benefiting from this would be illegal, unless they were the ones to cause it.
Live by the sword... (Score:4, Insightful)
...die by the sword.
If you're trading based on news, minutes or seconds of advantage, and arbitrage, then you'll occasionally get nailed by something unforseen. Like a two-or three year old news story that 'looks' new all of a sudden.
So is someone watching over this, ready to pull the plug if something doesn't smell right? Nope. When the timing is so short, you're at the mercy of the system.
Besides, most of these programs are pure arbitrage. Which is sort of the 'greater fool' theory in play. You make money at someone else's expense. Like they didn't know about something, and you sell out a minute before they find out.
In this case, justice, if there is any, is won by those who saw the activity, realized the mistake, bought low and sold back high. Too bad, big institutional investor. You lost this round.
I can't shed a tear.
Re:Artificial Intelligence vs Natural Stupidity (Score:1, Insightful)
The problem wasn't the crawler, it's the people who thought the crawler was some kind of magic AI that could find relevant stories for them.
I agree. I think the company that stands the most to lose here is Bloomberg. The entire reason people use Bloomberg is to get the most important, relevant financial headlines. This filtering is Bloomberg's entire value-add to the news chain. If they just blindly copy a crawler and don't do any filtering, then why should anyone read their headlines?
Mod parent up! (Score:5, Insightful)
VALUE evaporates (Score:3, Insightful)
Burn 1500 $100 notes and the value will still be around somewhere, because less cash circulating will cause a drop in prices, so everybody else's cash will be worth a little bit more. But drive your new Porsche into a wall and you'll see $150 thousand evaporate.
A $1 billion drop in market value means that there's $1 billion somewhere that left the stock market to be spent on other things. This causes inflation, everybody's cash will have a somewhat smaller value.
blame it on Google? (Score:3, Insightful)
This wasn't Google's, it was the Tribune that posted the story as new. Google just picked it up and republished it, as they do with all news, without any guarantee that it's accurate.
And the people who caused United to lose the money were automated trading programs. Maybe they should be made a bit more robust? Just a thought.
If this technique wasn't used for manipulation (Score:4, Insightful)
Re:Holy crap. (Score:5, Insightful)
That's right -- the source of the story should be liable.
So, which source? The original journalist, for reporting on an event at the time in 2002? How about the original paper, which listed it as a popular story? Google, which added the story to their news aggregation feed? Other news outlets, for reporting it as new news when it was seen on an automatic feed?
I don't think it would be right to prosecute any of these. Information is not illegal. It's how you act on it that creates a liability. Or am I way off base, here?
Re:Holy crap. (Score:3, Insightful)
Depends what you mean by "worth".
Someone was willing to pay that price, and someone was willing to sell for that price, but it doesn't mean that the price is an objective valuation of the object being sold.
If the trade determines the worth, then suppose I buy something at a low price, then turn around and sell it to someone else for a higher price. What is the "worth" of the item?
Human error (Score:5, Insightful)
Re:BEHOLD.... (Score:5, Insightful)
Re:Holy crap. (Score:4, Insightful)
Let's not forget the smart people who picked up and made a profit afterward.
Evolution is a great system. Here you have a bunch of morons who lost money because they didn't think for themselves and investigate the validity of a story before making a decision. They lost a bunch of money and are now not as attractive as the smart ones who knew what was going on, quietly waited, and bought low.
Survival of the fittest at it's finest.
Re:It's clear. Automated trading programs are moro (Score:3, Insightful)
This practice has failed catastrophically in the past, and been likened to "picking up pennies in front of a steamroller [wikipedia.org]". The problem is twofold. First, to make any money at this, you have to throw a lot of money behind it. A 0.1% gain over an extremely short period of time is only worthwhile if it's an 0.1% gain on millions, or billions of dollars. The problem is, sometimes something unexpected happens (the asian economy has a crisis, sub-prime lending collapses, you get a bad tip that United is going belly up), and instead of the 0.1% gain, you end up with a big loss.
So, yes, I understand that the idea of a "free money machine" is very appealing, but people are ignoring the risk. That needs to stop. It's a risk to the stability of the economy.
Re:Holy crap. (Score:3, Insightful)
And think about it, if you had been the first to get the news that the other news story was out of date, and it was still at 3$, you tripled your money in one day even though UAL is still down from the day before.
Re:Holy crap. (Score:3, Insightful)
That's right -- the source of the story should be liable.
I disagree, everyone knows that while news is usually right screwups are inevitable if you want fast news. Making providers of information liable for such mistakes will just mean that noone is prepared to supply information without a contract as to how you will use that information and potential liability incurred. I think that would be very detrimental to society as a whole.
The fact is if you are going to play the game of trying to move before everyone else does you are going to base some of your moves on bad information.
Re:Holy crap. (Score:4, Insightful)
All investment is gambling- some is just more risky than others. This doesn't make it a bad thing.
Re:BEHOLD.... (Score:5, Insightful)
Automatic trading applications take their inputs from Beta software?
Re:BEHOLD.... (Score:3, Insightful)
Except the article did have a date on it. There was a box on the page for today's date. I certainly hope you don't expect google's indexing system to be able to figure out what the context of the date on the page was.
Re:Holding a single stock is ... unwise ... (Score:4, Insightful)
Even US Treasury bonds and T-bills have some risk. The immediate risk is really small, because it requires that the US Treasury goes broke.
There are also other risks, though.
One is that your conservative investment (other than the instruments tagged correct for inflation) grow more slowly than inflation, leaving you with more money in absolute dollars but less buying power.
Another is the risk that by choosing conservatively your opportunity cost pays much higher even adjusted for loss risk than your safer, more stable investment.
Everything you do with money is a bet, even holding it in your hand. Some bets are far safer than others, but in an active market there's no real way not to play.
Re:Holy crap. (Score:4, Insightful)
Whose money they are using to bail it out?
Who voted Bush in twice?
Stupid people losing money ;).
Anyway, they have to try to bail it out to prevent other stuff from blowing up. It is actually not such a bad idea (of course it'll be good for me if they didn't - since I'm waiting for a "Big Sale" on the entire stockmarket).
However you should see the hypocrisy - in the 1997 Asian Financial Crisis, people like the IMF[1] (and other "Experts") were saying that Governments shouldn't be doing bail outs and instead they should allow the insolvent banks and financial institutions to fail. So were they incompetent or evil?
Go figure.
[1] http://en.wikipedia.org/wiki/Asian_financial_crisis#IMF_role [wikipedia.org]
Re:Holy crap. (Score:3, Insightful)
Diversification is not necessarily dilution. Sure, if you're expecting that small start-up to be the next Microsoft or Google, and it ends up being so, then you're going to curse yourself for not having invested more money in it. But in all seriousness, you probably have a higher chance of winning by going into a casino and betting everything on square 21. However, if you invest wisely in good companies and keep your money in for the long run then you have a good chance of making a bundle on all your investments. The diversification is just insurance against unfortunate events.
Google Air (Score:3, Insightful)
I thought it was a secret plot by Google to launch their new Google Air at a fraction of the price they were looking at yesterday.
Just goes to show the fun that can happen when automated programs respond to automated programs. One wrong switch and Pandora is unleashed.
Re:BEHOLD.... (Score:3, Insightful)