Gems from the "Saturday WSJ" (ugh!) on Consensus

I'm sure you've heard - the WSJ has a Saturday edition. The first edition was yesterday, available online.

While I'd like to pretend to be excited about this, I simply feel it's another day of the week with "must-read" reading, in comparison with the largely optional reading contained in most 7-day newspapers, like the NY Times.

I did find this tidbit from "Saturday's Journal" (a regrettable phrase!) interesting:

[On] Tuesday ... Jefferies & Co. put out a note observing how phone maker Nokia's business might affect other companies like Texas Instruments and RF Micro Devices. The five-paragraph Jefferies report looked a lot like another five-paragraph note on the same subject issued by Legg Mason. That day, Dow Jones Newswires noted that three paragraphs of each report were almost identical.

On Wednesday, Jefferies, in a prepared statement, said an associate analyst "plagiarized some of the wording...from a report prepared by another firm." That analyst, Jackie To, "is no longer employed by Jefferies."  Link

And they wonder why "Wall Street Consensus" is usually wrong! 

This will stand as "Exhibit L" as to the reason "Wall Street Consensus" is usually wrong - because it represents one or two original views copied and slightly modified twenty times over.

However, on the subject of consensus, I also saw this in the same WSJ article:

ConsensusView.com is a just-launched freebie Web site that allows professional traders to post their forecasts on stocks (U.S., U.K. and Canadian), futures and currencies. In return, posters see the consensus view of all contributors. Every month there's a prize of $1,000 for best forecaster.  Three former Oxford University students started the site, which aims to tease out the best tips from the masses.

Their inspiration was the book "The Wisdom of Crowds" by New Yorker magazine columnist and estimable thinker James Surowiecki. You know: Given all the information, the masses rather than the few will make the best bet -- a bit like the so-called efficient-market theory, which, if memory serves, holds that whatever line we get into at the supermarket automatically becomes the slowest line. Or something like that.

I tried to read "The Wisdom of Crowds" a few months ago, but I got bored shortly after the part where the crowd of people guess the weight of a cow to within a few pounds (that was page three of the introduction.)

While I most likely will pick up "The Wisdom of Crowds" again - being, after all, an open minded person despite my seeming cynicism - I will definitely check out ConsensusView.com to confirm that determining the future price of a cow is harder than guessing it's current weight, as well as bear in mind that while I suspected that Wall Street research often plagiarizes peers, I now have an admitted example of it. - Ed