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Tesla Stockholders Can't Take a Joke

288 points by dsri 12y ago

oskarth 12y ago
At least this points to a profitable (albeit illegal, but what's legal on Wall Street anyway?) strategy in daytrading: 1. Buy stocks in X. 2. Hack X's blog (Hello Wordpress). 3. Put out a fake product announcement. 4. Sell stocks in X to stupid robot. 5. Profit. I'm not sorry for any ideas I might give people. The stupid robots had it coming ;)
- tptacek 12y ago
  That's a strategy that is at least as old as the Yahoo Finance message boards, and almost surely much older.
- drglitch 12y ago
  Dont overcomplicate things: 1. Sell short stock in X. 2. Put out a fake, negative press release. 3. Buy back shares at a huge profit. For prior example, see: http://money.cnn.com/2008/10/03/technology/apple/ http://money.cnn.com/2008/10/03/technology/apple/ In case you are wondering, this is, in fact, very illegal. (edit: formatting)
  - eru 12y ago
    > In case you are wondering, this is, in fact, very illegal. (edit: formatting) Split among multiple people, and choose jurisdiction carefully?
- snowwrestler 12y ago
  AKA "pump and dump." http://en.wikipedia.org/wiki/Pump_and_dump http://en.wikipedia.org/wiki/Pump_and_dump
civilian 12y ago
This is kind of a strong argument for some kind of "algorithm-proofing" editorial pass. Even if you aren't publishing an april fool's joke, you want the algorithms to respond correctly to your "X% bump in earnings and Y% penetration into new market Z". Maybe it'd be good to have a machine-readable companion for PR releases?
- eru 12y ago
  Why should the company care about a few minutes of change in the stock price?
pkallberg 12y ago
Probably automated trading.
solve 12y ago
> the stock jumped about $1.50 or about 0.75 percent Sounds like the market handled the joke incredibly well if it didn't even budge 1%.
- thehoff 12y ago
  Yeah, I was reading this trying to figure out if the 0.75% was a big deal (didn't seem to me offhand). Wonder how this compares to a normal trading day. edit: grammar
  - theGimp 12y ago
    It's a perfectly typical change in the price but normally you look at the change relative to the market that day. I'm on mobile but essentially if all the auto companies don't move and Tesla goes up 0.75% then it's a pretty good day for Tesla. Edited to fix typo
- joshu 12y ago
  You can't judge the magnitude of the move just by looking at the number. You have no idea if that is giant or tiny without context.
  - solve 12y ago
    Wrong. Percentage change is exactly what you look at, if you were to pick just one simple metric.
    - joshu 12y ago
      Standard deviation is the measure of typical amount of change. If you wanted to express it as a normalized z-score, that's your single number. 1% might be a .01 sigma move. It might be a 3 sigma move. Please don't present your opinions on a matter like this as if they are facts, especially when you are ill-informed.
      - solve 12y ago
purplelobster 12y ago
My guess is automated trading, looking for announcements like "Tesla introduces X". April 1st really should be hard coded as an exception in these algorithms, until they can take a joke that is.
- pyrois 12y ago
  Yeah, that's the author's guess as well. > And when I say "people" I mean mostly "algorithms," which are faster and more literal than humans.
- sarciszewski 12y ago
  I'd recommend "if the date is close to April 1, anything radical needs to be passed in front of a human analyst before it's allowed to affect the calculations" as a solution to these situations.
  - cscharenberg 12y ago
    That could turn April 1 into the yearly "serious announcement time" because companies would know a human will spend time really thinking about valuations rather than automated systems. :)
    - deleted 12y ago
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    - deleted 12y ago
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    - maaku 12y ago
      Problem f'ing solved.
      - deleted 12y ago
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      - joepie91_ 12y ago
crazypyro 12y ago
This is funny. I wrote a NLP program in the past (as a hobby project only) that analyzed articles and press releases to make predictions on stock prices. I didn't even think about adding April 1st (and the day before, to be honest) as an exception in the algorithm. Gives me something to do this weekend.
- IkmoIkmo 12y ago
  How's the (fictitious) ROI on that? :)
  - 1337biz 12y ago
    I'd like to see an April 1st only algorithm. Just one that knows how to spot a good joke and making money out of it.
  - crazypyro 12y ago
    I was simply using it to predict relatively short-term (between a few hours to 2-3 weeks) movements in the stock. I wasn't using it to even predict the magnitude of the rise/fall beyond a few "tiers". Think like small/medium/large magnitudes and that's not far off. With that said, I had between 60-75% success rate on predicting the direction, depending on how I set different things like requiring multiple sources, confidence required to execute prediction, NLP tweaking, etc. The tiers was worse, but I think it was around 40-45% on the last iteration. Obviously, I would want to get better at predicting magnitude before I used it in any real life trading. It also was highly dependent on the company/industry. It performed better on something like Apple or Google, but worse on some smaller companies in industries that are not near as news heavy. The main goal of the project was just to satisfy my curiosity with algo trading, web scraping and data analysis while giving me another cool project to talk about in interviews, as I'm a college student. I used scrapy, NLTK, pandas mostly.
    - nether 12y ago
      I think a 60% success rate is phenomenal, given that card counting only nets a 0.5-1.0% edge over the house. You've got yourself a 20% edge.
joshstrange 12y ago
Yeah, I'm not going to lose a wink of sleep over algorithms screwing up and making their owners lost a couple hundred thousand dollars (which isn't even a drop in the bucket). Telsa was not the only publicly traded company that did an April fools joke so I'm not sure why they are being singled out. You want to hand over all of our trading to computers to make more money? Fine (well not 100% fine but this is not the forum to discuss that) but I'm not going to feel sorry for you when your algorithm bites you in the ass.
- georgeecollins 12y ago
  Humor may be a great way for humans to battle newsbots and computer traders.
  - 6d0debc071 12y ago
    One thing that I wondered about with automated trading was whether it might make sense to have a rate-limited marketplace. Somewhere that caches trades received over a given time period and then executes them 'simultaneously' (or at least without preference for the order they were received in)....
    - curiouscats 12y ago
      That is similar to some of the sensible suggestions to reduce the front running gains high frequency traders extract from the market. I can't remember the details but even just pooling them by the second or something like that.
    - Yrlec 12y ago
      I'd love to see a stock market with a call auction every 15th min 24/7. It just doesn't make sense to have no trading at all during weekends and then claim that sub-millisecond execution is necessary when the market is open. The risk for the market maker shouldn't be much higher but the resources required to provide liquidity are much lower (no need to hire lots of developers to optimize your code). I wouldn't be surprised if a market like that would have tighter spreads (since it's cheaper to act as a market maker) but better stability (since an algorithm screwing up can be stopped during the 15 min interval).
cloakandswagger 12y ago
I think the bigger issue is that the joke just wasn't that funny.
- oldmanjay 12y ago
  people don't tell jokes on April fools. they tell earnest, absurd lies and expect you to laugh.
- delecti 12y ago
  It certainly wasn't laugh-out-loud, side splitting, rolling on the floor laughing funny. But making fun of everybody jumping on the smart watch bandwagon by showing a stupidly large clock tower strapped to a wrist got a chuckle out of me. Does an April Fools day joke really need to be that funny? I happen to like the tradition even when they're especially unfunny.
  - sliverstorm 12y ago
    I like the obviously ridiculous product launches by big name companies, but I hate the "literally everything you read on the internet on 4/1 is a lie" part.
    - ethanbond 12y ago
      You must have a pretty limited definition of "the Internet." And in my book, jokes that are clearly jokes are distinct from lies.
      - sliverstorm 12y ago
        How about jokes that are not clearly jokes.
iamcurious 12y ago
How long, on average, does it take for another source to declare it an April 1st joke? It seems an easy fix to wait 20 minutes or so. Sure, you lose an edge, but after that you will know everybody is acting stupid but you.
- unfunco 12y ago
  Many of the successful algorithmic trading platforms rely on super quick transactions, 20 minutes is a lifetime for many companies, especially when they invest heavily to shave mere microseconds from transaction processing times.
jameshart 12y ago
So on now reading the second fantastically well-constructed piece of writing about obscure stock ticker behavior on Bloomberg in 24 hours, had to look up the author and, indeed - both this and yesterday's Oreo Vomitoxin piece were both written by Matt Levine. Will be following with interest.
- deleted 12y ago
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- roganp 12y ago
  What I'm wondering is how many layers of management had to approve a joke press release? I would bet it went pretty high up the chain.
  - cynoclast 12y ago
    It probably came from Musk himself. He's a huge nerd and the wall at Tesla Motors that was once covered in framed patents is now covered in a giant picture of CAST from Zero Wing, and the announcement that they were giving them away was titled, "All Our Patents Are Belong To You". He literally announced their sharing of patents with a meme from like 2002.
    - omegaham 12y ago
      Pedantic correction: It's "CATS." :)
      - a1369209993 12y ago
        Even-more-pedantic correction: It's "It's "CATS".". :)
        omegaham 12y ago
        I was always under the impression that you want to put punctuation inside quotation marks. The only exception is in programming, as you don't want to put punctuation inside strings. Looking into it a little bit more, apparently the British put punctuation outside quotation marks, and Americans put it inside. Interesting.
fullwedgewhale 12y ago
I think it would be in everyone's interests to require all publicly traded companies to put out 4 press releases during the year (one per quarter) with an obviously ludicrous claim. Either the algorithms would get better or they would go away.
- lallysingh 12y ago
  Or the folks running the algorithms could put April 1st days in their test corpus?
  - lgas 12y ago
    I imagine fullwedgewhale was picturing them as being randomly distributed, not all on the same day every quarter.
    - antsar 12y ago
      And I imagine lallysingh meant that including April 1 headlines in the test corpus could help train the algorithms to correctly interpret false headlines, whether those headlines occur on a single day or not.
mapt 12y ago
Bonus point: This doesn't have to be a fraudulent press release. If Tesla's lawyers decide "Oh shit we need to make a watch now or the SEC will come after us"... it's not exactly hard to make a watch.
- harshreality 12y ago
  That's not how it would work. It was a joke (lie) given the intentions and plans of Tesla on April 1st. Any human (correction: any human who should be making investment decisions) looking at the announcement can tell that it's false. It wouldn't matter if Tesla later decided to introduce a watch named the Model W to try to "cover up" the lie. (It might matter to someone, but it wouldn't turn a crime into a non-crime.)
  - krick 12y ago
    Your statement is easy to prove wrong: it's enough to find any human that looking at the announcement can't tell that it's false. And I bet I can find such human. It scares me, how many of them I can find.
    - sib 12y ago
      That's why the "reasonable person" standard exists. Laws generally are not interpreted binarily.
    - Crito 12y ago
      > "it's enough to find any human that looking at the announcement can't tell that it's false." I have no doubt that you could find such a person. Similarly, I can find people who believe that the earth is flat, that the queen is a lizard, and that nuclear bombs do not exist. Finding a person who believes something stupid is no feat. That is why the law has the concept of the reasonable person. Anyone who believed this joke was not reasonable.
digitalneal 12y ago
I know US is the center of the world and all but if Aprils fools is culturally a western only thing, I would think it puts traders on other ends of the world at a disadvantage. "We" know it was a joke but those from other cultures trading in our markets would have to take that extra beat to think "is this a joke or not". Instant disadvantage.
- __m 12y ago
  if you read the press release it becomes clear that it is a joke, no matter the date or culture. If one can afford to gamble with money based on headlines or algorithms, one probably deserves to get burned.
- prodigal_erik 12y ago
  If a company announces a stupid product in all earnestness, it's part of an investor's job to predict its failure in the market and decline to route more of society's resources to the company.
krick 12y ago
It's curious that people on this thread are talking mostly of "dem stupid algorithms", while the part about the "securities fraud" seems much more interesting to me. It's easy to see that release makers tried as much as they can to make it obvious that it's a joke. Pretty stupid one, as whole this "tradition" of 01.04 is. But while Bloomberg guy obviously tries to justify Tesla, he is citing the definition that, in my opinion, shows that it is securities fraud. Because enough with this "hey, it's a joke" attitude, we have facts. Statement about "Tesla Model W" is untrue — a fact. Tesla gained from that — fact. "Reasonable" is very ambiguous word, and it is a shame that some judge can decide what is reasonable and what isn't, but I would say that an investor (and it doesn't mater if it's a human, a company or a machine) who makes money by investing on daily basis can be called reasonable as a matter of fact. And the likelihood of it altering the price turned to be substantial indeed, as we can judge by what happened. I think that "jokes" like that can and should be viewed as fraud, and it should be punished. After all it's not like serious shit doesn't happen on 1st of April.
- seanp2k2 12y ago
  As I see it, it's basically a question of whether a computer gets to be called "reasonable". Since the definition of "reasonable" starts off with (of a person) having sound judgment; fair and sensible. "no reasonable person could have objected" synonyms: sensible, rational, logical, fair, fair-minded, just, equitable ...I would say that a computer isn't reasonable. I would go on to argue that whoever let a computer read headlines and use complex pattern-matching to bet large sums of money was also not very reasonable or responsible.
- krschultz 12y ago
  Laws are strewn with the "reasonable" standard because there are unreasonable people that will sue over stupid things. It's not sad that "some judge" will have to figure out what is reasonable, that's their job. Do you think it is reasonable to make a trade based on a headline without reading the article? What happens if a company accidentally screws up the headline, are you going to sue them? Any reasonable investor that read the article knew it was a joke, especially if you saw the picture.
krschultz 12y ago
A new Turing Test for the algorithms that trade stocks: can it tell when something is a joke?
startupfounder 12y ago
This is not only a fun April Fools joke on the surface (Tesla introduces a Watch), but it is a much better joke when you dig down a little deeper and see that Tesla and Elon are making fun of the stock market's short attention span. Elon doesn't want to take SpaceX public because of this very fact, the market doesn't know how to have a 20 year vision of putting people on Mars let alone the ability to read under the headline. All great jokes are rooted firmly in reality.
- Osiris 12y ago
  The fact that the press release was made only 5 minutes before trading closed might, in fact, support this idea that it was aimed at automated trading as a human wouldn't have had much time to react to the news so close to the end of the day.
  - a_c_s 12y ago
    On the contrary: if humans take more than 5 minutes to react, then releasing a joke 5 minutes before trading ends has no risk of harming the stock if people misinterpret the press release as fact.
    - cbsmith 12y ago
      That's what Osiris said...
mch82 12y ago
My only issue with this article is that it seems to be written backwards. It's not a problem that Tesla published a joke on April Fools' Day, which is pretty much a trend in the tech industry since Google started doing it years back. The problem is that automated trading algorithms overreact to human behavior and cause human consequences. If anything, additional SEC scrutiny should target the algorithms and their corporate users. When jokes are illegal and harmful algorithms are legal, then culture and humanity are sucked out of life.
- floatrock 12y ago
  Agreed. This submission is titled "Tesla Stockholders Can't Take a Joke". Although technically true, the misleading part is the stockholders being talked about are algorithms, not people. We should be worrying not that Tesla released a joke PR that moved the price, but that we live in such an apparently unstable financial world where in the quest for milliseconds, HFT algorithms create non-negligable price swings in response to completely de-contextualized information. Five years ago this wouldn't have been a blip on the radar. If the rules have changed, so be it, but we should recognize that it's the system we've built that has changed the rules. We can yell 'securities fraud' at Tesla's PR department, but if so, we should recognize it's fraud because Tesla was releasing information that confused the dominant traders, which are now algorithms. If that's fraud, do we now have a fiduciary duty towards the algorithms? More troubling, if the system we've built is so unstable around just PR releases, what's going to happen next time there's a serious problematic signal?
  - cbsmith 12y ago
    > Although technically true, the misleading part is the stockholders being talked about are algorithms, not people. That was on purpose though. The title was meant to be deliberately misleading to highlight the fact that what we think of as "stockholders" is wrong: increasingly, the "stockholder" is an algorithm.
  - harryh 12y ago
    The price swing was negligible.
chucksmart 12y ago
A lawyer might recommend branding a watch 'Tesla W 'in the coming month. Make it ipso facto a true statement.
eldavido 12y ago
I like how finance is "slower" on the west coast. Less of an HFT/trading/options emphasis, vs. sales/partnerships/BD/making stuff people want.
- DannoHung 12y ago
  West coast finance is just deals. Go look at the M&A, Private Equity, or bond markets on the East coast if that's the speed you're looking for. Start dealing with something that has similarity to liquid instruments (many buyers and sellers, equivalence of goods) and the same exact shit'll happen. Or did you think Uber's pricing surges were due to people sitting down at a table and hashing out what the best prices for rides were during a given day?
kyleblarson 12y ago
Most algos aren't really stockholders for more than a few milliseconds.
- kasey_junk 12y ago
  Can you quantify that? Are you judging by "algos that trade the most" or "number of algos". Or "trader id attached to the algo", or "at the clearing house?".
TheBeardKing 12y ago
Looking at the price history, Tesla's stock didn't rise over what it was on March 31st and April 2nd: https://www.google.com/finance?q=NASDAQ%3ATSLA&ei=8sQeVemMKIjGsQf7vIDAAg https://www.google.com/finance?q=NASDAQ%3ATSLA&ei=8sQeVemMKI...
joshdance 12y ago
Trading firms now add April Fools algorithm, and get smarter. The world moves on.
rebootthesystem 12y ago
No, the real issue is that stocks have been turned into hype driven vapoe-ware. Tesla stock has a P/E of NEGATIVE 250 or thereabouts. OK, they are building a company and maybe even an industry. I get it. Yet the problem is one of ridiculous valuations. There's huge risk. It is nothing less than legalize gambling. This coming from someone who day-traded full time for over a year. The things I experienced during that time made me decide that the stock market was nothing more than a form of gambling. Don't blame the joke or the algorithm. Blame a regulatory system that does not protect the masses from "going to Vegas" any time they touch the stock market.
- JoeAltmaier 12y ago
  The entire stock market is based on gambling. No, not even that. You're gambling on the value of the baseball card, not even on the value of the player. Once a company sells stock, that share value is essentially unrelated to the company except by tradition and cultural expectation. The share can vary all over the map, and only gets a reality check if it goes below book value (none ever do). Even dividends hardly matter; they are factored into the stock price near dividend time, and drop out the day after the dividend. SO no they haven't turned into anything; they always were vapor-ware.
  - harryh 12y ago
    So you think it's purely a coincidence that AAPL is up 3-4x in the past 5 years while Radio Shack stock has lost 99% of it's value? It has nothing to do with the fact that Apple is making huge profits while Radio Shack lost money hand over fist?
    - JoeAltmaier 12y ago
      Within the bounds of 'book value', yes. The fact that you are convinced there is some necessary relationship (and that I am wrong) is the 'cultural' part of it. You think that somewhere there's a link between those facts, when in fact there is none. None but other people believing the same thing.
encoderer 12y ago
I somewhat disagree with the consensus. This, like Netflix moving their earnings date, is a big middle finger to the people who provide liquidity in the company's stock. Musk feigns intolerance and disinterest in the games of the market. But more than any other CEO, he baits and stokes it. Several times in the last year, as TSLA stock takes a beating, he drops a tweet. He did it on October 1st with the "Model D" tweet. It creates a boomlet until the announcement, then a crash back down to reality. It creates a bag-holding moment for retail investors. It's not unreasonable to think that the CEO should not be meddling with the public market. I go even further and say: the investors and traders of TSLA have significantly helped the company succeed. Why does he keep kicking them in the teeth?
- prodigal_erik 12y ago
  Investors evaluate the company's products for themselves, and buy-and-hold to route society's resources appropriately. Traders prey on investors, forcing them to waste effort on behaving less predictably so their transactions aren't front-run.
  - encoderer 12y ago
    > Traders prey on investors, forcing them to waste effort on behaving less predictably so their transactions aren't front-run. It's not your fault, but I think you've just been spun by the Michael Lewis Flashboys hype machine here. Frontrunning isn't really a problem. Did you know the majority of orders are price IMPROVED, in part due to the activities of high frequency traders? Meaning, you place an order to buy at $10 and it's filled at $9.995 because some HFT wanted your order flow so they improve the best quote by 1/2 penny to get to fill your order. Moreover, if you're a buy-and-hold investor, even if you were "front run" you would never even know nor miss the 1/2 penny per share or whatever. Respectfully, this is just a subject that's complicated and it to grok it you need to give it some real thought.
    - prodigal_erik 12y ago
      Where did they get them? If it's their fault equities were not available at $9.995 from anyone else, they haven't provided any liquidity. I don't believe hold times in milliseconds actually facilitate trades that would not have happened anyway.
kasey_junk 12y ago
I'm curious where the line gets drawn on this. I mean, yes given the context of April 1st and the nature of the text it was clearly a joke. But what if you removed either piece of that? What if they'd done this same announcement on the 3rd wed. of October? What if they'd sent out announcements, rented a convention center, setup a "One More Thing" reveal? Then a couple days later admitted it was a joke. Pretty epic prank really. In many ways, much much more funny. Also pretty clearly illegal. What if on April 1st they announced something that was so drastic that people thought it was an April 1st joke but it wasn't?
- jjarmoc 12y ago
  > What if on April 1st they announced something that was so drastic that people thought it was an April 1st joke but it wasn't? I've been surprised lately how few people seem to recall Google's launch of Gmail on 04/01/2004. There was a lot of back and forth debate about whether or not it was a joke. What they promised was pretty incredible for the day. Adding to this was the tone of the announcement... http://googlepress.blogspot.com/2004/04/google-gets-message-launches-gmail.html http://googlepress.blogspot.com/2004/04/google-gets-message-...
legohead 12y ago
Tesla stock is crazy unstable in the first place. I've invested in it purely because I like Elon so much, and it has been humorous to watch it "progress". A report of a tesla battery catching fire, and the cause is still unknown? Stock price drops. Elon writes an amazing article calming any fears about his batteries? Stock price drops. New SUV Model? Stock price drops. Earnings this quarter higher than expected? Stock price drops. etc.
BrainInAJar 12y ago
I laughed at "shareholder algorithms"
yellowapple 12y ago
The alternate explanation would be that the algorithms actually do have a sense of humor and like to buy stocks with companies that make them laugh. My hypothesis is that those stocks were only subsequently sold again only because the algorithms found a different press release to be funnier.

288 points by dsri 12y ago

At least this points to a profitable (albeit illegal, but what's legal on Wall Street anyway?) strategy in daytrading: 1. Buy stocks in X. 2. Hack X's blog (Hello Wordpress). 3. Put out a fake product announcement. 4. Sell stocks in X to stupid robot. 5. Profit. I'm not sorry for any ideas I might give people. The stupid robots had it coming ;)

tptacek 12y ago
That's a strategy that is at least as old as the Yahoo Finance message boards, and almost surely much older.
drglitch 12y ago
Dont overcomplicate things: 1. Sell short stock in X. 2. Put out a fake, negative press release. 3. Buy back shares at a huge profit. For prior example, see: http://money.cnn.com/2008/10/03/technology/apple/ http://money.cnn.com/2008/10/03/technology/apple/ In case you are wondering, this is, in fact, very illegal. (edit: formatting)
- eru 12y ago
  > In case you are wondering, this is, in fact, very illegal. (edit: formatting) Split among multiple people, and choose jurisdiction carefully?
snowwrestler 12y ago
AKA "pump and dump." http://en.wikipedia.org/wiki/Pump_and_dump http://en.wikipedia.org/wiki/Pump_and_dump

civilian 12y ago

This is kind of a strong argument for some kind of "algorithm-proofing" editorial pass. Even if you aren't publishing an april fool's joke, you want the algorithms to respond correctly to your "X% bump in earnings and Y% penetration into new market Z". Maybe it'd be good to have a machine-readable companion for PR releases?

eru 12y ago
Why should the company care about a few minutes of change in the stock price?

pkallberg 12y ago

Probably automated trading.

solve 12y ago

> the stock jumped about $1.50 or about 0.75 percent Sounds like the market handled the joke incredibly well if it didn't even budge 1%.

thehoff 12y ago
Yeah, I was reading this trying to figure out if the 0.75% was a big deal (didn't seem to me offhand). Wonder how this compares to a normal trading day. edit: grammar
- theGimp 12y ago
  It's a perfectly typical change in the price but normally you look at the change relative to the market that day. I'm on mobile but essentially if all the auto companies don't move and Tesla goes up 0.75% then it's a pretty good day for Tesla. Edited to fix typo
joshu 12y ago
You can't judge the magnitude of the move just by looking at the number. You have no idea if that is giant or tiny without context.
- solve 12y ago
  Wrong. Percentage change is exactly what you look at, if you were to pick just one simple metric.
  - joshu 12y ago
    Standard deviation is the measure of typical amount of change. If you wanted to express it as a normalized z-score, that's your single number. 1% might be a .01 sigma move. It might be a 3 sigma move. Please don't present your opinions on a matter like this as if they are facts, especially when you are ill-informed.
    - solve 12y ago

purplelobster 12y ago

My guess is automated trading, looking for announcements like "Tesla introduces X". April 1st really should be hard coded as an exception in these algorithms, until they can take a joke that is.

pyrois 12y ago
Yeah, that's the author's guess as well. > And when I say "people" I mean mostly "algorithms," which are faster and more literal than humans.
sarciszewski 12y ago
I'd recommend "if the date is close to April 1, anything radical needs to be passed in front of a human analyst before it's allowed to affect the calculations" as a solution to these situations.
- cscharenberg 12y ago
  That could turn April 1 into the yearly "serious announcement time" because companies would know a human will spend time really thinking about valuations rather than automated systems. :)
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  - maaku 12y ago
    Problem f'ing solved.
    - deleted 12y ago
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    - joepie91_ 12y ago

crazypyro 12y ago

This is funny. I wrote a NLP program in the past (as a hobby project only) that analyzed articles and press releases to make predictions on stock prices. I didn't even think about adding April 1st (and the day before, to be honest) as an exception in the algorithm. Gives me something to do this weekend.

IkmoIkmo 12y ago
How's the (fictitious) ROI on that? :)
- 1337biz 12y ago
  I'd like to see an April 1st only algorithm. Just one that knows how to spot a good joke and making money out of it.
- crazypyro 12y ago
  I was simply using it to predict relatively short-term (between a few hours to 2-3 weeks) movements in the stock. I wasn't using it to even predict the magnitude of the rise/fall beyond a few "tiers". Think like small/medium/large magnitudes and that's not far off. With that said, I had between 60-75% success rate on predicting the direction, depending on how I set different things like requiring multiple sources, confidence required to execute prediction, NLP tweaking, etc. The tiers was worse, but I think it was around 40-45% on the last iteration. Obviously, I would want to get better at predicting magnitude before I used it in any real life trading. It also was highly dependent on the company/industry. It performed better on something like Apple or Google, but worse on some smaller companies in industries that are not near as news heavy. The main goal of the project was just to satisfy my curiosity with algo trading, web scraping and data analysis while giving me another cool project to talk about in interviews, as I'm a college student. I used scrapy, NLTK, pandas mostly.
  - nether 12y ago
    I think a 60% success rate is phenomenal, given that card counting only nets a 0.5-1.0% edge over the house. You've got yourself a 20% edge.

joshstrange 12y ago

Yeah, I'm not going to lose a wink of sleep over algorithms screwing up and making their owners lost a couple hundred thousand dollars (which isn't even a drop in the bucket). Telsa was not the only publicly traded company that did an April fools joke so I'm not sure why they are being singled out. You want to hand over all of our trading to computers to make more money? Fine (well not 100% fine but this is not the forum to discuss that) but I'm not going to feel sorry for you when your algorithm bites you in the ass.

georgeecollins 12y ago
Humor may be a great way for humans to battle newsbots and computer traders.
- 6d0debc071 12y ago
  One thing that I wondered about with automated trading was whether it might make sense to have a rate-limited marketplace. Somewhere that caches trades received over a given time period and then executes them 'simultaneously' (or at least without preference for the order they were received in)....
  - curiouscats 12y ago
    That is similar to some of the sensible suggestions to reduce the front running gains high frequency traders extract from the market. I can't remember the details but even just pooling them by the second or something like that.
  - Yrlec 12y ago
    I'd love to see a stock market with a call auction every 15th min 24/7. It just doesn't make sense to have no trading at all during weekends and then claim that sub-millisecond execution is necessary when the market is open. The risk for the market maker shouldn't be much higher but the resources required to provide liquidity are much lower (no need to hire lots of developers to optimize your code). I wouldn't be surprised if a market like that would have tighter spreads (since it's cheaper to act as a market maker) but better stability (since an algorithm screwing up can be stopped during the 15 min interval).

cloakandswagger 12y ago

I think the bigger issue is that the joke just wasn't that funny.

oldmanjay 12y ago
people don't tell jokes on April fools. they tell earnest, absurd lies and expect you to laugh.
delecti 12y ago
It certainly wasn't laugh-out-loud, side splitting, rolling on the floor laughing funny. But making fun of everybody jumping on the smart watch bandwagon by showing a stupidly large clock tower strapped to a wrist got a chuckle out of me. Does an April Fools day joke really need to be that funny? I happen to like the tradition even when they're especially unfunny.
- sliverstorm 12y ago
  I like the obviously ridiculous product launches by big name companies, but I hate the "literally everything you read on the internet on 4/1 is a lie" part.
  - ethanbond 12y ago
    You must have a pretty limited definition of "the Internet." And in my book, jokes that are clearly jokes are distinct from lies.
    - sliverstorm 12y ago
      How about jokes that are not clearly jokes.

iamcurious 12y ago

How long, on average, does it take for another source to declare it an April 1st joke? It seems an easy fix to wait 20 minutes or so. Sure, you lose an edge, but after that you will know everybody is acting stupid but you.

unfunco 12y ago
Many of the successful algorithmic trading platforms rely on super quick transactions, 20 minutes is a lifetime for many companies, especially when they invest heavily to shave mere microseconds from transaction processing times.

jameshart 12y ago

So on now reading the second fantastically well-constructed piece of writing about obscure stock ticker behavior on Bloomberg in 24 hours, had to look up the author and, indeed - both this and yesterday's Oreo Vomitoxin piece were both written by Matt Levine. Will be following with interest.

deleted 12y ago
[deleted]
roganp 12y ago
What I'm wondering is how many layers of management had to approve a joke press release? I would bet it went pretty high up the chain.
- cynoclast 12y ago
  It probably came from Musk himself. He's a huge nerd and the wall at Tesla Motors that was once covered in framed patents is now covered in a giant picture of CAST from Zero Wing, and the announcement that they were giving them away was titled, "All Our Patents Are Belong To You". He literally announced their sharing of patents with a meme from like 2002.
  - omegaham 12y ago
    Pedantic correction: It's "CATS." :)
    - a1369209993 12y ago
      Even-more-pedantic correction: It's "It's "CATS".". :)
      - omegaham 12y ago
        I was always under the impression that you want to put punctuation inside quotation marks. The only exception is in programming, as you don't want to put punctuation inside strings. Looking into it a little bit more, apparently the British put punctuation outside quotation marks, and Americans put it inside. Interesting.

fullwedgewhale 12y ago

I think it would be in everyone's interests to require all publicly traded companies to put out 4 press releases during the year (one per quarter) with an obviously ludicrous claim. Either the algorithms would get better or they would go away.

lallysingh 12y ago
Or the folks running the algorithms could put April 1st days in their test corpus?
- lgas 12y ago
  I imagine fullwedgewhale was picturing them as being randomly distributed, not all on the same day every quarter.
  - antsar 12y ago
    And I imagine lallysingh meant that including April 1 headlines in the test corpus could help train the algorithms to correctly interpret false headlines, whether those headlines occur on a single day or not.

mapt 12y ago

Bonus point: This doesn't have to be a fraudulent press release. If Tesla's lawyers decide "Oh shit we need to make a watch now or the SEC will come after us"... it's not exactly hard to make a watch.

harshreality 12y ago
That's not how it would work. It was a joke (lie) given the intentions and plans of Tesla on April 1st. Any human (correction: any human who should be making investment decisions) looking at the announcement can tell that it's false. It wouldn't matter if Tesla later decided to introduce a watch named the Model W to try to "cover up" the lie. (It might matter to someone, but it wouldn't turn a crime into a non-crime.)
- krick 12y ago
  Your statement is easy to prove wrong: it's enough to find any human that looking at the announcement can't tell that it's false. And I bet I can find such human. It scares me, how many of them I can find.
  - sib 12y ago
    That's why the "reasonable person" standard exists. Laws generally are not interpreted binarily.
  - Crito 12y ago
    > "it's enough to find any human that looking at the announcement can't tell that it's false." I have no doubt that you could find such a person. Similarly, I can find people who believe that the earth is flat, that the queen is a lizard, and that nuclear bombs do not exist. Finding a person who believes something stupid is no feat. That is why the law has the concept of the reasonable person. Anyone who believed this joke was not reasonable.

digitalneal 12y ago

I know US is the center of the world and all but if Aprils fools is culturally a western only thing, I would think it puts traders on other ends of the world at a disadvantage. "We" know it was a joke but those from other cultures trading in our markets would have to take that extra beat to think "is this a joke or not". Instant disadvantage.

__m 12y ago
if you read the press release it becomes clear that it is a joke, no matter the date or culture. If one can afford to gamble with money based on headlines or algorithms, one probably deserves to get burned.
prodigal_erik 12y ago
If a company announces a stupid product in all earnestness, it's part of an investor's job to predict its failure in the market and decline to route more of society's resources to the company.

krick 12y ago

It's curious that people on this thread are talking mostly of "dem stupid algorithms", while the part about the "securities fraud" seems much more interesting to me. It's easy to see that release makers tried as much as they can to make it obvious that it's a joke. Pretty stupid one, as whole this "tradition" of 01.04 is. But while Bloomberg guy obviously tries to justify Tesla, he is citing the definition that, in my opinion, shows that it is securities fraud. Because enough with this "hey, it's a joke" attitude, we have facts. Statement about "Tesla Model W" is untrue — a fact. Tesla gained from that — fact. "Reasonable" is very ambiguous word, and it is a shame that some judge can decide what is reasonable and what isn't, but I would say that an investor (and it doesn't mater if it's a human, a company or a machine) who makes money by investing on daily basis can be called reasonable as a matter of fact. And the likelihood of it altering the price turned to be substantial indeed, as we can judge by what happened. I think that "jokes" like that can and should be viewed as fraud, and it should be punished. After all it's not like serious shit doesn't happen on 1st of April.

seanp2k2 12y ago
As I see it, it's basically a question of whether a computer gets to be called "reasonable". Since the definition of "reasonable" starts off with (of a person) having sound judgment; fair and sensible. "no reasonable person could have objected" synonyms: sensible, rational, logical, fair, fair-minded, just, equitable ...I would say that a computer isn't reasonable. I would go on to argue that whoever let a computer read headlines and use complex pattern-matching to bet large sums of money was also not very reasonable or responsible.
krschultz 12y ago
Laws are strewn with the "reasonable" standard because there are unreasonable people that will sue over stupid things. It's not sad that "some judge" will have to figure out what is reasonable, that's their job. Do you think it is reasonable to make a trade based on a headline without reading the article? What happens if a company accidentally screws up the headline, are you going to sue them? Any reasonable investor that read the article knew it was a joke, especially if you saw the picture.

krschultz 12y ago

A new Turing Test for the algorithms that trade stocks: can it tell when something is a joke?

startupfounder 12y ago

This is not only a fun April Fools joke on the surface (Tesla introduces a Watch), but it is a much better joke when you dig down a little deeper and see that Tesla and Elon are making fun of the stock market's short attention span. Elon doesn't want to take SpaceX public because of this very fact, the market doesn't know how to have a 20 year vision of putting people on Mars let alone the ability to read under the headline. All great jokes are rooted firmly in reality.

Osiris 12y ago
The fact that the press release was made only 5 minutes before trading closed might, in fact, support this idea that it was aimed at automated trading as a human wouldn't have had much time to react to the news so close to the end of the day.
- a_c_s 12y ago
  On the contrary: if humans take more than 5 minutes to react, then releasing a joke 5 minutes before trading ends has no risk of harming the stock if people misinterpret the press release as fact.
  - cbsmith 12y ago
    That's what Osiris said...

mch82 12y ago

My only issue with this article is that it seems to be written backwards. It's not a problem that Tesla published a joke on April Fools' Day, which is pretty much a trend in the tech industry since Google started doing it years back. The problem is that automated trading algorithms overreact to human behavior and cause human consequences. If anything, additional SEC scrutiny should target the algorithms and their corporate users. When jokes are illegal and harmful algorithms are legal, then culture and humanity are sucked out of life.

floatrock 12y ago
Agreed. This submission is titled "Tesla Stockholders Can't Take a Joke". Although technically true, the misleading part is the stockholders being talked about are algorithms, not people. We should be worrying not that Tesla released a joke PR that moved the price, but that we live in such an apparently unstable financial world where in the quest for milliseconds, HFT algorithms create non-negligable price swings in response to completely de-contextualized information. Five years ago this wouldn't have been a blip on the radar. If the rules have changed, so be it, but we should recognize that it's the system we've built that has changed the rules. We can yell 'securities fraud' at Tesla's PR department, but if so, we should recognize it's fraud because Tesla was releasing information that confused the dominant traders, which are now algorithms. If that's fraud, do we now have a fiduciary duty towards the algorithms? More troubling, if the system we've built is so unstable around just PR releases, what's going to happen next time there's a serious problematic signal?
- cbsmith 12y ago
  > Although technically true, the misleading part is the stockholders being talked about are algorithms, not people. That was on purpose though. The title was meant to be deliberately misleading to highlight the fact that what we think of as "stockholders" is wrong: increasingly, the "stockholder" is an algorithm.
- harryh 12y ago
  The price swing was negligible.

chucksmart 12y ago

A lawyer might recommend branding a watch 'Tesla W 'in the coming month. Make it ipso facto a true statement.

eldavido 12y ago

I like how finance is "slower" on the west coast. Less of an HFT/trading/options emphasis, vs. sales/partnerships/BD/making stuff people want.

DannoHung 12y ago
West coast finance is just deals. Go look at the M&A, Private Equity, or bond markets on the East coast if that's the speed you're looking for. Start dealing with something that has similarity to liquid instruments (many buyers and sellers, equivalence of goods) and the same exact shit'll happen. Or did you think Uber's pricing surges were due to people sitting down at a table and hashing out what the best prices for rides were during a given day?

kyleblarson 12y ago

Most algos aren't really stockholders for more than a few milliseconds.

kasey_junk 12y ago
Can you quantify that? Are you judging by "algos that trade the most" or "number of algos". Or "trader id attached to the algo", or "at the clearing house?".

TheBeardKing 12y ago

Looking at the price history, Tesla's stock didn't rise over what it was on March 31st and April 2nd: https://www.google.com/finance?q=NASDAQ%3ATSLA&ei=8sQeVemMKIjGsQf7vIDAAg https://www.google.com/finance?q=NASDAQ%3ATSLA&ei=8sQeVemMKI...

joshdance 12y ago

Trading firms now add April Fools algorithm, and get smarter. The world moves on.

rebootthesystem 12y ago

No, the real issue is that stocks have been turned into hype driven vapoe-ware. Tesla stock has a P/E of NEGATIVE 250 or thereabouts. OK, they are building a company and maybe even an industry. I get it. Yet the problem is one of ridiculous valuations. There's huge risk. It is nothing less than legalize gambling. This coming from someone who day-traded full time for over a year. The things I experienced during that time made me decide that the stock market was nothing more than a form of gambling. Don't blame the joke or the algorithm. Blame a regulatory system that does not protect the masses from "going to Vegas" any time they touch the stock market.

JoeAltmaier 12y ago
The entire stock market is based on gambling. No, not even that. You're gambling on the value of the baseball card, not even on the value of the player. Once a company sells stock, that share value is essentially unrelated to the company except by tradition and cultural expectation. The share can vary all over the map, and only gets a reality check if it goes below book value (none ever do). Even dividends hardly matter; they are factored into the stock price near dividend time, and drop out the day after the dividend. SO no they haven't turned into anything; they always were vapor-ware.
- harryh 12y ago
  So you think it's purely a coincidence that AAPL is up 3-4x in the past 5 years while Radio Shack stock has lost 99% of it's value? It has nothing to do with the fact that Apple is making huge profits while Radio Shack lost money hand over fist?
  - JoeAltmaier 12y ago
    Within the bounds of 'book value', yes. The fact that you are convinced there is some necessary relationship (and that I am wrong) is the 'cultural' part of it. You think that somewhere there's a link between those facts, when in fact there is none. None but other people believing the same thing.

encoderer 12y ago

I somewhat disagree with the consensus. This, like Netflix moving their earnings date, is a big middle finger to the people who provide liquidity in the company's stock. Musk feigns intolerance and disinterest in the games of the market. But more than any other CEO, he baits and stokes it. Several times in the last year, as TSLA stock takes a beating, he drops a tweet. He did it on October 1st with the "Model D" tweet. It creates a boomlet until the announcement, then a crash back down to reality. It creates a bag-holding moment for retail investors. It's not unreasonable to think that the CEO should not be meddling with the public market. I go even further and say: the investors and traders of TSLA have significantly helped the company succeed. Why does he keep kicking them in the teeth?

prodigal_erik 12y ago
Investors evaluate the company's products for themselves, and buy-and-hold to route society's resources appropriately. Traders prey on investors, forcing them to waste effort on behaving less predictably so their transactions aren't front-run.
- encoderer 12y ago
  > Traders prey on investors, forcing them to waste effort on behaving less predictably so their transactions aren't front-run. It's not your fault, but I think you've just been spun by the Michael Lewis Flashboys hype machine here. Frontrunning isn't really a problem. Did you know the majority of orders are price IMPROVED, in part due to the activities of high frequency traders? Meaning, you place an order to buy at $10 and it's filled at $9.995 because some HFT wanted your order flow so they improve the best quote by 1/2 penny to get to fill your order. Moreover, if you're a buy-and-hold investor, even if you were "front run" you would never even know nor miss the 1/2 penny per share or whatever. Respectfully, this is just a subject that's complicated and it to grok it you need to give it some real thought.
  - prodigal_erik 12y ago
    Where did they get them? If it's their fault equities were not available at $9.995 from anyone else, they haven't provided any liquidity. I don't believe hold times in milliseconds actually facilitate trades that would not have happened anyway.

kasey_junk 12y ago

I'm curious where the line gets drawn on this. I mean, yes given the context of April 1st and the nature of the text it was clearly a joke. But what if you removed either piece of that? What if they'd done this same announcement on the 3rd wed. of October? What if they'd sent out announcements, rented a convention center, setup a "One More Thing" reveal? Then a couple days later admitted it was a joke. Pretty epic prank really. In many ways, much much more funny. Also pretty clearly illegal. What if on April 1st they announced something that was so drastic that people thought it was an April 1st joke but it wasn't?

jjarmoc 12y ago
> What if on April 1st they announced something that was so drastic that people thought it was an April 1st joke but it wasn't? I've been surprised lately how few people seem to recall Google's launch of Gmail on 04/01/2004. There was a lot of back and forth debate about whether or not it was a joke. What they promised was pretty incredible for the day. Adding to this was the tone of the announcement... http://googlepress.blogspot.com/2004/04/google-gets-message-launches-gmail.html http://googlepress.blogspot.com/2004/04/google-gets-message-...

legohead 12y ago

Tesla stock is crazy unstable in the first place. I've invested in it purely because I like Elon so much, and it has been humorous to watch it "progress". A report of a tesla battery catching fire, and the cause is still unknown? Stock price drops. Elon writes an amazing article calming any fears about his batteries? Stock price drops. New SUV Model? Stock price drops. Earnings this quarter higher than expected? Stock price drops. etc.

BrainInAJar 12y ago

I laughed at "shareholder algorithms"

yellowapple 12y ago

The alternate explanation would be that the algorithms actually do have a sense of humor and like to buy stocks with companies that make them laugh. My hypothesis is that those stocks were only subsequently sold again only because the algorithms found a different press release to be funnier.