RealMoney's Blog Watch

The Dark Side of Web 2.0

The notion of "Web 2.0" is that the Web is a collaborative environment, and collaboration among potentially millions of people could produce great products. (For instance, everyone can contribute to Amazon.com reviews, not just professional book reviewers.)

Nick Carr often underlines the dark side of this collaboration in his blog Rough Type. In his latest post he points out that "Web 2.0 makes it so much easier to introduce mistakes into the sites we use most often." For instance, a Wikipedia entry accused John Seigenthaler, a 78-year-old former assistant to Attorney General Robert Kennedy, of being involved in the assassinations of both Kennedy brothers.

For more than four months, the libel passed for truth. It even went through Wikipedia's much-vaunted quality-control process, as Seigenthaler notes:

[Wikipedia founder Jimmy] Wales, in a recent C-Span interview with Brian Lamb, insisted that his website is accountable and that his community of thousands of volunteer editors (he said he has only one paid employee) corrects mistakes within minutes. My experience refutes that. My "biography" was posted May 26. On May 29, one of Wales' volunteers "edited" it only by correcting the misspelling of the word "early." For four months, Wikipedia depicted me as a suspected assassin before Wales erased it from his website's history Oct. 5. The falsehoods remained on Answers.com and Reference.com for three more weeks.

This kind of collateral damage may be the price we have to pay for "community authorship," but it's not an insignificant price. [Mark] Moyes's question is one we should keep asking ourselves: "Is this the future we want?"

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Testoterone and Poor Taste

Underthecounter.net is the newest blog pointing out in almost humorous fashion what happens when ego meets money on Wall Street. It recently harpooned the magazine Trader's Monthly:

Trader Monthly magazine is so eminently mockable we don't even know where to start. That's not really true: We know exactly where to start. How about the August/September cover story on the 30 Best Traders Under 30. Without even cracking the spine of the magazine, you can almost smell the mix of testosterone and poor taste...

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High Dividends, High Growth

The other day, I wrote about how people actually think it's a negative that cash-rich public companies are giving back cash to shareholders in the form of increased dividends and buybacks. This is a ridiculous attempt at contriving a bear market argument from something that is clearly positive. Absolute Returns points to an article by Cliff Asness and Robert Arnott that argues high dividend payments are directly linked to higher future earnings growth:

The conventional wisdom is that lower payout ratios and higher retained earnings are necessary to drive earnings growth. Arnott and Asness find just the opposite. Higher retained earnings may be indicative of empire-building and marginal investment opportunities.

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James Altucher is a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of Trade Like a Hedge Fund and Trade Like Warren Buffett. At the time of publication, neither Altucher nor his fund had a position in any of the securities mentioned in this column, although positions may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback; click here to send him an email.

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