Google Finance is now offering free realtime stock quotes for the NASDAQ, with promises of more realtime data to come.

It must be rather tough to be a competitor of Google.

Alex at UsableMarkets writes about Inspectd.com, which calls itself a “training tool for traders”. It’s basically a stock market game based on technical analysis. They show you a stock’s chart, minus its name, and you have to pick whether to buy or sell. Then they calculate your performance. Rinse and repeat.

Alex criticises the charts, which I agree are terrible. But I have a bigger problem with the entire concept. As far as I know, there is no evidence (from many studies) that technical analysis can outperform the market. In fact, once you take trading costs into account, it’s quite likely to underperform the market.

Yet, when playing Inspectd’s game, some people will have good performance simply due to luck. It’s just like roulette. Sometimes you get on a “winning streak”, which is not due to your skill, but simply by chance. Or, toss a coin many times and sometimes you’ll get runs of heads or tails. It’s just the nature of randomness, and you don’t have any control over it. However, Inspectd could give you some false impression that you actually have some talent at technical analysis. Your confidence boosted, you then go out and start playing with real money in the real stock market, and it ends in tears.

I think Inspectd needs to come with a health warning, like cigarettes.

I can’t resist saying something about this whole Bear Stearns thing. One aspect that keeps popping up in media reports on it is the effect that this will have on the firm’s employees (potential lawsuits aside). I wonder if people fully appreciate the risk they are taking by tying not only their income but also much of their wealth to a single firm. Incentive contracts are generally a good idea to encourage performance, but so is diversification (of wealth, if not income).

It’s worth thinking about for a moment — how would it affect you if your current employer imploded tomorrow?

Finance stuff usually goes over my head, with all their cute little acronyms and things. But anyway I found this from Felix Salmon to be very interesting: The cost of buying insurance against defaults on supposedly ‘risk free’ US Treasury bonds has gone from 0.016% (1.6 bp in finance jargon) to 0.16% over the past 8 months. Even I can calculate that’s ten times bigger!

Thanks to the amazing world of finance, it seems you can buy securities that are related to this insurance (there is where I start to feel dizzy). So if you’d bought one of these last July, you would’ve made ten times your money in less than a year. Nice! It seems that in finance, every silver lining really does have a cloud. Or something like that.

Check out the latest Facebook application: Cake Investment Club. Share your portfolio with your friends. See who’s outperforming who.

All I can say is, for goodness sake, don’t use this. It’ll only lead you to make more costly trades in fits of jealousy over friends who’ve gotten lucky. It’s highly unlikely that any of your Facebook friends have any better information than the market already does.

A possible exception is if your friends are trading on inside information. Maybe you should watch the trades of friends who are trading shares in the companies that they work for. Would this make you also liable as an insider-trader?

(HT: Mashable)