Uber’s cancellation and slow surge – and thinking about the present within the scope of the past

For those familiar with the work of Neil Postman, he is perhaps most familiar with those in the Informatics field, and for an infamous speech in 1990 at an IBM sponsored speech to the German Informatics society, whereby he discussed  his ‘Information-Action Ratio’.

Simply put, he contended “The tie between information and action has been severed. Information is now a commodity that can be bought and sold, or used as a form of entertainment, or worn like a garment to enhance one’s status. It comes indiscriminately, directed at no one in particular, disconnected from usefulness; we are glutted with information, drowning in information, have no control over it, don’t know what to do with it.”

His theorem can be applied to almost every socio-economic and political field, but has particular relevance to information relating to the stock market. There has never been more information available to traders, and never has there been less time for traders to act on this information.

This leads to what can best be described as an ‘intentional short term memory loss’ that happens subconsciously quite often to traders and people involved in the stock market. The news flow and information has never been so voluminous, that out of sheer self preservation and to ensure the ability to take action, informational retention is limited to a distinct recency bias.

This week for example has seen a telling example of this. Uber, for all intents and purposes somewhat of a pillar of our popular culture and lifestyle, had its NYSE trading debut on Friday. After closing 7.6% down after Friday’s trading, Uber’s stock dropped as much as 13 per cent on Monday in New York, as sellers seemingly panicked before the stock closed down 11 per cent at $US37.10. The initial public offering was priced at $US45.

Ignoring the obvious external factors that may have had an initial effect on the price, what is interesting is how the market has responded to the extraordinary step of CEO Dara Khosrowshahi sending a company wide email to all staff members.

“Remember that the Facebook and Amazon post-IPO trading was incredibly difficult for those companies. And look at how they have delivered since.” It seems as if people have begun to remember, with Uber’s stock achieving a 7.76% rise back up to 39.96.

So how can you prepare yourself to attempt to reject these biases? The best manner, as ever, is to gain an understanding of the market and look for trends, commonalities and outliers yourself. Rather than receiving small amounts of information, it is important to understand where news relating to a stock relates to the wider trends in the market.

To assist you, Reach Markets sends a Morning Report which gives a detailed overnight wrap of the overseas markets, as well as all the key figures and resistance numbers to look out for in the day’s trading ahead (and some trade ideas).

Sign up to receive your morning report, and begin your journey to understanding the market better.