STEVE INSKEEP, HOST:
For some people, President Trump's tweets are investment opportunities. Since his election, the president has repeatedly named specific companies on Twitter. Within seconds of those mentions, the company's stock price has moved. Investors are now asking how they can protect themselves or profit. Chris Dieterich of The Wall Street Journal has written about this.
CHRIS DIETERICH: The first week of this month, he tweeted in the middle of the day, so markets are open. He critiques Toyota Motors for plans to open a factory in Mexico. A few seconds tick and, lo and behold, orders pour in. The stock falls about 1 percent right in the middle of the day - pretty clear cut uncharted territory for professional investors having one of the most powerful people in the world just publicly name out a single stock in a tweet. The same thing has happened for companies like Lockheed Martin, companies like Boeing, other automakers.
INSKEEP: How many seconds are we talking about that the market moves if it's, say, the Toyota story or another one like it?
DIETERICH: In Toyota, you can see specifically it's one, 1,000, two, 1,000, three, 1,000, four. And then the flood flows from there, so it's almost instantaneous.
INSKEEP: You're saying that someone is at a computer terminal, reads that tweet, absorbs it, instantly hits - or as quickly as they can - hits sell and enough people do that that the stock price moved in four seconds.
DIETERICH: That's absolutely right. So not only professional traders too - there are surveys here from E-Trade. Younger people between the ages of 25 and 30, a recent survey they did found that three-fifths of those people with accounts over a certain size have been trading on these tweets. So it's also ordinary Americans who just watch the markets closely that are absolutely watching the Twitter feed and hitting sell as soon as they can recognize what stock has been named.
INSKEEP: So you could program a computer to watch for the president mentioning Toyota, but then somebody has to think, what did he say about Toyota, is that bad for Toyota, is it relevant to Toyota?
DIETERICH: That's right. The computer is there with the speed, but the interpretation, it still takes several seconds to process. And while that seems like a very short period of time, that still is - it's sort of like years in terms of high-speed trading lingo on Wall Street.
INSKEEP: What does it mean that sometimes what happens is Trump mentions Toyota, the stock plunges, but then it recovers minutes or hours later?
DIETERICH: Yeah, that's - I mean, that's a reaction of truth. What's in the content of these tweets is often vague. It's often incomplete. So that's what you have in markets generally is this instantaneous need to price in some comment and then the ultimate digestion of what's happening. And so often they have come back. And so the more profitable strategy, at least so far, has been essentially to buy the overreaction, and the market has been successful, but often what markets price in is overreaction.
INSKEEP: Does it get even harder because even the people around the president have tried to say again and again and again don't pay so much attention to his tweets. He doesn't mean what he says literally. You really can't take this man at his word.
DIETERICH: It's going to be really interesting to see how the real-time interpretation of the tweets changes over time. So already there have been signs that - of this diminished effect as it becomes a little bit like less novel market-moving updates.
INSKEEP: Would you recommend that amateurs, daytraders, play this game?
DIETERICH: I would absolutely not recommend that amateurs play this game. This is the world of overreaction in split seconds. It's the same as going to Las Vegas. You're well in the realm of speculative trading, and if you consider yourself an investor at all, you would stay as far away from this as you possibly can.
INSKEEP: Chris Dieterich of The Wall Street Journal, thanks very much.
DIETERICH: Thanks, Steve.
(SOUNDBITE OF SYD DALE'S "IT'S NOT UNUSUAL") Transcript provided by NPR, Copyright NPR.
