Cake Financial: Investing Meets Social Networking

Have I got a hot tip for you! Last week I was briefed on Cake Financial, a site that launches today. It's a unique mashup of social networking and the stock market that creates one of the most interesting financial sites that I've ever seen.

At this very moment I'm playing voyeur by following some hotshot investors as they move up and down the market. If I followed the wisdom of the best performers in the crowd, I would jump in and buy shares of Cisco and Fidelity Contrafund. Better yet, I can study the strategy of other investors and use their performance as my lesson. And I gotta tell you that watching real people win and lose real money from real investments is much more instructive than reading any of the investment blogs and web sites.

Cake Financial gives you tons of ammunition with which to make a reasonable transaction. It tracks the top performing investors. It shows you which stocks are most widely held on the network. It lets you look historically at each member—how long they've been investing and their performance charted historically. Best of all, when you sign up you can add yourself to the mix and see how you're doing relative to the site's top performers.

In addition to allowing you to be a market peeping Tom, Cake Financial consolidates your investments by linking directly to your various portfolios from the major brokerage houses. Currently many of the popular brokerage firms, including Charles Schwab, Smith Barney, e*Trade, Fidelity, Merrill Lynch, and others, are supported. If you don't use a big brokerage house you're out of luck.

Of course the security question loomed large in my mind. The site states that it provides you with a screen name and doesn't divulge any member's net worth or personal information. As with any social network, you are free to identify yourself to whomever you trust. By design, no one can come in to the site and try any shenanigans like fixing the market by pretending to buy and sell, since only real transactions conducted via the various brokers show up in the site's data.

Steven Carpenter, the CEO of Cake Financial, told me that there's no evidence that "experts" are any better than the rest of us and that many put their own self interest above that of their clients. Carpenter said that financial gurus like Jim Cramer and the rest of the pack don't outperform the market and their hot picks often turn cold. Cake Financial allows users to identify a subset of good investors that make consistently good business investments.

Since the site was housed behind closed doors before today's launch, the population that's currently using the site is a bit homogenous. Mostly (but not all) men, mostly in the high tech or Internet industry, and, from what I can glean, they've got similar portfolios. But they're also doing really well in a tough market.

What I like appreciate about Cake Financial is its transparency and inclusively. This isn't a place for seasoned investors only. It is a place where you can see what others are doing.

My tip…take a trip over to the site, sign up (don't register your broker until you're comfortable), and poke around. Oh yeah, one final word of advice…don't buy what I buy or you'll never make it to the top of the list.