Saturday, October 21, 2006
Brain Weds Brawn
INVESTMENT EDUCATOR INVESTOOLS LAST MONTH acquired online brokerage firm thinkorswim in a $340 million cash-and-stock deal with intriguing possibilities.
First, it isn’t just another transaction in which an online broker exits into the arms of a bigger rival, forcing clients to adapt to an unfamiliar platform. In fact, thinkorswim may emerge larger, post-purchase. Second, the deal combines two complementary attributes—market knowledge and online-trading execution muscle—that could spur new growth at the combined entity.
INVESTools (http://www.investools.com) considers an educated investor is a more effective—and profitable—investor. The firm (ticker: IEDU) offers courses, online and live, aimed at helping investors understand how to balance risk and opportunity, and fatten their portfolios.
In fact, students brought the two companies together, according to INVESTools’ CEO, Lee Barba. A number of one-time classmates and other colleagues get together periodically to talk about stocks and strategies. One such Washington, D.C., group—primarily active options traders—had organized a conference call with thinkorswim founder Tom Sosnoff, and invited Barba to listen in.
Sosnoff stopped the session at one point and asked, “Who are you guys? You seem to know a lot about options trading.” They identified themselves as INVESTools grads. The group members suggested that Barba take a look at thinkorswim’s technology and consider working it into INVESTools teaching toolkit.
“We needed an account-acquisition engine because we hate marketing, and I think we made the best trade possible,” Sosnoff told Barron’s in an e-mail. In a letter to current thinkorswim customers, he added, “With our new partner, we won’t have to worry about morphing into a marketing company like most of our online competitors.”
Sosnoff also says this deal will double the size of his development team and that he’ll add new investment classes to thinkorswim’s existing curriculum in the coming year. Previously privately held thinkorswim (http://www.thinkorswim.com) also launched a Web-based paper-trading platform, which allows users to simulate trades and view the results.
Last month, thinkorswim rolled out Shadow Trader, which delivers streaming market commentary, including live analysis of sector trends and individual stock performance. Designed to round out thinkorswim’s option-oriented education programs, this new content, available at no additional charge, explains technical indicators and market internals, such as volatility divergences and contrarian- sentiment indicators. Shadow Trader is broadcast live via the thinkorswim software over a dedicated audio network.
Richard Fetyko, an analyst at brokerage Merriman Curhan Ford, says the purchase should allow INVESTools to hold on to more client revenue. Previously, the firm generated small fees from referrals to online brokers. But it spent heavily to acquire customers before handing them off to the brokers. “INVESTools was missing out on the recurring revenue streams that online brokers have,” he adds.
Fetyko says that INVESTools talked to several online brokerage firms. “They were most impressed with thinkorswim, in part because of the corporate culture being very aggressive on the customer side, and the high-touch customer service,” says the analyst.
Prior to this linkup, INVESTools had been affiliated with optionsXpress (http://www.optionsxpress.com). Both thinkorswim and optionsXpress ranked very high in Barron’s annual review of online brokers. Earlier this year, optionsXpress was the winner for Web-based brokers while thinkorswim was at the top for software-based brokers. Thinkorswim ended up in second place for Web-based brokers as well.
Fetyko says that INVESTools management seeks “best in class” affiliations. For example, in January 2005, it bought Prophet.net (http://www.prophet.net), an excellent online charting and analysis platform.
Barba says that thinkorswim’s philosophy is consistent with INVESTools’ regarding the importance of education. “I’m very passionate about what we’ve built and saw that same passion in Tom,” Barba states.
OptionsXpress will now lose clients referred to it from INVESTools. These folks usually qualified for the firm’s Active Trader commission schedule ($9.95 per transaction, rather than $14.95). OptionsXpress president David Kalt says the impact will be minor. “We’ve seen fewer and fewer accounts directly from INVESTools over the last six months,” says Kalt. “We have other channel partners, and we have our own educational areas.”
Kalt agrees that education is key to successful trading. “I clearly see that there’s strong demand for increased education among investors, especially about options,” he says. As a result, optionsXpress is offering more seminars and “webinars” than in the past, teaching the mechanics of deploying options strategies as a long-term investor. “The growth of online investing and online options investing will be directly correlated to educating the investor,” says Kalt.
TRADESTATION (http://www.tradestation.com) clients who trade 5,000 or more shares in a month will have the firm’s $99.95 platform fee waived for the following month. The offer begins Nov. 1. The previous minimum was 25,000 shares. TradeStation’s analytical platform, with its charting and trade-automation capabilities, is aimed at frequent traders.
Published in Barron’s, October 16, 2006.
Saturday, October 07, 2006
Juicier Apple Is Tempting
DURING A PRESENTATION I GAVE at a personal-finance conference back in 1992, I asked the Mac owners in the audience to identify themselves. Just two from a group of about 300 people raised their hands. “I like my Mac,” explained one of them, “but I have a PC for my serious work.”
That seems an apt summation of the two computing systems’ long battle: in one corner, the Mac, expensive, fully outfitted with software and suited for graphics-heavy games; in the other, the PC, cheaper and stripped down (with loads of options to build-your-own), but able to handle most jobs with ease.
But the nature of this bout is changing for everyone, including electronic investors. The newest Macs offer PC-like pricing, especially since they come as an integrated set that doesn’t need pricey add-ons. In turn, PC users who have been waiting to upgrade to Microsoft’s delayed next-generation operating system, Vista, can’t help but look on a little enviously.
Through its new Intel-based Macs, Apple Computer offers a tempting alternative. Its third-quarter report to shareholders boasted huge sales increases, and says that the company—already enjoying iPod’s huge success with consumers—now holds 12% of the laptop market, up from 6% in January. Desktop sales haven’t experienced the same leap, but analysts expect that will change as the Intel chips are installed in future systems. (Apple didn’t respond to our queries for this story.)
When you buy a Mac with the Intel Core Duo processor, you’re able to run software that is written for both Mac OS X and Windows XP. Microsoft has stopped producing Internet Explorer for the Mac operating system, but it will still run under Windows XP on a dual-processor Mac.
Prices for a MacBook with the Intel Core Duo processor now rival those of a Windows-compatible notebook. We found a MacBook with a 2GHz processor on Amazon.com that included a 60-gigabyte hard drive and 512MB of RAM for $1,199.99 (including a $100 manufacturer’s rebate), the same price as a Sony VAIO that had a 1.86GHz processor. (The Sony had a 100-gigabyte hard drive and 512MB of RAM.)
Last month, we asked Barron’s readers to tell us about their experiences in moving from the PC to the Mac. We didn’t get a huge response, but the comments we did receive were interesting—and positive.
One writer gushed, “The iMac is the best computer I have ever owned, now that it has both operating systems, Windows and OS X. Last week, I bought a new MacBook laptop and installed Windows on it, and E*Trade works perfect on it also.”
Another noted that Interactive Brokers’ Java-based trading platform runs “flawlessly” on his Mac. Java applications are platform-independent, so they can run on PCs or Macs. He goes on to say, “In fact, by transferring a folder, I can switch my settings and portfolio, from Windows to Mac machines, and vice-versa. I’m very pleased with this flexibility, because I don’t have to take my computer when I travel. I just copy the appropriate folder onto a flash drive and transfer it to any computer anywhere.”
A reader in Florida reports a more mixed experience using a previous Mac version with active trading platforms: “Both E*Trade Pro and TD Ameritrade Apex platforms run on Macs, as these are Java-based applications, but E*Trade’s futures platform does not.” (E*Trade confirms that this is the case.) There isn’t yet a mobile Mac-compatible platform, explains one of our respondents, so some of the applications discussed in “Latest Road Rage: Trading” (The Electronic Investor, Aug. 14) that run Windows cannot run on Macs.
Java-based direct-access trading software, such as thinkorswim’s or Interactive Brokers’, are theoretically platform-independent and thus should run on Windows, Mac and Linux operating systems. Programs that are defined as running on Windows, such as Fidelity’s Active Trader Pro, should also run on the Intel-based Macs.
Still, the Mac falls short on technical-analysis software written for its operating system. Yes, the new Macs can run software written for Windows, but few publishers have tested these programs on the Apple systems. We found a technical-analysis program called ProTA for Mac OS X, by BeeSoft (http://www.beesoft.net), that has two versions: ProTA and ProTA Gold. ProTA includes classic charting, technical analysis, portfolio management and quote maintenance, for $59. The gold version ($199), can create custom indicators, trade modeling, optimization of parameters, and scan for trading opportunities. ProTA’s features are comparable to those of Fidelity’s Wealth-Lab Pro (http://www.fidelity.com), which is free to Fidelity customers whose trading frequency and portfolio size qualify them.
The fate of products like ProTA for Mac OS X may depend on how big a bite Apple can take out of the desktop marketplace. And Apple’s success relies in part on how many publishers like BeeSoft take the risk of supporting its cause.
Published in Barron’s, October 2, 2006
Saturday, September 30, 2006
Queen for a Day
Note to readers: This piece is a feature that was part of the cover package in the September 25, 2006 issue of Barron’s, which focused on luxury cars. The research for this article was the most fun I’ve had as a freelance writer. Contact me if you need a review of, say, renting a villa in Italy or comparing hotels in New Zealand.
To see a .PDF reprint of the article, which includes a photo of me behind the wheel of the Ferrari, click here.
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"WOW, WHAT A RUSH!" I hollered as we exited Highway 280 in Menlo Park, Calif., punctuating the experience with a loud, “Yee haw!” Muttered my 17-year-old daughter, Kate: “That was terrifying.”
I had just tested how quickly the 1997 Ferrari F355 Spider I’d borrowed from Club Sportiva in San Francisco could get to 100 mph. Answer: very, very quickly.
Teenage boys obviously had a different view of the six-speed Ferrari than Kate. “Whoo-hoo! A Ferrari! Cool car!” three of them whooped as we drove, with the roadster’s top down, in San Francisco. “Nice ride!” called out another in Palo Alto. “Oh my God, where did you get that car?"-with a deflating emphasis on the “you"-squealed another at the local high school.
For the shock value alone, driving a Ferrari is great fun, especially for someone like me, with two children, who’s been driving a “mom car” for a couple of decades. Although Kate accused me of having turned into a man with a midlife crisis, I had a huge smile on my face the entire time I had the keys in my pocket and, especially, when I had my foot on the gas pedal.
Club Sportiva (http://www.clubsportiva.com) isn’t a typical car-rental place. As its name implies, it’s literally a club, and membership entitles you to borrow vehicles for up to 21 days at a time. An Elite membership costs $12,495 a year, and provides 80,000 points that can be swapped for a certain amount of drive time, depending on what you select. The lowest membership level, Gold, is $3,195 for 17,000 points. Each car in Club Sportiva’s fleet is assigned a daily point value-25 for a Ferrari, 19 for a Maserati, down to 10 for a non-luxury Mini Cooper convertible.
That value is multiplied by two factors—the month in which you drive the car, and whether you’ve got it for a weekend or a weekday. Taking out the Ferrari on a weekday in September costs 3,000 points, while driving a much more commonplace Mercedes CLK 500 costs a mere 1,440. The weekend tab would be 4,200 points for the Ferrari, and 2,016 for the Benz. The dollar value of a weekend day in the Ferrari for an Elite member is $656. Not cheap, but still almost $100 less than the same car rented for a day from Dream Car Rentals in Las Vegas (http://www.dreamcarrentals.com).
If you’re contemplating buying an exotic or luxury vehicle, a rental can be a smart way to really get to know a car for a few days. It certainly makes sense to carefully evaluate a $200,000 Ferrari or $100,000 Porsche on your schedule, rather than the sales staff’s.
And how much fun would it be to cruise up to your 25th class reunion in a Lamborghini? A supercar would be a fun treat for a special birthday or a surprise anniversary trip, too.
For a relatively comprehensive nationwide list of suppliers of fancy cars, check out the Exotic Car Rental Directory (http://www.exoticcarrentaldirectory.com). Be warned: The ease and cost of renting an exotic or luxury car depends, to a large degree, on your location. The closer you are to Las Vegas, Los Angeles, the New York City area, Chicago and Miami, the easier it is to find a company that will let you take a spin in a Ferrari, Lambo, Maserati or Porsche.
In Southern California, for example, Beverly Hills Rent-A-Car (http://www.bhrentacar.com) has several Ferraris and Maseratis, and recently picked up a Lamborghini and an Aston Martin. They even offer to deliver a car nationwide, for a price: To bring a Ferrari to me in Northern California would have tacked another $1,700 onto whatever the rental tab would be.
Would it be worth it? Maybe not. But once you’ve been behind the wheel of a Ferrari, spending that much or more to get in the driver’s seat again doesn’t seem irrational at all.
