Published in Barron's
Columns and featured published in Barron's.
Saturday, May 09, 2009
New Tools for Bond Shopping
Post-publication note: After this column ran in print, TD Ameritrade, which had previously exclusively licensed the Knight BondPoint technology, forced TradeKing to remove the questionnaire referred to below. We will run an update in the 5/18/09 column.
FED UP WITH VOLATILITY? JUST WANT TO PARK your money in a conservative fixed-income holding and not worry about it? Online broker TradeKing (http://www.tradeking.com) recently announced an expansion of its fixed-income search capabilities, achieved by teaming up with Knight BondPoint, which provides electronic access to fixed-income inventory.
The TradeKing Bond Wizard features five questions, on desired yield, tax status, desired rating, time to maturity and how much you’d like to invest. After you’ve specified what you’re looking for, the Wizard displays a list of bonds or certificates of deposit that match your criteria. An interactive table of fixed-income investments shows a snapshot of the entire fixed-income marketplace and what yields are available in a variety of time frames. Click on a yield to drill down for more detail about that particular item. Only TradeKing clients can access this feature.
TradeKing’s commissions for bond trading are $4.95 per bond, with a minimum of $14.95 per transaction. Treasuries and CDs are $24.95 per transaction.
“As investors strive to preserve capital and create balanced portfolios, we’ve seen a new wave in the growth of fixed-income investing,” says Don Montanaro, TradeKing’s chief executive officer. “These new tools will be especially helpful to investors seeking a way to quickly search thousands of fixed-income choices to find the bond or CD with the yield and time frame that best rounds out their portfolio,” he notes.
TRADEKING CHECKS OUT HOW its customers feel about the markets every quarter, and its late April survey of 360 retail options and equities traders shows an overall lessening of despair. Twenty-eight percent of options traders and 16% of equities traders described themselves as either “bearish” or “very bearish”; but that’s down from 36% for both groups in January 2009. The current figures represent the lowest percentage in bearish sentiment since April of 2008.
Those surveyed shifted their trade triggers from political to economic, stating that quarterly earnings announcements were more influential in their decision-making than were the new administration’s programs and promises. Traders also are eyeing consumer spending and U.S. unemployment claims. All these trade triggers represent a change from a year ago, when oil prices and interest rates were the two top concerns.
Notes Montanaro: “Given the high degree of volatility in the markets today, we know there is a tremendous amount of uncertainty still out there among investors.... But what we see and hear from our clients is that there’s a sense of optimism, and a belief that opportunities exist for investors in this climate, if you’re willing to look for them.”
OPTIONSXPRESS HAS JOINED FORCES with SmartStops.net to provide an easy and effective way to better protect your portfolio, and potentially improve overall returns on your stocks and exchange-traded-fund positions.
We took a look at SmartStops when it was first introduced last summer ("A New Way to Tell When to Fold ‘Em,” July 7, 2008), and still think it’s worth using. SmartStops provides optimized exit points, calculated daily to help you protect profits and cut losses.
OptionsXpress (http://www.optionsxpress.com) also announced that it is acquiring Optionetics, a provider of investment-education services, including live seminars, proprietary software analytics, online and offline educational products, and individual coaching. “With its focus on derivative products, we believe Optionetics will help ... our customers ... be more successful in their investing,” says optionsXpress CEO David Fisher.
Partnerships between investor-education firms and online brokers have often proved to be successful customer-acquisition engines—for both partners. In a letter to customers sent out on April 28, optionsXpress said, “With the acquisition of Optionetics, we’ll have the ability to bring you even more investor education, both on the oX platform and directly from Optionetics.”
MAKE A PLAN: Simplifi, a Winston-Salem, N.C.-based outfit, has launched a financial-planning tool at its Website, Simplifi.net. Currently in beta-testing, the site is free to users. It appears to be aimed at those who don’t want to spend a lot of time with a calculator when deriving a financial plan and is, as its name implies, simple.
When you’re setting up your plan, you enter approximate figures for, say, your checking-account balances, the value of your home, and other assets. You don’t need to enter any account numbers or passwords, which is appealing from a security point of view, but means that you will have to update the figures manually when you want to review your plan at some later date. As you go along, Sophie, a virtual financial planner, offers advice and guidance.
Each goal you set, such as saving for a child’s college education or your own retirement, is graded with a goal-point average (GPA) from A+ to F. The GPA is based on a formula that calculates how much your financial goals will cost over time, and what you are currently saving to reach those goals. If you want to improve your GPA, you must either save more or pay off debts, or remove or lower the cost of some of your goals.
Simplifi makes money when you purchase a product from one of its partners that can help you implement one (or more) of your action items. The Website might be too simple for some of our sophisticated Barron’s readers, but if you don’t have a plan in place at all, consider checking it out.
TIPS FOR TWEETS. Keep watch on the Securities and Exchange Commission from Twitter; the commission now has three Twitter feeds: new (SEC—news), investor education (SEC—investor—ed) and a jobs listing (SEC—jobs) The news feed, for instance, breaks stories such as insider-trading charges.
If you want to keep up to the minute on swine flu, be sure to follow the Centers for Disease Control and Prevention’s Twitter feed at CDCemergency. Updates on reported cases by state and an essay detailing how to screen for the virus are available. The CDC feed is low on hype and high on information.
Published in Barron’s, 5/4/2009.
Saturday, April 25, 2009
Traders Atwitter Over New Apps
(Note: My working title for this column was “Twittering Twaders,” but that didn’t make it to print. Much to my dismay.)
QUITE A FEW BROKERAGE FIRMS ARE PUSHING THEIR OWN social-media applications in an effort to get new customers—and to keep current customers engaged.
TradeKing (http://www.tradeking.com) and Zecco (http://www.zecco.com) have integrated electronic conversations between customers into their trading platforms, and Charles Schwab now allows its high-asset clients to talk among themselves. But several firms now offer customer service—and customer-to-customer communication—via San Francisco-based Twitter (http://www.twitter.com), the ubiquitous service that lets anyone broadcast messages ("tweets") of up to 140 characters over the Web and via registered cellphones.
Twitter co-founder Biz Stone, appearing on Comedy Central’s The Colbert Report this month, said that the service started as a side project. “It’s the messaging service we didn’t know we needed—until we had it,” Stone told host Stephen Colbert. The outside world first got to Twitter in 2007. Twitter is free now, but won’t be forever.
AS IT TURNS OUT, FREQUENT TRADERS are engaging more and more with one another by using Twitter in various ways. The benefits of Twittering run from gossip-sharing and info-sharing among customers to on-the-spot guidance from the brokers’ customer-support Twitterers. The service can provide information on bargains, too. Scottrade customers, for example, got a tweet about a 30% discount on TurboTax.
As new as the Twitter phenomenon is, there are already conventions focused on Twittering about trading. For Twitters on stocks and options, you place a dollar sign in front of the ticker symbol. You can then filter the Twitter feed to display only entries with dollar signs in them, or specific tickers you want to follow.
The newest broker on the block, tradeMonster (http://www.trademonster.com), decided to implement a Twitter integration rather than launch its own social-networking site just for its customers. Smart move. The customer base at tradeMonster isn’t very large right now, as the site just launched last fall—but having a presence on a very popular medium gets the name out there for others to see.
TradeMonster customers, as well as those who have signed up for a tradeMonster “paper trading” account—a trading simulator—can quickly tweet a stock or option they are following. The Twitter integration places a small lowercase “t” that resembles the Twitter logo in quote, chart, and position displays within the platform on your personal computer. To tweet what you are looking at right now, you just point your mouse at the “t” and click on it.
A Twitter window displays the price of the item you are looking at—say, Goldman Sachs stock, or an option position—or even a multi-leg position that you are considering trading. You can edit the generated tweet, or add to it, up to the 140-character limit.
It is clear that, when the chatter around a certain trade is significant, this form of communication can add significantly to price pressure.
Skip Shean, vice president of marketing and business development at tradeMonster, said the firm decided to implement a Twitter integration—rather than build a social-networking platform that only its customers could access—in order to generate responses quickly. “We decided to go where the audience already is, rather than trying to draw it off of there and bring it to our house,” says Shean.
Especially for a new firm, I think, that is a good call.
Speed of response is particularly important to an online trader. A private network might give you interesting replies, because they will come from (by definition) members of your own network. But the replies might be slow and shallow if the community is small.
TradeMonster’s Twitter integration provides its customers with a wider discussion arena, and also shows off the firm’s offerings to the huge Twitter audience.
Getting started on Twitter is easy; the hard part is keeping up with the huge number of messages posted. The challenge is to filter out the junk (Is it really important to know what celebrity Ashton Kutcher is doing right now?) and find something interesting.
ONE SERVICE THAT IS AIMED RIGHT at traders is StockTwits (http://www.stocktwits.com), which lets you enter tickers on the “Portfolio” page, and thus filter the incessant stream of incoming posts.
There are quite a few other Twitter-filtering programs out there. My two current favorites are TweetDeck (http://www.tweetdeck.com, obtainable by downloading and installing a small application) and Twitterfall (http://www.twitterfall.com), which runs on a Web browser.
TweetDeck organizes the tweets into columns, so it is easier for you to see responses sent directly to your user name, or to filter a variety of topics and have those posts show up in separate places. If you really are interested in hearing everything Ashton Kutcher has to say, you can put his tweets in a column separate from those that pertain to your investments.
Twitterfall also has a powerful filtering engine; the tweets drop onto your screen as small illustrated boxes. You can control the flow of the posts; those that meet your criteria are queued up and displayed at an interval that you set. I have Twitterfall set up to show me messages aimed at customer-support representatives of various online brokers. Scottrade, tradeMonster, Fidelity and several others have customer-support reps who are Twittering away all day.
While interviewing Biz Stone, Stephen Colbert uttered and Twittered this investing tip: “Note to self: Send robot to past to invent Twitter before this guy.”
Great idea, but tough to put into action. By the way, my Twitter address is twitter.com/twcarey.
Published in Barron’s, April 20, 2009.
Saturday, April 11, 2009
Online Currency-Trading Sites Multiply
IF YOU LIKE TRADING ON VOLATILITY, THERE IS nothing quite like the forex market.
It is open 24 hours a day, five days a week, and the players range from global banks to individuals. The daily volume is well over $3 trillion, according to the Bank for International Settlements. Despite its gargantuan size, the market isn’t tightly regulated, and traders can use lots of leverage, which poses benefits and dangers. There is no central exchange; the market moves from one country to another. As Tokyo is closing, for example, London is opening.
Among the 25 firms we evaluated for our annual Best Online Broker review, published on March 16, E*Trade, Interactive Brokers, MB Trading, thinkorswim and TradeStation all come with some kind of built-in forex- trading system. OptionsXpress and TradeKing have enabled currency futures trading, and customers of SiebertNet can place forex trades through a live broker.
Last week, Zecco (http://www.zecco.com) announced it is partnering with the forex trading firm GAIN Capital (http://www.gaincapital.com) to launch Zecco Forex. “Today’s volatile forex markets have created an attractive and complementary opportunity for our investors,” said Jeroen Veth, CEO of Zecco Holdings. “Zecco Forex provides them access to another asset class where they can make trades independent of overall equity-market direction.”
ZECCO’S FOREX OFFERING (http://www.zecco.com/forex) is a separate legal entity from its regular platform, so customers must sign up for a separate account. In time, however, the firm plans to integrate the two platforms into a single display, but that isn’t likely to happen until next year, according to Zecco spokesman Gabriel Dalporto.
When you arrive at Zecco’s forex site, you will find some educational content, as well as an opportunity to sign up for a practice account with $50,000 to start. The practice account lets you play with the analytical tools in the GAIN Capital platform and gives you a feel for how forex trading works. The account includes real-time quotes and charts, along with all the trading tools and information available to Zecco Forex customers. These tools include single and contingent order types, a real-time newsfeed and market commentary, plus daily and weekly research.
Should you decide to take the leap to trading with your own money, you can sign up for either a mini account, with a minimum deposit of $250, or a standard account, with $2,500. Those who deposit $10,000 or more can use a more advanced trading platform. The Java-based downloadable trading platform, ForexTrader Desktop, runs only on Windows, while the more advanced ForexTrader Web can be used by those with Macs and the Safari browser.
Most forex brokers don’t charge explicit commissions; they tack on a fee to the price paid for the trade. Zecco’s spreads are in line with what most of its rivals charge; a list can be found at http://www.zecco.com/forex/trade-pricing.html.
A key component of forex trading is leverage. Yes, stock and option traders can employ leverage by trading on margin. But their use of margin is minuscule, compared with that often found in foreign-exchange trades. You can utilize leverage of as much as 200 times the size of your account, so with just $500, you can hold $100,000 of currencies. With high leverage, however, comes much greater risk. It is imperative to stay on top of all your open transactions to avoid a huge margin call. Failure to use leverage prudently can be disastrous, as Lehman Brothers, Bear Stearns and thousands of no-down-payment home buyers found out.
Zecco Forex’s offering lets customers trade in 37 currency pairs, though most of the action is in just a few currencies (primarily the U.S. dollar, Japanese yen, euro and British pound). The Zecco community is starting to see action in its newly launched Forex section, so you can discuss your strategies with other traders.
FIDELITY’S FIXED-INCOME AUTO-ROLL program (http://www.fidelity.com) went live at the end of March. It allows customers to automatically reinvest the principal of their matured new-issue U.S. Treasury bills, notes and FDIC-insured certificates of deposit into similar new-issue instruments. The goal is to make it easier for customers to remain fully invested and leave less cash on the sidelines.
The Auto Roll Program’s methodology takes into consideration the original instrument’s security type, size, term to maturity and coupon frequency when locating a new purchase. Customers can verify that the pending trade matches their objectives through a Fidelity e-mail alert. If they decide not to reinvest, there is an option to cancel the trade.
Auto Roll is available for new-issue Treasuries and certificates of deposit with a term to maturity of five years or less. If a Treasury or CD that matches the original investment isn’t found, Fidelity will alert the customer and move the principal of the mature instrument to the default cash position in his or her brokerage account.
NOTES ON SWITCHING ACCOUNTS: In response to our March 23 “How To Switch Brokers Painlessly” column, Steve Sanders, vice president at Interactive Brokers (http://www.interactivebrokers.com), tells us that there is a sister system to the Automated Customer-Account Transfer System, or ACAT, used by many firms. Called the Currency and Banking Retrieval System, it passes lot and cost-basis information from one broker to another. Adds Sanders: “It is up to the discretion of the broker to use this system. [Interactive Brokers] makes full use of this system, whenever the ACAT transfer broker also makes use of this system.”
Published in Barron’s, April 6, 2009.
