Is patent peace good for NVDIA and Intel?

While giant chip maker Intel ($INTC) has continued to make the best mass-market PC based semiconductors, it’s had lots of smaller competition nipping at its heels throughout its history.  My favorite has always been NVidia ($NVDA) — a maker of great cutting-edge technology used in high-end computers and game consoles.

The two firms (Intel is 10X in marketcap) inked an agreement in 2004 to share some technology that Intel felt needed to be updated as new technology came to market.  Well, they finally agreed on a new structure entitling NVDA to $1.5B in licensing fees over the next 5 years and providing access to each others’ new technology.

This agreement signals a new era for NVidia. Our cross license with Intel reflects the substantial value of our visual and parallel computing technologies. It also underscores the importance of our inventions to the future of personal computing, as well as the expanding markets for mobile and cloud computing — NVidia president and chief executive officer Jen-Hsun Huang (Xinhuanet)

The market liked the news and NVDA has seen its stock rise 34% in 2011 alone.  But is inking this deal with the 800lb Intel really good news for NVDA?

Here’s a primer:

  • Intel needed access to NVidia’s tech, too

…the agreement shows that Intel sees the importance of the graphics processing technology that Nvidia dominates. Those sorts of chips are used in everything from smartphones to automobiles to television sets (San Jose Mercury News)

…Nvidia’s own graphics processing units are now challenging Intel’s chips as all-purpose processors and Nvidia is moving towards greater involvement in mobile computing, with chips based on the architecture of the UK’s Arm, rather than Intel’s x86 processor designs (FT)

…Microsoft ($MSFT) in turn, announced that its next version of Windows would be ARM compatible. Whether that turns “Wintel” into “Winvidia” won’t be known for several years when Nvidia’s ARM processor is ready for the market, but the announcement did strike a psychological blow against the old order of things (Fortune)

  • Certain analysts are focused on what wasn’t part of the deal

But the subtext of what wasn’t part of the deal is also compelling…Nvidia has long been rumored to be trying to dip its toes in the processor market. The fact that Nvidia didn’t get the rights to Intel’s processor designs reinforces that Nvidia plans to take a different path to take on Intel. That path involves licensing a different design that is already popular for phones and other mobile devices. (NPR)

  • It’s now all about mobile computing

As computing becomes more about entertainment and less about productivity a host of companies are making their moves to make computing, fun, mobile and power efficient. But don’t expect Intel to give up its dominant role in the industry any time soon. (gigaOM)

  • INTC validating NVDA’s parallel processing tech

Nvidia specializes in processors that are ideal for processing complex graphics and has been promoting them to be used for other complicated mathematical tasks, such as medical imaging and weather forecasting. While traditional central processors found in PCs are designed to make huge calculations very quickly, one after another, graphics processors, or GPUs, excel at carrying out several small calculations at the same time, which makes them handy for specific kinds of tasks. Nvidia has been talking about the world needing a parallel processor and it seems Intel is validating their technology (CNBC)

Regardless, most analysts see this as a win-win for both firms with demand for next-generation chips ramping as mobile computing sucks up existing supplies.  Whether it’s for offensive or defensive reasons, with this new agreement in hand, both INTC and NVDA look to benefit going forward.

photo courtesy of JD Hancock

Tradestreaming Radio #3: Monetizing financial content, benchmarking 2.0

tradestream radio, discussing investing and technology

The latest edition of Tradestreaming radio is out and it’s a good one. You’re not going to want to miss

  • an in-depth interview with leading financial ad network Investing Channel‘s founder/CEO, Nikesh Desai
    • Nikesh shares his view on where the industry stands today and where it’s headed
    • we discuss strategies on how to better monetize financial content
    • new online business models for financial content
  • next up is an interview with CEO, Dirk Quayle on why it’s so important for investors to properly benchmark their performance
    • the evolution to a distributed set of independent tools to add a layer of performance transparency on the financial blogosphere
    • the need for customized benchmarking tailored to individual portfolios by position
    • how Morningstar needs its own watchdog overseeing the ratings firm

Of course, you can also subscribe to listen to our podcasts with your iPod/iPhone via iTunes here.

Check it out and let us know what you think.


Live from the internet, it’s Tradestreaming Radio, with your host,’s own, Zack Miller.


Miller: Hey! This is Zack Miller. I’m the author of TradeStream Your Way to Profits: Building a Killer Portfolio in the Age of Social Media.

This is Tradestreaming Radio. It’s our home in cyberspace. This is the place where we discuss everything about the convergence between technology and investing, hopefully helping you to make better, more informed investment decisions. You can find old, archived editions of our radio program at, and also on iTunes.

I’m glad you joined us. We’ve got a great show lined up today.

First up on today’s show is a conversation I had recently on a stop over in New York with Nikesh Desai. Nikesh is the CEO and founder of Investing Channel, it’s an ad network for financial sites. What that means for those of you who are uninitiated with ad networks, they’re basically a marketplace. They are representing publishers, people who publish content on the websites to help sell ad space on their websites, as well as representing advertisers who are looking to target financial customers. They’re buying traffic basically on websites as well. They’re the middle man, they’re the broker, and that’s what they get paid for.

It’s a really interesting space for me, because Nikesh sort of sees ongoing trends in financial content, where things are headed, how content is being monetized, new business models. He sort of has a front row seat into what’s occurring on the internet.

I interviewed Nikesh as part of an interview included in my book TradeStream. I recently had a chance to sit with him for about an hour to catch up. The majority of that conservation will be included here.

Desai: … come from investment banking, doing internet corporate finance, M & A, then kind of trying my hand at operations at a few internet companies like People PC.

Miller: Then you moved to The Street?

Desai: Yeah, after People PC I moved to The Street to run business development there.

Miller: What did that entail? Was that- deal making?

Desai: Yeah, it was basically deal-making.

Miller: Content syndication?

Desai: A lot of it was content syndication, distribution of their subscription product, how to enhance ad revenue beyond traffic, what are other different content we can bring into the site. In fact, some of the early discussions I had with their editors- I was one of the few people that had feet on The Street.

Miller: Right.

Desai: Everyone else was kind of internal, or ad sales.

Miller: Right.

Desai: But I was the only one kind of talking to other-

Miller: In a financial content company biz dev is a really core competency, because you are the only person who is sort of the in the real world.

Desai: Right. Right. You know that well. It was pretty evident that a lot of people wanted to just some notoriety, content-wise, that they were willing to give content to The Street for free. So, it was tough to get over the hump with our editors to kind of take any content that they didn’t vet out fully, which is understandable, the point being that they were paying, and still are paying, so are a lot of other editorial companies pay quite a bit of money. You know from Seeking Alpha that you don’t have to.

Miller: Right.

Desai: It was pretty clear. That was 2004, I think it was. There was an opportunity to kind of figure out something editorially, and with the free model, but I didn’t get the time- there was just a lot of “internal stuff” that was going on.

Miller: There’s always that editorial tension, right? Like if you’re a real editorial driven company content is seen as core. That’s hard to say, “We’re going to bring that in from outside sources,” really. Right?

Desai: Yeah, although it wasn’t too far from what they already do. They have plenty of contributors, not employee folks. I think the idea of a controlled environment of 50 contributors versus 1,000 contributors was daunting. It needed to be kind of streamlined obviously. That’s what I think Seeking Alpha did really well.

It was just interesting to see it kind of, at somewhat an early stage, but see that clash, like you said, of just editorial kind of- control, is maybe the word, versus the business kind of understanding. I feel like whereas, “Geez, if I just added 100 more articles a day with the distribution I created, that could double our traffic in 90 days,” right?

But, understandably you’ve got to be able to- The Street has a brand. Any media company has a brand, an editorial brand that they need to maintain. I don’t know if you’d say the same for Seeking Alpha, but I would say they don’t really need to maintain an editorial brand, per se, but more how they- they’ve got to control the content within limits. You know? And let the audience kind of pick and choose what they enjoy reading.

Miller: I mean truly any financial brand, part of their job is to point people to what they think is interesting. Right?

Desai: Yeah.

Miller: And high quality.

Desai: Yeah. I guess-

Miller: In some sense The Wall Street Journal does that.

Desai: Right.

Miller: And, that’s what they told us. I wrote about this in the book, they felt that was their mission in traditional journalism.

Desai: Right.

Miller: They saw Seeking Alpha as sort of taking that same role in the blogosphere.

Desai: Right. Yeah. Yeah.

Miller: I guess curating, filtering, whatever you want to call it.

Desai: Yeah. I guess what I mean is there’s less- look, if Seeking Alpha puts up a bunch of whatever-

Miller: Yeah. It doesn’t really harm them.

Desai: It doesn’t really harm Seeking Alpha’s brand. I mean The Street puts out a story on a public company that just was scathing or wrong, they’re in deep stuff.

Miller: That’s true.

Desai: I guess that’s kind of where I see that. But clearly I think, I’m biased in saying this to a certain extent, because I deal in the long tail, as much as Seeking Alpha does, in a very different way. But I feel in finance you might, and I’m a self-directed investor, maybe not a financial advisor, I might go to some of the larger media portals, or companies to do some topical research, but I’m really going to niche sites and individuals that I follow, because they’re well-known in real estate investing, or quant [assumed spelling] trading.

Miller: Right.

Desai: These are 50,000 page view blogs.

Miller: Right.

Desai: It may be at best 1 million or 2 million page view blogs.

Miller: Really long-tailed type stuff.

Desai: Yeah, but those are where a lot of the real investment decisions are being made I feel like. I think that kind of engagement is what Seeking Alpha has been able to get, like you said earlier, with dealing with that kind of niche content, and really valuable audiences. Not that the mom and pop retail one isn’t valuable, but these are more kind of high-net/financial professional folks that define a lot of what our network is.

Miller: Sure.

Desai: And I imagine Seeking Alpha, but slivers of the other larger media portals, not the majority of it.

Miller: So you left The Street in what year?

Desai: I left The Street like early ’03.

Miller: Then you started Giant Step?

Desai: Then I started Giant Step Strategies. It was basically kind of a revenue strategies advisory company, where we were helping FT, Investor Place, IBD, Schaeffer’s Research, a lot of financial media companies, as well as some non-financial media companies, looking at everything from what do you do from a biz dev point of view, how is your site laid out, how do you even commission your sales team, how do you optimize your ads? So depending on the project it was soup to nuts, in some cases it was just content distribution, biz dev.

What morphed out of that, in basically late ‘07/ early ’08, was Investing Channel; for two reasons. One a lot of those same consulting clients were asking us to help execute ad ops and ad sales; A.

And, B, with the ease of content creation there’s a lot more dispersion of users. They’re not converging to large portals in media companies, and it has made it that much more difficult then for advertisers to really find and target their niche audiences, I think because it’s more critical in finance than many other verticals. Probably health as well, and technology.

I’ve put those three as like sub-niche verticals that you really need find your audience. Like I said earlier with people in finance really kind of “transacting” in the long tail, versus just researching maybe in the short tail, it created an opportunity I think to go out and aggregate.

And, look, there’s been networks before, but aggregate things that are super niche level so that you can target a pension fund manager, versus a financial advisor, versus a hedge fund manger. You go to most places and the best they can do really is target a financial professional, generically speaking.

Miller: Or a business person, even more generic.

Desai: Right. Yeah. Right. Right.

So, that’s what we kind of aimed and set out to do, because we saw this kind of change in consumer consumption of these financial content, and had that demand from our consulting business, both of which I started with Bob Verrico, who was running The Street sales and marketing group, prior to that did a bunch of stuff, including running iVillage’s ad sales group through their IPO. Their founder is Jay Desai, who started-

Miller: Just happened to have the last same name as you?

Desai: It just happens that he’s my older brother.

Miller: [laughs]

Desai: Who started the internet M&A at H&Q, which was sold to J.P. Morgan. So, he comes form the whole financial services background. Had been doing a lot of kind of early start up strategy and venture capital, private equity rather, help with them. So, joined us, as we were potentially looking for capital and starting this business.

So, anyway. So, we started Investing Channel effectively about three years ago now.

Miller: OK.

Desai: And since then have gone from zero to about 10 million uniques.

Miller: Wow.

Desai: There’s a lot of things obviously that I would say we’re unique, but the reason I kind of compare us more to financial media companies than other networks is, A, we’re providing all types of ad products that any single site would do, from advertorial, to newsletter, to email, to display, to sponsorships, whatever it is, but also we’re exclusive to managing our publishers’ networks. So we’re rep firm/ network in a way.

You know if you think about someone like The Street- I don’t know where Seeking Alpha is, but I think they’re probably in the range of 5 million uniques, we’ve been able to get that in the long tail…

Miller: Right.

Desai: …pretty quickly. It’s a matter of ratcheting really. I mean I could probably double the network fairly quickly, although getting exclusive deals is not easy. But, it’s a matter of where the ad budgets are, how big are they to kind of then grow the network. So, we’ve been kind of slowing growing this from one million to three million, to five, to ten now, at the end of this year.

Miller: That’s great. I don’t know if you can name names, but like what’s a typical advertiser in the present environment?

Desai: Yeah, I mean it’s nothing too different than what you see on The Street, or some of those larger financial media companies.

Miller: So fund companies, or-?

Desai: But I would say- yeah. Fund companies are spending even more. I would say, like, five years ago options companies were spending a lot, right? OptionsExpress, etc.

Miller: Right. That was a fad.

Desai: Two and half years ago-

Miller: Forex.

Desai: It was Forex, right? And they’re still spending, and so are the options guys. But now I feel like there’s a third way in the ETF side, and that’s dictated by, again, where investments are coming from. Schwab buys an ETF company and now is issuing their own stuff. You see that a lot more where not only there’s a bunch of new small ETF sites popping up and growing from zero to a couple of hundred thousands pages quickly. But there’s, again, that demand from- whether it be self-directed investors, or financial advisors, to maybe have less risk on an individual stock and spread it across a fund, but still have pretty decent upside with it.

We foresee, and have seen a lot of fund, generically speaking, spending. But, so are still the retail brokers.

Miller: But do they end up saying- like at least with a retail broker, and I know from personal experience that they are looking at like the conversion, because they can follow that entire usage through to funding an account. A fund company doesn’t really- it’s really just straight ahead advertising.

Desai: Yeah, it’s hard to say-

Miller: like lead gen?

Desai: Yeah. I mean wouldn’t say it’s- in some cases it’s branding. In other cases they might want someone to download a white paper just to learn more. In finance in general, other than a few products, you’re not buying a $30 or $50 product where you click and buy.

Miller: Right.

Desai: Right? You’ve got to have some user education of why to buy a fund, or why- open up an online brokerage account, that’s a little bit more just one to one, I guess transactional in some way. But most other things it requires some kind of education. I think that’s a big shift I see also in working with our advertisers and agencies. It’s not just straight banner stuff.

Miller: Right.

Desai: They want more integrated stuff. They want to push their content down to our audiences. I think that’s the way to go. You’ve got to educate your audience about whatever financial product that you have. It’s not 30 day window to sell often times.

But, a lot of these guys are just looking for awareness in some way. I kind of differentiate that from just pure branding.

Miller: Right.

Desai: They’re still looking for downloads, or people to kind of learn more about fund, or whatever it might be. But it’s not necessarily, like you pointed out, online retail brokers looking not only, “OK, did someone open a brokerage account. How much did they fund it? How much are they actually trading?”

Miller: Right.

Desai: That’s great. They have that funnel to kind of analytically figure out what’s working for them from a marketing point of view, but it’s less of that type of analysis for the issuers of funds.

Miller: So how much time and energy do you as Investing Channel put into like sort of personifying your users? Like, are you getting to the point where you can say, “This guy is in the market for-” “He’s moved beyond mutual funds and now he’s looking into ETFs.” Has it gotten that granular yet?

Desai: It’s moving towards that. So I’ll kind of speak generally, and then specifically Investing Channel. So, there’s a lot “data targeting” that’s happening in the ad marketplace. In the last year and half it’s been a big shift in buying. That coupled with exchanges, coupled with DSPs, right?

Miller: What’s a DSP?

Desai: Demand Side Platforms where agencies are building their own networks. In all cases it’s about in some ways commoditizing the banner a bit, because you can buy a banner for $10, $3, or $0.25 in today’s market.

Miller: Right.

Desai: But it’s about creating a more fluid marketplace like there is for buying keywords.

Miller: Right.

Desai: And I think that shift has tried to push itself years ago, but is really coming into more fruition today, where this concept of audience targeting and actually finding a cookie profile, not just an impression.

Miller: You’re talking more like behavioral?

Desai: Well behavioral, depending on how- many people may define it one way or the other. You visit options content then you leave it, I can behaviorally find that person.

What I’m talking about is you can buy data from search engines about the search terms that were looked up. You can buy data from an offline financial advisor directory that has that person’s postal information, email address, all that stuff. So there’s all this third party data, I’ll put in that general bucket, that you can go out and buy. Then using technology tie that email address, for example, based on that profile of someone being a financial advisor in Atlanta, and tie that profile anonymously to a cookie, and then distribute a banner to that profile that you’ve just defined, whether at eBay, Yahoo mail, or contextually relevant on my network for Seeking Alpha, or whoever.

That data targeting is becoming more and more prevalent, which goes along the lines of your question, however a lot of it is still like in travel and auto, and like more personal finance- credit card, insurance type stuff. Where you can find that information about someone who may have been on Orbitz and actually typed in a trip to Honolulu and that data is being sold anonymously to then target a banner, which is very relevant, obviously.

But I think there are some privacy concerns that Obama’s administration literally now is kind of looking at, and is going to shape positively or negatively a lot of this data targeting. I think there is kind of an in between that needs to be thought through, but I’m not a politician here.

Anyway, due to what we’re doing I think this data targeting is a lot more relevant for mass networks, where you’ve got a ton of inventory that’s not that super defined and you need that level of targeting. When you’re a vertical, whether you’re a media company or a network, when you’re super kind of verticalized, and when 75% of your revenue- in most vertical companies’ cases comes from the vertical.

Miller: Right.

Desai: Right? There’s not a lot of need for a ton more targeting, because you know if they’re in a fund section versus an options section, versus whatever, what that first ad you should be showing them, and that ad is going to be a higher CPM than anything else.

Now, you could layer in what you’re talking about knowing that person opened up an online brokerage account and we found out some information that they’re really trading ETFs, to then target an ETF in a non-ETF content area. But there’s a couple of things that’s wrong with that scenario. One, that data costs a lot of money to then finally target that ETF that it might not be as valuable just to put up another financial relevant ad that’s contextually relevant.

Miller: Right.

Desai: Or hit that ETF ad in that ETF category, where again, it’s going to be worth in a CPM basis.

So your comment about someone is a mutual fund section and then following them out- yeah. That’s behavioral. That’s being done by us quite a bit. But part of what I took your question about is relevant to this whole buying of data on and offline outside of our network. And we’re doing that for example AARP. They want to target a certain age group.

Miller: Right.

Desai: So, yeah. I’ll go out and buy that data, attach it to my network, and find that 55+ crowd. So, I find for a vertical company buying that kind of intent or demo type data is more relevant for mom-endemic, non-financial advertisers than we have found for financial advertisers.

This whole data market is still being kind of sussed out, what’s valuable, what’s not, what’s legitimate, all of that kind of stuff, but we are starting to work a lot more with more finitely defining those cookies, and those unique users versus just contextual targeting, which still I think king. I think that’s still the most relevant time to hit someone with the highest CPM versus a lot of this data.

Miller: A few years back there was this talk that video was the next battleground. Do you see as an ad unit video being used more and more, or was that more hype back then?

Desai: I definitely think it is something that people are spending a lot of time on, and from an advertiser’s point of view want to get in front of more, but I think even mobile has surpassed that in some ways. I actually don’t know if it’s quite there in finance. It’s definitely there in many other consumer verticals.

But in terms of video, I just look at some of my network, and these are long tail sites, some of them that just put up some You Tube stuff, or use some other player to kind of get people into the video, and it’s growing pretty quickly. It has been for a while in a lot of other verticals.

I think in finance for some reason it’s just taking a little bit longer, and people who are trading, or busy, or whatever it is, don’t want to read a two page article. There’s just been a shift where people are actually consuming a lot more video than before. That’s obviously just led to advertisers and agencies wanting to use that medium to get in front of their audience.

It’s in some cases been nice because some of these more traditional advertisers are so used to kind of a TV commercial environment.

Miller: Right. Right.

Desai: This is a better way of getting more of their budget, because we all know there is a disproportionate amount of ad span in the offline print TV, etc. world versus the online, when the online world is much more measurable, as we know.

So, yeah, there’s been, I feel- I wouldn’t say it’s anything significantly different than a year ago, but definitely a big demand for video kind of advertising generally, just putting a video in a ad unit and having it auto play- no. Right? It’s still got to have the in context of someone kind of listening and watching an actual video.

But I feel like when I go to like J. Fam or a lot of these financial conferences, two things that come up a lot outside of the traditional marketing conversation are, one, like I mentioned earlier, content. How do we get our content out there? How do we get our content out there to kind of educate people to get them to buy our product, is one big discussion.

And, now obviously with iPad and all of this tablet stuff going on, mobile is a big discussion. I think part of it- it’s not necessarily a fad by any means, but it’s the thing to talk about right now. I personally don’t think- it’s kind of like video was maybe three, four, five years- maybe five plus years ago.

Miller: Right.

Desai: It’s still going to, at least in finance again I think is very different for gaining and things of that nature that are very consumer, but in finance these guys are still on their desks, they’re still trading, they’ve still got a big computer browser in front of them. They might be running to lunch and have to do something along it, but that’s a short term thing.

I think tablets and mobile is a big thing, and we see huge demand from our advertisers and agencies to figure out how to get in front of that. “How do I get in front of social- facebook, Tweet stuff?”

So, a lot of this is a little bit more media hype, and it hasn’t quite hit finance, but I think it will in some shape or form, but I think it’s probably a couple of years away.

Miller: From a lot of the people I’ve been speaking to, particularly on the asset manager side, and I don’t know if those are direct advertisers on your network or not, but those are certainly people paying and spending the time and the money to try to bring in new assets. That’s the game there.

Content is obviously, beyond the ad unit, content marketing is one of the best and most cost effective ways of creating a pipeline for these guys. Does that conflict or accentuate some of the work that you’re doing with people? Meaning maybe that free submitted article, Seeking Alpha, maybe- and again Seeking Alpha has not provided this level of detail, but maybe that converts better, or we don’t even know how well that converts. But that’s one way of bringing in new customers.

Desai: Right. Yeah. But, like you said, it’s just one way.

Miller: Right.

Desai: Right? I mean you could, if you’ve got no budget that’s the only way to do it. Right?

Miller: Right.

Desai: And that’s what you should go after, but if you’re looking to really build a business and figure out other means- I think looking at all ways you can market yourself, whether it’s PR by writing this content, whether it’s search engine marketing, whether it’s this banner stuff, whether it’s buying legion from different places. I think there is a full mix of media that can bring in a lot more customers.

But, yeah, at a base level-

Miller: I’m mean from that level an ad unit really is just another form of content, right?

Desai: Yeah, absolutely. I’ve always felt that even if a blogger or a site is writing whatever content they’re writing about, their ad that’s next to it, it’s content. It’s on the page. What the advertiser does with it we can’t always control. I wish I had a little bit more control, because I think we could help advertisers maybe get more out of the banners that they do, since we know our network best and nature of sites.

But, yeah, I totally agree. It’s another form of content. Frankly, they can put their article content within a banner, because it provides a much bigger distribution vehicle than it is trying to get your content published through ten different mediums.

It’s not actually an easy thing to push out your content to a lot of distribution outlets. It is a much easier scenario with much more scale to do that if you wanted just to push content in a banner type unit, but make it look in an integrated way. There are ways that we’ve done that with a lot of our advertisers.

Miller: When I look back at- from what I know as successful advertisers, I guess, in the investment advisor arena I immediately think of Ken Fisher, Fisher Investments. He’s pioneered direct mail in the financial industry. I know what he was doing online was a lot of the same, which was, “Download this free report.”

Desai: Right.

Miller: And then they get somebody on the phone to call you and follow up afterwards.

I’ve heard just in an ad hoc way that I guess the conversion on that stuff has dropped way off recently. Well, at least vis-à-vis still direct mail offline.

Have you heard similar trends to that?

Desai: Nothing relevant to Fisher’s particularly, but… and I agree he has a created a marketing machine there. I think more often than not, as a side note, I feel like a lot of advertisers who don’t work out for us, and for other sites, it’s not necessarily a product issue. It’s more of their marketing funnel. “What do I do when I capture that person?”

Miller: Right.

Desai: And I think there’s a big opportunity in terms of providing marketing services for financial companies on the backend.

Miller: Right.

Desai: Not the front end ad, to get better conversion.

Miller: Is this what you were talking about before in terms of helping them develop their campaigns and things like that?

Do you see your firm migrating to that arena?

Desai: Yeah, I mean we are doing that already in some ways with advertisers that we feel need it. Because, look, I don’t want to take someone’s money and already feel like going into it that it’s not going to perform. So, in some ways we do it, but we don’t provide marketing services and charge for it, and have a design firm.

That’s something that we’re open to and considering, but I think it probably wouldn’t be an internal thing. I might work with a couple of vendors to provide those services as necessary, and just pass the cost on. I think that’s an expertise that we could hire for, and that we have to a certain extent endemically, just because we’ve been in industry so long.

Miller: Right.

Desai: But there is certain expertise that I would want to bring a firm-

Miller: I guess for you the question is whether your advertisers really valued that enough to pay for it, right?

Right now they’re paying you for distribution, right?

So, all of a sudden then you’re sort of saying, “Well, I’m going to help you with distribution, but I’m going to make it more effective.”

Desai: Right, and I think…

Miller: And that’s where there’s always like this push back about-

Desai: Well, so there’s- we have two clients. Right? There’s direct advertiser, or the agency who has the advertiser client.

Miller: The agency probably doesn’t care at all. Right? They’re just doing their job.

Desai: They’re just doing their job, and that is their job. It’s hard for me to say, “Well, this is what you should do.” It adds another layer, so even if the client is dealing with some of the backend funnel stuff, it’s just tough to go around, and so it doesn’t happen quite often in those cases.

But if you’re working direct advertiser, which is 50% of the time for us, they’re definitely much more receptive, and open to a lot of what we may suggest for their campaign. It’s just a matter of sometimes resources on their end to make changes and whether we can provide those resources, and how do you then account for that cost? And often times we just build it in to this CPM if we can, or pass that cost on in some shape or form.

But going back to your questions about Fisher and direct mail- we are more of a digital sales company. We actually do sell direct mail surprisingly, and that’s because we have a handful of postal files that folks like Fisher and Ameritrade and things of that nature are still buying it, with success. But, anecdotally, I don’t know a lot about that space. Anecdotally, I have heard the conversion rates are dropping off quite a bit, because it’s just partially a dying advertising medium, but it’s also just an older demographic that keeps getting older. And so the conversion is just-

Miller: Right. But people are still trying to get to them, though?

Desai: Oh yeah, and they’re still valuable.

Miller: Right. Right.

Desai: I agree though with what you said, the conversions just aren’t there as much as it used to. And I think that those companies who spent a lot of time in direct mail- you look at the old school AOL ISP disks. Right? They spent a crap load of money via direct mail, and it worked for a certain amount of time. But then broadband came in and-

Miller: And killed that.

Desai: And killed it.

So I think in some ways the online medium is not killing it per se, but direct mail- I put that into the print category as it is. Newspapers, and magazines, and all that stuff, clearly, are hurting right now. Things that used to be 40 page magazines are 20 page magazines.

So there’s no doubt that people are spending less, and the conversions are less, because there’s just more mediums that are more measurable, whether online or elsewhere, that their spending their time and efforts on.

Miller: Just to sort of take a detour, a lot of my readers and listeners either contribute or run their own financial sites. Many are not necessarily in the business as a business. It’s sort of as a hobby, or they do it late at night, or something like that.

Do you have advice- and I’m hitting you up. I’ll give you a second to think about it. Do you have advice for somebody looking to get into the business, from where you sit in the industry, how to best monetize their content?

Because a lot of people are struggling. “Do I create a subscription model?” “Maybe free is good because there are no barriers to entry. Everybody can read my stuff.” But then using an ad network isn’t always- it doesn’t feel like the most cost effective way, because a blogger is not going to have the big page view numbers.

Desai: Right. Right.

Miller: How do you think about things like that?

Desai: When you say ‘get in the business’ I am assuming you’re meaning how do I become a big or small player in the financial media?

Miller: Is it feasible for them to get into the business?

Desai: Right. I mean it depends on what their goals are. If they are looking to just-

Miller: Can you build a cheap ad view supported website?

Desai: Yeah. Absolutely, I have a ton of case studies just in my network of 250 sites that are hedge fund managers on the side, yet have built a pretty nice business on their blog between ad revenue and subscription revenue. So I think the short answer is it’s somewhat of a science to build-

Miller: Can you quantify that, what do you mean by a ‘nice business’. Clearly they’re a hedge fund manager, they don’t really need the revenue from the blog.

Desai: Look, they might be generating anywhere from as little as a few thousand to $25,000 a month.

Miller: Wow.

Desai: Between ad revenue and subscription revenue.

Miller: How big a site would a site like that be, that you are defining?

Desai: Between 300,000 pages to 1,500,000 is the range. Again, it totally depends on the content, right? We are generalizing right now, but it’s got to be niche content that’s valuable, that high net, or financial professionals are willing to pay for.

Miller: Typically it’s actionable content, content somebody can read and go make investment decisions on?

Desai: Not necessarily, some of it is industry pieces. Like one writes about the real estate investment market, and it’s not really actionable. It’s just a lot of in-depth research that hedge fund managers and financial professionals would potentially want to buy, or are buying.

That is why I say that it is very, very content dependent, but like I said it’s a bit of a science. You look at any financial media company, it’s free registration/ paid registration, right? There’s a model to get people from reading free content to signing up for a free newsletter, because building up a database is critical, to getting them onto a pay product, to them hitting them with a pay product over time.

You can learn a lot with analytics these days to see where your traffic is. What are people reading? What do they see as valuable to them? Say, “OK, let me turn that into a newsletter now. If that newsletter has three contributors, and I can see one of them is getting the majority of the reading, maybe that guy should be the pay product.”

It’s very much a science, that of Motley Fool, Agora, Investor Place, The Street, all of these guys do very, very well. I think at a much smaller scale, an individual blogger that has an expertise in a subject matter can actually do really well.

I’ll just name a couple that are in the network, that started out free and now have a pay product, maybe just in the last year, and are doing pretty well. Mad Hedge Fund Trader, who, as a business runs money for high net worth folks. Market Folly, who is a hedge fund manager and now just started a pay product, has grown that pretty quickly in just a few months.

So the concept of making, without a lot of work, because these guys have a full time job, of making $5,000-20,000 between an ad model and a subscription model is very much there. I think paid content is something that we are looking to get into more, even though we are an ad business right now, because finance I only see that growing and growing versus a lot of other spaces are diminishing.

Miller: That was going to be my next question.

Desai: I think it’s going to be tough to just pay for the New York Times, quite frankly.

Because, while it’s great content, it’s not super-niche, highly valued, needed content.

Miller: You see the emergence of really, as you said before, everything splintering into these pockets of expertise, and sort of the broad based news sites are becoming less relevant I guess to people. In finance specifically.

Desai: For investors, I think I use ‘finance’ too loosely sometimes, because there’s personal finance- world of home loan, credit card, insurance.

Miller: And that will always sort of be a great broad base.

Desai: Exactly, I agree.

Miller: It’s more generic content in that sense.

Desai: Exactly, and that audience is not as high net worth. They’re not paying for content. The investing audience, their high net worth financial professionals have money to spend to make investment decisions on. In that space, paid content becomes… and will continue to grow, I feel.

Miller: I can’t believe that what I think of as the traditional investment newsletter, a paid product, I don’t want to name names, but some of these ones that have been around for 20 years. I can’t imagine they are doing as well today as they were ten years ago.

I guess my question to you was has that revenue just gone away? Or has that been replaced by the next generation premium site? Which either could be a newsletter- I see sort of the emergence of these stock communities, something like the Kirk Report.

Desai: Right.

Miller: There are a variety of these sites, where people pay a subscription. They are for very active, very communicative type sites, where you’re not just being pushed out content, you are participating in something.

How do you see that playing out? I mean just to put up a newsletter and say I want to charge $397 a year for it, obviously if you work out the numbers it has the potential of being a great business. But I know a number of people who have done that, and it just doesn’t work for them.

Desai: Yeah, and this might sound like a little bit of a cheesy response, but I think, again, it’s the content. A lot of products that have done well and have now flailed, it’s in my mind because it was a marketing product, it wasn’t a financial product. It was buy stocks under $10.

That, in my opinion, has no merit, a stock that’s under ten dollars, or a penny stock versus something that’s $100, you’re still basing however you judge investing in that stock on some level of fundamentals, or whatever your research is. Not based on just on it being a dollar price.

But it’s a marketing spin that works with the psychology of retail investors. And that stuff in years past has really done well. I think, again with the ease of creation of content a lot of that stuff that was paid is free, and in some ways maybe uncovered as not the best product.

And the things that are now succeeding, I think there is marketing spin to it. I’m not going to lie. But the things that are succeeding, and will continue to succeed, are things that actually provide true value to the end user.

Miller: Because there’s a level of transparency, and this is what you were alluding to, that’s crept online. Either through these experts like Covestor or kaChing.

Desai: Exactly, and I think that’s a great point.

Miller: People know how all of these things are performing now. And most of the time it’s not as advertised.

Desai: Right. Someone else mentioned this, but the analogy is, in terms of transparency, when you used to go to a doctor 15 years ago you kind of had to trust whatever the heck he said.

Miller: You looked at the diploma on the wall, and that was it.

Desai: Right. Now, there’s so much content online where you can do you’re research on the little wart that you have on your hand, or whatever the heck it is, to go in and say, “Doc, these are the fours things, you didn’t mention two of them.” So there’s so much more transparency out there in the marketplace that the end business person has to really step up and provide true value because of that transparency, and know what the heck they’re talking about.

Miller: Thanks to Nikesh Desai for participating in this podcast. You can check out Nikesh and his firm Investing Channel at .

Next up, we’ve got Dirk Quail, who is the CEO of a company called . We’ve profiled LikeAssets on the blog previously. Like Assets provides customized benchmarking solutions for individual and professional investors.

If I have a portfolio of securities, and I want to see how well I am doing vis-à-vis a benchmark most platforms allow me to see how well I’m doing against the S&P 500. That may or may not be the appropriate benchmark for my portfolio. So LikeAssets actually looks at the securities in an individual portfolio, and customizes a tailor made benchmark for the specific portfolio. So here’s my conversation with Dirk.

Dirk, tell us about LikeAssets, what are you guys doing?

Dirk: Well, LikeAssets, we think is the only site that let’s investors find out if they are beating the market, and also research firms, and columnists, and bloggers’ ideas are making them money.

You can think of it as the Nielsen for investment ideas. Nielsen monitors and rates the effectiveness of TV shows. And LikeAssets can be the Nielsen kind of taking all sorts of investment ideas, monitoring them, rating them in a consistent way, and that can include an investor’s own ideas, other ideas from the web, from research firms, advisors.

We think ultimately armed with that knowledge of how things are performing it allows an investor to the take action to either change their strategies, or essentially even outsource it and say, “Hey, I can’t do this very well. I should have somebody else help me out.” Or, “I should be in passive ETF’s”.

Miller: Who else are you competing against? How is benchmarking done today?

Dirk: I think if you go out and you kind of canvas the portfolio trackers, and brokerages out there, there’s I think a pretty laissez faire way of benchmarking. Typically it’s the S&P 500, or the Dow. Some of the sites might actually pick your benchmark and lay it across your portfolio, or compare it.

The problem with that is that there’s a lot of different types of investments out there; stocks, mutual funds, ETF’s. Just picking one benchmark invariably fails against the portfolio. It’s not going to match up correctly.

We do all that work for the investor. We take every single stock, mutual fund, and ETF, we analyze them and classify them, and then we store that. When an investor creates a portfolio we identify for each security what the appropriate benchmark is, and we blend that together.

Miller: LikeAssets is sort of assuming a lost out of investors, that they at least have an asset allocation strategy. It’s been my experience that many investors don’t even know what that is. How do you help there?

Dirk: Yeah. I think the first step is actually if they look at those ten securities in the site they’ll be able to say, “Hey, what is my asset allocation?” So that’s kind of the first step. Then from there they can take a view on what their asset allocation should be and monitor towards that.

We can help them out with that, we can provide models that are appropriate, or they can do it on their own. And some people just don’t care, they’re just going to trade, but it still is helpful to know if your picks are meeting the appropriate benchmark. So, it can be used across the investor spectrum from people who have asset allocation strategies to people who don’t.

Miller: I then asked Dirk about benchmarking in general. It seems to be that a lot of institutional investors sort of just game the whole benchmarking thing anyway using whatever benchmark, regardless of its appropriateness, that makes them look better. I asked Dirk to address that, and how investors value performance vis-à-vis certain core baselines.

Dirk: I think so. Higher is important, but I think consistency is also really important. I think you hit upon that, which is if you sat down with five different advisors, or five different institutional players, they would use different benchmarks. They might use different asset classification systems for the same exact portfolio of stocks. They might just show different benchmarks for their picks because it might make them look better.

So, it’s hard to track what’s appropriate, and that’s what we’re trying to do because really it’s about consistency I think first and foremost. Of course, we think the quality is very high and there, but that in and of itself- each institutional say they have a high quality way of classifying assets. But I think it needs to be that consistent across the investing world for investors to get help, and better understand these things.

Miller: How proactive do you plan on being with the service in terms of alerting investors about how far they have drifted from a particular benchmark or style, investment style?

Dirk: Yes, absolutely. We want to let the investors set targets so we can do their monitoring and we alert them. If they are tracking an allocation and their performance in a certain asset class is not doing well, so they can take a look and decide if they need to make a change.

If they’ve identified an asset allocation strategy, and a couple of their asset classes aren’t performing, we want the site to help them find other ideas for that asset class that might perform better for them. Ultimately, you can search by asset class and find very specific investors’ advisors, investors’ research that can help you out.

Now if you don’t want to do all that, we also want to create models for people that can allow them to just pick those and still of course monitor them and ensure that the performance is there, and that the performance is tracked relative to the benchmark.

Miller: Many investors struggle with benchmarking their own performance because they have securities and portfolios scattered across different accounts. I asked Dirk if Like Assets was getting into the account aggregation game.

Dirk: Right now that functionality is actually available at the Seeking Alpha app store, there’s a LikeAssets app there. We’re actually bringing that functionality back into the site in the near future.

But it’s very easy that investor can just log in the way they would normally to their broker, and we’ll go ahead and get the data. We use the FX technology, which is the same thing Quicken uses to get that data. We’ll bring that data into Like Assets, and we’ll calculate the performance of their investments; Mutual funds, stocks, ETF’s. We’ll include the dividends, of course. We’ll look at closed positions and allow them to see the total performance for the account, but we’ll also allow them to see performance by individual position. We’ll create a blended benchmark based on the positions that they have.

So investors can see the performance of each position both if it is benchmarked, as well as the portfolio’s performance, and the overall portfolio benchmark. So, you’ll get an asset allocation too. An investor can start going, “Ah hah.” “I can see what my asset allocation is across accounts.” So you could have an E-Trade account, a Schwab account, a Fidelity account, and we’ll put it all in the same asset classification system, combined with performance, and then combine the benchmark.

But you can of course break it out by account and look at the performance. You might have a retirement account versus a taxable. You can also look at it by stock, mutual fund, and ETF. And I think that’s a really cool feature, because I think to being able to say, “I’ve got stocks at Fidelity, stocks at Schwab,” and see how your stock picks are doing relative to mutual funds. I think that will be very eye opening to investors, because of course many investors do much worse stock investing than they think they do. They just don’t have a really good way to get a handle on that.

Miller: I would think with all the technology and research put into managing customers at the online brokers, that they would be better at benchmarking. Is it just that they don’t care?

Dirk: I don’t know. Part of this is born out of some of that frustration into really being able to understand what my performance is, and get an appropriate benchmarking. The online brokerages do fantastic things in other areas, their screens, their execution. Maybe it’s just, and I’m just speculating, it might be just a matter of priorities for them. But I think it’s sounds to be really critical, and I think we have quite a bit of validation that investors do need to understand this. It’s really hard to make changes and invest properly if you can’t monitor how you are doing.

Miller: Like Assets was one of the first third party data vendors to participate in Seeking Alpha’s app store. Seeking Alpha launched the equivalent of the investing app store, like Apple’s iTunes store. I asked Dirk about participating in that type of community and selling their content, their tool through such an environment.

Dirk: Yeah. I think we’re really excited about that as well. I think especially with this ongoing trend for more specialized information out across the internet there’s going to be investment ideas all over the place. Long term I think it’s going to be very useful to have a very consistent way to monitor and score those different specialists. Because that’s ultimately where a lot of this will go.

There was just an article in Barron’s over the weekend about a real estate research house out in California and their picks. It’s just very interesting, because I would love to be able to say, “We have their picks for the last five years, and here’s how they’ve performed relative to the couple of different RE indexes. If you want RE exposure, these guys are doing a great job.”

And that’s what we think should be going on ultimately for investors When you have a portfolio and you find an asset class that you need, you can go here and find the ideas and the sources that are going to make the money. And that can’t happen if everybody is presenting their performance differently.

I mean people are starting to put it out there, like Motley Fool just in the past year has put out, “Here’s how some of our newsletters are doing.” But they even acknowledge that their performance is different for some of their own different newsletters and advisors, and they are having to make consistent. It’s not even consistent within that one website, let alone from Motley Fool to The Street, and other places.

So, investors are going to have a heck of a time if everybody start fires up their own performance measurement and their own benchmarks. So we think there’s definitely a place for someone who’s going to be kind of a grand central station for all of that type of analysis.

Miller: Hey Dirk, can you tell us a little bit about yourself, your own professional background and a little bit about your parent company?

Dirk: Sure. I worked in banking, before I was at Deutsche Bank. I started working with John Patterson, he was the CEO, and John Hagen, who was the CTO, about 12 years ago. We actually started working more in the defined contributions space, and worked on advice and managed account solutions together with a company called Infosys which was eventually bought by Morningstar.

Through that process of developing institutional solutions we came up with a lot of the things we’re putting out there in LikeAssets right now, like asset classification, style analysis, the performance. We also have wealth forecasting and advice that is going to be added ultimately to LikeAssets as well.

Miller: You mentioned Seeking Alpha before as sort of an expert investment community. How do you size up that new kind of second generation financial website. I know you’re obviously selling your products through that, so obviously you’re biased, but tell me what you think about Seeking Alpha.

Dirk: Well, I think Seeking Alpha has done a fantastic job of putting together an incredible wealth of investment information, investment ideas. The great thing about it is that it goes the full range from passive, passive allocation advice you can find great columnists and bloggers there like Roger Nusbaum he’s kind of an ETF guru. He has a lot of great ideas too. Very active, specific stock picks.

So, having that full range of investors there is a great place to offer Like Assets because all those people are active and taking time to really look at their investments, and they therefore should really benefit from looking at their performance, and understanding the benchmarking concept better.

Miller: I told Dirk I could imagine a time where Like Assets tools were sort of distributed out into the blogosphere and individual bloggers with portfolios, journalists talking about stocks, could use some of those tools to proclaim to their audiences how well they’ve performed vis-à-vis a benchmark. I asked Dirk if that was sort of the direction the company was taking.

Dirk: Absolutely. I think that makes a lot of sense. It goes back to the concept of being this kind of independent, objective rating, where you know it’s consistent. Somebody who’s proud of their performance can point to that and say, “Hey, I have this independence here, there’s consistence, analysis, and scoring going on over here at this site. Here’s how my portfolio has done. Here’s how their doing.”

We want to have people with the ability to track different providers of research and ideas and have grades on their portfolios every week. That is going to be a feature, so you can get email updates on portfolios you’re tracking. So, it’s going to be a great way.

We have a couple of the sites already doing research, who are doing well, that are very interested in developing a stronger connection, so they’ll have more of a regular reference to see how their portfolios are doing linked from their sites, because they like the idea of having those links to show how their research is performing in this third party picture.

Miller: Dirk has analyzed Morningstar’s role recently as sort of arbiter of benchmarking truth in the investing world with a couple of blog posts and some analysis recently. So, I asked him a little bit about that.

Dirk: Yeah. That’s absolutely right. Morningstar itself needs to be rated. I did a blog post on their mutual fund picks, and their stocks picks, and it’s very telling to me, basically they have over a year and a half, they have provided a 0% return over their appropriate benchmarks, their mutual fund picks and their stock picks on their website. I think it was a very interesting analysis, some thing you are obviously not going to see on the Morningstar website, but it just point out the need for this type of service.

Miller: Thank you very much, Dirk, for participating in this week’s Tradestreaming Radio. You can check out Dirk, and Dirk’s firm Like Assets at There’s a link to it on my blog at Once again, I’m Zack Miller, the author of TradeStream Your Way to Profits: Building a Killer Portfolio in the Age of Social Media. Thanks for checking us out. I look forward to talking to you again in a couple of weeks.


E*Trade rolls out Android app, gears up for big push in mobile


E*Trade announced the launch of a mobile application — the E*Trade Mobile Pro for Android.

E*Trade account holders can

  • View real-time streaming stock and options quotes
  • Access real-time news and information
  • Trade stocks during regular market and extended hours sessions
  • View orders, alerts, news, charts, watchlists, and portfolios
  • View a “Complete View” of all E*TRADE brokerage and bank accounts

This app launch for Android rounds out E*Trade’s mobile applications which include products for iPhone and Blackberry.  As of November 2010, customers have moved close to $1billion dollars via E*TRADE Mobile Pro since its launch.Like E*Trade, the brokers seem to be focused on continuing to push out offerings for mobile.

High nominal stock prices don’t mean anything (or do they?)

I’m curious why so many high-flying stocks in our current market also carry very high (nominal) price tags.  As investors, we’re used to seeing Buffett’s Berkshire Hathaway shares priced in  mortgages (plus $100k).  But look at the prices on these stocks that have been standout performers this year:

  • $NFLX (around $200)
  • $PCLN (around $400)
  • $GOOG (near $600)
  • $BIDU (over $100)
  • $AAPL ($300 and change)

Why not just split the stock?

In recent historical markets, companies would have been quicker to split their firms’ stocks.  Although stock splits don’t impute any real economic change (instead of 1 share of stock worth $50, I now have two shares worth $25 a piece), a lot of research has been done analyzing the after-effects of splitting stock.  Ever since Fama, Fisher, Jensen and Roll’s seminal paper The Adjustment of Stock Prices to New Information (1969) , investors have been seeking to understand why markets react to stock splits.  I’m more concerned, though, with what the lack of splitting is signaling to investors.

(Not) Catering to what investors want

There’s an interesting paper by Alon Kalay and Mathias Kronlund (both of U of Chicago’s Booth School of Business) entitled The Market Reaction to Stock Split Announcements: Tests of Information, Liquidity, and Catering Hypotheses (2010).

This paper veers from the current trend among researchers that stock splits were a form of catering — corporate boards splitting (or not) was dependent upon what they think investors are looking for (high/low prices).  [See Baker et al Catering through Nominal Share Prices (2009)]  This theory held that boards were constantly monitoring investor appetite for low or high priced firms and essentially managed their own stock prices, pushing and pulling to cater to investor demand.  Here, not splitting Apple stock would signal that corporations believe there is a premium valuation to be had by keeping the stock price high (perhaps a la Buffett).

That wouldn’t tell us much about where Apple’s stock will trade in the future but it does say that Apple believes it can receive a higher valuation by keeping its nominal stock price high.

On the other hand

Kalay and Kronlund don’t buy the catering hypothesis and instead hypothesize that there is informational value in stock splits.  Not unlike why insider buy or sell their own firms’ stocks, decisions by corporations aren’t driven by marketing purposes (trying to find more buyers of their stock) but by fundamental reasons.  In the informational theory, stock splits “are often coupled with the manager’s belief that the firm is doing well.”

Meaning, a manager is more likely to split a firm’s stock when he or she is optimistic about the firm’s future performance.  This theory does leave the door open that manager catering is behind the split but it contends that the abnormal returns from post-split are driven by a higher earnings expectation in the future (when compared to non-splitting firms).  So, I’m inferring here that not splitting the stock is signaling that management doesn’t see unexpected (to the public) earnings in the near future.

So, do we back up the truck and buy $AAPL with both hands or should we infer management doesn’t see unexpected higher growth down the pike?

photo courtesy of prw_silvan

Seeking Alpha ramping up

Financial opinion aggregator Seeing Alpha is ramping up its traffic and overall site activity according to a blog post by the company’s founder and CEO, David Jackson.

Jackson’s November Update included a variety of data points, all accentuating the site’s growth:

  • Seeking Alpha’s new App Store has scored over 20k installs
  • new section launched targeting income investing
  • launch of a mobile site
  • site traffic hits all-time high

According to SA’s Jackson

During the week starting the 7th of November, Seeking Alpha had the strongest traffic in the history of our site — 7% more traffic that the second strongest week in the history of the site and 40% more than we saw in the same week in 2009

Tradestream Radio Episode 1

building an investing empire

This week’s Tradestreaming Radio is live.  I discuss



Hi, this is Zack Miller, and you’re listening to Tradestreaming Radio. I’m the author of and the author of the recent book Tradestream Your Way to Profits: Building a Killer Portfolio in the Age of Social Media. And, Tradestreaming Radio is our home in the internet radio space, and we hope to use this forum to expound upon some of our ideas and bring in some interesting people who have ideas of their own that I think you would find quite interesting.

I, myself, am focused on sort of the intersection between online media and investing. And, my book, Tradestream Your Way to Profits, outlines eight strategies that call from my experiences as a business development person at Seeking Alpha, a hedge fund analyst, and now a independent asset advisor.

So we can just jump right into it.

So tradestreaming as a theory, as a philosophy is all about finding the most valuable information from the most valuable person with that information, making that available through social media. One of the strategies that I find most appealing from this vantage point is insider trading, right? So, tradestreaming is finding people who have a strategy that’s been proven to work either academically, or in practice, hopefully the marriage of the two.

Insiders, we’re talking about corporate insiders now, have the ability and have the demonstrated ability to outperform markets over the long-term. And, I devote an entire section of my book, an entire chapter, to an insider trading strategy. It’s a two-tiered strategy, and I wrote about it recently on the blog, check it out there. But, I talked about the Muzea  model, a behavioral model. He was broker-sum-insider trading strategy guy named George Muzea, who wrote a book called The Vital Few vs. the Trivial Many: Invest with the Insiders, Not the Masses. And he attributes outperformance by insiders to a behavioral basis. So, he segments insider trading activity by looking at the behavior of insiders, and trying to get into their heads to better understand the rationale behind their trades.
So therefore if you were going to implement a strategy based upon Muzea you’d want to focus on who is doing the trading, what Muzea calls value insiders, 70% of trades done by insiders with a long-term view of their firm.

He also segments out catalytic insiders. These are corporate types not concerned with book value of their firm, but rather they see, you know, a temporary anomaly in the pricing of their stock and they may step in to buy or sell the stock.

I found that there was another model, the Seyhun model. Nejat Seyhun is a professor of business at the University of Michigan. Wrote a book called Investment Intelligence from Insider Trading. He creates a bit more detailed model where he creates a hierarchy of insiders ranking in order of their access to higher quality tradable information.
So starting at the top you have senior management, C-level executives who have their management finger on the pulse of their firms. Though they’re not allowed to trade on what’s called insider information, which would be, you know, private, or non-public information, that if made public would obviously affect the stock price. Definitely they have a view of their firm. You know, they see sales reports, they know about partnerships they’re working on. And, you know, they know better than anyone else the dynamics of their industry. They are quality players and when they step in and buy or sell their stock, particularly on the buy side, people should take notice.

Then next down you have officers, employees of the firm, not senior enough to make senior decisions, but definitely affect the operating of the company as a whole. You have directors, people who sit on the board of directors but are outside of the firm. They have very little information, right? So, they’re sitting at quarterly board meetings, or something like that. They’re not actually part and parcel of the day in/day out inside of a company. And then you have large share holders, these are hedge fund guys, institutional types who own more than 10% of the stock.

So the strategy here is, and you know, you can read the book for more information, but it’s to focus on active versus passive insider transactions. We want to focus more on the buy side. You know, particularly corporate insiders sell stock for all types of reasons, particularly in technology stocks. There’s options, you know, exercising all the time. And a lot of that is just noise. That’s people getting liquid. It’s diversifying out of their holdings. The research shows that on the buy side when somebody steps in with their own hard-earned money and decides to purchase their own company’s stock it’s a lot more indicative of future price movements.

So, we want to focus on buys, not sells. We want to look at clustering and consensus. Insider trading activity is a much better indicator of future movement in stock price when multiple insiders are buying at the same time, called a clustering, without a conflicting trade, and that’s called consensus. We want to look for three or more insiders stepping in and all participating in buying or selling their stock as an indicator.

This strategy works better looking at small caps. We want to mirror corporate insider buying, so less than a billion dollars is sort of the sweet spot for this strategy. We want to look for earning surprises. It’s a good idea to look for insider buying activity in firms that recently reported a positive earning surprise for some reason. You know, we’ll see insider buying as continued momentum play there. And bigger is better. Larger purchases are better signals than smaller ones. We want to look for purchases over 10,000 shares. Obviously, you know, how big the purchases will also depend upon the price of the stock. So, 10,000 shares in a stock that’s worth $1 is not necessarily a great signal, but in general that’s, we want to see a larger purchase. Obviously we want to see corporate insiders putting more money up to show more conviction.

So in all these methods, all these methods improve returns. The three most important determinants of quality are, to repeat, top executives. We want to see the C-level executives buying. We want to see them buying in small firms, right? The fact that somebody at 3M is buying is a good thing, but not as good as somebody, you know, at a smaller micro cap. And, we want to see a big position. We want to see them stepping up.

So, to quote a research report by Piotroski and Roulstone entitled Do Insider Trades Reflect Superior Knowledge About Future Cash Flow Realizations? They said we find strong evidence that insider trades are associated with the firm’s future earnings performance. Consistent with insider trading on the basis of both security misevaluation and private information about future cash flows. So, you know, obviously to do this it’s going to take some legwork, right? So, you know, I haven’t found a perfect system that mimics the Seyhun model. There are some premium sites that allow you to do such a thing.

You know, you can actually theoretically do this through using the SEC database, or through Yahoo Finance, which is free. A site called J3SG, which is kind of a funny name, but it’s a good site that follows insider activity. They have a free version and a premium version. The premium version actually does a lot of this for you. There’s Guru Focus, which a lot of people use.

A new blog, which I think is really helpful called Insider Monkey, which is following a lot of insider movements and expounding upon some of these theories that I’m talking about. Asif Suria has a site called SINLetter that actually does, you know, a rundown on insider buying and selling.  Finviz is a screener that can be used to screen for some of these types of stocks. Insider Cow and Old School Value insider buy screener, are some of the resources that I put up there. You can find that all on the blog. I would definitely check out that strategy, that’s the insider trading strategy.

So, next up in Tradestreaming Radio for this week I wanted to focus on what we call ‘trend watch’. This is something that I’ve chosen that I think is interesting. I hope you find interesting. Today’s trend has to do with consolidation in sort of the second generator online broker platforms.

Obviously, you know, we have two big players, well, three big players in the online broker space. We’ve got Ameritrade, Etrade, and Schwab. The reason I stumbled upon that is because Schwab, you know, I don’t think is a classic online broker. Obviously they do have online brokerage access.

We’re seeing second generation platforms that emerged more recently begin to consolidate, and the first thing we saw last week is interactive brokers, it’s a platform that a lot of new investment advisors, registered investment advisors, RIAs, are building their portfolios on. They do a lot of this mirroring type thing where you can actually manage your portfolio and bring in managed accounts that are executed automatically when you make a change in the model portfolio.

Interactive Brokers took over a 6% position in trade station. We saw Ameritrade enter this fray with the ThinkOrSwim purchase. I guess that’s probably about 18 or maybe 24 months ago already, and reportedly in the industry that was a great purchase on their behalf $600, $700 million. I don’t remember the exact number.

And, now we’re seeing, you know, consolidation, or perhaps potential consolidation at the second generation brokers who really have built, you know, really powerful technology platforms. That’s what they are first and foremost. And they’re technology platforms that are attracting sort of the next generation investment advisor business. So, I’d keep your eye on that.

Next up on Tradestreaming Radio is our deal watch. Just this week we’ve launched Tradestreaming Marketplace We’re going out and sourcing the best of breed financial/investing products, negotiating on our community’s behalf and offering really valued added deals.

This week is what I like to call value investing in the sports betting marketplace. So, I like to tell the story about famed value investor Joel Greenblatt, who as you know probably as the author of The Little Book That Still Beats the Market. And, he’s the founder of The Magic Formula, which is posted returns of, you know, about 40% a year for 20 years. He explains his results when you ask him. It’s nothing more than a focus on what makes a good investment in the real world. And, he throws in a little sixth grade math to boot. In Greenblatt’s world this strategy extends to schooling. He’s also focused on turning around failing schools in the New York area, and he’s had great success with that.

So the way I think of it is value investing can be applied to an educational model, it can be applied to anything. I’m an investor who uses valued based principles in my investing strategy and tradestreaming, in my book. Everything that  I’ve written about on my blog is about identifying and investing in low-risk/high-pay off targets. And, that’s what got me thinking about sports betting.

I’m not a gambler at heart, for sure not, but I do believe the internet has opened up new markets that weren’t easily accessible before. We’ve seen examples in online Forex, obviously offline Forex is a huge market. It’s extremely easy now to open up an online Forex account and be able to trade currencies. We’ve seen peer to peer lending, the prosper.coms of this world. I wrote about this in my book as well. This has social value for sure, but it’s also an opportunity for enterprising investors.

So, why would somebody bet on sports? There’s liquidity. You have marketplaces now where you can find bid and ask. There is some transparency. You can see sort of the, you know, price movements. You can get your hands on historical data, so you can build strategies that take advantage of this. It’s odds based success. So, just like investing, you know, you don’t have to be perfect 100% of the time, but if you can be more, you know, more than half the time right you can actually make money this way. There’s continuous pricing. And, what a lot of people like about it, and this is sort of the gambling aspect, is the instant gratification.

So, I was drawn to a new book on the market written by Daniel Fabrizio. It’s called Sports Investing: Profiting from Point Spreads. The title was compelling, obviously, because you know all of a sudden, you know, instead of betting it was investing in sports. That’s not quite accurate, but you know, it sort of took it out of the gambling realm and turned it into something that’s more familiar to me.

So, I like this book. It does a few things really well. It differentiates between investing and betting. It uses data to formulate some winning strategies, and a few of the strategies in the book are- one strategy is value, one’s contrarian, one’s momentum based.
There’s details on how these strategies work with each of the major sports, so football, baseball, basketball, hockey. Sorry, no soccer. There’s a section on Monte Carlo analysis to advise how to manage your portfolio and position size, this is sort of the bank roll in sports betting lingo. And it explains how to lower vigorish, which is the equivalent to a spread in a stock. This is where sports books make their money, their commissions.
It’s an introductory book. It’s very short. It’s not made for an advanced sports better, but for me, who’s a neophyte in this whole thing it was a good introduction, and gave me a little bit of meat to be able to go onto the next step.
Fabrizio doesn’t just write books, he actually has a full blown sports betting platform. He’s not a marketplace, but he has a research tool called

I took out a subscription there and basically all the theory that is, you know, elucidated in the book comes to life in Sports Insights. And Sports Insights was developed in part by a Quant from MIT. And, you know, in there you can get access to contrarian value strategies. There’s strong historical evidence to show that betting against popular opinion can be profitable, so obviously value investors know that. The same holds true in sports.
There’s a momentum strategy. Some investors like to let the winners run. And, sports investors can find strategies, odds-based strategies, that work in that way.

There’s also a fundamental analysis tool where you can rank a team, you know, based upon whatever is going on, you know, in that team itself, or in an individual player himself. And, just like you have in real life investing there’s special situations. So, you know, Sports Insights allows some betters to zero in on certain intangibles of the game, or the direct correlation of how two teams match up against one another.
It’s not perfect, and Fabrizio is the first to tell you that, and he warns against, in general, using any platform that makes bold and audacious claims.

I feel that having spent some time managing this system, it’s a great system, it’s a great way to get your feet wet in sports betting, particularly if you have the value investing bent. And, the deal is great. I mean, so we went out there, basically you get a $40 book, which is Sports Investing: Profiting from Point Spreads, Fabrizio’s book. You get six month premium access to Sports Insights, which is worth about $600. And, we’re putting together an exclusive webinar for anyone that purchases this package through called The Three Secrets Investors Should Know to Make Money in Point Spreads. It’s going to be led by myself and by Dan, and it should be great.

And, on top of this there really is no risk. So, again, you want to lower your risk whenever you make a purchase, whenever you’re investing in anything. There’s a 30 money-back guarantee. So, you’ve really upped your odds for success. Check it out on the site. We’re selling it for $399. You know, it’s about 40% off retail price. Check it out. Let us know, and join the Tradestreaming revolution. Thank you for listening, and I hope you will join us again next week.

Raising the roof with recent housing sector insider trading

Insider trading — particularly when clusters of executives are buying their own small-mid cap stocks — can be useful in forecasting future stock movement (in this case, up).

The Motley Fool ran a really good article detailing all the insider purchases occurring in the housing sector (or ancillary sectors that might rise in sympathy with a rebound in housing).

Company Industry Insider Trend
Cousins Properties ($CUZ) Real Estate Investment Trust Insiders like Lawrence Gellerstedt (CEO) and Taylor Glover (Chairman) bought $709,733 worth of stock between 8/12-8/24
Winthrop Realty Trust ($FUR) Real Estate Investment Trust Insiders like Michael Ashner (CEO) and Lee Seidler (Director) collectively bought about $2.46M worth of stock between 8/13-9/27
Gordmans Stores ($GMAN) Home Furnishing Stores Insiders like Debra Kouba (Officer), Richard Heyman (CTO), Jeffrey Gordman (CEO), Johanna Lewis (Officer), Michael James (CFO), and Michael Morand (Officer) collectively bought $532,221 worth of stock between 8/11-9/27.
Lennar ($LEN) Residential Construction Sidney Lapidus (Director) bought $97,500 worth of stock on 8/19
La-Z-Boy ($LZB) Home Furnishings & Fixtures Edwin Holman (Director) bought $20,568 worth of stock on 8/31
MFA Financial ($MFA) Real Estate Investment Trust Insiders like William Steven Gorin (President), Robin Josephs (Director), and Timothy Korth (General Counsel) collectively bought $136,778 worth of stock between 8/5-8/26
Select Comfort ($SCSS) Home Furnishings & Fixtures Jean Michel Valette (Director) bought $130,000 worth of stock on 8/27

Source: 7 Insider Executives Betting on a Housing Recovery (Motley Fool)

photo courtesy familymwr

The real-time web and its impact on investing (Future of Investing)

This post was originally included as part of an ebook that I published alongside the launch of my book, Tradestream, entitled “Tradestreaming and the Future of Investing”.  The content was so good I wanted everyone to have access to it :-).


The rise of independent publishers through blogging tools such as WordPress has been profound for the investor community.  With the integration of RSSCloud, PuSH, Twitter, and Facebook — blogs are now part of the real-time stream and are playing an ever large role in the day-to-day of the investors. I’ve seen firsthand two major trends that were previously unthinkable and nearly impossible to pull off. The first is the micro specialist blogger who focuses on a very niche topic — perhaps a single stock or a single bucket of previously uncovered equities.  The exposure and insight from these publishers has provided a key data point to investors, and provides content on topics that are not covered by analysts and the MSM financial publications.

The second major trend has been the inclusion of bloggers covering seemingly non-financial content, but who are in fact informing investors with their coverage.  This trend includes fashion bloggers who impact investors covering retail, and local political bloggers who cover topics which impact energy markets, currency trading, and the like.

Raanan Bar-Cohen has over 15 years experience as an entrepreneur and innovator in the digital media space.  Raanan currently serves as Vice President of Media Services at Automattic, which leads the WordPress Open Source publishing project and runs a number of online services including, Akismet, Gravatar, IntenseDebate, and PollDaddy.
Raanan blogs often @ and can be followed @

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Looking at Magic Formula returns, Morningstar gets all apologetic over industry performance

Screening 2.0 and beyond

Readers of this site have learned a bit about Screening 2.0 — the ability to use Internet tools (many of them, free) to recreate portfolios that conform to the investment criteria of history’s best investors.

Validea’s John Reese has done much of the research legwork on the subject and has produced a premium product to help investors create Peter Lynch, Ken Fisher, and Ben Graham portfolios (among others).

The magic of  Greenblatt’s Magic Formulamagictrick

One source I mention frequently is Joel Greenblatt’s Magic Formula.  Greenblatt wrote about his investing magic in The Little Book that Beats the Market.  He also provides investors with a free website to screen for the top ranking stocks that fit his criteria at

Morningstar takes a look at Magic Formula returns in a recent piece.  Here’s what they come up with:

We see that the formula posted approximately a 19.9% annualized return from the beginning of 1988 through Sept. 30, 2009. Over that time, the S&P 500 Index returned 9.4% annualized.

Not too shabby.

But as a frequent shill for the mutual fund industry, Morningstar feels the need to compare this market-trumping return to top performing mutual funds.  And that’s when things take an interesting turn:  The article’s author, John Coumarianos, sounds surprisingly introspective in his (near) critique of active fund management.

The market isn’t efficient, as the indexers say, but its inefficiencies are apparently not easily exploitable for some of the finest pros either–at least given how many of them currently go about investing, trying earnestly to predict future profits and discounting them back to the present. Perhaps managers outthink themselves or have too much confidence in their predictive abilities instead of relying on past results.

Why funds may perform so badly as a class

The author also cites the mutual fund structure, size, and the legacy nature of a fund portfolio — making it so easy for investors to buy and sell an already outdated model — as an impediment.  Does this mean that portfolio mirroring a la kaChing and Covestor (where investors sync their brokerage accounts up to a professional investor’s portfolio model) has another leg up on the industry?  The separately managed account model (SMA) which institutionalizes this mirroring process does have its benefits, including better tax efficiency (all stocks are held in investor’s name and cost basis is individualized) and transparency (stocks in the portfolio are held in brokerage account).