Monday, December 14, 2015

Easy Online Finance and Your Future


Jonah Engler - Online Finance

In late 1999, respected tech journalist Robert Cringely wrote a cautionary and foretelling PBS column about the expansion of day trading, which he essentially labeled as a panacea.

Cringely described the pre-Y2K dream scenario and its flaws: With just a few thousand dollars and an account set up for retail online trading, anyone could jump on the day trading bandwagon and start taking positions backed by margin loans. Back then, the required training could be accomplished by a weekend seminar at a Holiday Inn, and with the right strategy any day trader could simply move to Costa Rica and take up surfing while automated trades programmed with limits and stops would produce thousands of dollars in profits each week.

The scenario above is certainly too good to be true, and Cringely decried it as such. He was not alone in this criticism; a few others disapproved of how online day trading was being marketed and sold to the American public, who was caught up in an astonishing bull market that would lead to the Dot Com Bubble and the eventual crash of Wall Street in the early days of the 21st century.

Despite Cringely and others alerting would-be day traders that they were entering a field with a high rate of failure, Internet retail brokerages doubled down on their marketing efforts. Television commercials by E-Trade were hilarious; one depicted a male day trader wearing the typical attire of Wall Street investment bankers in the 1980s: striped Armani shirts, cuff links, suspenders, a Rolex wristwatch, and slicked-back hair. The trader watched his desktop monitor in disbelief as his portfolio holdings tanked, and at some point he decided to jump out of the window in desperation; fortunately, he was day trading from his ground-level home and he merely landed on the bushes lining his garden wall.

Another interesting TV commercial from the Dot Com Bubble era depicted a businessman traveling to the Far East and boarding a rustic sampan ferry boat somewhere in the South China Sea. The businessman strikes a conversation with the ferry boat pilot, who reveals his ownership of certain blue chip stocks that he trade from a mobile phone while piloting the sampan. This commercial by Fidelity Investments was meant to be futuristic and clearly ahead of its time, and that time has arrived.

Whereas Cringely wrote about thousands of dollars required to get started in day trading; such is no longer the case. Expensive desktop systems are no longer needed, either; smartphones with the right mobile apps installed allow day traders to speculate on the go, and certain platforms such as the foreign currency markets are open 24 hours a day. The barriers to entry are almost non-existent these days, but the panacea and the failure rates Cringely wrote about are more prominent than ever.

Jonah Engler is a financial expert who hails from NYC.

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