Aladdin's cave of software, technology's wave after wave
Illustration: Peter Riches.
I SPOKE at the Trading & Investing Expo last weekend in Sydney. As the biggest independent expo on the investment calendar, it has always been an interesting window on how the sharemarket is developing.
There was a time the expo was a gathering of full-service brokers bristling with tradition and integrity. Polite if competitive. Senior partners on display.
Those were the roots and they remained pretty much undisturbed until some cutting-edge exhibitors turned up one day and started offering these rather risky derivative thingies called options, which unsettled, upset and confused the traditional broker and at the same time set the mould for the expo as a showcase for "What's next in Finance?"
Over the years you can see the industry progress. Options gave way to futures, futures gave way to warrants, and warrants gave way to the internet, which understandably caused a major shift in expo focus.
From the early 2000s, the expo became a platform for the innovation and growth of online brokers instantly propelled to ''platinum'' sponsor status by their success. It was a revolution, and the traditional brokers would have done well to have spotted it earlier.
The ability to trade from your kitchen spawned the next revolution, the push for individuals to "take control" and the explosion of the self-managed superannuation industry began, another growth business for the expo circuit.
And the evolutions continued. Next came technical analysis. Compared with the rather grey regurgitation of fundamental analysis, the colourful art of prediction through technology swept in and blossomed. The internet was the perfect medium. Charts, colours, calculations and keyboards. Perfectly suited to a computer chip and its lack of emotion. For a moment there it got a bit out of hand.
Black-box CD set sellers proliferated, and for a time we had a saying: "What's the difference between a new investor and a professional technical analyst?" The answer was "two weeks" or "two grand", take your pick.
The internet had opened the financial space to prolific software developers, and expo product proliferated. It was all part of the cycle that had to be, and has been reigned back, with hardly a box set to be seen last weekend.
Technical analysis, or more accurately, trading skills, are now a core educational focus for expo talks and seminars, and in a market that requires you to do a lot more than simply invest and have patience everyone is appropriately on the bandwagon. But it doesn't end there. The latest wave to sweep over the financial landscape is, of course, contracts for difference and their cousins, foreign exchange trading.
CFDs in particular have not had the best of press, but the message is already out there and is now openly touted by the providers themselves.
They are risky, not suitable for all investors and "you can lose more than your initial deposit". In other words, they're for people that know what they're doing.
But when you're over that, the expo is the Aladdin's cave of software innovation, the potential and capability of which is almost more compelling than the underlying purpose.
And that's about the state of things so far, although the wheel is still turning.
Emerging in the expo now are the "no bull market in equities" products, and although not front and centre yet, you couldn't help but notice them.
There is a new strong showing from the fundamental value products, for instance, and several other ''in any market'' products such as exchange-traded funds, Chinese investments, art, wine and we are almost full circle now with the full-service brokers returning to cater to the investors for whom "independence" did not work out.
If there's one thing you can rely on, it's the human ability to adapt, and whatever the state of the sharemarket, the finance industry does adapt, and is adapting.
The next expo is in Melbourne in October, in case you want to know what's going on.
Marcus Padley is a stockbroker with Patersons Securities, and author of stockmarket newsletter Marcus Today. For a free trial, go to marcustoday.com.au. His views do not necessarily reflect those of Patersons.