Financial Data in the Cloud?

I understand why people want to share their thoughts, status updates, pictures and everything else in between on Facebook. What I fail to understand is the idea of sharing your financial data via services like Blippy, Mint.com or Wesabe. The current security architecture seems so ripe for abuse and hacking it’s not funny. Blippy allows you to connect your credit card purchases to a social stream that ultimately can be piped into your Facebook newsfeed. Blippy had a security snafu back in April 2010 that revealed a handful of credit card numbers but the implications are that something bigger could be looming.

Wesabe just recently shutdown after burning through USD 5 million in VC money (Union Square Ventures backed). Even Wesabe thinks internet security is a big concern, below is what they have to say about security in their farewell letter:

…because Wesabe stores such highly sensitive data, continuing to operate the service with shoestring operations and security staff is not acceptable, and we do not want to continue accepting new accounts if we cannot guarantee the security level we believe our service requires.

The idea of aggregating all your financial data to some online website seems risky to me.  At least in the US if there is a hack attack you can take the company to court and sue for damages.  In India, good luck…imagine 26 years later the Union Carbide case is still going on and that case involves over 25,000 dead people.

Some people don’t care about securing their online financial data and that is fine…I do care. If we look at Mint.com which is a great service that I would never use, they should have an option where I can retain all my data locally. Then if I want Mint.com to analyze the data I can send it to them encrypted. Once they send me the results/advice via email they delete all my financial data from their servers all within minutes.

I think we are still in the early days of online data security and people have a carefree attitude about it. It will take one major security catastrophe to shake people and make them realize the security implications of “over-sharing” their financial data.

Personal Analytics

Ever wonder how much TV you watch, what are the most frequently watched programs, who do you call the most or when do you make most of your calls? Maybe I’m unique, but I’m surprised with all the technology I have no clear answers to those 4 questions.

We might have the social graph via Facebook, but what about the personal graph or personal analytics. I believe over the next 2 years we will have access to our TV viewing habits and telephone call log being sliced and diced by the most unlikely of sources.

With the introduction of Google TV, I can see them tracking (with permission) all my viewing habits and then making recommendations. Something similar to what Netflix does for movies. Then you can measure what you are viewing and scale up or scale down the viewing. The futuristic vision of 500 channels never quite happened but have access to over 100 channels is bad enough and something like Google TV would revolutionize the way we watch TV.

But, more interesting for me is my phone bill. For years, I would look at the printed bill and think what a waste of paper. They really should have had a one page summary with charts showing your top talkers, time of day graphs, etc. Since the carriers controlled the data they just didn’t care to really offer this. With the introduction of smart phones I can see an app sitting on the iPhone or Android and harvesting my call logs and then spitting out daily/weekly/monthly reports depending on what I want to track.

For me, the ultimate would be an app that would look at my “Top 10” callers for the week and create a “favorites” list on the fly. Truly personal.

India's first actively managed ETF

Motilal Oswal (MO) one of the larger stockbrokers in India is launching its first structured product the MOSt Shares M50, which is an actively managed exchange traded fund (ETF). ETFs as an investment vehicle are pretty old school in the US where over USD 600 billion are tucked into them.

In India, ETFs are relatively unknown and most of the ETFs have been passive index funds tracking the Sensex or Nifty. Benchmark has been the 800 lb gorilla in the Indian ETF space with their Nifty BeES which tracks the Nifty index. The MOSt Shares M50 is one of the first actively managed ETFs in India. Which means that a fund manager, Rajnish Rastogi, is actively managing the money and can tweak the investment model in real time. According to Rastogi’s LinkedIn profile he “developed the first (worldwide) fundamentally enhanced index and obtained regulatory approval to manage an Exchange Traded Fund (ETF) that tracks it.” If you are looking for more details about the ETF you can visit their site and download the mind numbing PDFs.

For me what is interesting is seeing the ETF space grow in India. ETFs typically have a lower cost (known as expense ratio in the biz) and can be traded via your local stockbroker. When people ask for investing advice, I give them my 3 stage process:

1. Absolute beginner – get an ETF or mutual fund that tracks the index (Benchmark Nifty BeES is an example)
2. Intermediate – broadly invest in ETFs or mutual funds (for example: Reliance Growth Fund or MOSt Shares M50)
3. Expert or gambler – invest directly into the stock market by picking the stocks yourself

I will be tracking the MOSt Shares M50 to see how it outperforms against the Nifty. According to them, they will pick the same stocks in the Nifty 50 index but “remix” the index. Would I recommend this product? Potentially, but I need to see how the ETF stacks up against the index and more importantly does the ETF have enough daily trading liquidity.

For more information on how ETFs got started checkout Wikipedia.