October 2000

Q: What sets IDEAglobal apart from other firms that supply investment research and analysis?

A:  There are four things that set us apart:

The first is that we are the only company that earned its credentials servicing the needs of the top professionals, and is now offering the same intelligence to three other segments: institutional buy-side, day-traders, and individual investors. In this way, we are leveling the playing field for all participants who want to take control of their wealth management. We are an agent of democratization.

The second thing is that we are unbiased. We don't allow our analysts to have exposure, to trade, or to manage money in any of the instruments we write about, including stocks, bonds, and currencies and their derivatives. This ensures that our content remains totally independent, impartial, and free of bias.

The third is that we are global in scale. Our research and strategy team of up to 200 full-time experts is the largest group of independent analysts in the world. Located in five time zones and covering the 24-hour market cycle, they provide real-time analysis to a community of clients in more than 80 countries.

Finally, we deliver more content than any other research company in existence: about 2,500 pieces of original analysis each day. And unlike some outfits that generate reports once a day or once a week, we offer up-to-the-minute information throughout the market cycle.

Q:  What's the biggest problem Internet investors face today?

A: Investors have the same needs, whether they are professionals or retail: access to fast, professional, and sincere analysis to guide them. There is an information overload that is filled with financial information with too much implicit bias, too much consensus thinking, irrelevance, and a lack of original thinking.  Most investors want to make their own trading decisions, and to do this well one needs full coverage and needs to be armed with quality help in the battle to manage money.

Online access to financial information, which is still relatively new, has evolved during an unprecedented bull market. In some respects this has affected the discretion and discrimination that normally guide investors. I'm not suggesting consumers are irrational, but they're operating in an environment of information overload. Today there are literally hundreds of thousands of web sites, computer billboards, and discussion groups supplying financial research, investment recommendations, market analysis, and news stories that could influence investment decisions. 

There are also more web that aggregate other people's content than there are original content providers. People are learning the hard way that information isn't necessarily reliable just because it appears on the Internet.

Q:  What results have recent market corrections, particularly in the NASDAQ, had on individual investors?

A:  Although the market has since recovered, the latest big drop was a shock for many newborn Internet investors. Most of them had never before seen a sustained 10 percent drop-off in the overall NASDAQ. There had been other, smaller drops but the market had always bounced back in a day. This fostered unreal expectations among many retail investors. Thus, when the NASDAQ dropped 10 percent people were expecting a bounce. It never came. The market dropped another 10 percent and still there was no bounce. When it dropped a further 10 percent individual investors began asking themselves, Shouldn't I be spending more time studying how these markets work?  Shouldn't I be reading about how these markets are influenced?  Whose investment advice do I trust?  And why are 99 percent of Wall Street's recommendations bullish even though the market is in decline?  These kinds of questions are great for us. When the consumer is more rational, more discerning, interest in our products increases dramatically.

Q:  How would you describe the evolution of Internet investing?

A:  It started roughly five years ago in America when companies like E-Trade and Charles Schwab began developing and marketing Internet investment tools while simultaneously reducing their transaction costs. The daily volume of business being conducted by these and other online retail brokers began increasing at a tremendous pace. American banks soon took notice, and it wasn't long before they began offering the same kinds of services. This is now being repeated with banks in Europe, Asia, and elsewhere that have traditionally looked to America to get an early indication of what they should be doing for their customers.  Financial institutions all over the world now realize that, as a business model, e-trading and people managing their own money over the Internet are here to stay.  As a result traditional brick and mortar banks, trading houses, and brokerages have been spending huge amounts of money to better their financial products for individual investors worldwide. In addition some of the top e-brokers in the U.S. now have an international presence, or are expanding their international capabilities. What was incubated in the U.S. a few short years ago is now becoming a major new global industry.

Q:  IDEAglobal recently acquired StreetAdvisor.com.  What attracted you to the company?

A:  We were interested in Streetadvisor.com because, like us, they are known for producing research that is unbiased and independent. Also, they've been producing research in U.S. stocks, an area in which we've been growing our own research capabilities over the past two years. This acquisition accelerates that expansion program because it brings approximately 20 additional professional analysts to our team. We were also attracted by the fact that Streetadvisor.com focused on servicing the needs of retail Internet investors, consumer houses, and active traders. IDEAglobal, on the other hand, had always been focused on servicing the top tiers of the financial community: economic policymakers in governments, professional traders, fund managers, corporate treasurers, and institutional investors. With a web site that had already captured the attention of individual American investors, we knew that Streetadvisor.com would help us increase our visibility, our branding, and our web presence in the retail investor arena.

Q:  You continually stress that you're a global company.  Why is that so important to you?

A:  Global is important because money has no home; it can move in split seconds from one instrument to another, domiciled thousands of miles away. We live in an interdependent world. No country is an island; what happens in Germany and Japan directly affects our households and corporations.  For example, Japan raised its interest rates last week; this will increase the yield of the 10-year note in the U.S. Treasury market, and this in turn will increase the cost of borrowing for mortgages financed in America, which reduces free cash available for investing, may slow the U.S. economy, and may lead the Fed to hold off from raising the Fed Funds rate for a while. If U.S. households had been aware of a chance of a Japanese rate increase (as we had anticipated two months ago), they could have front-loaded borrowing and saved money.  At an investment level, say Nokia (a leading European mobile company) announced a new product, or device, or technology, which is seen as a "killer" development. Nokia stocks would rise; all its direct competitors, such as Motorola would most likely suffer. Motorola stock has a large weighting in the Index, and this would affect the whole market. Just like monitoring weather conditions in the Atlantic and Pacific is necessary to predict the weather in the U.S.A., it's crucial to have a global monitoring capability.  IDEAglobal has a global antenna. We watch and monitor the globe and are able to alert our clients and readers to leading indicators of factors that will affect their bottom line.

The term "global" is not just part of our name.  It is in the bloodstream of the company. From day one our research spanned the world.  Within our first six months we had established operations in London, New York, and Tokyo. We employ 30 or 40 different nationalities. Our advisory board includes people like Helmut Schlesinger, the former president of Germany's central bank; Ng Kok Song, from the government of Singapore's investment corporation; and, until recently, Nick Stern, who is now chief economist at the World Bank. Similarly, our executive board is spread around the world, as is the core group of people who manage our various operations. So in every context -- language, management, marketing, research, analysis, delivery, and more -- we operate as a global organization.

Q:  How does IDEAglobal distribute its content?

A:  We use every available distribution channel. In the top-tier professional space we distribute our content in real time through proprietary networks such as Bloomberg, Reuters, and Bridge/Telerate. Added to this are fax, e-mail, and web site services specifically geared toward the institutional buy-side community.  We also have web sites that focus on the second- and third-tier buy- side: the non-hedge fund community, corporate treasurers, mutual funds, retail investors, and so on.  In Europe, where we've been delivering content through wireless pagers for several years, we're in the process of launching wireless products on an even grander scale that will include cell phones. We're also in the process of analyzing Streetadvisor.com's radio program.  We hope to globalize that medium as well.  And finally, we're looking at web-casting our content and selling it in video and voice form.  Our objective is to become suppliers of financial information anytime, anywhere, on any device.

Q:  How do you get a feel for what's happening in the market?

A:  Basically, we have put together a world-class team dedicated to figuring out not what's happening, but what will happen. Over 75 percent of our analysts have either traded markets, made policy at central banks or governments, or managed money, and are experts in the functioning or markets and market psychology.  In their own disciplines, some of our staff are literally among the best in their fields. All the major players want to talk with us, from the largest financial institutions and trading houses such as Citibank and Goldman Sachs to the U.S. Treasury. We are tapped into the thinking of these players, which gives us a sense of how they will react to unanticipated changes in market moving factors. In other words, we have a good idea of what Wall Street thinks about the Fed, the upcoming elections, or any other relevant issue. This "inside track" allows us to give all of our clients, professionals to retail, advice on how markets will trade, how economic policy will be made, and specific trading opportunities. This, in turn, allows our readers to make more informed and confident money management decisions.

Q:  How did you originally position your company in the marketplace?

A:  When we started we knew we had a real edge in understanding how the global offering and exchange markets work.  We said, Let's create an online research capability and sell it to people right at the top of the investment heap. Our goal was to go to the people who are supposed to know it all and improve the intelligence that drives their decision-making on a daily basis. In doing so we branded ourselves as a top-flight supplier of information. Within eight weeks of selling our first product we were breaking even, with a million dollars of annualized revenue. We then targeted trading desks in dealing rooms less influenced by branding, and people who could make judgments on their own. After reading our content for a week or two they quickly became permanent clients.  With their testimonials in hand we moved on to the more homogenous sales desks of dealing rooms around the world. People in the markets know what's good for them; if you can help them make more money, or manage risk better, they become dependent on your work.

Q:  Clients at different levels pay different amounts for the information you supply.  Exactly how does your multi-tier system work?

A: The best way to explain it is to borrow a metaphor from the world of auto manufacturing. BMW makes a 3 series automobile for the person who wants the credentials and quality but not all the bells and whistles. They make a 5 series for mid-range customers, and a 7 series for those who want it all. Each succeeding series is specifically purposed for the different needs of each segment, and the cars are priced accordingly. But no matter which series you choose, you're still getting a top quality product. We essentially do the same thing with our content. Our equivalent of the 7 series is aimed at our "master of the universe" hedge fund trader or heavy-trading people in investment banks. Our "5 series" is marketed to the institutional buy-side. Our "3 series" is aimed at the active day traders, fast, young people who want to benefit from the best of our intelligence in a compact and easily accessible manner. Most important, we have a Series 1 product, which is free to all retail and consumers, supported by advertising and sponsorship; this is in fact the new IDEAadvisor web site. The key thing is that we don't differentiate. For example, let's say we're putting out a view that the price of Cisco Systems will go up next week by 10 dollars a share. We'll produce many analysis pieces on this view and sell it to dealing rooms around the world. That same view will be expressed to our mid-range clients, at the same time, at a lower cost. Without a time delay, we'll basically offer at no cost to readers of IDEAadvisor.com the same outlook and intelligence. That's what makes us say we're an agent for the democratization of market intelligence.

Q:  Tell me a bit about your background.

A:  I finished my master's degree at the London School of Economics when I was 20. While killing a year before doing my MBA in Chicago, I found a job in London with an American company, based on the West Coast, that was in the business of analyzing the Fed Funds rate and the American fixed income market.  They hired me to set up their international operations. I built the business for them from scratch. And I loved the job.  It was a great experience. I left the company in November 1988. Two months later I founded IDEAglobal.

Q:  If I were an individual Internet investor, what's the key thing you'd want me to know about IDEAglobal?

A:  We want you to know that there is quality analysis out there that is relevant to your needs, and that it is written by professionals with top credentials who not only have a great forecasting track record but who are also creative and imaginative in doing your investment homework for you. Through IDEAglobal and IDEAadvisor.com, you can get access to the same kind of information that influences the Alan Greenspans of this world every day.

For a biography or listing of interviews with Shandi Modi, please contact Dora Vardis at (1) 212-571-4332.