Opportunities in Cloud Computing

09/18/2012 4:52 pm EST

Focus: TECHNOLOGY

John Netto

Author, The Global Macro Edge

John Netto talks about the trading and investing opportunities in cloud computing technology.

My guest today is John Netto.  We're talking about the next big thing in technology, cloud computing, and how you can profit from that.  So John, talk about cloud computing in that technology sector.  Where can I make money there?

There are a lot of ways to make money.  When we think about cloud technology—that's powering the next generation of investment in those tools out there.  When you look at conventional investment metrics, we're looking at legacy issues like custodial issues where platforms out there—you had to be in a certain brokerage firm, you had to use a certain provider. 

When it comes to cloud technology, what I'm focused on is how we can take technology and be able to be custodial-agnostic, technology-agnostic, broker-agnostic and allow me to from one account map to multiple managers and multiple strategies and gain the power of diversification, which up until now because of technology was just simply something that wasn't available.

Is there software now that I can do this with?

Sure, Citrix Technology is a firm that is powering cloud investments.  They allow an investor who may have an account at one brokerage firm to map their capital, while still keeping control of their capital, to multiple providers and multiple strategies. 

So if I want to invest in a global macro fund, if I want to invest in a long/short fund, a mean reversion fund, a trend-following strategy, I can through this cloud technology upload all these different file formats, all these different statements, and all these different positions into the cloud and have an instance of—let's say my hometown where I'm domiciled and set up, and from that go ahead and use the technology to manage the risk and control that risk and quantify that risk.

Is this for someone who maybe has a huge portfolio? Or, if I've got a $100,000 account, even a $50,000 account, should I be using something like this as well?

Cloud technology is available on a number of different levels.  So if I'm a large proprietary trading shop right now, this is technology that I'm already beginning to use so that I can further diversify and further build a more robust portfolio.

But, it's also technology that's being made available to mainstream investors as well.  Even if you don't use the technology directly, you can still use the products that embrace that technology, because you can still benefit from this cloud technology.

Alright, so I know you've bought into the cloud, you believe in the technology and it's going.  How about the companies providing cloud technology not just in the financial space, but otherwise?  I mean, do you think those are a good investment right now?

I think they are.  We're seeing the strength of the NASDAQ market in cloud providers out there. How well they've done and how capital flows, or acknowledging the fact that eliminating redundancy, incorporating technology that is scalable—these are hot-driving themes that we are seeing both at this show and throughout the entire industry.

It's not a surprise that when it comes to the financial markets, those who can adopt this technology early will be the leaders for the next generation of investing going forward.

If there's a caveat in all of this, I know that when Amazon Cloud service goes down some very large web sites go down.  Do you see this as a problem in terms of if there's a problem with the system, I can't get to my money, I can't make my trades that I need to do?  What do I need to be aware of there?

Well, clearly disaster-recovery and business-continuity plans have always been important.  They're just as important when it comes to incorporating cloud technology.  So having a robust business-continuity plan which has a brick and mortar solution behind it is something a lot of these firms are looking at. 

Ultimately, we're dealing with something in the cloud where there's a virtual aspect to it, but at some place in the world there are still servers, there is still infrastructure that needs to be set up as a result.  So having those networks, having those redundancies in place so that if there is a technological challenge that you face you have a plan that can facilitate, and you can still continue in your business and making your investments.

How about internationally?  If I can trade on my mobile phone as long as I have an internet signal or a cell phone signal, internationally it may be not as ubiquitous as it is in the United States. What do you see going on there?

Well, throughout developing nations this is a trend. It's not only in the United States, but Europe and parts of Asia.  Again, it's about the need.  What we're seeing is more top-end people, business to business.  Cloud growth is obviously quite huge and growing even more rapidly. 

If I want to make an investment in Asia, and I were to have profits that weren't denominating in yen, I need that cloud technology so I can upload that data, have that repository. I own a portfolio of stocks in the Nikkei.  I have managers over there.  I clearly want a technological presence.  I clearly want to use the cloud to help me monitor those global investments and process that information, analyze that information, and aggregate that information so that I can diversify myself geographically from a currency perspective, from an asset class perspective.

And this is the kind of stuff that was not available to the retail trader, only huge institutions even a couple of years of ago.

It's amazing how much technology has progressed and how mainstream this has become.

John, thanks for your time.

Thanks, Tim.

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