Digital signatures ahead
Bills wind through D.C., sparking mini rallies
By Emily Church, CBS MarketWatch
Last Update: 1:26 PM ET Dec 23, 1999 Commentary Section
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NEW YORK (CBS.MW) -- A column last week on the prospects for online options trading drew a batch of e-mail, including an intriguing point from reader Jim Lucier. See column.
Digital signatures would be "steroids for the online financial services,"
Jim Lucier
D.C. analyst
The Washington D.C.-based analyst for Prudential Securities is keeping an eye on the progress of a new federal law that -- "one hopes," he writes -- will create uniform standards for use of digital signatures.
Digital signatures, of course, replace the pen signature. They're not widely used in contracts. But Internet-based companies in the business-to-business space in particular are banking that will change.
Increasing interest in the issue is likely behind the run in VeriSign (VRSN: news, msgs) stock, which is trading at the high end of its 52-week range, Lucier argues. Internet security company RSA Systems (RSAS: news, msgs), also near its high, is possibly another beneficiary.
Entrust Technologies (ENTU: news, msgs), Baltimore Technologies (BALT: news, msgs), Network Associates (NETA: news, msgs) and Cybercash (CYCH: news, msgs) are also stocks with a digital signature play component, Lucier notes.
There are two bills on the subject and both have been passed by their respective houses -- the Millennium Digital Commerce Act in the Senate and E-Sign in the House. The two are pretty close. Lawmakers ought to be able to hammer out a compromise, even though consumer groups have held them up amid concerns about whether industry will have to abandon consumer notices.
Lucier thinks the groundwork has been laid for a successful meeting in conference on the bills. He thinks the legislation could be among the most important that lawmakers will pass next year.
Wider acceptance of digital signatures could open the gates for the e-banks and brokers next year. The law would be "steroids for the online financial services industry," says Lucier.
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"The reason why is that (the e-brokers) can lead a customer up to the brink, but in virtually every case, they have to wait two weeks until they mail the customer and the customers mail them back, whether it's to open an IRA or to options trading."
Everyone in retail services knows you can't meet your entire demand with a "hesitation waltz" like that, he added.
Use your imagination beyond the e-financial services: small and medium-sized businesses switching to digital signatures could move e-commerce in lots of unexpected directions, not in the least is procurement. What of electronic agents, or bots, that could search the Web, find and purchase products that meet a company's specifications?
Windows 2000 comes with digital signature and public key encryption capability -- the basic tools for paperless operations, Lucier notes.
Index or not
It's probably starting to dawn on a number of investors right about now that a goodly number of stocks have put in a less-than-stellar performance this year. Even among those who thought they were smart enough to get into an index fund.
Year-to-date, the S&P 500 stocks have returned 16.83 percent. That's good stuff... they should be pleased, but I'll bet some of them get more than a bit miffed when they look at the year-to-dates of the Nasdaq 100: up a cool 94.02 percent.
Seems not even index investing is delivering the market's gains. As a result, strategist Bill Meehan at Cantor Fitzgerald thinks quite a few investors are going to bail out of index funds and start buying the top 50 or so performers -- the big engine of this Nasdaq-led bull market.
That would be a shame.
Index investing doesn't mean you can shut out the trends forever. It was definitely the hot ticket a couple of years ago, and it's still one of the best -- if not the best -- ways for a long-term investor to be in the market. But it's one arm of a strategy. This week, we're running a column on what the Wall Street strategists are looking for in the coming year. Quite a few are recommending investors look abroad for the strongest returns.
Meehan agrees with that idea, and he suggests investors take a look at international funds. It'll be fun to revisit that in December 2000!
Emily Church is New York bureau chief for CBS MarketWatch.
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