Citadel Infuses E*Trade with Strong, Experienced Management 46 comments
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On November 29, 2007 Citadel invested $2.5 billion of cash into E*Trade (ETFC). Citadel had been “scrutinizing E*Trade’s balance sheet” since July 2007, when E*Trade first reported its mortgage market problems in a conference call. “So Citadel understood better than most—even E*Trade management—not only how serious its problems were but also the real value of E*Trade’s business” (source).
With this transaction, Citadel also became E*Trade’s largest shareholder with 20% of E*Trade’s stock. At this time Citadel owns 89.53 million shares; and holds $1.75 billion of 10-year bonds at 12.5% interest. As E*Trade’s biggest shareholder and debtor, Citadel influenced the appointment of Donald Layton as CEO on March 3, 2008. Layton had worked for 29 years at JP Morgan Chase, but was at that time living leisurely as a retired banker and serving on E*Trades board of directors. Pulling E*Trade out of this mortgage mess was not the way Layton planned to spend his retirement years. Why did Layton come out of retirement and accept the position of CEO? When asked, Layton stated, “The board ask me if I would do it... I didn’t get to where I am without having a competitive side” (source).
Mr. Layton’s commitment to E*Trade Stock and to Shareholders is demonstrated by the fact that all of his 2008 and 2009 incentive compensation is in the form of equity... “nearly 90 percent of his total compensation will be composed of restricted stock and stock options, with no cash bonus” (source).
In just three months, Layton’s team has demonstrated commitment to E*Trade’s shareholders value through frugal cost cutting, non-core asset liquidation to increase cash, and creative and aggressive advertising to strengthen their brokerage activity. Layton’s competitive nature has moved E*Trade rapidly forward in its “turn around” plan as proven by the recently announced 10% cost cut, liquidation of India stake for $145 million and other monetization of non-core assets, and brokerage metrics for April that showed the best DART in the brokerage industry.
But the Mortgage Portfolio continues to hamper E*Trade’s Brokerage Image and analyst ratings. Maybe the trigger is about to be pulled to remove this problem from E*Trade.
This week, on May 27, 2008, it was announced that Senior JP Morgan executive Bill King would be joining Citadel (source). Since Layton came from JP Morgan, this move of talent into the Citadel/E*Trade circle makes sense. Mr. King was co-head of global securitized products at JP Morgan. At Citadel, King will be “head of securitized products—a newly created position—with responsibilities for mortgage securities, asset-backed securities, collateralized debt obligations and related products.”
Citadel now has “a newly created position” and a specific department for handling complicated mortgage instruments; so Citadel and E*Trade will most likely “prudently manage the risk” of E*Trade’s Mortgage Portfolio by transferring it to Citadel’s Specialized Department. This is best for effectively managing the mortgage instruments, and is best for the future success of E*Trade to function as a global brokerage service. With 20% ownership, E*Trade’s success will mean millions of dollars of increased value for Citadel’s 89.53 million shares. Increased stock value will also mean that Mr. Layton will get appropriately compensated for his unprecedented efforts to help E*Trade turn around. Since both Mr. Layton and Citadel will gain tremendous and well-deserved benefits from this arrangement, Citadel may very well quickly pull the trigger on this one.
But wait a minute … what about the other 22% of E*Trade’s Shareholders? The “111.4 million short side” shareholders that own 22 percent of E*Trade’s outstanding shares? With all of Layton’s “turn around,” and Citadel support, why does such a large “short position” exist? Here are three prevalent theories:
Theory #1: The market is going to drop, and all stocks will drop as the market goes down. Rebuttal: Even if the market adjusts downward, a stock price that has been “beaten down” will recover quickly. Price drop will be small, volume will be low, and low price will not be sustainable.
Theory #2: Short interest of 80 to 111 million shares has existed since December 2007 (source). Hedge funds have identified mortgage stocks as great “short position” stocks and have heavily shorted E*Trade because “everyone is doing it” after all it is a “mortgage stock.” Rebuttal: This is an example of Wall Street firms “not dotting the i’s and crossing the t’s when it comes to risk management” as was discussed by Kenneth Griffin (Citadel Investment Group founder) in the recent New York Times article entitled “A Wish List for Fixing Wall Street.” Firms that are blindly shorting without doing homework on business fundamentals will suffer the most from large short positions when a “short squeeze” occurs (source).
Theory #3: Mr. Layton will dilute shareholders by issuing a large number of shares for cash since a large block of shares were authorized (600 million) in the Annual Shareholder Meeting on May 16, 2008. Rebuttal: This type of dilutive stock issuance is highly unlikely for the following reasons: a) cash has been obtained by liquidating non-core assets, and b) impact on stock price would negatively affect Mr. Layton’s compensation, but more importantly would affect Citadel’s Equity Value.
The bottom line is that E*Trade and Citadel are operated by experienced and competitive executives. Donald Layton and Kenneth Griffin are men who have proven success records and great respect in the financial sector. In due time, they will make E*Trade a respected success.
Disclosure: Long ETFC
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This article has 46 comments:
You can read the 'call reports' on Etrade Bank at: fdic.gov, and get a feel for the actual performance of their held portfolio. It is performing and well reserved. Also, we don't know how the portfolio that Citadel bought for 27 cents on the dollar is performing, but my 'guess' is that it is throwing off a ton of cash right now. Citadel's interests and mine, as a shareholder are pretty well aligned right now, and rather then 'fearing' their actions I am cheering them on!
Another nice article Cindy!
Also, your rebuttal to theory #2 just does not hold water. Wall St may be short-sighted, but having worked there for 15+ years, I can tell you they don't invest millions of dollars in a company they don't even realize the sector for, and they are WELL AWARE of what type of company E-Trade is.
That said, I'm also long ETFC, so believe the shorts are wrong - but not for the reasons you mention. Also, given the narrow trading range for this stock over the past few months, I would expect to see some covering of positions rather than a huge squeeze....Still I could (and often am) wrong.
That MBS portfolio is quite solid and should be valued at 100% if not higher.
"At the same time,Citadel registers for "potential" sale over 90 million shares it got for lending ETFC $1.9 Billion at 12.5 % last November. It also registers this debt for "potential' sale at the same time as the share authorization. Curious! "
one should ask what Citadel's intention is ..... MONEY!! of course!
Citadel is basically getting ready to realize their investment and they're certainly going to maximize their profit. they're getting ready for the stock to go through the roof right after they swap out the debt so they hold and controls more shares. KG is a genius setting this whole thing up.... wow. i assume a long term investment is lower in tax even with the hedge funds.... which means they'll wait till they get the tax break?
somebody, please tell me if there is something wrong with my naive assumption.
SA was set up to provide a voice for those without a platform for their views to make themselves heard.It's a good idea and I've read a lot of great articles on this site.
SA was not set up for people to shill their investments although I suppose every good idea eventually gets corrupted and Cindy Reed is simply taking the abuse to its inevitable level.
Some facts:
Cindy went long ETFC and decided to explain her position on SA in mid April.No problem there,essentially what the SA site is all about.
Then Cindy got a "bright idea". There's no real limits on SA,Cindy could flood the news with positive articles on ETFC and theoretically profit for her trouble by stimulating the stock pps.
So,our heroine marched over to the yahoo message board to actually recruit help in perpetrating this distortion of the process.
There she found other shills perfectly willing to join the cabal and promote the stock.Cindy trolled the board under the name savyinvestor11,the entire story can be followed by reading her posts:
search.messages.yahoo....
Her main partners in this blatant and undeniable promotion on ETFC are numbersssss and prescient11, other sympathetic and contributing posters include dig4gem, rossetti2000, methusalaw, piyrwsc, krisscritter_1, quasimatter and epiquette ,to name a few.
What these slimy folks are doing goes against the spirit if not the letter of the rules of SA.I don't like it and I'm going to dog them with this warning.
I have no position in ETFC after selling my last shares in June'07.I was a vocal long for 4 years before that and am currently a very vocal cautionary voice on the stock.All my posts can be found on yahoo under JBMARIA.
Here's the list of Cindy's pumps in chronological order:
Citadel Infuses E*Trade with Strong, Experienced Management
on May 29, 2008 about ETFC
Who Will Trigger E*Trade's Magic Moment - and a 111.4M Short Squeeze?
on May 29, 2008 about ETFC
Seeking E*Trade's 'Magic Moment'
on May 23, 2008 about ETFC
E*Trade: What the Analysts and News Haven't Told You
on May 22, 2008 about ETFC
Schwab, E*Trade: Monthly Activity Comparison and the Industry Average
on May 15, 2008 about ETFC, SCHW
E*Trade's Annual Shareholder Meeting Should Pressure the Shorts
on May 09, 2008 about ETFC
Comparative Price Shopping: Selected Banking, Mortgage and Brokerage Stocks
on Apr 21, 2008 about BSC, CFC, ETFC
E*Trade: Primed To Turn Around?
on Apr 18, 2008 about AMTD, ETFC, SCHW
thanks for your input.
yes, the 12.5% is very good and solid but still can be much less of the 2 choices.... so i'm thinking when the "time" is matured... swap... and for their benefit, i don't think Citadel intends to dump the entire block to lower the price unless there is substantial "reasons".
jbmaria,
being that you're fairly neutral on etfc at the moment, what's your take on what i've wrote? i'm really interested on what you think is a good signal to jump on etfc.
Read the SEC filing about Layton's compensation. If I recall,he gets a $1 million salary,a generous package in the event of any buyout along with lots of options that indeed won't pay out unless the pps eventually rises.Not exactly all or nothing.
And remember when insiders bought it was speculated that they wanted to show support for the company by making token buys at a critical juncture of ETFC's survival struggle.Take a good look at the amounts they bought other than Layton (approx. $1million worth),rather modest amounts for bankers.
I just wouldn't invest based on those two factors but it's your money.
As far as ETFC as an investment, my professional advice would be to stay clear. While it may well rebound, no sophisticated investor would go long here consider a long position here. There is too much uncertainty in the mortgage debt markets with much more expected issues down the road. As well, the market risk remains high.
Cindy is right about one thing though, upon a market sell off ETFC won't get hit as bad and could even rise a bit, as investors look to park money in undervalued stocks (at least temporarily). Her knowledge of this dynamic (which very few realize) gives her credibility in my book.
As one of the few who predicted the collapse of both the real estate bubble and the banking system, I would wait for more positive developments with ETFC. There is nothing wrong with getting in later when the stock is $10.
While ETFC might well rebound, I would say it is going to take a long time. In the meanwhile you will be missing so many other investments with much better risk-reward characterisitics. Still, if greed has taken you, buy the calls and trade them but not the stock.
Understand that Citadel has the ability to do many things that could dilute the heck out of the stock. And as some have mentioned, they can easily convert their shares to debt. This is NOT the stock or the TIME for small-time investors to get involved.
Always do the right thing and you will become a great investor. The risk is too high right now to go long ETFC. And it certainly isn't moving so why expose yourself to both company and market risk? Currently, ETFC is a very bad investment.
Hoping and dreaming gets you nowhere except in the loser bin. Wait for results, wait for real results. Most who chase beaten down stocks have no idea what they are doing. They see a low price and assume the stock will recover. Often they are wrong. Buying distressed securities is something I focus on and I feel that I'm pretty damn good at it. Ihave an excellent track record to show that. I would stay clear at least for right now.
If you want a low risk, greatly undervalued stock, Try CC. In my view, fair value puts them at $14. I wouldn't pay attention to BBI buyout offer. The offer is a joke and CC management knows it. I'd be shocked out of my mind is CC accepted any offer under $12/share. The company has very little risk and NO DEBT (except that used for seasonal inventory). I bought it at around $4 back around 2002 and did quite well for the same reasons. Yea okay, post your senseless reasons why CC is "no good"....the same BS Wall Street utters...dream on kids. The risk reward for CC is much higher than for ETFC. Only a moron would go long financials here. That should be obvious. If you cannot see than then you really have no idea what you are talking about.
I don't like CC because of the earnings projections for 2009 and 2010 are negative 1.84 and negative $1.65. Retail stocks right now are quite risky.
You should change your name to "the Real Shmok". Your analysis is fraught with erroneous assumptions and reveals your low life demeanor. Please stop innundating this wall with your garbage.
CEO Layton has done a great job turning this company around and getting rid of the mortgage business that almost sank them. I am long ETFC for full disclosure and have both equity and option positions. I have realistic expectations and am not pumping the stock, but think it is a great speculative play at this time. Everyone should consider the downside as well as the upside and make their play as they see fit.
I am accumulatiing more options and shares when the price dips below $4. Looks like it may be putting a solid $4/share bottom in if it can close above the $4 mark again today.
Appreciate everyones posts both pro and con. It is good to see everyone's opinion and we can all benefit from looking at upside and downside of any trade. However, there is a lot of BS you have to sort through sometimes and you need to consider the persons perspective as a shareholder, short or long, bearish or bullish and their stake when you read their blog.
You have never disclosed your position on ETFC. That alone makes me suspicious of you. At least Cindy has the dignity to reveal that she is proudly long. You are really getting on my nerves with your brainless analysis and neverending negativity. $1 million dollars investment by individuals other than the CEO are minor investments?!?!?!?! Are you kidding me?!?!?! Have the dignity to say you are short rather try to play it the people's advocate.
Rather than putting out your on frustrations from losing $ on the short side on Cindy I would suggest having the dignity to reveal your position on ETFC and start thinking a bit harder before your type...we are all sick of you spamming the walls with nonsense.
"Was long ETFC for probably 4-5 years,posted as a strong buy during that time,sold all my shares over $22 up to $25,from '06 to mid '07.
Never been short ETFC,never even directly told anyone to sell or short. Have been cautious since $25 and negative on ETFC prospects-all correct calls.
It's all in the posts on the yahoo message boards.
Look it up!
Just the fax."
"As far as ETFC as an investment, my professional advice would be to stay clear. While it may well rebound, no sophisticated investor would go long here consider a long position here. There is too much uncertainty in the mortgage debt markets with much more expected issues down the road. As well, the market risk remains high.
Cindy is right about one thing though, upon a market sell off ETFC won't get hit as bad and could even rise a bit, as investors look to park money in undervalued stocks (at least temporarily). Her knowledge of this dynamic (which very few realize) gives her credibility in my book.
As one of the few who predicted the collapse of both the real estate bubble and the banking system, I would wait for more positive developments with ETFC. There is nothing wrong with getting in later when the stock is $10.
While ETFC might well rebound, I would say it is going to take a long time. In the meanwhile you will be missing so many other investments with much better risk-reward characterisitics. Still, if greed has taken you, buy the calls and trade them but not the stock.
Understand that Citadel has the ability to do many things that could dilute the heck out of the stock. And as some have mentioned, they can easily convert their shares to debt. This is NOT the stock or the TIME for small-time investors to get involved.
Always do the right thing and you will become a great investor. The risk is too high right now to go long ETFC. And it certainly isn't moving so why expose yourself to both company and market risk? Currently, ETFC is a very bad investment. "
Excellent!!
Someday ETFC might be a worthy investment but not until I see the writedowns stop and I wouldn't mind seeing at least two Q's of pro forma earnings.
I won't get the best price by waiting but I'll also not get caught in a disaster either.Buying ETFC now is a crapshoot.
Sure they have a long way to go and it is a risky endeavor, but "crapshoot" would have been a good term for Dec 07 to Feb 08. Since then, they have significantly reduced their riskiest mortgage based loans and had a nice infusion of capital through various methods to improve the solvency issues they had. Some diliution occurs as a result, but overall strenthens this play for the long term.
I certainly consider ETFC as a speculation play at this point, but far from "crapshoot". Know your risk for the downside, but keep loading up on this one. As I stated previously, Jan 09 Call with a $5 strike price is loooking better everyday.
The Fed,the banks and the congress/executive branches have thrown the kitchen sink at the mortgage meltdown. Preliminary evidence gives some indications it may have staunched the bleeding. BUT,if this is only a pause in the downdraft,ETFC and many other paper holders have a realistic possibility to go under.
So,speculation or crap shoot,call it what you wish,I'll wait for more confirmation.
did bahtia just hinted that etfc is ready to ripe?
OK. Writedowns are an artificial accounting requirement. This is what is really going on since my firm actually does forclosures. Banks are now stopping short sales (to be distinguished from stock short sales) of houses. That means, when someone is in default and the house is on the market, they are not allowing the sale to go through for less than the value owed on the house. Also, seconds are buying out the firsts to put themselves in first position on decent collateral. Cash infusions from the Fed are allowing them to do that. So, what happens when they forclose. Are they selling the houses at fire sale prices? Not necessarily. A lot of banks are holding on to the properties and valuing them on their balance sheets at FMV based on a recovering real estate market. Also, they are hiring property managers to rent the property. So--Bank balance sheets are looking better. Also, the big banks are writing legislation to change the writedown rules. There may be some changes to the write downs based on the reassessment of the collateral and the coming recovery in the real estate market.
The reality is that in many markets where real estate was far to expensive, many people will be able to buy properties that were unaffordable, the banks will get paid back, and the bad loans will have been cleared out. None of the banks that I deal with are nearing a liquidity failure.
If everything I've read is sort-of averaged-out, the general sentiment I'm getting from articles I've recently read reviewing ETFC is that interest is definitely growing. The company has little in the way of downside and the big write-offs may well be behind them.
What's more interesting to me is the support for this company from the people who use their services. It's almost a weird kind of cult-like thing! I guess I can understand why to an extent because I know first-hand how great their platform is... quick, excellent tools, great service, banking all in one place, etc. It's really a pretty aweseome thing. It seems that most people tend to agree too. If you look at the CUSTOMER feedback you see that these guys are die-hard... very strange band-of-brothers mentality around this company that you don't see elsewhere. Just look at some of the sites that have recently popped up like supportetrade.com, or the Yahoo, Google, and Microsoft forums where people regularly chat about this stock. The people are die-hard!
Anyway I think ETFC is probably a fairly decent investment at this point. It looks like there could potentially be some crazy upward activity as loans begin coming back into check and especially when this company announces a profit. From what I've read it looks like a profit in the third quarter is going to be most likely. I expect the stock will be considerably higher than $4 when that happens!
www.reuters.com/articl...
needless to say that etfc has prove itself to be strong on innovation. etfc should be trading as strong as schw if not better within 3 to 4 years and will eventually overtake schw if schw doesn't keep up. once the older generation that buys into schw's brand dissipates, schw will need strong marketing/business strategy to stay on top.
here is the point... at any given time i can think of 10 reasons to buy or short any given stock.. you name it and i can find a list of reasons.. now when you look at what can really happen, thats when you have to use logic instead of rationality..
for example, there is a point that nearly a quarter of etrade's float is sold short right now, implying the possibility of a squeeze.. and when you type it out persuasively like both cindy and jbmaria have so eloquently done it is fairly easy to draw possible correlations between what can happen and what will happen. Fact of the matter is, all we really know is that the stock is heavily shorted.. is this an attempt by citadel to hedge their huge position in etrade? or is this speculators making bets on the future of the company? well its neither.. it IS however a combination of the two, which, without insider information is impossible to know or understand..
so anytime ANYONE on this site makes ANY comment in regard to the short float on etrade, they are only presenting a speculation of the facts which until news gets published is unfounded and unproven.. YET, it seems like everyone commenting on etrade seems to sit on the board at the company when they give their points of view and frankly im tired of it..
if people on this site wish to point out that citadel holds 20% of the company and there is a 22% short float... and then draw a line that citadel must be hedging their position.. thats fine... but at least these "people" should point out that they are making a pure speculation because they have no idea why the shares are shorted and who has shorted them. and this is just one example from one point people have used to either be bearish or bullish on the stock..
personally i feel like citadel has made an investment in etrades future. i also understand that etrade offers a more competitive platform for people to trade on, for these two reasons i am long etrade.. it seems unlikely to me that a bunch of ivy league educated finance professionals at citadel with access to all the inside information they could need at etrade would hold the position in the first place if they were not 100% positive that things would turn around. THAT IS MY OPINION... not the FACTS...
the facts are..
1. etrade has lost a majority of its value due to bankruptcy risk
2. citadel took a huge stake in etrade
3. etrade has a huge competitive advantage with its superior trading platform.
4. I am long etrade.
i believe that its easy to draw a line that if citadel takes a huge stake in a very successful company that made one huge mistake, they probably arent going to let etrade fail. if you draw that line, it is then possible to draw another.. if citadel is not going to let etrade fail, then the stock price should not reflect a company on the razors edge of bankruptcy, yet it does at the moment.. and if you believe in the efficient markets hypothesis then you would have to believe that something else is wrong that the public doesnt yet understand or know about. But if that were the case, then why would citadel lend etrade capital when they have have a very clear picture of what faces etrade...
hmmm...
i would not recommend etfc to anyone, but i am long etfc because i am not a strict student of efficient markets and i like to gamble.
i think cindy needs to have a little bit of journalistic integrity when she writes about stocks.. its great to have an opinion, but she is passing alot of opinion off as fact, and i think that she should try to be a little more responsible when other peoples money and livelihood are at stake.. otherwise i view her on the same level as the guys at enron.. she is recklessly pumping a stock for her own benefit, while disregarding the financial viability of everyone she targets with her propaganda..
there is no doubt in my mind she is trying to help everyone, but when she doesnt follow any code of ethics when it comes to presenting fact vs opinion, all integrity goes out the window, and many of the good points and arguments she brings up then become worthless. she is a classic case of someone that has let emotions get the better of them and now she cant tell the difference between what is real and what is opinion.
te.edu
Jun 06 04:20 PM
i have a feeling that jbmaria lost alot of money when etrade got destroyed by citi... yet, all the points he/she brings to the table are valid, the potential for any of these points to occur is somewhat minute. at the same time its obvious that cindy is probably betting the farm on etrade right now, thus she is pumping the hell out of this stock.."'
You have it backwards,I made a ton on ETFC and sold at $25,all documented in my posts,I can get a link for you if necessary.There's still plays in the OLB sector but my premise is ETFC ain't it,at least not now-why take the mortgage risk? Why play the competitor shackled by oppressive debt? where will profits come from now they've abandoned originating mortgages-their beautiful model is now tattered.
Cindy and other pumpers on the yahoo board have conspired to "put some lipstick on this pig" and that's simply wrong.
I don't like CC because of the earnings projections for 2009 and 2010 are negative 1.84 and negative $1.65. Retail stocks right now are quite risky.
Wow. What type of company are you a CFO of? Based on your comment I would suspect you are a bank CFO. You clear have no idea about risk. Anyone long financial stocks right now needs to have their head examined. The worst is not even close to being over.
Sure retail is bad. Can you tell me the condition of the financials? I was merely trading risk by mention of CC. Are you aware of that concept? The fact is that, while CC is not at the top of my list, it has a much better risk-reward than ETFC. In fact it has very little risk currently. The company has NO DEBT (except for seasonal inventory).
ETFC is simply a terrible investment right now, PERIOD. There are so many better opportunities out there. One of them is cash. Why are so many of you missing the commodities market? US assets (other than commodities) are trash right now and the situation isn't going to change anytime soon. And if you want to take a VERY long stance on US equities the last thing to invest in right now are the financials. At the very least, you had better be trading or hedging these stocks with options if you decide to deal with this trash. WAKE UP GUYS.
These people clearly have no idea what is going on with the banks. They listen to the daily "ups and downs" reported by the media because they have no idea what is going on. These are the same people who look to Cramer for investment ideas. They would be in much better shape if they listened to your comments on ETFC instead of maintaining their incestuous love for this stock which they hope will make them rich.
Perhaps the most astonishing thing about these saps is that they aren't even playing this very risky position wisely. They all seem to be holding ETFC instead of trading it or buying calls. Now I know why I am able to make so much money so easily from trading when I get spare time. There is so much dumb money in the market and ETFC has been a big source of this via making everyday Joes think they can compete against the pros in the market.
These posts on ETFC could be used as a case study for a behavioral finance course showing how people who invest in a stock fail to see reason and react with their emotion due to their financial attachment to the stock. It is really both shocking and funny to read the posts on ETFC because you can easily spot who is long the stock and those who have no bias.
To spell it out for so many of you out there who are long ETFC, maybe if you had no stake in the company you might be able to realize the value in jbmaria's posts; then again, I doubt it since buying ETFC right now indicates you lack a fundamental thought process needed for investment due diligence. Maybe we can call this element basic intelligence?
It's really a shame the SEC allowed anyone with a computer to enter the markets against the pros. I hate to see people get taken. But at some point these people can only blame themeselves. If they didn't learn anything from the Internet bubble they won't learn anything ever.
You mean the "pros" behind Bear Stearns? Those Pros?
People stay long because their financial advisers and tax advisers tell them to. At all costs. Which is stupid if it means losing money. Ill pay short term taxable gains on a gain any day.
Also, I think that the everyday, ordinary person should not be trading in stocks on etrade without having some basic knowlege of what the risks are. Otherwise, park it in mutual funds.
I keep wondering, though. If you dont care about etrade , why are you here, posting? Just like JB Maria. What is your point? I have made a lot of money trading Etrade and dont need your advice or your concern. People here seem to be knowlegeable and know the risks. And, it seems, if I can follow your reasoning, that you would welcome us "rubes" entering the market against you pros.
Maybe selling short is what should be banned.
If you also knew what happened, you'd realize that it was a liquidity squeeze out on repos out rumors from Europe. The fact is that the same situation could have happened to ANY bank, commercial or investment. Bear did not "blowup." Of cours enow that the Fed has opened its credit to IBs, they are protected from a fate similar to Bear. Most likely, Bear got screwed by the Fed because they did not help with the bailout of LTCM a few years back.
So yes, especially the pros at Bear, much more so than the others who mainly do retail (sales).
"I keep wondering, though. If you dont care about etrade , why are you here, posting? Just like JB Maria. What is your point? I have made a lot of money trading Etrade and dont need your advice or your concern. People here seem to be knowlegeable and know the risks. And, it seems, if I can follow your reasoning, that you would welcome us "rubes" entering the market against you pros."
Now what kind of idiotic remark is that?? Are you suggesting that this is to only serve as a pep rally for ETFC holders? Are you stupid?? If anything you should welcome and even thank us for our commentary because it is the most accurate I've seen. Your problem is similar to most other amateur investors - you let your emotions rule your reasoning. You want to hear only good things about your stock because it reinforces your decision to buy it. This is a suicidal mentality. I suggest you start listening to the realities because I know damn well what I am talking about and jbmaria seems to know as well.
If you don't like it don't read the posts. And the fact is that these people are NOT sufficiently knowledgable about the risks. That is why jbmaria and I have been so kind as to give our time to point them out to you guys.
It's all about risk and reward and risk is almost always the variable that investors fail to properly account for because it is very difficult to measure. I don't care if ETFC goes to $30, the fact is that the risk is too high and I would not care if I missed the boat. When you can realize that then you will be in much better shape. Only a fool cannot see that the credit crisis has further to go. Why sit and hold ETFC when there is absolutely no stimulus? Ask yourself whether you think Jim Rogers or Warren Buffet would buy it here. They would laugh at you if you asked them about ETFC.
You are explosing yourself to not only specific risk in ETFC, but also sector and more importantly MARKET RISK. When I have to explain these things it reinforces my view that there should be a requirement, like an 5-year course prior to letting the average Joe in the market. It's really frsutrating to see so many poor investment decisions. I do not like to see people lose money at the expense of big funds.
Maybe financials have not "bottomed out" like you say but trying to predict a bottom is pointless. And, the the pros I was talking about re: bear are not the bear analysists themselves. I am talking about the ones who were telling everyone to buy bear stock the week before it crashed.
Also, regarding etrade. It is a good stock to trade with. Right now, it is a good price to average in at before earnings with the price at 3.75. I predict an uptick back to 4.00 again where I will sell. Shorters will come back and force the price down.
I have made 15,000 over the last 2 months just on this stock doing this. If it goes down, I win--Up, I win. If it plummets--well, another buying opportunity. If it goes bankrupt--highly unlikely--that is the risk I take. Its not like this is the only stock I own. Apple, tons of mutual funds, various other financial stocks, pharmas, --A well dioversified portfolio.
I know people that talk big gains in the commodities market. They also have huge risk and can suffer huge losses, especially trading on margin. When they get burned in the traditional stock market, they go there with the promise of quick riches. Nothing wrong with that. Its just that with great promise of reward comes great risk.
Cindy is threatening to insult your intelligence and post yet another article tommorrow,forewarned is forearmed I suppose.
You are clearly in ETFC for the long term. If read all your posts I am confident I would confirm that. Even by your anger in us "realists" making posts about ETFC's risk indicates you are LT. If you were merely "trading" it as you claim, you would care less about criticism on the stock.
In addition, you should know to never trade a dangerous stock because you could easily get stuck or get blown out, if for instance it opens low and you have a stop, or if you have to stop and it gets blasted. So for you to try to discredit the comparison with Buffet is unwaranted, especially since it is clear that most everyone that posts on ETFC is long term.
Okay, so for those who aren't long term, I notice you made no mention of Jim Rogers. The fact is he would tell you that youre crazy doing anything with ETFC, and he would be right. If you wanted to play the high risk game of trading the financials, you still lose because WM has been were all the action has been for months. It has had intraday swings of 15% + ......many many days. ETFC barely moves.
As far as your comment on commodities, you don't have to buy futures. There are many ways to invest or trade commodities. Have you ever heard of XOM or PBR or gold, etc. There are loads of ETFs that mirror many commodity sectors. It is clear to me that you really are rookie. For you to even be thinking of trading ETFC is highly irresponsible. Even I would not touch it here and I shorted the banks in Q3 of 2007. I can tell you I know well what is going on..more so than anyone you can name with the exception of Rogers.
I hope you don't get blown out but from what I have learned based upon dealing with 1000s of people on Wall Street, they never learn the easy way and they never listen to the ones who really know better. In most cases, they eventually must learn the hard way. If it is not ETFC that teaches you a lesson it will another and most likely many more. The absolute worst thing that could happen to you and others who "believe" in ETFC would be for it to rebound, for that woiuld confirm that you really think you know what you are doing.
Only the very best of investors should ever deal with distressed securities. All others who do are fools. I have extensive experience and success investing in distressed securities and I won't touch ETFC here.
One more thing....diversificati... is what investors do when they truly don't know what's going on. This market cannot be hedged by diversification.
jbmaria lol. If anything, this site serves as a contrarian indicator for the investors with the real money.
Your response: "You mean the "pros" behind Bear Stearns? Those Pros?"
Your coverup: "And, the the pros I was talking about re: bear are not the bear analysists themselves. I am talking about the ones who were telling everyone to buy bear stock the week before it crashed."
Come on. Do you really expect me to go for that? You know you meant Bear Stearns. Now I see why you guys are in such denial about ETFC. Denial is a strong part of your personality.