jbmaria

E*Trade: Why the Strange Earnings Report?

Hirendu,
seems to me you are clearly mischaracterizing Schwab's comments in response to a question???

""If the time of a willing seller came along we would be there as a player, but more on our terms," Charles Schwab, the company's founder and chairman, said when asked the brokerage's strategy if regulators were to force E*Trade to sell part or all of its business.

"We're not hostile, we want a willing seller," Schwab said of his firm's acquisition strategy in general, adding an acquisition was not necessary to increase market share."

Schwab Interested in E*Trade: Is E*Trade Interested in Schwab?

Hirendu,
seriously,
are you dating Cindy???

seekingalpha.com/autho...

Schwab Interested in E*Trade: Is E*Trade Interested in Schwab?

rl,a year ago you wrote:



rl27 CommentsFollow
with etfc first lien performing worst then expected, it is also expected that it would perform better over time as the storm blows over. even if the credit market continues to crumble, the majority of the stressed borrowers would have already folded. in the near term, we should expect less then "wow" results from etfc but it is very hard for me to see etfc not to at least double by next year. i'm trying pretty hard not to build a high expectation but at the same time, i'm expecting to at least triple my investment in the next 12 month period. am i expecting too much? is my thinking overly optimistic? if i triple my money in a year, is that not an "wow"? Apr 28 01:17 PM|Report abuse|Link|Reply00

Your credibility is a tad thin.
Just an observation from reviewing your historical comments on ETFC.

E*Trade: More Good News

ETFC currently owes Citadel $2.1 Billion at 12.5% interest,planned to grow to $2.5 Billion in the next 2 years:


'We have the option to make interest payments on our springing lien notes in the form of either cash or additional springing lien notes through May 2010. During the second quarter of 2008, we elected to make our first interest payment of approximately $121 million in cash. During the fourth quarter of 2008, we elected to make our second interest payment of $121 million in the form of additional springing lien notes. We expect to make our next three interest payments, which equates to all interest payments on the springing lien notes through May 2010 in the form of additional springing lien notes. The November 2010 payment is the first interest payment we are required to pay in cash."

So,as of now they are on the hook for:
"1) The $1.9 billion in principal does not include the $121.0 million of capitalized interest in November 2008, which resulted in $2.1 billion in principal of springing lien notes outstanding to Citadel as of December 31, 2008."

E*Trade's Brokerage Business Shouldn't Be Ignored

orca,

I miss Cindy too.

Tax Loss Harvesting & the 'Wash Sale' Rule

As I continue to beat this dead horse,I ran across this article which I'll post here for informational and archival purposes:

Bankrate.com
Don't let your tax break get washed away
Tuesday January 13, 6:00 am ET
Kay Bell

Your portfolio took a beating, but you were able to use that to your tax advantage by selling some losers. Now one of your former stocks has turned around and you want it back.
In this tax tip:

ADVERTISEMENT

• No loss now, but later
• What exactly is identical?
• IRA swap eliminated

Don't be in too big of a hurry to call your broker. If you repurchase the stock too soon, you'll violate the wash sale rule. This regulation prohibits a shareholder from selling a holding at a loss, using that loss for a tax break and then turning right around and buying the same or similar stock.

It's designed to "prevent the deduction of noneconomic losses," says Selva Ozelli, international tax editor for RIA, a New York-based provider of tax information and software to tax professionals. That's basically what you're trying to do, Ozelli says, if the whole purpose behind a transaction is to generate a tax loss, but you believe in the investment itself.

Most investors encounter the regulation when they reacquire a stock soon after selling, but it works the other way, too.

Specifically, the law says you may not take a tax loss on a security sale if you have obtained the same or a substantially identical security 30 days before or 30 days after a sale. So don't try to get around the rule by buying more of a stock just before you dump the poorly performing shares you already own.

No loss now, but later
When a stock transaction violates wash sale guidelines, the Internal Revenue Service will not let you take the tax break immediately. However, all is not lost.

"The deduction of your loss is postponed to a later date," says Ozelli. That is, the disallowed loss is added to the cost of the new shares you bought. This gives you the tax basis for the holdings, which you'll use when you sell the reacquired securities.

For example, Jim bought 100 shares of Stock A for $1,000 and sold them for $750, producing a $250 loss. Fifteen days later he bought 100 new shares of Stock A for $800. Because Jim bought identical stock, he can't immediately take the loss. But he can add the disallowed $250 to the $800 price of his new shares, producing a basis of $1,050 for the new shares. When Jim sells his reacquired Stock A shares, the adjusted basis will, depending on the sales price, produce a bigger loss to claim or reduce any taxable gains.

What exactly is identical?
The wash sale timing considerations are pretty straightforward. That's not necessarily the case for the rule's other key component: the nature of the sold and repurchased stock.

Investors who deal in individual stocks usually don't have problems. It's easy to tell what stocks the IRS might deem substantially similar. But what about mutual funds?

Let's look at Jim's portfolio again. This time he's closing out his Fidelity XYZ Telecom Fund account at a loss. He believes, however, that the sector is poised for growth so he uses his XYZ proceeds to immediately buy shares of Vanguard ZZZ Telecom Fund. Since both funds are invested in telecom holdings, has Jim violated the wash sale rule?

While technically it looks that way, some tax professionals say Jim is in the clear thanks to IRS vagueness when it comes to wash sales and mutual-fund trading.

"Generally speaking, there are no hard-line guidelines in regard to what is substantially identical in the mutual fund context," says Ozelli. "Rather, the taxpayer has to consider all the facts and circumstances in each case, and there are lots of different interpretations through the courts and private IRS rulings."

Shares issued by different fund groups are not likely to be considered substantially identical, says Ozelli. It gets a little dicier if you shift funds in the same sector within one fund family, for example, going from Fidelity XYZ Telecom to Fidelity Emerging Markets Telecom. Here again, says Ozelli, the facts and circumstances would make the difference, but the IRS would likely take the position that different classes issued by the same fund family are substantially identical.

And, the tax specialist cautions, the IRS always has the power to disregard a sham transaction.

"Even if you made it look like a substantially different security," says Ozelli, "if the IRS identifies that there is no economic substance to the transaction, it will be disallowed."

IRA swap eliminated
Some investors had tried to work around the wash sale rule by buying the sold or similar stock for an individual retirement account, or IRA. In these cases, they argued, because the retirement plan (Roth or traditional) is separate from the taxpayer's individual personal holdings, the wash sale rules shouldn't apply.

The IRS, however, has officially nixed such transactions as a way to circumvent the wash sale rules.

In Revenue Rule 2008-05, published Jan. 22, 2008, the IRS says "if an individual sells stock or securities for a loss and causes his or her IRA or Roth IRA to purchase substantially identical stock or securities within a specified period, the loss on the sale of the stock or securities is disallowed under section 1091, and the individual's basis in the IRA or Roth IRA is not increased by virtue of section 1091(d)."

Essentially, that means the IRS recognizes that the individual investor and the IRA investor are one person, so the wash sale rules apply.

Tax Loss Harvesting & the 'Wash Sale' Rule

Thanks again Richard.
You quoted Congress' intent :

"Overall, he pointed out that the intent of Congress in legislation was to prevent investors from recreating the same economic position and risk exposure within the waiting period."

Not to be argumentative but with 2X risk exposure,the argument could be made for the allowance.

But OK,let's say he can't claim the loss. Now what?
How can he recapture a legitimate long term loss on IWM for his return. Is it gone forever or is there a procedure for undoing the damage?

Tax Loss Harvesting & the 'Wash Sale' Rule

Thanks Richard but at the risk of sounding "dense",the switch will not allow claiming the loss or will legally allow the loss to be claimed?

Your response was bit confusing:

'I will offer my uncertified personal view that
substituting a 2X fund tracking the same index as a 1X fund you sold
for a loss does not qualify under the Wash Sale Rule."

My thinking was that to get the 2x leverage,derivatives ,not the underlying securities were used?

TIA

Tax Loss Harvesting & the 'Wash Sale' Rule

Good article Mr. Shaw.
I think I may have screwed up inadvertently if I'm reading this right.
A client I advise had a loss in the IWM ETF. To capture the loss,I simultaneously sold the IWM and invested the money in the UWM ETF,which is a 2X leveraged play on the same underlying index,the Russell 2000.

Simple question,is it a violation of the wash rule?
Does the 2X leverage eliminate or negate the “substantially identical” caveat to the wash rule?

Examining the "Unprecedented Demand" for Gold Eagle Coins

Things I don't know:

Where does the Mint get the gold-Fort Knox? On the open market?

Who's watching the gold in Fort Knox? Do citizens get to know how much is there,does the amount stored rise and fall and if so how?
Heard crazy rumors the Gv't. is not letting us know that we have little gold left in Ft. Knox-any chance?

No,I don't wear tin foil hats-just curious.

S&P Upgrades E*Trade Despite Struggling Financial Sector Peers

Ah,those fickle analysts:

S&P REDUCES RECOMMENDATION ON SHARES OF E TRADE FINANCIAL TO SELL FROM HOLDFont size: A | A | A
5:58 PM ET 7/22/08 | S&P Marketscope
RELATED QUOTES


4:00 PM ET 7/23/08
Symbol Last % Chg
ETFC
3.41 -15.80%
Quotes delayed at least 15 minutes

Q2 loss from continuing operations of $0.24 vs. EPS of $0.37 is wider than our $0.15 loss estimate. Loss provision for home equity portfolio was wider than we expected and credit quality declined, while losses on security sales offset better net interest margin and cost controls. Losses from investments in the GSEs will hurt Q3 results, but capital raised from other asset sales may offset. Net account growth also slowed. We widen our '08 loss estimate widens to $0.65 from $0.49, but keep target price at $3, a discount to a declining projected book value as writedowns continue.

Countering the AP's 'E*Trade Financial Earnings Preview'

Cindy ,you wrote this convoluted paragraph;

"Bank Earnings Exceed Mortgage Losses: In their June 30, 2008 press release, E*Trade announced that it has been able to “generate earnings in the Bank to absorb credit losses in excess of management’s current three-year forecast.” E*Trade investor relations has confirmed multiple times that the word “EXCESS” in this statement is related to the earnings and not to the losses. In other words, in is wrong to interpret this as saying losses are in excess of management’s forecast; the validated disclosure from this message from E*Trade Management is that earnings are exceeding losses."

Do we need a retraction in light of earnings or am I just misreading it?

Countering the AP's 'E*Trade Financial Earnings Preview'

Cindy,didn't you base an entire polemic on an S&P upgrade?

S&P REDUCES RECOMMENDATION ON SHARES OF E TRADE FINANCIAL TO SELL FROM HOLDFont size: A | A | A
5:58 PM ET 7/22/08 | S&P Marketscope
RELATED QUOTES


4:00 PM ET 7/23/08
Symbol Last % Chg
ETFC
3.41 -15.80%
Quotes delayed at least 15 minutes

Q2 loss from continuing operations of $0.24 vs. EPS of $0.37 is wider than our $0.15 loss estimate. Loss provision for home equity portfolio was wider than we expected and credit quality declined, while losses on security sales offset better net interest margin and cost controls. Losses from investments in the GSEs will hurt Q3 results, but capital raised from other asset sales may offset. Net account growth also slowed. We widen our '08 loss estimate widens to $0.65 from $0.49, but keep target price at $3, a discount to a declining projected book value as writedowns continue.

Metrics, Mortgages and Analysts

Well Cindy,all your "good friends" on the ETFC board seem to be missing you?

messages.finance.yahoo...

Metrics, Mortgages and Analysts

seekingalpha.com/artic...



......"A Final Word of Caution
Those of you looking to make easy money in the financials like E-Trade (ETFC) need to think again. The risk is too high right now. I find it amazing how so many who have taken a long position in ETFC cite the company's impressive book value as some sign of value or financial strength.Understand that book value is used in the event of liquidation of assets in bankruptcy and therefore usually has no impact for common stock holders. In addition, book values of financials are meaningless since the banks have overvalued their debt. Finally, book values typically have no way of fully accounting for the type of massive leverage the banks have built.If you were not aware of these basic facts, you really need to sit this one out, save your cash and wait for the next bull market, when nearly everyone does well.

Even Citibank (C) has considerable downside from here, as does Bank of America (BAC). Over the past year, I have made many recommendations to short the financials. Earlier in the year, my attention was focused on Lehman Brothers (LEH) and American International Group (AIG). The story on these guys is far from over but I would wait for a rally before going short again.

The next short to consider will be Merrill Lynch (MER). When MBIA (MBI) and Ambac (ABK) get another downgrade, Merrill will be in deep trouble due to their large exposure to insured mortgage debt. That said, you might be wondering why Merrill is already near a year low. It's quite simple. All that I have told you about Merrill's risks is widely known. But that does not mean it can't go lower. However, unless you are very experienced with shorting, you need to stay away from this strategy.

Will there ever be a time to pick up the financials? I doubt I will bother to pick up any of these (other than for short-term trading) even when I sense the bottom has been reached because the climb back up is going to be very slow and small. The dilution that has and will continue to occur will crush earnings for many years."