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E*Trade Financial: Laying the Foundation for Success

Dan Blue wrote:

What you failed to mention is as of last year Etrades mortgage portfolio is 11.8 Billion. Etrade perdicts that they will write down 1.5 billion over the next 3 years.

Response:

I am going to guess that you didn't listen to the conference call, and you have been repeating that information because someone else who didn't listen to the conference call told it to you. Am I right, or am I right?

If you HAD listened to the conference call, you would know that E*Trade DID NOT AT ALL predict a $1.5 billion loss in their present HELOC portfolio. What they said was:

a) The BOD expects the company to show a profit in 2008.

and

b) for those who question that forecast, the BOD believes they used ultra conservative figures such as a POSSIBLE $1.5 billion loss.

The BOD went on to say that they didn't at all believe that they would see $1.5 billion in losses, but had used that number simply to produce a conservative model and to satisfy the doomsdayers who might try to argue that they were unrealistic.

In REALITY, the E*Trade HELOCs have an average credit score of 732 and are performing twice as well as most others, and if we assume that an average of 50% of failures would be recovered by equity foreclosures, to get a $1.5 billion loss, would take $3 billion in foreclosures. That is 25% of their portfolio! Ladies and gentlemen, if you think that 25% of people with an average credit score of 732 are going to fail in the next two years, then you are not talking recession, you are talking depression and armageddon.

I really think that kind of talk is a bit overboard. Lets get back to reality, shall we? The E*Trade BOD is confident that they will generate a profit EVEN IF the country goes into a depression and they were to have to write off an almost unrealistic amount of $1.5 billion.