Axolotl Folly

The DVR Continues to Be a Life Changer

Interesting thoughts. A real game changer for me is Apple TV. I no longer need - or even want - cable TV or satellite. Dish and DirectTV are just middlemen. I download my favorite shows/movies directly over the internet and watch in my living room. Will Google eventually bring out a similar device? TiVo definitely a takeover target here.

Small Businesses Call CIT's Bluff; Government Says 'No' to Further Aid

Great article. Fully agree with the observation that CIT is a zombie bank.
Also relieved that finally the government has decided to NOT bail someone out. The economic process of creative destruction must be allowed to weed out the good companies from the bad, and CIT falls into the latter category - badly managed with a broken business model.

Why Investors Should Avoid American Express

I've seen AMEX advertising CDs at ~2.2%. Now that they have given the TARP money back, looks like they are trying to build a deposit base to avoid issues with securitized debt.

Analysts Will Soon Upgrade E-Trade

That note from Trone was an "Upgrade" - the first of many. The company being sold is far more likely than bankruptcy, which has now been taken off the table. The brokerage alone is worth $7-10B and is generating substantial earnings, and would be no shortage of potential buyers.

Ken Griffin knows more about convertibles than most people, that's how he built his fortune and he wouldn't ruin his reputation by throwing good money after bad with the Citadel ETFC investment.

The HELOC loan portfolio is in run-off mode, and has been for some time now. The losses there will get sequentially smaller.

The equity raise was highly dilutive, but prior to that the stock was priced for bankruptcy anyway. The fact is they were able to raise a large amount of money (relative to their market cap) with no help from the taxpayer. That's something BAC or C couldn't do in this market.

Don't know about you, but I'll take my chances with ETFC ahead of a taxpayer-sponsored full-service broker.

Why Is E*Trade's CEO Giving the Company to Citadel?

The deal is not necessarily a bad one for ETFC holders. The interest expense at the parent will be reduced significantly, and the price of $1-1.20 puts a floor under the stock (which has traded as low as 59c earlier in the year). I think Citadel will ultimately aim to sell out a very large profit in a few years when the E-Trade loan portfolio is in much better shape.

Note that Ken Griffin is now on the board of directors, and as such he would have a fiduciary duty to act in the interests of all shareholders. The deal still needs to be approved at a special shareholder's meeting under NASDAQ listing rules.

Happy investing.

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

E*Trade shareholders who are frustrated with the current management (myself included) can and should vote against the re-election of directors at the coming annual meeting on May 28th. You will have received your proxy voting instructions via e-mail, and you can vote online. If nothing else, it will be a protest vote.

Common shareholders are NOT completely powerless, even though it feels that way. Look at the the recent Bank of America annual meeting where shareholders stripped Ken Lewis of the Chairman title, in a victory (albeit small) for corporate governance.

E*Trade: Why the Strange Earnings Report?

Thanks for the thoughtful article and analysis. I too am mystified at the high level of provisioning. If they've turned the corner regarding loan losses and other credit quality metrics, then why the continued high level of reserve build? It seems contradictory.

At the parent level E-Trade owes $2 billion in 12.5% notes, much of that to Citadel. Any conversion of this debt to equity would devastate current shareholders. Referring to Citadel as a "partner" in the conference call also makes me nervous.