<<Customer assets are down because the market is down.>>
Exactly. Thanks for pointing that out. The market seems to have missed that point, although it was clearly stated by analysts:
"Net new assets in May totaled $8.6 billion at Schwab, while total customer assets were $560.7 billion in May, down "less than 1 percent" from April, the brokerage said. The slip in total assets was related to market downturn in May, analysts said."
Then, not only was the asset decline explained by the market downturn, the reasons for that downturn were further elaborated upon:
"More investors were seen staying on the sidelines in May, with expectations of hikes in interest rates putting a damper on activity, said said Kenneth Kraska, president of The R.J. Forbes Group, a deep discount broker.
"It's been quiet, and June looks quiet, " he said. "People bought Internet stocks like AOL at higher prices and they're holding on to them."
And yet the following GOOD news seems to have been overlooked:
"Schwab said daily revenue, or commission, trades averaged 150,000 for the month, which is down from 207,700 in April, analysts said. Average daily trades, however, rose 78 percent from May 1998."
Furthermore, the total assest are down less than 1% while S&P was down 2.36% for May.
So... trading volume was down, as to be expect due to the market as a whole; revenue was down, again due o the market; average trades were WAY up; and Schwab's total assets beat the market. Am I missing something? Where is the bad news?
And last but not least, the analyst at Banc Boston Robertson Stephens said that these May numbers have not caused him to change his revenue or earnings estimates for the brokerage for the quarter.
Well folks, someone please help me. I'm new to the market but I'm no dummy. I can NOT speak to whether or not Schwab us still over-valued. Personally I don't believe so but I can't back that up. What DOES scare me, however, is this incredible knee-jerk reaction by the market. The news was not unexpected and was not all that bad. In fact, there was much GOOD news in the report. It only looked bad if all you read was the first line "Average daily trading volumes dropped 28 percent in May at Charles Schwab against a banner April..."
Once you read past that it made perfect sense -- it sure didn't seem like it boded an impending 'disasters'. In fact, didn't the report suggest that Schwab weathered a brutal May market pretty well? Help a newbie. Point out the flaws in this logic. Educate me.
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