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I got this mailing, too (my IRA is with Brown.) My first reaction
was, short EGRP and SCH before everyone else finds out about it.
(Brown had an ad in Barron's this Saturday touting their new rates,
but no mention of on-line trading...Tuesday should be a very
volatile day for EGRP and SCH.)
My feeling: Not only will E-trade lose some revenues if they match
the price (and it's not a 100% proposition that they will!) but
(more importantly) the _growth_ of new accounts (and, in particular,
of new accounts who trade often) is going to be cut dramatically.
So it's not the earnings that I see endangered; it's the 58 P/E
multiple. I can't believe that someone who's just coming into the
market would pick E-trade at $15 over Brown at $5 (market orders'
prices.) On the other hand, it remains to be seen how many existing
E-trade users will switch over. (Not everyone thinks E-trade's
service is bad, apparently...)
If anyone can win a price war, it's Brown/Chase--they have the
economies of scale to do it, even though they're very late into the
online market.
Disclaimer: I don't speak for my employer. I've never used E-
trade. I have used Brown, and I'm happy with them...and I'll likely
move my on-line trading account back to Brown, whether or not E-
trade takes a hit.
DC |
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