When I started investing 9 years ago, I deliberately avoided the PC box makers because the argument was there aren't a lot of significant barriers to entry. Well, Dell has shown that you don't have to have a high-margin business in order to succeed, you just have to do it more efficiently than the others.
When you look at the internet brokers, first there where only a handful, then there was a glut, but now, there aren't a lot of new comers anymore. They have realized that they couldn't just compete on price. ETRADE's advantage is they set their commission rates low, but not the lowest. Could you imagine these other brokers raising their rates because their profits are being squeezed because of the need to spend to scale up their technology. Etrade hit the pricing sweet spot.
At some point, I expect some consolidation in the industry and this will help Etrade tremendously. Just when the PC boxmakers were narrowed down to a handful, that was when Dell really took off. I have always enjoyed gambling, but with Etrade, it's like owning the casino. Longs and shorts bet, the house always make the money. Perhaps the bull market will end someday, but as long as it remains interesting, as long as there's volatility, Etrade will make money.
Better than a casino, cause you don't even have to build a hotel and give the guests all the perks. And you don't have to payoff the mob. |
