You indicated that Schwab sent you the following reason for placing WIND on the high-maintenance list:
Wind River Systems (WIND) is placed in this group of stocks because of the price volitility(sic) and because their software platforms are used in developing the environment for the Internet and for the Intranet.<\i>
Not true.
When pressed, Schwab claims volatility was the only reason for placing WIND on the list. This argument lacks face value validity because there are over 3,000 stocks with greater volatility than WIND.
When really pressed, Schwab says other, unmentioned factors may have been considered.
When really, really pressed, Schwab says they have the right to put any company they want on the list without explanation. They will not tell you exactly what criteria was used. They will not say a specific factor was not used. This means that the platitudinous reason they told you was not guaranteed to be truthful, and is almost certainly a lie.
I believe WIND was placed on the list for reasons having little to do with the stock, but mainly with Schwab accounts that own stock. Schwab has procedures to restrict margin in individual accounts to control risk. However, with WIND, they took the easy way out by adding it to the high-maintenance list.
Unfortunately for WIND, it is relatively illiquid, so the high-maintenance flag may well have unbalanced its price equilibrium more than would the flag appropriately placed on a high-flyer like Yahoo!.
In a nutshell, your friendly broker, noticing that you had a significant (concentrated) position in WIND, placed WIND on the list, and may have contributed to the acceleration of Friday's crash.
Don't feel sheepish about WIND's subsequent volatility when complaining to Schwab; they may well have contributed to it.
Allen |
