Ecoman--Thanks for your response. I appreciate that you are sticking with a great management team. They were the first in many areas and I think they will continue to bring creative ideas to the marketplace. I first heard Cotsakos speaking at the the UC Berkeley Entrepreneur's forum and was impressed with him there. He received a standing ovation from the crowd of Business School professors and MBA types (many were early investors). That was in 1997, just before the stock lost 50% due, I think, to new competition from Discover, etc.
It's been a rough ride for ETRADE since that fall. If it hadn't been for the Internet flame that was held underneath the stock since last Winter, the stock might have been floundering now. I think competition is intense. Who can really make money off of $10 trades?
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Of course, the company has done well in the current environment of high activity trading. But their expansion into new geographies and niches indicates that they need to push into more profitable markets. It is also a bet that the current level of middle class interest in stocks and financial speculation will continue.
I am puzzled why you say that "on-line investing is the future." I can see only a couple of reasons why:
1. On-line trading is cheaper.
2. On-line trading gives you more control over your investments.
With the first point. A rich investor would not be concerned with a full commission if the service was good. They want good advice from a trusted associate and certainly are willing to pay the fee. The low commission market mostly attracts the middle class bargain hunters with smaller accounts. Those are on a stock buying spree and doing well for now. What will happen if stocks become more of a looser? I guess we agree that the Internet traders will do worse than others from over-leveraging their accounts. So, the bet on ETRADE is a leveraged bet on the continuing bull market.
The second point is certainly true. You get to do your own research, watch the ticker by the hour (minute), read SI, Barrons, WSJ, TMF, TSC, etc. What fun. At least, if your making money. But is pursuing money really living? Watching investments is hard work. Not to moralize. I think that a good bear market will take the fun out of doing your own investments (ie. loosing money).
So, it comes down to where we are in the cycle. I guess we don't know yet. But I have a strong feeling that we are at the top. And if that is true, EGRP is a better short than the average stock. |
