OT -- Jeff I just read an interesting story. Remember when I was telling you about JBOH and how an insider sold a big chunk of the stock way below the market price? The story traveled via Jay Fisk to someone else and from there to another place and finally ended up in the JBOH thread (I was just reading that thread).
These people are amazing! It is as if there is no sense of logic there. Instead of doing the math and analysis, they retorted that since there was some debt forgiven, the transaction was not so bad. Well if you take the debt into account, the stock was still sold for under $2.80 a share. This is still less than one third of the market price! Can't anyone do math on that thread? Why would a $9 stock sell in block for $2.80?
Long time ago when I was briefly on that thread, I pointed out that the name of the game is asset gathering and not pure commission generation. I also pointed out that if the on-line brokerage business proves to be the barn burner that these guys hope for, the big houses will jump into the market and take it over in a snap. The big houses have the money, experties, and the reputation to take over this market if it proves profitable. Some people just don't want to see the facts.
This week's Barron's ranked the on-line brokerages. The top 5 were DLJ, Discover, NDB, Web Street, and Datek. Only NDB is an independent. E-Trade didn't make it in the top 5, Schwab and Siebert which are well experienced companies in their own right were 9 and 10. Ameritrade was at the bottom (20th) and JBOH was not even a consideration. The point being that with all the head start that these guys have had, the big houses managed to over take them faster than it takes to execute a market order on-line. Not to mention that DLJ and Discover customers are a lot richer than JBOH and AMTD customers (enough so that DLJ gives previllages for accounts over a 100k).
Now I told them that the name of the game is asset gathering. Still these guys are valuing the e-brokers on the basis of market cap to customer ratio. Why don't we do the same with the autos and value Hyundai on the basis of BMW's market cap to customer ratio?
The only thing keeping this stock up is its low price (not to be confused with cheap valuation). At $9, a lot of people out there can afford to buy 100~200 shares and collectively delay the drop. This stock is worth at most $2.50 (based on insider block sale) and I am going to short another 2000 shares.
Sun Tzu
Message 8237914 |
