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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (28950)	11/13/2007 1:05:25 AM
From: Spekulatius	Respond to of 78751

ETFC- sorry to hear about your troubles , Paul. I agree it's better to be cautious about Etrade if you fall beyond the insurance limits> I do have a savings and a brokerage account but they fall well within the limits, so i am not that worried. I decided a while ago to have a backup brokerage account, in my case it's a Wellfargo PMA with 100 free trades/year. I kept ETrade because of the convenience ( online data, Marketcaster, free research and because of the 5$/10$ commission structure for ex Brownco customers). if i had a larger account I would look at Fidelity, BofA (if you have some cash and thus take advantage of free trades) and Interactive Brokers (which i like and they have pretty generous insurance limits). I have posted a while ago that i can envision a scenario where ETrades looses they entire tangible equity - this would not take more than 10% losses on their entire mortgage book. I also owned ETrade shares, which i sold at around 15$ after i realized that E*Trade is not a brokerage firm but rather a gigantic lending institution with some brokerage operation attached to it (commission are only about 190M$ last quarter while interest income was 950M$ and interest expense 530M$). Ohh well. Lessons learned - again. I used to really study balance sheets after a disastrous 2002 but i feel i have gotten sloppy in the last few years as the market has become more and more bullish and buying on dips appeared to be safe. Not any more,we are seeing some bad balance sheet habits (SIV, of balance sheet vehicles) coming back to roost.

To: Paul Senior who wrote (28950)	11/13/2007 1:43:00 AM
From: E_K_S	Read Replies (3) \| Respond to of 78751

Hi Paul - I would not put too much confidence in the SIPC insurance as their total assets in the insurance pool is only $1,403,558,035 ($1.4 Billion). (http://www.sipc.org/pdf/SIPC_Financial_Statement%20FINAL.pdf ) Your securities should be safe as long as the brokerage firm has not done some type of fraudulent accounting but the cash reserves could be at risk if a large balance is kept. Many of the firms provide a secondary insurance policy (through lloyds of london) but the recovery amount is capped per account and it would probably be several months (or even years) to access these funds as the account would be frozen pending some receivership review. After your heads up notice several weeks ago, I reviewed my options and opened up an additional treasury money fund through Vanguard (Total Assets $19.7 Billion) and electronically linked (both wire and ACH authorization) all my brokerage and savings accounts so I can transfer idle cash w/i hours to the safest institution. I now keep a small cash balance at my brokerage accounts and move money electronically when I purchase or sell securities to the Vanguard treasury fund or credit union. Vanguard's Treasury fund has the lowest expense ratio in the industry and currently pays 4.65% interest. I also use the Schwab Treasury money fund (total assets $3.79 Billion) (it is closed to new investors) but their expense ratio is twice that of Vanguard. Interest earned is not subject to state income tax but the yield is slightly lower than a regular money fund. It is the safest way to hold idle funds as long as your account is not frozen. Securities can be transfered electronically institution to institution but should not be an issue as long as the brokerage company has not commingled or cross collateralized customer's stocks held on account. As Schwab is my main repository for my equities on account, I discussed my concerns with the VP of Operations and came away assured that equities held on account are quite secure (in terms of accounting for short shares and shares loaned to other institutions) and in no way are commingled or cross collateralized to support Schwab's capitalization reserves. I was concerned that Schwab's new sister company Schwab bank did not have a significant firewall from their brokerage unit. It does and in fact is set up as a separate entity with its own capital reserve originally financed by Schwab without any capital ties to the parent company. I am not sure what ETrade does or how they have financed their mortgage broker arm. I suspect they came into this problem due to their fast growth, lack of internal risk controls and perhaps using too much of their capital reserves to finance and leverage their mortgage business. I do not have an ETrade account only accounts at Vanguard, Ameritrade and Schwab. A friend of mine emailed me a letter they received from ETrade this morning and I can understand your concern. Here is a copy of their letter: "...Too All ETRADE Customers: This is a challenging time for the financial services industry. Bad news in the credit, housing, and stock markets continues to dominate and ETRADE is not immune to these market conditions. However, you, our customers, should know that we continue to be well capitalized by regulatory standards. As a matter of fact, we could absorb an immediate write down in excess of $1 billion and still remain well capitalized. Nobody knows for certain what the ultimate impact will be from these markets, but it is our expectation that news in the market will get worse before it gets better and, armed with these expectations, we are taking prudent measures to effectively manage the company's balance sheet. We will continue to earn your confidence, providing state-of-the-art asset protection, including ETRADE's Complete Protection Guarantee, SIPC Protection for ETRADE Securities customers and FDIC Insurance for ETRADE Bank customers. We appreciate the opportunity to continue to serve you and your investing needs...." ------------------------------------------------------------- The key is to identify a few large brokerage firms to transact your equity business (including your 401K portfolio) use treasury funds and/or credit union accounts (up to 100K insured) to park your cash reserves and establish electronic transfer authorizations between all of your accounts so if you need to move money quickly (in or out of your accounts) your infrastructure is in place. I have enough distributed between all of my accounts so if a freeze is placed on one of the accounts (due to an E*Trade type event), I can still manage my portfolios and if necessary be all in treasuries w/i 24 hours or when trades clear (three days). EKS P.S. I would not be surprised to hear other financial "land mine" announcements so every investor must be diversified and have an exit plan.

To: Paul Senior who wrote (28950)	11/13/2007 2:25:06 AM
From: Madharry	Respond to of 78751

Well two weeks ago I transferred a bunch of assets from etrade to schwab. they seemed to be the most interested in getting my business. I now have accounts with ameritrade, interactive brokers, schwab, and etrade. i had left calls and puts there as well as some low priced stocks there. I am trying to quell my anxieties about what i have left there thinking that they have probably separately incorporated the brokerage and the bank side of things so in all likelihood one part could go belly up and the other could continue to function. one think i would do is make sure your money market funds are in tbills or some such fund. i should do the same. my wifes stuff is with fidelity and scottrade, so we are pretty diversified. at least with brokerage accounts.

To: Paul Senior who wrote (28950)	11/13/2007 7:27:07 AM
From: physcdisp	Respond to of 78751

Paul: If I am reading this correctly, you intend to sell your positions. But you actually do not have to. Just open an account in any other broker online like Schwab or Ameritrade and do an ACATS accounts transfer. Only caveat is that you should not be doing any transactions during the move. The whole process should take less than 7 business days. Thanks

To: Paul Senior who wrote (28950)	11/29/2007 9:49:00 AM
From: Spekulatius	Read Replies (2) \| Respond to of 78751

Paul, would you mind us telling what broker you have been moving assets to? I would be interested in how you rate your new broker vis-a-vis E*trade. I have been opening an additional brokerage account- Fidelity, just in case. Right now I just use it for cash management, not my stock holdings. They have an easy online account transfer system and i do think they are very safe, but commissions are high unless you are an active trader. I like that they have lot's of third party research on stocks.