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To: GST who wrote (39872)	2/13/1999 2:49:00 PM
From: Glenn D. Rudolph	Respond to of 164684

Will ETrade Move Beyond ETragedy? Visit ETrade Group Inc.'s headquarters in Palo Alto, Calif., and it feels more like a frenetic startup than an established brokerage. The average age of ''associates,'' as employees are called, looks to be 25. On the walls are ETrade's ads, with headlines that scream: ''50 Reasons To Leave Your Broker.'' Over the past three years, ETrade has built one of the most successful brands in financial services--by zinging Wall Street. Just talk to CEO Christos M. Cotsakos, a former executive at A.C. Nielsen Inc., and get ready for an earful: ''[Full service firms] have been absolutely irresponsible. They have made so much money in this market, yet they haven't delivered easy, value-added solutions to customers,'' he says. ''For us, this is a jihad.'' CLASS ACTION. But Cotsakos might want to spend less time slamming competitors and more time addressing ETrade's own problems. During the week of Feb. 8, ETrade's systems were down for three consecutive days due to computer failures. The problems even spawned a Silicon Investor Web site dedicated largely to ''ETragedy's'' problems. ETrade also acknowledged that on Feb. 9, it was hit with a class action in Santa Clara County. ETRade spokeswoman Lisa Nash says the problems were caused by an effort to upgrade systems and only 2% to 5% of customers were affected. From Feb. 2 to Feb. 10, ETrade's stock fell 35%. ETrade's main problem is it is growing too fast. ETrade, with 800 employees and only one retail office, is the third-largest online broker. It didn't offer Internet trading until February, 1996. It was the first Net company to make money, but it lost $200,000 in 1998 and a further $13.2 million in the first quarter of fiscal 1999. Revenues in 1998, nevertheless, were $245 million, excluding interest income. But investors are looking past today's losses and focusing on ETrade's phenomenal growth. In 1998, ETrade's accounts doubled from the prior year, to 676,000. Its stock has shot up 72% since yearend 1998. Despite constant promotion of itself as a technology company, it actually spends three times as much on marketing as on technology. In addition to its low fees, ETrade's growth is based on big marketing spending--$150 million in 1999--and nonstop hype. It is staking out new U.S. markets, such as equity underwriting, and plans to license its name in 36 countries for upfront and operating fees. Cotsakos' crusade is to make a fundamental change in investing--by replicating full-service firms' spectrum of services electronically but without using human brokers or building branches. ETrade is trying to move away from just selling discount trading. Instead, it aims to offer a variety of financial services, from bonds to mortgages. ''Our model is based on bringing the power of the Internet to the consumer,'' says Kathy Levinson, ETrade's president. ETrade doesn't even like to be categorized as a brokerage. It sees itself as a pipeline that can deliver all sorts of products to consumers, from books and CDs, which it already sells on its Web site. ''Brokerage is just content,'' says Levinson. Nevertheless, most online analysts are recommending ETrade--with a few caveats. The firm intends to spend heavily on marketing to grab new accounts so will lose money for three quarters. But ETrade's finances are fairly flush. Japan's Softbank Corp. paid ETrade $400 million for a 27% stake. The cash may be invested in small Internet-related startups. James Marks, an analyst at Deutsche Bank Securities Inc. in New York, describes ETrade as a ''$400 million blind pool with operating brokerage attached.'' What's next? Cotsakos is eyeing banking and insurance. And he wants to link ETrade's international franchises into a global, 24-hour, cross-currency customer trading system. These ventures haven't diverted him from castigating the big brokers whenever he can: ''Are we are going to put 'em out of business? No. But we are going to change their business model.''

To: GST who wrote (39872)	2/13/1999 2:52:00 PM
From: Mark Fowler	Read Replies (1) \| Respond to of 164684

Michelle--not sure what to include either--if I go to Las Vegas and put 50 bucks on red 9 -- I am saving, yes? Or placing a bet which is as good as saving, cause I couldn't just lose the money, yes? Perhaps the distinction is between more or less speculative uses of money -- by that score we have NO new net savings -- everything has become speculative--sometimes in the extreme (AMZN),<< Gst is there a point here my head is spinning could you explain this to us less fortunate ones thank you? ;-)

To: GST who wrote (39872)	2/13/1999 3:01:00 PM
From: Sarmad Y. Hermiz	Read Replies (1) \| Respond to of 164684

GST, < if I go to Las Vegas and put 50 bucks on red 9 -- I am saving, yes? > This is not a good example. The simple explanation is that personal consumption exceeds personal income. Capital gains are not counted in personal income, even though they provide the funds for the excess consumption. Personal income includes wages, dividends, interest, rent... In other words, we are living beyond our current means because we are spending some of our past savings (capital gains). -Sarmad