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Non-Tech : Derivatives: Darth Vader's Revenge -- Ignore unavailable to you. Want to Upgrade?

To: accountclosed who wrote (932)	4/18/1999 5:16:00 PM
From: Henry Volquardsen	Read Replies (2) \| Respond to of 2794

A, I have to give a disclaimer first. I have equity stakes in large cap banks and insurers. I also have an equity interest in a non public internet broker that is considering going public. So I have a personal interest in both sectors staying strong. The outlook for the big banks and insurers depends on your economic outlook. The current environment is very positive for US financial stocks. Growth is good, loan demand is good, inflation is low. These are all positives. In addition the problems in the Asian and South American markets are providing US financials with an excellent opportunity to acquire businesses at very attractive prices. As readers of this thread know I am not overly concerned with the size of derivative risk. So my own opinion is that, given the outlook for continued solid growth and low inflation plus the unique opportunity to acquire strategic businesses at attractive prices, financial stocks remain attractive holds. They are a bit expensive to acquire at these levels but if you already own I do not think it is time to sell. My biggest concern for this sector would be if it appeared we were going to see a recession or a return to inflation. Internet brokers are a much more interesting question. There is no question in my mind that the internet is going to completely transform the brokerage industry. Within several years any brokerage firm that does not provide internet capability will be risking its survival. But I do not believe this will translate into all of the current internet brokers being big winners. The situation is going to evolve considerably. The major brokerage houses will have to respond. There are several ways they could go. One would be to build a system de novo. Another would be to buy a small broker in order to get the software and then ramp it up. A third would be to try to acquire accounts i.e try to swallow a major, but this would be very expensive. As the situation develops I think we will see both winners and losers in this sector. The survivors will be those that provide something unique, either in services or capabilities. Also the winners will be those that establish strong alliances. The plain vanilla firms will wind up as losers as they will be easily supplanted by the main line firms as they start adopting internet strategies. But keep in mind I have a strong vested interested in how this sector plays out. Henry