Sadly I get most of my breaking news these days from Google Trends. I usually take a peak in the middle of the day and when I took a peak today I saw ETFC as the #3 hottest trend on Google for 11/12. ETFC of course stands for E*Trade Financial and the stock is getting pounded today because Citi Financial Research Analyst Prashant Bhatia slashed his rating on the bank in a report Sunday headlined, “Bankruptcy risk cannot be ruled out.”
Also from Herb Greenberg's post: Following Friday’s news of an SEC investigation, further mortgage-related losses and the withdrawal of earnings guidance, Bhatia wrote, “The continued negative news flow about charges resulting from its mortgage & CDO exposure, an SEC inquiry, and continued deterioration in its financial condition, all increase the likelihood of significant client attrition.” You can also read this analysis from The Wall Street Journal and watch this video from Jim Cramer who called it a shocker with a potential run on their bank.
Now I know a little bit about E*Trade from the few months I spent with them after they acquired Harrisdirect. I can't write (say) that I was upset to leave them when I received my package because I was happy to try something new (yes those two links are from 2005). I'm sure a bunch of you readers think that I'm going to gloat but I won't.
I'm actually kind of melancholy for the people that have their money with them and for the employees that actually work extremely hard for their meager salaries. I'm sure both the non-executives as well as the average investor are concerned about their jobs and their investments. Uncertainty is quite natural in times like this. Me? I left them a long time ago and moved my money out as soon as they dropped me from their employee accounts.
Sadly this is what happens when mergers happen and we as regular citizens are left with future choices. Sure everything works great as long as you are getting good service, but as soon as something goes wrong, you are left scrambling with less choices.
Two things come to mind when I saw the news. First was back in the CSFBdirect days when we were having a competitive review of the brokers. When we got to E*Trade I said that they were vulnerable because they had so many other lines of business that they'd take their eye off their trading business; the agency team that presented the results thought I was nuts because the diversity was their strength. The second was back when TD and Ameritrade merged. I wanted to run an email campaign saying that people should bring their accounts to Harrisdirect because we were safe and secure. Smarter folks canceled the ad campaign for obvious reasons.
Anyway, good luck with E*Trade. If you are a current employee worried about what comes next, read this post. You never know what's out there until you try. If you are an investor, well, there were valid reasons why the banking, trading, and insurance businesses were separate entities at one time. Just remember, it is your money and you need to be an informed person. Good luck.