In case you missed it. Etrade lost 60% of it’s market cap today due to subprime.

[Coronita]

 

 

http://quote.yahoo.com/q?s=ETFC

E*Trade's Meltdown

The stock price gets slashed in half after the online brokerage says it can't predict new credit losses and an analyst mentions the possibility of bankruptcy

It went from bad to worse for E*Trade Financial (ETFC) on Nov. 12. First, the company said the fair value of its $3 billion asset-backed securities portfolio had deteriorated further since Sept. 30, resulting in larger-than-expected writedowns. Thanks to rating agency downgrades and more problems in the credit markets, the company said it can't stick by its previous earnings predictions.

Then, Citigroup (C) analyst Prashant Bhatia poured salt on the wounds on Nov. 12 by placing the probability of bankruptcy for E* Trade at 15%. He worried that the recent news would cause customers to pull their money out of E*Trade bank accounts. That would create a classic "run on the bank" scenario and could force E*Trade to sell its assets to give customers back their cash.

Bhatia estimates that if E*Trade were forced to liquidate its portfolio, it could sustain more than $5 billion in losses. He downgraded the stock to sell from hold.

By the close of trading Nov. 12, E*Trade shares plunged nearly 59% to $3.55 after closing the previous session at $8.59. In June, the stock traded above $25.

E*Trade struck back at Bhatia's assessment. "The management team is focused on serving our customers as we combat the market reaction to the irresponsible comments included in the recent Citigroup analyst report," E*Trade spokeswoman Pam Erickson said in an e-mailed statement. "We take exception to the sensationalism based on unfounded speculation."

Though E*Trade tried to reassure customers and investors that its deteriorating financial situation wouldn't be fatal for the firm, it had very little else to say. No one, including E*Trade execs, really knows how bad things can get.

"Actual securities-related losses will depend on future market developments, including the potential for future downgrades by rating agencies, which are extremely difficult to predict in this environment," the company said in a statement. "Accordingly, management believes it is no longer beneficial to provide earnings expectations for the remainder of the year."

E*Trade is essentially saying, "We don't know how bad things could get," says Morningstar (MORN) analyst Patrick O'Shaughnessy. "That uncertainty is letting Wall Street's imagination run."

E*Trade also tried to assure customers it's taking steps to handle the problems. "We could absorb an immediate write down in excess of $1 billion and still remain well-capitalized," wrote President Jarrett Lilien in an e-mail to E*Trade customers Nov. 12. "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," he added.

In October, E*Trade announced almost $200 million in losses due to the tough credit conditions, prompted by worries about risky mortgage debt. "We are clearly disappointed with the overall company performance as a result of the severe volatility in the credit markets," E*Trade Chief Executive Mitchell Caplan said at the time.

The immediate concern is $450 million in assets that are considered the riskiest of E*Trade's holdings, Morningstar's O'Shaughnessy says. Of those, about $50 million was recently downgraded by credit ratings agencies, and more downgrades could be on the way.

O'Shaughnessy says huge losses above the $1 billion threshold are within "the realm of possibility," but unlikely. "It's hard for me to see where that billion dollars could come from," he says.

In response to the credit problems, E*Trade CEO Caplan announced a plan last month to restructure the company. The goal is to move away from risky credit investments and back toward traditional brokerage and banking business. But analysts say it could take a year or more to be implemented.

The irony for E*Trade is that its credit losses arrive as its core business—offering a range of financial services through a bank and online brokerage—hums along. On Nov. 12, E*Trade reported results from October showing total client assets up 4% and its strongest trading volume ever.

In the competitive online brokerage industry, E*Trade's troubles could be an opportunity for its rivals. TD Ameritrade (AMTD) was up 5.3%, to $18.89, and Charles Schwab (SCHW) shares rose 2.6%, to $22.81, on Nov. 12.

The weak balance sheet combined with the strong business results lead some to think E*Trade could be a takeover target. But a buyout might have to wait a while, until the potential credit losses become clearer. Until then, buyers may be very wary.

 

 

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FYI, a lot of employers use ETrade for ESPP/Stock options/etc., Qualcomm, Yahoo, Symantec for example. Although I doubt there will be a run from the subprime mess itself, lots of paranoid people moving assets out might trigger a self-fulfilling prophecy….which is why I'm still up late. Not taking any chances. DTCing all me and my wife's stock from stock options, espp shares, private investments, etc into other brokerage accounts and wiring all cash out in excess of FDIC insurance from the etrade bank.

 

[4plexowner]

This is why Jim Sinclair (www.jsmineset.com) is telling us to eliminate all financial intermediaries standing between us and our assets

Yes, if E-Trade goes under you are likely to get your money back from SIPC – of course, you’ll be at the end of the line in any bankruptcy proceedings and might wait 2 years to see any of your money

SIPC is another under-funded plan like FDIC – there are enough assets to cover about 2% of the potential losses – as long as only a few people lose money SIPC and FDIC will be OK – in a massive meltdown SIPC and FDIC are likely to be handing out chits or vouchers that will trade at a discount to US dollars

Protect your assets (if you plan on keeping them)

[4plexowner]

This is why Jim Sinclair (www.jsmineset.com) is telling us to eliminate all financial intermediaries standing between us and our assets

Yes, if E-Trade goes under you are likely to get your money back from SIPC – of course, you’ll be at the end of the line in any bankruptcy proceedings and might wait 2 years to see any of your money

SIPC is another under-funded plan like FDIC – there are enough assets to cover about 2% of the potential losses – as long as only a few people lose money SIPC and FDIC will be OK – in a massive meltdown SIPC and FDIC are likely to be handing out chits or vouchers that will trade at a discount to US dollars

Protect your assets (if you plan on keeping them)

[4plexowner]

This is why Jim Sinclair (www.jsmineset.com) is telling us to eliminate all financial intermediaries standing between us and our assets

Yes, if E-Trade goes under you are likely to get your money back from SIPC – of course, you’ll be at the end of the line in any bankruptcy proceedings and might wait 2 years to see any of your money

SIPC is another under-funded plan like FDIC – there are enough assets to cover about 2% of the potential losses – as long as only a few people lose money SIPC and FDIC will be OK – in a massive meltdown SIPC and FDIC are likely to be handing out chits or vouchers that will trade at a discount to US dollars

Protect your assets (if you plan on keeping them)

[4plexowner]

This is why Jim Sinclair (www.jsmineset.com) is telling us to eliminate all financial intermediaries standing between us and our assets

Yes, if E-Trade goes under you are likely to get your money back from SIPC – of course, you’ll be at the end of the line in any bankruptcy proceedings and might wait 2 years to see any of your money

SIPC is another under-funded plan like FDIC – there are enough assets to cover about 2% of the potential losses – as long as only a few people lose money SIPC and FDIC will be OK – in a massive meltdown SIPC and FDIC are likely to be handing out chits or vouchers that will trade at a discount to US dollars

Protect your assets (if you plan on keeping them)

[g2006]

I have some CDs in etrade (under 50K) do I need to worry. If I do an early withdrawal etrade has a penalty…so I’m thinking whether to withdraw or wait for maturity

[g2006]

I have some CDs in etrade (under 50K) do I need to worry. If I do an early withdrawal etrade has a penalty…so I’m thinking whether to withdraw or wait for maturity

[g2006]

I have some CDs in etrade (under 50K) do I need to worry. If I do an early withdrawal etrade has a penalty…so I’m thinking whether to withdraw or wait for maturity

[g2006]

I have some CDs in etrade (under 50K) do I need to worry. If I do an early withdrawal etrade has a penalty…so I’m thinking whether to withdraw or wait for maturity

[4plexowner]

Here’s Jim Sinclair (www.jsmineset.com) showing us the legal language which allows an internet broker to basically say, “Tough titty, kitty – your money is my money until I decide to let you have access to it.”

I especially like this phrase: “… reserves the right to … block my access to the Service without notice, for any reason or for no reason …” – that means you could wake up on a monday morning to find that the Asian and European markets melted down overnight but you can’t sell you positions because your internet broker has blocked access to the Service …

Yes, you can play the macho game and threaten to sue your broker (and their dog) – a lawsuit will cost you MINIMUM $15K and you won’t win anyway – much easier to protect yourself before anything happens

~

(s) Termination of Accounts
I may close my Account at any time, after all Debit Balances are paid, on written or oral notice to _____TRADE Securities. ______TRADE Securities reserves the right to terminate my Account or to block my access to the Service without notice, for any reason or for no reason. The terms and conditions of this Agreement will survive termination of my Account and will continue to apply to any disputed or other remaining matters involving my relationship with _______TRADE Securities. After the termination of my Account, I will remain liable to _____TRADE Securities for payment of any indebtedness or obligation to ____TRADE Securities, plus interest as provided under this Agreement.

(e) Modification of Agreement or Service
I understand that ______TRADE Securities may change any of the terms and conditions of this Agreement and/or eliminate any term or condition anytime. _____TRADE Securities reserves the right, but does not intend to follow it as a matter of course, to notify me of modifications to the Agreement by mailing or e-mailing a written notice or new Agreement to me. I understand that the normal method of notifying me of modifications to the Agreement will be to post the information on the _______TRADE Securities Web site. I also agree that ______TRADE Securities may change its Service anytime and that it is not obligated to provide me with notice of such a change.

I agree that use of the Service after a change to the Service or notice of a change to this Agreement, or if I do not close my Account within fifteen (15) calendar days of the change to the Service or notice of a change to the Agreement, means that I accept the change, whether or not I actually know of it, except that changes required by law will be effective immediately.

[4plexowner]

Here’s Jim Sinclair (www.jsmineset.com) showing us the legal language which allows an internet broker to basically say, “Tough titty, kitty – your money is my money until I decide to let you have access to it.”

I especially like this phrase: “… reserves the right to … block my access to the Service without notice, for any reason or for no reason …” – that means you could wake up on a monday morning to find that the Asian and European markets melted down overnight but you can’t sell you positions because your internet broker has blocked access to the Service …

Yes, you can play the macho game and threaten to sue your broker (and their dog) – a lawsuit will cost you MINIMUM $15K and you won’t win anyway – much easier to protect yourself before anything happens

~

(s) Termination of Accounts
I may close my Account at any time, after all Debit Balances are paid, on written or oral notice to _____TRADE Securities. ______TRADE Securities reserves the right to terminate my Account or to block my access to the Service without notice, for any reason or for no reason. The terms and conditions of this Agreement will survive termination of my Account and will continue to apply to any disputed or other remaining matters involving my relationship with _______TRADE Securities. After the termination of my Account, I will remain liable to _____TRADE Securities for payment of any indebtedness or obligation to ____TRADE Securities, plus interest as provided under this Agreement.

(e) Modification of Agreement or Service
I understand that ______TRADE Securities may change any of the terms and conditions of this Agreement and/or eliminate any term or condition anytime. _____TRADE Securities reserves the right, but does not intend to follow it as a matter of course, to notify me of modifications to the Agreement by mailing or e-mailing a written notice or new Agreement to me. I understand that the normal method of notifying me of modifications to the Agreement will be to post the information on the _______TRADE Securities Web site. I also agree that ______TRADE Securities may change its Service anytime and that it is not obligated to provide me with notice of such a change.

I agree that use of the Service after a change to the Service or notice of a change to this Agreement, or if I do not close my Account within fifteen (15) calendar days of the change to the Service or notice of a change to the Agreement, means that I accept the change, whether or not I actually know of it, except that changes required by law will be effective immediately.

[4plexowner]

Here’s Jim Sinclair (www.jsmineset.com) showing us the legal language which allows an internet broker to basically say, “Tough titty, kitty – your money is my money until I decide to let you have access to it.”

I especially like this phrase: “… reserves the right to … block my access to the Service without notice, for any reason or for no reason …” – that means you could wake up on a monday morning to find that the Asian and European markets melted down overnight but you can’t sell you positions because your internet broker has blocked access to the Service …

Yes, you can play the macho game and threaten to sue your broker (and their dog) – a lawsuit will cost you MINIMUM $15K and you won’t win anyway – much easier to protect yourself before anything happens

~

(s) Termination of Accounts
I may close my Account at any time, after all Debit Balances are paid, on written or oral notice to _____TRADE Securities. ______TRADE Securities reserves the right to terminate my Account or to block my access to the Service without notice, for any reason or for no reason. The terms and conditions of this Agreement will survive termination of my Account and will continue to apply to any disputed or other remaining matters involving my relationship with _______TRADE Securities. After the termination of my Account, I will remain liable to _____TRADE Securities for payment of any indebtedness or obligation to ____TRADE Securities, plus interest as provided under this Agreement.

(e) Modification of Agreement or Service
I understand that ______TRADE Securities may change any of the terms and conditions of this Agreement and/or eliminate any term or condition anytime. _____TRADE Securities reserves the right, but does not intend to follow it as a matter of course, to notify me of modifications to the Agreement by mailing or e-mailing a written notice or new Agreement to me. I understand that the normal method of notifying me of modifications to the Agreement will be to post the information on the _______TRADE Securities Web site. I also agree that ______TRADE Securities may change its Service anytime and that it is not obligated to provide me with notice of such a change.

I agree that use of the Service after a change to the Service or notice of a change to this Agreement, or if I do not close my Account within fifteen (15) calendar days of the change to the Service or notice of a change to the Agreement, means that I accept the change, whether or not I actually know of it, except that changes required by law will be effective immediately.

[4plexowner]

Here’s Jim Sinclair (www.jsmineset.com) showing us the legal language which allows an internet broker to basically say, “Tough titty, kitty – your money is my money until I decide to let you have access to it.”

I especially like this phrase: “… reserves the right to … block my access to the Service without notice, for any reason or for no reason …” – that means you could wake up on a monday morning to find that the Asian and European markets melted down overnight but you can’t sell you positions because your internet broker has blocked access to the Service …

Yes, you can play the macho game and threaten to sue your broker (and their dog) – a lawsuit will cost you MINIMUM $15K and you won’t win anyway – much easier to protect yourself before anything happens

~

(s) Termination of Accounts
I may close my Account at any time, after all Debit Balances are paid, on written or oral notice to _____TRADE Securities. ______TRADE Securities reserves the right to terminate my Account or to block my access to the Service without notice, for any reason or for no reason. The terms and conditions of this Agreement will survive termination of my Account and will continue to apply to any disputed or other remaining matters involving my relationship with _______TRADE Securities. After the termination of my Account, I will remain liable to _____TRADE Securities for payment of any indebtedness or obligation to ____TRADE Securities, plus interest as provided under this Agreement.

(e) Modification of Agreement or Service
I understand that ______TRADE Securities may change any of the terms and conditions of this Agreement and/or eliminate any term or condition anytime. _____TRADE Securities reserves the right, but does not intend to follow it as a matter of course, to notify me of modifications to the Agreement by mailing or e-mailing a written notice or new Agreement to me. I understand that the normal method of notifying me of modifications to the Agreement will be to post the information on the _______TRADE Securities Web site. I also agree that ______TRADE Securities may change its Service anytime and that it is not obligated to provide me with notice of such a change.

I agree that use of the Service after a change to the Service or notice of a change to this Agreement, or if I do not close my Account within fifteen (15) calendar days of the change to the Service or notice of a change to the Agreement, means that I accept the change, whether or not I actually know of it, except that changes required by law will be effective immediately.

[4plexowner]

g2006 – as long as you withdraw before they declare bankruptcy you will be OK

feeling lucky?

[4plexowner]

g2006 – as long as you withdraw before they declare bankruptcy you will be OK

feeling lucky?

[Author]

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