E*Trade - should I abandon ship?

[Porsche-O-Phile]

They underwrote a bunch of crappy mortgages and invested in a bunch of M.B.S.-es. Wondering if I should pull my stuff out and go elsewhere (I've opened an account on OptionsXpress as a preemptive measure). What do you guys think?

[sammyg2]

My opinion is, if you are even considering it then you should do it.
When it comes to hard earned money I don't trust anyone.
Risking it with investments is one thing but risking it with a company that's having financial troubles is scary.

[legion]

http://news.yahoo.com/s/nm/20071114/bs_nm/etrade_ceo_dc_2

NEW YORK (Reuters) - E*Trade Financial Corp (ETFC.O) Chief Executive Mitch Caplan categorically ruled out the possibility of bankruptcy on Wednesday, days after an analyst said mounting credit losses and the potential loss of customer assets might make the discount brokerage insolvent.

Yep. That would scare me.

[Porsche-O-Phile]

Considering Enron said the same thing, yes.

I'm going to start pulling out tomorrow methinks. I'm a bit unnerved by this.

[911Rob]

Read Kowasakis/Trumps book "we want you to be rich" and quit buying this $hit.

A few years ago I mighta said, sell now, and double down in a few weeks based on the news release. Today I'd just say bail out.

[red-beard]

It's just a trading company. Unless you have lots of cash sitting in an "account" you should be fine. Unless of course you have stock in e*trade....

[legion]

Originally Posted by red-beard

It's just a trading company. Unless you have lots of cash sitting in an "account" you should be fine. Unless of course you have stock in e*trade....

Not true. That is what they started as, but they do investment banking.

If they wanted to be leveraged in their long positions on sub-prime MBSes, where do you think they borrowed the money from? Customer accounts...

[dd74]

Like the other said, I'd get out ASAP, Jeff.

[Porsche-O-Phile]

Thanks. I just initiated a bunch of transfers on liquid stuff (banking accounts, sweeps, etc.) Stock holdings are a bit more problematic. If I cash out and sell all my positions, I'll take losses on a few (not terrible, but still losses). It might be better than leaving stuff in there and having it "disappear" however if there are bigger underlying problems at ETrade HQ.

At the moment I'm leaning towards "sell off everything and get outta' Dodge" but I need to think about it. I just bought into several of these positions!

I need to double-check my literature but I thought brokerage houses were required to cover you up to a certain point if they went insolvent (?)

The basic banking accounts were FDIC insured but I said "f*ck it, I'm outta' here" on those - I'd rather have my $$$ elsewhere rather than going through some lengthy and protracted fight with FDIC involved. Could be years, right?

This mortgage stuff is SO toxic. I wouldn't be surprised if ETrade's days are numbered.

[red-beard]

Call another broker. I KNOW you can transfer stock assets without cashing them out.

[GDSOB]

Originally Posted by red-beard

Call another broker. I KNOW you can transfer stock assets without cashing them out.

+1

[Porsche-O-Phile]

Will do. Thanks gents.

[red-beard]

According to the WSJ, they have 40 Billion in bank deposits spread over 3.7 million customer accounts. Part of the stock price tanking is the fear that customers will run on their accounts.

[Tobra]

I would equate this to when I have a diabetic patient come in and I contemplate prescribing antibiotics for a funky looking foot. If the idea enters my head, they get them, ergo, you bail

[pwd72s]

Day traders...especially those trading on "programs" they bought? Lots of luck, guys...you'll need it.

But then...send me $9,999.00 if your're looking for a "sure thing" in market investing. I've got the secret info.

[Don Plumley]

Cash and securities held by brokerage firms are covered by the SIPC.

[Dantilla]

E-Trade just sent me an invitation/application to move cash into an account with 4.7% interest.

That is a great rate for a savings account. They really must want people to give them cash quickly. I'll pass.

[Porsche-O-Phile]

OK, did a bit more digging. Turns out E*Trade stock positions are covered by SIPC, which is good news. Breathing a bit easier. Here's some information for others:

http://www.sipc.org/how/covers.cfm (lots more good info elsewhere on their site too)

In the grand scheme of things however, I'd rather avoid some long, protracted debate with a third party over getting my holdings "covered" in the event of a collapse. Sounds like a long, time-consuming and possibly expensive process. Yes, it's a measure of protection but given a choice, I'd rather things didn't go there. So I'm pulling out now.

The ones that complained about the "run on banks" in 1929 are the ones that got there only after the banks ran out of money. The ones that got there ahead of the crowd did okay, generally speaking. I'd rather be in that group. Even if E*Trade remains solvent and gets through this okay, I'd rather go elsewhere for a while until this blows over and whatever is going to happen, happens. This is perhaps (probably) an overreaction on my part, but when it comes to protecting the few assets I have in this world, I don't care if it is. If I'm being paranoid, so be it. It keeps me alive.

Anyone who has been on here for a while knows how bearish I am on real estate right now and the underlying foolishness surrounding it that has transpired over the last few years. Any empire built on the real estate bubble (even only partially) is like a high-rise built on sand. Very dangerous. The "subprime" stuff is very, very toxic and E*Trade certainly won't be its first, or only victim. Everyone who ate of that poison apple is going to at least get sick, and some are going to die from it. I'd just rather not have my assets anywhere near one of the ones that does.

I will talk with OptionsXPress today, which a couple of other guys I know use (they talked me into opening up an account with them last week, so this works to my advantage). They seem like a very good outfit and I've liked what I've seen so far in my limited dealings with them. If anyone's interested (or in a similar situation) here's some information they sent to me as a new account-holder:



Might be worth checking out for anyone else in a similar situation. Looks like they're more than willing to allow people to transfer investment positions to them and will even pay the fees so you can. Opportunistic. I like it.

[Porsche-O-Phile]

Updated "urgent message" posted on their site as of this morning. Sounds very propagandist to me. I hope they pull through (I've always liked E*Trade's business model of bringing the markets to the "little guy" which used to be very difficult). I'm not so sure they're out of the woods though. . . We'll see.

[trader220]

The value of their accounts is the crux of their business, someone will most likely buy their retail brokerage outfit.