November 13, 2007

The Run on eTrade Won't Have My Footsteps

Mob mentality, especially on the market, can be a dangerous thing. I've found that often, the best thing to do long term is to avoid the one-day panics as groups jump out of one stock or another, whether based on rumors, or even hard news. This week's activity in eTrade just may be exactly that, as I've seen the viability of my long-term broker put in question.

As speculation and analyst commentary stated, eTrade will likely be writing off massive loans that have gone unpaid, to the tune of multiple billions of dollars. Some have speculated the company could go bankrupt, or even be at risk of closure.

Obviously, given all my discretionary market funds are tied up in eTrade, and have been since the beginning of the decade, the thought has crossed my mind to transfer my cash out of eTrade, back into the bank, for later investment in another brokerage. Any of them. But even more than my thoughts of going with the crowd by giving into the panic, I've considered going against the grain by buying eTrade stock, which just might be oversold. Maybe I could even actually profit from the short-term timidity of others?

Regardless of that choice, which I haven't acted on, I'm not leaving eTrade. The brokerage has given strong service for a long time for me, and I have close to zero expectations that I'd find my funds were completely gone. That would be a scandal of epic proportions, one I don't see happening.


  1. ETFC was so massively oversold, it soundly proved a point in an argument I was having with a friend about the rationality of the market. My opinion is that there is very little logic to short- and medium-term pricing, that it's all based on knee-jerk "main street" opinion rather than wall street analysis.

    I'm happy to say that I did buy ETFC at 3.69 on Monday as I watched their market cap swing so low that it became a foregone conclusion that they'd either recover or be bought out. Quickest and easiest money I've made in a long time - I just wish I'd bought more!

    Same with CROX - knees jerked it way too low. Sadly I bought in too soon on that one, but them's the breaks.

    EMC, VMW, AAPL, the list goes on. Watch for the idiots selling and buy before the rebound!

  2. Stephen, you were faster than me, unfortunately. I got in at about $5.50 today, which is fine, but not as amazing as yours - sounds like a great pick. I don't get all of them right, and I certainly don't have a great track record of patience, but we'll watch this one. Truth is, not everything is rational - and that's made clear on a daily basis.