Why the E*Trade Shorts Have It Wrong

E*Trade's (ETFC) management is doing everything right to turn the
company around, and their efforts will reap benefits for shareholders
sooner rather than later. The stock has obviously taken a serious hit
due to its careless investments in commercial mortgage-backed
securities and other derivative products.<!--more--> The company has also done a
great job disclosing the magnitude of future writedowns, namely $3
billion over the next two years, which in turn has painted a clearer
picture of future performance. Joe Moglia, the CEO of TD Ameritrade (AMTD),
recently mentioned on CNBC's Fast Money that the defection of customers
from E*trade has already taken place.

Despite the
financial turmoil, management has shrewdly decided to focus on
investing in its core competence. The company is continually investing
in its trading platform; after having had an account with TD Ameritrade
and Schwab (SCHW) I can attest to E*Trade having a superior trading platform.
Another great initiative has been the firm's global trading platform,
namely the ability of a U.S investor to invest in stocks traded on a
variety of global stock exchanges in local currencies. That strategy
should become highly accretive to earnings once it gets more widely
adopted. The company's marketing strategies have been highly effective
and have allowed the company to at least regain some of the customers
who had switched to other brokerages.