My World

So, Mitch unloaded 300 thousand of his shares at $3.87 a share today. It is all making sense now!

Last summer, when Etrade’s stock was doing well, there was the talk of merging with Ameritrade. At the time Caplan would not go through with it. At the same time the current CEO (R. Jarrett Lilien) was using his own money to purchase shares of Etrade. Do you think he is still interested in a merger deal? You bet!

I look at it this way: We have one guy who thinks Etrade is worth at least $15 dollars a share and we have one guy who thinks it is only worth $3.87. Which guy do you want running your company? Which one of them is looking out for shareholders?

No wonder Caplan was forced to resign!

I have to admit, I am a bit obsessed with this stock and company. I own a huge amount (for me) of Etrade shares. It makes me prone to fantasize about possible deals in the near future.

If I were the CEOs of Citadel, Etrade, and Ameritrade, the following is the the GREAT DEAL of the 21st Century.
Here is the deal: Ameritrade is going to buy the brokerage part of Etrade. They are going to pay in shares and cash. They will give us the equivalent of 1 share each… Basically buying our brokerage for 20 dollars a share…, plus let’s say… 4 dollars cash.

So, yes, they are valuing Etrade at 24 bucks a share when they do this. I think, last summer, Ameritrade was willing to do a similar deal. They think the brokerage is likely worth just that. (CUSTOMERS + SYSTEM + INTERNATIONAL EXPANSION/BRAND)

So, Etrade gets $4 dollars cash for the brokerage and we get 1 share of Ameritrade.

Everybody makes out in a deal like this!

Why does this work for everybody?

Citadel gets over $1 billion in Ameritrade stock. This is their commission for the whole thing!

(they are supposed to have like 1/5th the outstanding shares outstanding aproximately 100 million shares of AMTD.

We each get the equivalent of 24 bucks a share for our stock…

The 4 dollars cash per share that we get will go into our banking reserves…

Well, the cash we get from AMTD will be enough to fill our reserves AND then some. In fact, I see it this way… the 4 bucks will be used for reserves AND to pay back Citadel, either all at once, or continuously via the high payments, or as collateral for another loan (TD Bank has a lot of cash to lend).

Etrade shareholders like myself are left with 1 share of Etrade and 1 share of Ameritrade.

Our Ameritrade shares will NOT be dilutive. To Ameritrade’s bottom line, I believe that the brokerage, without the mortgage issues, is worth 1 share of Ameritrade. In other words, the Ameritrade’s float will increase substantially, but earnings per share should stay relatively stable, and then accelerate into the future.

Basically, Ameritrade gets exactly what they want. They want Etrade brokerage customers and trading platform. They are willing to pay up for it too. And, why wouldn’t they?

We, the shareholders, get exactly what we want. Even the people who thought they were completely screwed by the recent 80% drop in share price will be rewarded.

We will ALSO have our ETFC shares when the deal is complete. They may be worth only a a couple of bucks or so, but I think that is just the gravy. I firmly believe that ETFC will come out great… We’ll be well-capitalized, the worst of the mortgage paper has been sold off already, a favorable treasury loan and/or a decent loan from TD-Bank will be used to refinance that Citadel loan.
From personal experience, I know the mortgage system to be very good. And, unless the economy goes to hell, the current loans that Etrade has on paper will certainly be worth close to their face value.

Even the regulators will be happy. It is difficult to say that Ameritrade is pilfering the company if they pay $CASH in the amount of Etrade’s total current market value for an asset. It is not a fireside sale… Ameritrade is paying full-price cash for each share. The actual cash will be used to re-capitalize and further support the mortgage/banking business. The bond holders (including Citadel) will be happy to have enough cash to keep going/growing for several years. Regulators will be happy because a direct bailout was not necessary AND nobody is getting screwed.

My Etrade shares will be worth 10 bucks each in a few years. My Ameritrade shares will be worth 30 bucks in a year and double that in 2 years.

I will retire!

… end of fantasy…

It occurs to me that the forex market (foreign exchange market) has been saving the U.S. from inflation. This may or may not continue.

Here is how it works: The FX market is supposedly more than a trillion dollars a day and growing. So, there is probably 1/2 a trillion U.S. dollars sitting in accounts that are being actively traded every day. In other words, there is a TON of cash not circulating in the U.S. economy because of this huge market.

The majority of people who trade currency gets fleeced. However, the idea is not only to take money from gamblers and “investors”… the idea is to keep the U.S. dollars busy and out of circulation. Since it is out of general circulation… this is good for us. It keeps our inflation down at artificially low levels.