I am concerned about Etrade after the stock plunged and I moved some assets to Interative Brokers. However, I just realized that the market capitalization of Etrade (ETFC) is higher. Why is that? Are the concerns about IB that I am not seeing? Afterall, I didn't see Refco coming either...
Appreciate this, and I have read it carefully before. I work in wall street so I am not so impressed. 1) $4.8 billion equity capital is good, but AIG/LEH had more. 2) Trades per day, prop trading, years in business -- LEH had better, but it worked against them in the end not for them. 3) SIPC -- I get, but the $30M Lloyds is not impressive. The maximum Lloyds will pay is $150M so it is unlikely that the insurance is that high when it is divided by all the accounts in the end of the day. Also, will money be returned only on the funding basis? i.e. what if you made money 10% a year for 10 years -- will they only give you your orignal cash eaten by inflation without the profits?
Dude nothing is truly safe unless you take your money and stuff it in a mattress. And then once the gov't is done even your cash will be worthless (OK technically not worthless but when it costs $10 million to buy a loaf of bread it's pretty close). Your "safest" bet is to spread the money around with several brokers, but only keep enough with each broker to do your trading. Personally as someone who has seen the IB risk management system close out a position almost instantly when there was not enough margin* I feel pretty safe with IB. Sure if Petterfly wants to steal $500 million and go to Argentina I'm f*cked, but it's less likely that IB will go under due to some idiot overtrading. SSB *someone who shall remain nameless screwed up the FA allocation profile and allocated a futures contract to the wrong account ** (to clarify for E-Trade users it was me who screwed up the allocation)
As far as I know IB has not been selling (and buying) POS mortgage related "securities/turds" like LEH so this is not an apples to apples comparison. That said of course if Lehman and Bear could go under, anyone could (except Goldman).
Does any one know if I went to IB's insurance company they would let me buy additional insurance to further hedge myself? Hopefully, IB will answer this. thank you
Just get one of those AIG "you do something stupid the taxpayer bails you out" policies. Everyone has them nowadays....
ETFC: Shares Out 12/31/2009 1893.971M Market Cap USD 2822.02M IBKR Shares Out 11/ 9/2009 41.215M Market Cap USD 669.33M Also, why the short interest? Float 40.28M Short Int 3.146M