Daylight Robbery

We've been following the day-trading stories for some time now mesmerised by the amount of money people are making sitting at home and "playing" with some nifty stocks. Fuelled by both envy and desire to have a pop, it seems that this wave of online activity is almost getting out of hand as the companies behind some of the more popular sites scale up their profits with new acquisitions and mergers.

The latest news comes from E*Trade and their $1.8 billion purchase of Internet-based Telebanc Financial -- a move that will hopefully broaden its financial offerings, but analysts are split on whether buying a bank with fewer than 70,000 customers is a wise move. Sounds pretty good to us, but what do we know about pinstripe wearing City folk?

"It's a bad idea. They need physical distribution," said Forrester Research analyst James P. Punishill. "This purchase simply distracts and wastes capital that could be put to better use." Interesting point James. But Genni Combes, who follows E*Trade for Hambrecht & Quist, called E*Trade's move "really smart." "The consumer wants a frictionless environment where they can move money around," she said. "The demand is for a full suite of products and services. This will resonate with consumers." ... "frictionless environment" ... "resonate with consumers", now you're talking Genni.

News.com adds that the merger comes as online brokerages are broadening their financial offerings, while traditional bricks-and-mortar brokers are slowly adding online trading to their menus. Bill Burnham, online financial services analyst with Credit Suisse First Boston, thinks online brokerages are positioned to become global online services firms by adding mortgages, banking, and potentially other financial offerings.

"Online brokers have the opportunity to do an 'Amazon,'" Burnham said at a financial services conference held last month. "Brokers are going to move from positioning themselves as U.S. online or discount brokers to becoming global online financial services firms. Several will begin offering banking in the summer."

That's great, we'd loved to "do an Amazon", but think we have much schmoozing and ironing of shirts to do first.

http://www.etrade.com/

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