The default PR strategy for companies in a tenuous financial position is to declare that anyone who points out this tenuousness is “irresponsible,” as E*Trade did yesterday. Why? Because it’s a handy way to deflect the blame.
Some have suggested that Prashant Bhatia, the Citi analyst who put a SELL on E*Trade and suggested that its depositors might run for the hills has a grudge against the company. Maybe so. Or maybe he was just pointing out what other analysts, investors, and E*Trade management were too blind or careless to see: That highly leveraged companies can be obliterated by sudden changes in market trends.
Those tempted to buy E*Trade’s implicit argument that its troubles are simply the result of an irresponsible analyst should remember that the market is as good at seeing through analyst b.s. as it is at seeing through management b.s.: If Bhatia’s logic had been flimsy, his own reputation stock would have gotten smashed. As it was, when yesterday’s dust cleared, it was E*Trade’s stock that was down 59%.