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If you think sandwiches and stocks don't have much in
common, just ask Eddy Sweileh.
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Impact of Online Trading
by Cory Johnson
Freddie's Sandwich Shop, on a sleepy corner of San Francisco's
North Beach neighborhood, is an unlikely epicenter in the
world of online trading. But I know of no other place that
better illustrates the degree to which the trading of stocks
on the Internet has altered our world.
Freddie's is a tiny deli in a residential neighborhood, a
10-minute walk from the financial district in one direction,
Fisherman's Wharf in the other. You could pass the place a
dozen times before you noticed it. Its only sign is a
perfunctory "Freddie's" logo painted on the front window.
Fewer than a dozen people can cram into Freddie's at a time,
and at lunchtime, they do. His sandwiches, you see, are
neighborhood classics. Hungry fans descend on the shop midday,
double-parking their pick-up trucks and BMWs on the street
outside. Behind the deli counter, Eddy Sweileh, his wife
Rosalia, and two helpers crank out the coveted sandwiches one
at a time. Sweileh, of Lebanese and Jordanian decent, is in
his early 40s, just short of six feet tall. He's quiet and
hard-working. A few chairs and a bench outside are as desired
as his sandwiches: When the rest of the city is soaked with
fog, the sun somehow still seems to shine over this urban
hamlet.
Freddie's might be a world away from daytrading. Yet there are
clues to its status as an embodiment of online trading. The
old Zenith next to the deli is not tuned to a soccer match but
rather to CNBC with its tell-tale ticker framing the bottom of
the screen. Sweileh is cordial with his regular customers, but
not to the point of distraction. At all times, he keeps one
eye on the cash register, the other on CNBC. To most, he's
just Eddy-the-sandwich-guy—they already feel in-the-know
if they avoid calling him "Freddie." But few of his customers
know Sweileh as the fervent online trader that he is.
Eddy-the-sandwich-guy is not alone in his passion for
trading stocks over the Internet. Over 23 million
Americans have caught the bug.
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Sweileh rises early every morning, long before his shop opens
at 11 a.m. Most mornings he's already online at 6:30 a.m.,
ready for the market open. His Ameritrade account is fired up
and at the ready. He's not frenetic; many days pass without a
single trade. But Sweileh is an active trader. His take from a
three-year-old AOL position has funded all sorts of trades, in
and out of the latest trends—the Nets, the telcos, the
B2Bs. (In the daytrading universe, there is little time to
spell out "Internet stocks," "telecommunications stocks," and
"Internet business-to-business stocks".) Sweileh jumps into
hot names, and jumps out before they can hurt him.
Sweileh is not the only one watching the tape. As the line
slowly moves forward, a handful of 30-somethings in chinos and
open-collared shirts eye the screen as they talk about
interoffice politics or ski weekends in Lake Tahoe. Then the
CNET symbol scrolls across. Conversation stops. "Whoa, another
dollar and I won't be underwater," says one, to a laugh.
Freddie's has always been a business of regulars. Once it was
the second generation Italian-Americans for whom North Beach
is so well known: The late mayor Joe Alioto stopped by
regularly for his Italian combo—pepperoncini and
mustard, no tomato, no mayonnaise, no lettuce. But now
Dotcom-ers dominate the crowd. CNET headquarters lies just
down the hill, and at Freddie's a group of them gathers each
day for lunch. Like Sweileh, many of them dabble in online
trading. And the rest of them have their heretofore
unimaginable personal fortunes tied up in CNET stock - just
the type of stock Sweileh trades.
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Leading online trading companies ranked by assets, in
billions of dollars.
See full graph
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A boom on the Internet
Such amateur online trading has swept the nation. Ten years
ago it was inconceivable, but as the 1990s drew to a close,
online brokerage accounts had grown to more than 23.1 million,
according to a recent report by Credit Suisse First Boston.
The same study said the major online brokerages—led by
Schwab, Fidelity, TD Waterhouse, Quick & Reilly, Etrade,
and Ameritrade—now hold some $1.3 trillion in customer
assets.
As new online traders have flocked to the market, they have
shown themselves eager for new stocks to trade. Investment
banks have been more than happy to fill that need, bringing
new companies public by the dozen. And through trial and some
error, they've found that these new traders covet one type of
stock above all others—the Internet stock. The growth of
Internet initial public offerings, or IPOs, has closely
followed that of online trading. E*Trade, for example, had
485,000 accounts at the end of the fourth quarter of 1998.
That same quarter saw 10 Internet IPOs. Nine months later,
E*Trade had some 1,200,000 accounts, and the market saw 67
third-quarter Internet IPOs.
This graph shows the precipitous rise of Internet
initial public offerings, both actual and scheduled,
from 1997 through the first quarter of 2000.
See full graph
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These Net stocks, of course, have created tremendous wealth.
IPOs provided Net companies with more than $1.5 billion in
December alone, according to IPO Monitor. Though not
successfully in all cases, those companies spend that money,
which finds its way back into the economy, including the back
of Freddie's Sandwich Shop, where the whole process starts
over again.
The impact of these online traders on the markets has been
felt widely, if not deeply. Such sometime traders have made a
volatile market even more volatile, and professional traders
say they have had to be on the lookout for stocks that
suddenly start to move, fueled by the actions of these
newcomers.
Continue: The real daytraders
The Formula That Shook The World
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Impact of Online Trading
A Trader's Lexicon
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Play a Virtual Market
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| Updated November 2000
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