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The story in June 2001

In late 1997, I decided that I wanted to own stock. Specifically, I wanted to own part of an Internet company. At the time, Real Networks looked very promising. So like many others at the time I opened an Internet stock brokerage account. For my broker I choose Datek. I was doing this mostly for fun, so I put in little more than the minimum required to open an account.

Several days after the IPO for Real Networks the stock was actually trading slightly below the IPO price. I decided that now was the time to buy into the company. I did and shortly thereafter the stock started to rise fairly rapidly. The rapid rise in value was amazing to someone who had previously only invested in Mutual Funds of one sort or another. 

Soon, however, I decided that the stock was overvalued relative to any sane fundamental valuation and decided to sell. At this point, my belief in long-term ownership must have been showing. (If I had predicted the ridiculous heights of the internet bubble, RNWK eventually reached almost 2000% of what I bought it for, but I settled for a much smaller gain. Also as of this writing it is only 250% higher than where I bought it. Glad I didn't buy at the peak.)

I passed through several other stocks in the time since then, making money and losing money. The end result is a very modest account with some Microsoft stock that I believe will generate sufficient returns going forward.

I have been holding the Microsoft stock for some time and have been pleased with its recent performance.

While I was never really a day trader, I had moments where I traded fairly regularly. Their low transaction fees was one of the reason I choose Datek in the first place.

Well, I have recently been informed that accounts not meeting a certain dollar threshold that do not trade at least quarterly, will be assessed an inactivity fee.

I wrote about this policy first, because it has an effect on my accounts return, but also because I fear that it is symptomatic of the sad demise of the initial promise of the Internet and e-commerce.

By moving stock trading into the electronic forum, it became possible for companies like Datek to drive down transaction costs and offer very low commissions. These commissions helped to allow people who had previously had their returns significantly impacted by commissions to be free to concentrate on the stocks performance. Part of the beauty of the situation was that cost of an additional account to Datek should have been negligible.

Alas, Datek like other dotcoms is trying to raise their margin per account, eyeball, click or other meaningless metric, even if, in so doing they are sure to drive away customers with less ability or interest in paying now without ample consideration of the long-term impact. Unless this trend changes, I fear that the Internet will end up much less useful, interesting and fun, than it would otherwise have been. I think they may have found away to get me to close my account and stop costing them pennies a year.

While I profited from the Internet boom, the expectation of above historical returns will continue to force just these sorts of short-term actions. That is the result of calculating the NPV of a customers transactions with a interest rate of 70%.