E*Trade — Pre-teens Ride the Bubble

My son received a rather enticing offer in the mail from E*Trade, the San Francisco-based Internet brokerage.

The brokerage will give him 25,000 frequently flyer miles if he opens a trading account at the brokerage for at least $50,000. Needless to say, my son — who just celebrated his tenth birthday — is ecstatic.

That is largely because the process of “wiring” money from, say, Europe to the United States has fundamentally not changed much in the last one hundred years, despite automation and global financial telecommunications networks like “SWIFT.”

Essentially, all he had to start trading stocks was check a few boxes, sign the form and send it back to E*Trade in a pre-paid envelope. Simple as that.

Of course, there is the small matter of where my son would come up with the $50,000 check to start the account — but kids are clever these days.

And, buried in a long paragraph of legalese, the brokerage did ask that the account holder be of “legal age to contract.” But such incredibly small type is fairly easy to ignore, especially when you are only ten years old.

These impediments aside, what really appealed to my son was the prospect of the great riches to be had. These days, even small children are keenly aware that there is money to be made in the stock market.

For instance, if my son invested his $50,000 in Cisco, and Cisco had another year like 1999, he would soon be sitting on a small fortune worth about $114,000.

With that kind of money and 25,000 frequent flyer miles, my son could jet off to Disneyland in California to celebrate his eleventh birthday in high style.

Perhaps it was all just a simple mistake. E*Trade probably bought its direct-mail list from a data collection agency that, through some careless mistake, included my son among the target group of young professionals who are likely to trade stocks over the Internet.

Or perhaps something else is going on here. E*Trade must realize that with 48 million Americans owning corporate stocks, there are 226 million other Americans who don’t — and it can’t hurt to get them started when they’re young.

So even if direct marketers misdirect the occasional piece of junk mail, they do know it’s never to early to start building brand loyalty.