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Any gamblers?
Old 11-23-2008, 09:11 AM   #1
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Any gamblers?

I've been playing the get-rich-slow stock market game and am content with it. Yet, I recently have had an idea that will not abate. Would you be willing to risk a stash of money (say $10,000) on a single beat down stock? Downside is limited to $10,000 with a huge unlimited upside. Take Ford stock for example. Could buy 10,000 shares. If it returns to say $20/share (GM/Chrysler fail but they survive?) it would be worth $200,000. For me, the loss of $10,000 today would represent approx. a yearly loss of $1600 when I retire ($10,000 grows to $40,000 over 20 years and I withdraw at SWR of 4% = $1600/yr - really just a few days work in 2028 dollars).

Appreciate any comments: talk me into/out of it, would you be willing, and
what single stock would you risk it on??
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Old 11-23-2008, 09:18 AM   #2
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I'm already in that mode, but not because it started out that way....when I originally bought the stock (not F) it was at $8, then I bought again on the way down and it closed Friday at 89 cents....man am I good at this stock buying stuff or what!!??
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Old 11-23-2008, 10:03 AM   #3
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I tried that with Enron. I was partially indexed at the time but that trade completed my conversion.

I now only own one stock - Bank of America. It's now trading around $11 and it was about $50 a few months ago. I think it's more likely that BAC will return to $50 than F or GM.
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Old 11-23-2008, 10:13 AM   #4
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I tried that with Enron. I was partially indexed at the time but that trade completed my conversion.

I now only own one stock - Bank of America. It's now trading around $11 and it was about $50 a few months ago. I think it's more likely that BAC will return to $50 than F or GM.
Hey 2B,

Wow ~ another BAC investor!....and I thought that I was the ONLY one!

Are you planning to harvest any losses?...then jump back in??
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Old 11-23-2008, 10:17 AM   #5
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Hey 2B,

Wow ~ another BAC investor!....and I thought that I was the ONLY one!

Are you planning to harvest any losses?...then jump back in??
I still have a gain in it. My cost basis is around $9. That goes all the way back to the early 90's.

I used to have a bunch but I "gifted" a couple hundred shares to my kids every semester to pay their college bills. The tax rate on the gain was near zero. It depleted the stock down to only 300 shares. I don't know why I haven't sold it by now except it always had a capital gain and I liked the dividend.
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Old 11-23-2008, 10:18 AM   #6
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Plan B: Throw the money at whatever asset sub-class is down the most, possibly emerging markets or high yield bonds. Less upside potential, less down side potential than individual stocks, but still plenty of volitility. My preference is for diversification. With ETFs, you could buy several different beaten down sub-classes.

There are probably collectibles on sale too, cars, guns, boats, etc. Raw land is getting cheaper on the Big Island in Hawaii.

When I get greedy, I usually lose.
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Old 11-23-2008, 08:23 PM   #7
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Raw land is getting cheaper on the Big Island in Hawaii.
You would think that us locals would be scooping it up...
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Old 11-23-2008, 08:55 PM   #8
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Would you be willing to risk a stash of money (say $10,000) on a single beat down stock? Downside is limited to $10,000 with a huge unlimited upside. Take Ford stock for example. Could buy 10,000 shares. If it returns to say $20/share (GM/Chrysler fail but they survive?) it would be worth $200,000.
It's hard to see how GM, Chrysler, or Ford survive absent a restructuring of their labor & dealer contracts. And it's hard to see how that happens outside of bankruptcy. Sure, the government could just pump an endless stream of money into the companies to keep them afloat, but at some point they're going to end up nationalizing them.

So if I assign a 95% probability to a $0 outcome, a 4.5% probability to a $5/share outcome and a 0.5% probability to a $20 outcome the expected value of my initial $10,000 wager is $3,250 . . . in which case, I'll take my chances at roulette.
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Old 11-23-2008, 08:56 PM   #9
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Originally Posted by SlowTwitcher View Post
I've been playing the get-rich-slow stock market game and am content with it. Yet, I recently have had an idea that will not abate. Would you be willing to risk a stash of money (say $10,000) on a single beat down stock? Downside is limited to $10,000 with a huge unlimited upside. Take Ford stock for example. Could buy 10,000 shares. If it returns to say $20/share (GM/Chrysler fail but they survive?) it would be worth $200,000. For me, the loss of $10,000 today would represent approx. a yearly loss of $1600 when I retire ($10,000 grows to $40,000 over 20 years and I withdraw at SWR of 4% = $1600/yr - really just a few days work in 2028 dollars).

Appreciate any comments: talk me into/out of it, would you be willing, and
what single stock would you risk it on??
Go for it. If your in the market period, your gambling. And I'm losing.
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Old 11-23-2008, 09:06 PM   #10
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I thought the same thing about GM, but it seems clear any bailout is going to involve equity dilution, the government will essentially be majority shareholder at the expense of current stockholders. Still, at a dollar a share it's probably better than a lotto ticket.
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Old 11-23-2008, 09:24 PM   #11
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I'll say this: I wish I wouldve bought American Airlines stock after 9/11 when everyone and their brother thought they were in mortal trouble. The government isnt going to let GM go out of business.
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Ford In Your Future?
Old 11-23-2008, 10:53 PM   #12
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Ford In Your Future?

Slow Twitcher,

I said to my wife a week or so ago, "Why don't we buy 100,000 shares of Ford. It's a dollar and change now and if it goes back to say $30...?"

Now, you have to understand that I was born in San Francisco and my relatives climbed over the Sierra Nevada Mountains in 1845. The Donner Party were late arrivals to us.

But my wife was born in Henry Ford Hospital in Dearborn, Michigan and went to Clara B. Ford Elementary School and Henry Ford High School (if there is such a thing), and her father went to the Ford Trade School and worked at Ford and her grandfather worked at Ford and all the rest of the clan worked at Ford. And she moved to California to get the hell away from all of that.

So, I had to be sure that there were no frying pans within reach before I spoke. However, having said all that I think you may be right. The New York Times today has just such an article. Ford doesn't need a bail out to last thru 2009 at least.

With gas prices down and their new Ford truck out a lot could happen. In any case read the article.

If you will provide a diversion I may sneak a few shares.

boont
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Old 11-24-2008, 01:06 PM   #13
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I'll say this: I wish I wouldve bought American Airlines stock after 9/11 when everyone and their brother thought they were in mortal trouble. The government isnt going to let GM go out of business.
On the other hand if you bought United Airlines stock right after 9/11 you ended up with zip.
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Old 11-24-2008, 01:51 PM   #14
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On the other hand if you bought United Airlines stock right after 9/11 you ended up with zip.
Big difference between those 2 companies. Its like comparing Walmart to K-Mart
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Old 11-24-2008, 02:16 PM   #15
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Originally Posted by SlowTwitcher View Post
I've been playing the get-rich-slow stock market game and am content with it. Yet, I recently have had an idea that will not abate...Appreciate any comments: talk me into/out of it, would you be willing, and what single stock would you risk it on??
always remember the casino gambler's rules
- only bring to the table that which you are willing to completely lose.
- walk away from the table while you are ahead.
- stop when you are behind.
- the house always wins, except in rare cases.
- stay away from the ATM.
- have fun and enjoy the ride.

i'm a mutual fund owner only. i played with a low stake in JetBlue individual stocks a few years back, just for the experience. i actually came out ahead. but the tax man was waitiing for me when i sold at a profit. all in all, i learned a lot.
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Old 11-24-2008, 07:39 PM   #16
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Big difference between those 2 companies. Its like comparing Walmart to K-Mart
True AMR was a better company

On the other hand the warning about Airlines being bad business was true in 2001 just as Auto are a bad business in 2008.

If you bought AMR right after 9/11 you would have got it for about $18 with perfect timing you could have sold it late 2006 early 2007 for $35-40 roughly doubling you money, vs a 35-40% gain on the S&P 500.

On the other hand if you held AMR stock it closed a $7.66 and you would have lost 50% more than the S&P.
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Old 11-24-2008, 09:43 PM   #17
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I wouldn't do it with just one stock, but I would put $10k on 20 different beat-down companies. That's what I did during 2001-2002, diversifying out of my (tech) company stock and into other really beaten down tech stocks. Some went to zero (WorldCom was a good one), some came close to 10x price gain. As a whole, I made close to 100% gain in 2003.

Putting all your money into one stock is a simple gamble. You just can't know that company well enough to avoid some serious risk. But investing in lots of risky companies is a lot less risky.
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