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Re: I'm an idiot/expensive lesson
Old 04-01-2005, 04:33 AM   #21
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Re: I'm an idiot/expensive lesson

In my last "real" job before ER, I cashed in my stock
options and quit. In less than 6 months my former
employer announced they were being acquired by a multinational conglomerate at a big premium. The stock jumped up to the purchase price in one day.
Top that one!

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Re: I'm an idiot/expensive lesson
Old 04-01-2005, 04:43 AM   #22
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Re: I'm an idiot/expensive lesson

I can't top the "worst stock" mistakes because I'm still waiting for my prescience to be recognized. Nortel. Sun. Build-A-Bear Workshops. Las Vegas Sands. Dolby. Cascade Microtech. 'Nuff said.

But our most educational experience was real estate. We bought our Hawaii 4BR 2BA fixer-upper on a 5000 sq ft lot in 1989 for $277K. The day after closing the master bathroom tub cracked its fiberglas, so we decided that we'd do the demolition if a plumber would finish the upgrade. This became a problem when we realized (during the demo) that no plumber would touch a puny little bathroom job, so we had to tackle the upgrade on our own "spare time" (between deployments).

In the ensuing eight months our home value rode the Japanese bubble to $425K, even with a bare-stud master bathroom and a Jacuzzi still in the garage. During a Sunday afternoon drive, we discovered a gigantic 3BR 2BA with a separate ground-floor apartment on 1.5 acres of North Shore bluff for "only" $625K. It was a bargain despite the rural location, raising our (childless) commute from 25 minutes to 90 (each way). Financing mandated every penny of savings, all of our equity, a full-time downstairs tenant, and a seller's loan of $50K. But what a drooling deal! We immediately wrote up an offer and handed over $5K (the local practice).

The realtor agreed that the seller's financing didn't have to be recorded so that our credit union would be blissfully ignorant of the leverage. It seemed fishy to us but he assured us that it was the current local practice. Both sellers nodded their heads in agreement. It kinda bothered us that the realtor insisted on assigning us an inexperienced "buyer's representative"-- we knew how to buy a house-- but we acquiesced to keep the deal moving. Of course we included the appropriate contingencies on financing & sale of our current house. They agreed with a contingency of their own for a cash buyer.

When we looked over the escrow paperwork later, it included a recording fee for the seller's mortgage. We reminded him of his oral promise and he shot back a stern lecture that we couldn't expect his client not to record the loan! This ethical pirouette completely surprised us so we left to "think it over" (and to discuss it separately with the sellers).

Two days later the realtor informed us that they had a cash offer and asked us to vacate our contingencies. We asked for a copy of the offer and were told that it was "confidential". Suspicious, we balked for time while we continued to sell our house. Our "buyer's rep" called every day to advise us to take the deal but somehow she couldn't manage to present our side of the issue. Threats rained down but weren't followed with legal action, which seemed to confirm our suspicions.

The market had softened a little but we finished the bathroom (very nice, learned a lot) and we eventually accepted an offer of $385K. Our credit-union mortgage was approved and we were ready to close on our new home. We presented the package to the sellers but the realtor wouldn't budge on the recordation and insisted that we forfeit the $5K deposit. More tantrums, lectures, threats. We left for more "think it over".

The next week Hussein invaded Kuwait, oil prices skyrocketed, and the Japanese bubble collapsed. Home values were plummeting and $625K was suddenly way too much. Our buyer backed out using their financing contingency. Our seller produced a cash offer ($525K) and this time they proved it with a copy of the paperwork. Finally recognizing a bad deal, we happily gave up our deposit.

A couple years later we started a family, and I shudder to think of the commute that we almost bought into. The big house dropped to $375K but has since recovered to $1.2M. The house looks great but the lot is severely eroded and the neighborhood school is crappy. The rental market collapsed for eight years. Banks started foreclosing on local owners with unrecorded loans (and underwater mortgages). We were transferred to San Diego and we wouldn't have been able to pay the mortgage or rent the Hawaii house. The realtor went bankrupt during a spectacularly public divorce where everyone volunteered their stories of his scumbag behavior. Our newbie buyer's rep is now one of the North Shore's biggest sleazy realtors. Wiser & poorer, we kept fixing up our house despite its "decline" to $277K and having to rent at a loss. Today it's still a high-market rental that's also doubled in value, and we didn't make any of those old mistakes when we bought our current home in the adjacent neighborhood.

Losing two months' pay hurt a lot back then, but today $5K seems like cheap tuition at the School of Experience.
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Re: I'm an idiot/expensive lesson
Old 04-01-2005, 05:04 AM   #23
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Re: I'm an idiot/expensive lesson

Here is my stock horror story:

Back in the heyday of tech boom, I did a lot of daytrading...one day the stock Onsale.com (ONSL, has since been acquired I think) was bidding up so I wanted to get in and out for a quick hit (like .50 cent move), so I put in a limit order for 10K shares at $45..didn't fill and the stock keeps moving up, so I put in another order for 10K shares at $46...stock keeps moving up and doesn't fill again (please note I forgot to cancel my first order!)..stock goes up to around $50, and then starts dropping fast, and of course since all of this happens within about 120 seconds, I fill $460K worth and then another $450K worth as it continues to drop...drops to around $43 a share (so I am down on paper about $50K in 3 minutes and I start to panic...luckily the stock moves up again and I manage to get out just about flat, completely drenched in sweat and my heart racing (remember I was just trying to make $25.-$0.50 share trade)

Anyway, that was the beginning of the end of my day-trading days....don't have nerves of steel I guess..

The stock open at $95 a share the next day! OUCH
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Re: I'm an idiot/expensive lesson
Old 04-01-2005, 05:13 AM   #24
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Re: I'm an idiot/expensive lesson

Okay farmerEd! Your story beats me.
We are sending you a deluxe version dryer sheet flag as an
award

JG
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Re: I'm an idiot/expensive lesson
Old 04-01-2005, 01:00 PM   #25
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Re: I'm an idiot/expensive lesson

Wow, feeling better already, I got my lesson paid for on the cheap!

At least I have that fat raise to offset the loss! :P
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Re: I'm an idiot/expensive lesson
Old 04-02-2005, 03:56 AM   #26
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Re: I'm an idiot/expensive lesson

Idiot NOT! Expensive and annoying yes. My first or second speculative stock vanished off the face of the earth so long ago I don't remember what it was. Made enough on the other to cover losses on the bad one and have made one or two 'sure thing' speculations with success since.

BRuce
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Re: I'm an idiot/expensive lesson
Old 04-02-2005, 04:05 AM   #27
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Re: I'm an idiot/expensive lesson

Quote:
A couple of months later, with no news in sight, the company declared bankruptcy.
...
The really fun part was paying that loan off at ~15% for the next couple of years.
See, this is why "insider trading" shouldn't be prosecuted. For every $1 made through inside info, I'd wager there are $10 lost by people who think they have a "hot tip" from an inside source.
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Re: I'm an idiot/expensive lesson
Old 04-02-2005, 04:35 AM   #28
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Re: I'm an idiot/expensive lesson

What is/are the moral of this/these storie(s)? Stick to mutual funds? (On average down 1 - 2% YTD), or sleep better with laddered CDs?

I personally am still on the fence, as I HAVE to have some return on my capital to live. It is my ONLY source of income. No SS, No Company Pension, Zip, Nada.

Surely, if you can get 4% on your Cash and only withdraw 3% (or whatever the numbers turn out to be in a given year) is that so bad?

Basically you win some and loose some, that's life.


SWR
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Re: I'm an idiot/expensive lesson
Old 04-02-2005, 04:40 AM   #29
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Re: I'm an idiot/expensive lesson

OK go on raise those forgotten suppressed memories. What the hell, is a very dark an stormy Saturday anyway.

Once upon a tech-time our young tech-rep enjoyed a cushy sales job selling among other things, very expensive memory chips to 3 of the United States' (world's) biggest computer makers. Yes, boys and girls at one time computers were built in the US at places like Norwalk, Owego, Menlo Park, Natick, Webster, and someplace called Poughkeepsie. Anyway our bright, eager, and fiercely loyal (an anachronistic deathwish) boyhero was diligently making sure that his three memory famished behemoths were being served up pricy portions of the latest an fastest (nearly 120 nano seconds!) chips. Those commission checks would insure his place in the prestigeous President's Club for years to come and plenty of funds to get into the STOCK MARKET He had heard of a company called Sycamore (pronounced sick-a-more not suck-more as it became known). Our boy waited until just the right moment to buy 1000 shares an $100 per share, and being intensly loyal still owns them... cheezit here comes the wife
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Re: I'm an idiot/expensive lesson
Old 04-02-2005, 08:20 AM   #30
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Re: I'm an idiot/expensive lesson

>>He had heard of a company called Sycamore (pronounced sick-a-more not suck-more as it became known). Our boy waited until just the right moment to buy 1000 shares an $100 per share, and being intensly loyal still owns them... cheezit here comes the wife

Ouch!
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Re: I'm an idiot/expensive lesson
Old 04-03-2005, 02:15 PM   #31
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Re: I'm an idiot/expensive lesson

Got this story from a friend of mine who was an eyewitness and swears, SWEARS, it is true---

This incident occurred in one of those ground floor walk-in offices of a large national retail brokerage which shall remain nameless. Anyway, this office had the usual ticker runing and chairs for the public to sit in and watch the market roll by. And the brokers all had little cubbyholes to make their cold calls etc. And by the front door there was a desk for the "man-of-the-day" broker to sit. The man- of- the- day gets all the walk in business for that day.

Well, this man-of-the-day is sitting there reading the sports page when a kid walks in and sits down. Kid says he wants to invest in something. Man-of-the-day asks what his investment objective is. Kid says he wants to double his money fast. Man-of-the-day asks what kind of money are we talking about? Kid says $20.

Man-of-the-day looks at him quietly for a moment and says nothing. Then he says "let's see your twenty, kid". Kid lays his twenty on the desk. Man-of-the-day reaches into his pocket and lays down his own twenty. Reaches into his other pocket and pulls out a quarter. "You call it, kid, double or nothing! " Heads!" says the kid. Sorry kid, but its tails. Man-of-the-day slides the two twenties into his pocket and picks up the sports page. Not another word said. Kid gets up and walks out of that office 20 bucks poorer but ever so wiser!

Donner
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Re: I'm an idiot/expensive lesson
Old 04-03-2005, 02:35 PM   #32
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Re: I'm an idiot/expensive lesson

Donner,

Re the $20 story: I love it. If it's not true, well it should be!
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Re: I'm an idiot/expensive lesson
Old 04-03-2005, 08:21 PM   #33
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Re: I'm an idiot/expensive lesson

Shockwave Rider'
Welcome back. How was the cruising?

Laurencewill -- I did so many dumb things with individual stocks I have lost count. Like selling Berkshire Hathaway at $5,500-- a 17-year low, back in the early 90s.

I came to realize that even if I heard a good story, did some analysis, read a Barron's article that made perfect sense to me yada yada, once I owned the thing and it actually went up a bit (surprisingly they often do for a little while), that I didn't have a clue when to sell, or why to sell or why to keep owning something.

How can you have a clue? Even people who work there usually don't know. Analysts don't know. CEOs might know but they can't do anything about it. Nobody really knows, because here's what is always lurking on the downside for any individual stock:

Some idiot over in the 14th cubicle over from the window on the third floor of the accounting department starts cooking up something with the clown in the 17th cubicle three rows over, and a year later the whole multibillion dollar edifice drops 27% in value.

Or more to the point, one more poor old soul in intensive care unit 432b on the 11th floor in a hospital in Louisville Kentucky dies this morning and your investment falls 60%.

No company or stock is immune from this.

Value stocks are great, but how do you know if you are in a value play (tyco) or a value trap (enron)?

Funds are the only way to ride through all this stuff and get the returns due the asset class, which, overall, still are prety good.

Seems to me you got off really, really cheap if you can learn the low-cost fund, buy and hold, rebalance once-a-year lesson just by getting canned by one Irish pharmaco.

You lucky dog!!
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