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"Maximum Tolerable Loss may be too much", or......
Old 06-18-2016, 11:04 AM   #1
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"Maximum Tolerable Loss may be too much", or......

.... "Don't make decisions while emotionally distraught", or, just simply, "Don't Be As Stupid As Me". You are welcome to select the appropriate lesson to be learned from my (very poor) example. Hopefully this will help someone else to avoid making the same mistake that I have.

For several years we have had a stock portfolio of a size that would allow my wife and I to live comfortably, but not extravagantly, for the rest of our lives. We were primarily invested in large cap blue-chip stocks such as MO, JNJ, KO, UL, SPY, HON, BRK.b, etc. A 4% withdrawal rate adequately covered our living expenses.

In the middle of 2015 when the price of oil started to decline I started buying North Sea offshore drilling stocks (SeaDrill "SDRL" and Noble "NE") when I thought they were cheap. As the price of oil continued to decline I continued to buy more. As they got dirt cheap I sold large positions in my blue-chip stocks to buy even more. At no point was I overly concerned; I believed wholeheartedly that the price of oil could not stay low forever, and I had made it through the crash of 2008 and 50% temporary losses, I could certainly hold on through this little bump in the oil market and come out the other side in a much better position. The "temporary" loss of net worth really would not affect us too much because there was no reason I would need to liquidate these positions. I could hold on until oil recovered.

At the beginning of 2016 my wife was diagnosed with terminal cancer. My entire world imploded and the stress levels were off the charts. I spent the first hour of every day in the shower with the dry heaves and my entire body convulsing I was so stressed with worry dealing with this issue with my wife. I have absolutely no idea how I did not have a heart attack. During the first couple of months of the year our portfolio continued to decline. About the second week of February my portfolio was down 40+ percent. I was in pure panic mode. I was worried and scared that I was losing all of our money at exactly the time when we would most need it. In retrospect I was in no position emotionally to make any portfolio changes but pure panic and worry set in. I liquidated the SeaDrill and NE positions at pretty nearly the exact bottom. Of course, they have both somewhat rebounded off of their lows now.

I am now left with a portfolio with a value of about 60% of what it was a year ago, significantly less dividend income, and a future which all-around looks a whole lot less bright. I will forever feel shame over losing money that could have made the time my wife has left so much more comfortable and enjoyable.

I'm not looking for sympathy, commiseration, or anything of that nature. Maybe someone can learn a lesson from my stupidity (and it was stupidity in the truest definition of the word).

My "maximum tolerable loss" was clearly not what I thought it was. I clearly should have not made serious financial decisions in the midst of such emotional turmoil. I never should have risked our security out of greed for "a little bit more".
.
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Old 06-18-2016, 11:08 AM   #2
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Interesting story and I hope that you fare well. I have had similar experiences with the stocks.

That is precisely why index funds are in most recommended portfolios. You can buy individual stocks, but the odds of you getting it right on the way up and down, is slim.
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Old 06-18-2016, 11:08 AM   #3
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.... ...
I'm not looking for sympathy, commiseration, or anything of that nature. Maybe someone can learn a lesson from my stupidity (and it was stupidity in the truest definition of the word).

...
Nonetheless, you have mine. Unfortunately, "maximum tolerable loss" can change with circumstances--and you experienced one of the worst. Your story adds to my knowledge as we come closer to retirement, and I thank you for that.

Good luck, and best wishes for you and your wife.

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Old 06-18-2016, 11:27 AM   #4
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Snidley, thank you for sharing that painful story, and prayers and wishes for a full recovery for your wife. To the degree that misery loves company, I have a good friend who is very smart and a very rational investor. He has an almost identical story to yours regarding an oil investment wiping out a huge portion of his portfolio. The difference is that the emotional trigger for him that started the investment was a divorce. The trigger that made him sell and lock in a big loss was realizing oil would need to return to $75/barrel for the company he chose to avoid BK. Best of luck. The portfolio loss may seem important but it pales compared with the health issues. Stay strong and give yourself some forgiveness. We've all done irrational things.


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Old 06-18-2016, 11:36 AM   #5
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Sorry to hear about your wife's illness. I did something like that back in 2007-8 with ADVDX, but not to the magnitude you described. It taught me a good lesson.
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Old 06-18-2016, 11:44 AM   #6
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So sorry to read of your wife's diagnosis. To me it underlines what really is important. Don't worry about your investments right now. Time to be at your wife's side.
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Old 06-18-2016, 11:57 AM   #7
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I don't want to be trite and say something like "sorry for your loss." The first thought that really comes to mind is, "aren't life events an absolute b*tch?". From my experience, they are, be they serious health conditions (yours or your SO's), financial woes, job loss at precisely the wrong moment, freak accidents (like the vacationing Nebraska couple in Florida whose two-year old son was taken by an alligator, or any of the poor victims in Orlando out for a good time only to be in the wrong place at the wrong time)?

Yes, I am sorry about your wife's condition, and hoping for it to improve. OTOH, I recommend losing the guilt and self-recrimination regarding your financial choices. Who hasn't been there, where more than one negative life event conspired to occur at once, and we subsequently made the "wrong" (in hindsight) response to a situation. I've personally been there more than once. Most recently, it was selling equities in '09 (looking back, what was I thinking? oh yea, I was scared, and the world/my world was going to hello in a handbasket) as the stock market cratered coupled with not one, but two(!), back-to-back job losses during that time.

What's actionable here is going forward making the commitment to learn about investing in such a way that you will never make this kind of mistake again. Creating a well-crafted investment policy statement will support you in not taking an errant action at precisely the wrong time in the future. More importantly, an ISP helps crystallize your investment and lifestyle choices and forces you to investigate, become knowledgeable about, and select carefully, a course of action founded on solid reasoning.

When the next "worst possible time for all of this to be happening" event arises in your life, you can look at your ISP and it will keep you on course. Research has substantiated this.
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Old 06-18-2016, 12:05 PM   #8
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+1. What's done is done and you learned a lesson. And, you are no doubt still far ahead of most everyone you know. Best wishes.
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Old 06-18-2016, 12:18 PM   #9
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Thank you very much for sharing your story. I believe many of us have the potential to fall into the same thing you have, so it's a good word of warning. I wish a full recovery for your wife.
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Old 06-18-2016, 12:36 PM   #10
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Sorry to hear that Snidley. I too made an oil sector gamble, going relatively all in on MLP sector about two years ago. I got spanked.

I hope everything works out ok. My mom has been cancer free for 8 years now. I don't know your situation but don't give up hope.
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Old 06-18-2016, 01:20 PM   #11
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OP your wife, and you, were dealt a harsh hand by fate. Sadly, it happens all too much. All you can do is regroup, and move forward as best you can. Good luck to you and your wife.


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Old 06-18-2016, 02:13 PM   #12
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Thank you for sharing your story.

My brother is going through a rough emotional time lately and I can see his impaired decision power. I've had a few episodes too, luckily before I had any investment assets.

And both of us weren't even remotely going through what you are going through now.

Ideally when you are emotional vulnerable you need a safety valve: usually a person who can temporarily take over and stop you from doing anything with potentially large consequences until you have stabilized. I act like that for my brother right now.

Unfortunately I don't have a person like that in my life, and don't know where to find one. Your story is a solid reminder that that is a very real risk for my own (financial) health.
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Old 06-18-2016, 02:18 PM   #13
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Quote:
Originally Posted by Snidely Whiplash View Post
....
My "maximum tolerable loss" was clearly not what I thought it was.
.
Thanks for sharing this SW. I hope for the best possible outcome for you and your wife. Tough times for sure.

I also have a few small "dicey" positions in the portfolio that would be a distraction if I were coping to deal with tough, emotional times. I allow myself up to 10% in speculative investments and currently enjoy the rush from managing the positions. But that's today while life is flying straight and level. I'm thinking it may be time to back out of those at the first reasonable opportunity and perhaps keep things more vanilla going forward.

Just curious, in addition to NE, did you also own PGNPQ when they split Paragon off?
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Old 06-18-2016, 02:30 PM   #14
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I, like all the others hope that your wife will recover and you both live a long life...

As to your 'stupid move'... (this is to other readers).... be very away of sector risks... IOW, it appears that the OP invested way too much money into oil thinking it would come back quickly... it means you are too concentrated in one sector of the economy and if that sector continues to crash you do also...

Do not concentrate any of your investments... diversity is the way to a long term gain... I remember back in the 90s when the internet was skyrocketing and someone asked me about investing.... I said diversification works both ways... when some sectors are shooting the moon you want to get into them... but as 2000 came about those same people lost almost everything.... I never did make a killing, nor did I lose everything...


A recommendation that I would make is have a play account... say a max of 5% of your total and do whatever you want to in it... I do... and like the OP I got into some stocks that have gone down on me (this year in Netflix and Apple, last year in shipping stocks, Alibaba and Cisco).... down maybe 30% over all.... but, I do not add any money to it... it is lower than before and that is the lumps... if I can get it back up then great... if not, I have to live with what I got...
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Old 06-18-2016, 03:35 PM   #15
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No lectures from me. I do fervently hope that things go well for you and your missus from here on.

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Old 06-18-2016, 04:23 PM   #16
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It takes a person with courage and a kind heart to share this personal tale with so many others in the hopes it may help some avoid the same painful mistakes. I have also made a foolish expensive mistake, but I am too embarrassed to share it with anyone other than my spouse. Forgive yourself. I know you and your wife will face the future with the same courage, faith, and eventually, peace.
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Old 06-18-2016, 05:37 PM   #17
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Thank you to everyone who took the time to reply. I'm appreciative of all the kind words and good wishes and thoughts for my wife from everyone.

Quote:
Originally Posted by 2017ish View Post
Unfortunately, "maximum tolerable loss" can change with circumstances--and you experienced one of the worst.
That's exactly what I failed to recognize. My "maximum tolerable loss" was appropriate as long as everything else in my life was going smoothly. I never anticipated that a horrific health issue in a loved one would occur or have such an impact on my financial thinking.

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Originally Posted by RenoJay View Post
Stay strong and give yourself some forgiveness.
I stay positive because my wife's time is short and I don't want the time she has left to be spoiled by my being miserable or unhappy. But I will never forgive myself for losing money that we could have used to make her remaining time more enjoyable. I know I can make back the amount I lost but not in the time she has left. It's a hard reality to face as a husband.

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So sorry to read of your wife's diagnosis. To me it underlines what really is important. Don't worry about your investments right now. Time to be at your wife's side.
That's exactly right. In many regards money isn't the most important issue right now, but it causes me significant stress above the worry and stress that I have in dealing with the prospect of losing my wife.

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Originally Posted by Options View Post
The first thought that really comes to mind is, "aren't life events an absolute b*tch.
We have lived a relatively problem free life up until the last 12 months. Just prior to my wife's diagnosis some serious issues absolutely devastated our family relationships. We have a son that has deployed to a very forward base in Iraq with his Army unit at the beginning of this year, and then this devastating news ref: my wife. Truly, when it rains it pours.

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I hope everything works out ok. My mom has been cancer free for 8 years now. I don't know your situation but don't give up hope.
My wife is an absolute rock. Brave and positive. I've never known anyone braver than her. She was diagnosed with pancreatic cancer that has metasticized to her liver. It is Neoroendicrine tumors (like Steve Jobs had), much less aggressive than normal pancreatic cancer, but it was discovered way late. It's pretty far advanced and her liver has "a lot of disease" according to her doctor.

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OP your wife, and you, were dealt a harsh hand by fate. Sadly, it happens all too much. All you can do is regroup, and move forward as best you can. Good luck to you and your wife.
Thank you. Regrouping and moving forward is exactly right. I guess it makes me feel a little bit better if it wasn't completely my stupidity that caused this. Being "dealt a harsh hand by fate" certainly added to the poor decision I made. I hadn't really looked at it like that. Thanks.

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My brother is going through a rough emotional time lately and I can see his impaired decision power. I've had a few episodes too, luckily before I had any investment assets.

And both of us weren't even remotely going through what you are going through now.

Ideally when you are emotional vulnerable you need a safety valve: usually a person who can temporarily take over and stop you from doing anything with potentially large consequences until you have stabilized. I act like that for my brother right now.

Unfortunately I don't have a person like that in my life, and don't know where to find one. Your story is a solid reminder that that is a very real risk for my own (financial) health.
That was my point in posting this. It's pretty easy with the Internet and online brokers to just login and instantly liquidate some positions. Maybe a traditional broker could have talked me out of some of those moves. I don't know. I just hope that anyone in the future who may come to this site and may search for maximum tolerable loss gives some thought to the external issues that could arise and affect their loss tolerance.

Quote:
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Just curious, in addition to NE, did you also own PGNPQ when they split Paragon off?
I had no shares of Paragon. Actually what few shares I got I sold right away. The bulk of my NE position was bought after the split. I did have a small position in NADL but that too got sold at a massive loss back in February...... at less than a third of the price it's trading at today.

Quote:
Originally Posted by Texas Proud View Post
IOW, it appears that the OP invested way too much money into oil thinking it would come back quickly...
I did. I kept buying as it went down. And I sold "good" stocks to put more into the "junk" stocks. And then sold at nearly the exact bottom. I could not have done worse. It just so happens that "the bottom" coincided with the news from the doctor that my wife had 3-5 months to live (since extended somewhat, but not by a lot). It all hit at the same time and my stress and panic was off the charts.

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No lectures from me.
I have a ton of respect for everyone on this forum. No one has beaten me up about all of this. It's a great group of folks here.

Quote:
Originally Posted by swakyaby View Post
It takes a person with courage and a kind heart to share this personal tale with so many others in the hopes it may help some avoid the same painful mistakes. I have also made a foolish expensive mistake, but I am too embarrassed to share it with anyone other than my spouse. Forgive yourself. I know you and your wife will face the future with the same courage, faith, and eventually, peace.
Its not very courageous. The anoniminity of my forum name keeps anyone from knowing my true identity. If I were posting under my real name I never could have admitted publicly to this.
.
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Old 06-18-2016, 06:10 PM   #18
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Its not very courageous. The anoniminity of my forum name keeps anyone from knowing my true identity. If I were posting under my real name I never could have admitted publicly to this.
I disagree.

Even with the "cloak of invisibility" it takes real courage to share your story of investment misfortune - and such real life experiences are among the most beneficial posts on this forum.

My sincere thanks to you (along with VaCollector and dixonge) for your openness and candor. Good thoughts and good wishes for you and your wife.
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Old 06-18-2016, 06:35 PM   #19
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I agree that posting this was courageous and selfless. I really do think it will help other people who read it. To the OP: I wish you and your wife comfort and peace.
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Old 06-18-2016, 06:48 PM   #20
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I so very much appreciate your candor in sharing your experience despite what must be unbearable pain, and can only imagine your heartache.

I can only say that I hope you forgive yourself, and unburden both of you from the stress of money concerns. Far easier said than done, I know. But so trivial given what both of you face.

Please don't continue to punish yourself for what many, many other less brave and less forthcoming folks have done.
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