Fellow Fools,I write this for several reasons, many of which are not clear to me at this point. I do know that I have had a horrible day and so I need to cleanse myself. I also write it to educate (but not necessarily amuse of enrich) members of a community for which I have great respect.I am 27 years old and I have learned more from this community and site than any other, hands down. Today, however, I punctuated a painful, painful lesson - one which I will grow from. It may prove to be the most valuable investing lesson I ever learn.Here's the short story long:I have been a Fool for quite some time - I've got all the books, several pages on the site are in my top bookmarks, I listen online to the radio show religiously each and every week. I believe the Gardner Bros. to be genuine and well-intentioned. I have been to a Fool book-signing. I wear a Fool ballcap. Though I have rarely posted - I have lurked on these boards silently and considered myself a member of this community for quite some time. Many of you are funny, some of you are brillaint. I feel fortunate to know this place.Over the last 2 weeks, I have been involved in the Rule Breaker Seminar. Unfortunately, I haven't been able to get much out of it. Here's why:When the Fools recommended CRA in December, I placed a small amount of my modest, yet not-too-shabby-for-a-20-something, portfolio in it. As you all know, it began to do very well. Enjoying the success and beginning to learn more and more about the company, I continued to buy more. I began to use a "margin" account to buy Celera. I was borrowing from my broker to buy more and more. The stock continued to rise. Things were looking unbelievable from my vantage point.Next, the unthinkable. In the last 2 weeks, Celera has fallen from its high of 276 to 85 at one point today. Why I will never know - perhaps just to teach me this lesson. As it fell, I told myself what a great chance it was...what a sale...what idiots the sellers were, running scared from meaningless Clinton/Blair comments and throwing all biotechs in the garbage...blahblahblah, etc....On the way down, I began to sell my other stocks to get Celera, cheaper (and again, using that MARGIN)I couldn't believe it at 170 and I bought.I was stunned at 150 and I bought.At 130, I sold every other stock I owned and margined myself to the gils. I was all Celera, all the time. And I was convinced I'd turn a massive profit on the swingback.-------------------------------------------------I held each and every share until the bitter, bitter end - which came, (surprise - bitterly!), this morning.When Celera hit $85 a share, my online broker was forced to sell my entire position to cover my margined debt. At that point in time, my shares were not worth the margin debt I owed, much less the required level of minimum maintenance.The fact that the stock bounced 21 points from that makes it just that much more disgusting - though if I had been truly Foolish, I wouldn't have been so outrageously margined and the this morning's brief meltdown wouldn't have really mattered.As I sit tonight - I have no shares of Celera in my account and an account that was worth almost $60,000 and was full of 6 promising, fantastic stocks is now worth $0.In fact, it's worth less - I must send $1,500 to the broker.I wiped out three years of Foolish saving and investing in TWO WEEKS with reckless, careless margin debt. It has almost made me physically ill. BUT I am doing my best to maintain a happy grin and vow to get back on the horse and ride it smarter this time. I really have no other choice. It might be quite some time before I post again at the Fool, needing some time to heal my wounds and focus on my future. But I will be back eventually with a basket of Rule-Breakers and Rule-Makers and I will learn from this tough, brutal lesson.I will again dig in and I will again change my financial destiny. This time, I'll do it with stocks I own and I will not get caught up in hysteria or visions of overnight riches.Chin up, Fool on. I wish you all the best of luck and hope my lesson here helps save someone from doing themselves what I have just done.
globalstreamer 2 thoughts come to mind from reading your post.I'm sorry to see this happen to you and I thank you for sharing your story. I've found that I've learned many a lesson since I've became an active investor in Nov. The one that's hammer home the most is to make sure you're diversified, but for this I had to experience it for myself. I'm trusting that your post will prevent me from having to actually undergo what you did before I learn the pit falls of margin.Thanks againCT
Globalstreamer,Thanks for sharing. I think everyone who invests has a similar tragic tale to tell. Mistakes go with the territory. I could say "You're young. You'll be back up in no time", but words like that don't help at this time. Your loss was a real physical blow - like a death, with all the stages: denial, anger, grief.However, as inconceivable as it seems at this time, you'll get through this. I think you did well to share with this board. We'll wrap our cyber arms around you, and comfort you.
Globastreamer, you have a lot of guts to post your message on this board. My hat is off to you. One day you will think of this as a good lesson and laugh about the amount involved.
Globalstreamer,I was very moved by your story and greatly admire your courage in sharing this story with others. You have a lot of courage. At the risk of sounding patronizing, I really think that someone of your obvious strength of character will do very well ultimately.I have frequently gotten agitated reading messages on this board misrepresenting both the risks of speculative stocks such as CRA and the risks of buying on margin. If I were you, I would consider other resources than TMF. There is an orgainization in Chicago called the American Association of Individual Investors which has a lot of resources to offer those interested in pursuing an analytical and systematic approach to investing. The have a wonderful (very short) book called "A Lifetime Strategy for Investing in Common Stocks" which I found very valuable. Another book (a classic recommeding an investment style now out of favor) is the "The Intelligent Investor" by Benjamin Graham. At the risk of sounding banal, you are very young and should not have trouble earning back the money you lost many times over. And there are much worse losses to suffer in life than temporary monetary ones. Setbacks such as these only count as failures if you do not learn from them.
Globalstreamer,The fact that this happened so fast to you is a wake up call to many of us who have had "the right pick" in a stock and wanted to put it all on just one company. Many of us spent our new found Celera profits, at least in our heads, just before the Clinton/Blair fiasco turned the market and this stock sour.Diversify? Avoid Margin? How foolish. How sorry we are for your losses, for each of us have been or could be where you are today.Good Luck to you young man, you've earned it.
Globalstreamer-Re: post #9140 (everyone should read and learn)WOW! That took some guts to tell people about your unfortunate circumstances. You should know that you have probably saved a lot of people from making a similar mistake by sharing your experience. You should be commended.Hang in there. Much better to have learned the risk of margin accts. in your 20's rather that your 50's.JGH
Perhaps your testimonial is what Greenspan ulimately wants to see. Using discression rather then gambling. We have enough debt at risk as it is. Just look at the National debt.It feels so good to get it off the chest.Blessings.
Subject: The real, real risks of margin. Author: globalstreamer Date: 3/21/00 9:22 PM Number: 9140 Chin up, Fool on. I wish you all the best of luck and hope my lesson here helps save someone from doing themselves what I have just done.Thanks for telling your story.I ran 10,000 to $100,000 and back to $0 in the late '70s.My mistakes:Too many eggs in one basket.Adding to position when stock is going down.My Thinking:If I could run $10,000 to $100,000 maybe I could run$100,000 to $1,000,000. Forgot to wake up and smell the roses: $100,000 in 1978 for a 20 something was a LOT of $.Many Fools - Do not understanding Risk/reward:Buying a stock selling at 100+ times sales is VERY HIGH risk. For no reason, the market could mark-down a 100X sales stock to 50X sales(or less). Not sure but looks like CRA has been marked down from 600X sales to 200X. Some of these 100X sales are going to be BIG winners. Concentrating in 1, not Follish. (I made the same type of mistake, not understanding risk/reward .. won't waste your time with details.... still don't think I understand risk/reward)Good luckSound like you won't make the same mistake again.As for me, still add to positions when a stock is moving down. Slow learner.
globalstreamer,I feel for you man... I do have a note to add on this though... I am in almost the same boat as you. I happened to see the stock when it had hit 140.. So I sold every other stock I had and margined myself to the hilt, just like you did. I got in at 138, needless to say when I saw it hit 85 I started feeling ill as well.. I "THINK" the only difference between your situation and mine is your choice of brokers. I'm with Schwab and all they asked me for when it hit 85 was $720, which has since changed to $410 dollars and I have no doubt it will further decrease as the stock rises. They do some sort of calculation and then apply it my gain/loss. I feel blessed that the stock is back on the rise and that Schwab didn't call my margin when they very well could/should have. I'll pay $29 a trade any day to have that kind of peace of mind..Good luck to you... When CRA gets back to 138 you can bet I'm going to get out of this margin debt... I have never been sooooo stressed out over market activity, as I have in the last few days... Life is too short for that kind of stress.DTMPS.. globalstreamer, who is your broker??? Just wondering...
On the way down, I began to sell my other stocks to get Celera, cheaper (and again, using that MARGIN)I couldn't believe it at 170 and I bought.I was stunned at 150 and I bought.At 130, I sold every other stock I owned and margined myself to the gils. I was all Celera, all the time. And I was convinced I'd turn a massive profit on the swingback.I held each and every share until the bitter, bitter end - which came, (surprise - bitterly!), this morning.When Celera hit $85 a share, my online broker was forced to sell my entire position to cover my margined debt. At that point in time, my shares were not worth the margin debt I owed, much less the required level of minimum maintenance.The fact that the stock bounced 21 points from that makes it just that much more disgusting - though if I had been truly Foolish, I wouldn't have been so outrageously margined and the this morning's brief meltdown wouldn't have really mattered.As I sit tonight - I have no shares of Celera in my account and an account that was worth almost $60,000 and was full of 6 promising, fantastic stocks is now worth $0.In fact, it's worth less - I must send $1,500 to the broker.I'm reading this and thinking to myself, man what a sad story, but the numbers don't seem to add up. Even if you bought all your shares at $170, which you say you did not, you wouldn't get a maintenance call until it got down below $57. And since when does a broker give a margin call in the middle of the day? And why'd they sell all your shares when selling a small amount would probably get you back above the 25% maintenance requirement?Ryno
<<Good luck to you... When CRA gets back to 138 you can bet I'm going to get out of this margin debt... I have never been sooooo stressed out over market activity, as I have in the last few days... Life is too short for that kind of stress.>>..amen....this morning you could here the cries of the sheep...baaaa..BAAAA...as they were led to slaughter....a dead cat will bounce, and this one will, but CRA will likely need to double, or triple bottom in the mid 80's before resuming a move upside....should gap up nicely at the open, as folks pour back in, but as I see it, and IMO, this will be a traders stock for the near term....sorry to hear of the margin horror stories, but as a reader of the Motley Fool, you should have read over and over...don't use margin, at least not with highly speculative stocks trading at 100's of times sales....stocks always go where you least expect them too....huibs..
Dear Globalstreamer,You now have a $61,500 education in investing. With your "degree" in hand, I encourage you to continue as an investor and pay yourself back for this expensive education. One previous poster wrote that investing may be, after all, a process of developing character, and not just a process of developing wealth.Someone related to me a story of a junior executive who made a decision that backfired and cost the company $1,000,000. Called into the boss's office, he asked if he was about to be fired. "Hell,no", said the boss. "I just spent a million dollars educating you! Now get back to work!"You have just learned a very important and painful lesson at a very early age.Now, get back to work! :)Good luck, and thanks for sharing your experience with the rest of us.K2
One of the Top Posts of the Year! Is there such a thing as "Super Rec"? I don't think people really realize how risky buying on margin is.
<<Chin up, Fool on.>>Been there. Rallyed. You will get through this, and be a better "investor" from here.Good luck, Steve
I wish you all the best of luck and hope my lesson here helps save someone from doing themselves what I have just done.globalstreamer,Thanks for sharing.As a new investor, I read about people on TMF making tons of money in less than a year by hitching onto the RB picks or Mechanical Investing and it's a bit disheartening because a careful reading of TMF principles disavow or discourage the risks they're taking (each RB pick is already extremely risky, yet the RB port is comprised of many stocks, not just one).I really appreciate reading your post because I have been contemplating doing something similar. Now, I'm glad I'm diversified and not on margin, though the returns are slower.I will again dig in and I will again change my financial destiny. This time, I'll do it with stocks I own and I will not get caught up in hysteria or visions of overnight riches.Chin up, Fool on.Hope to hear from you again when it's all a distant memory and you can share with us how you recovered.blue
globalstreamer -- Your story is very similar to what happened to me in 1991-2 where I turned $5,000 into -$5,000 while passing through +$30,000. Margin ultimately does this to everybody who uses it, and if I were king of the SEC I would ban it. Everyone thinks they have the discipline to use their 'power' wisely, but everyone goes crazy sooner or later. Anyway, you are young. You will rebuild on a much firmer foundation. Good luck to you. azurefox
Best of Luck.
Just a thought but maybe the slight rebound yesterday was due to a short squeeze? Anybody thinks that it will act as a catalyst and stop the free fall? I would love for this stock to start trading sideways for a while.
<<<I wish you all the best of luck and hope my lesson here helps save someone from doing themselves what I have just done.>>>Hey! Money's not important. The important thing is all those recs you got from your post!!!
There is not much that can be said to ease your pain, it is something you must find within yourself. You have tremendous courage in posting your experience and I suspect, based on that courage, you also have the strength to get through this. It is important to learn from our experiences, both the good as well as the bad, which you indeed have. The fact that you have shared this with countless others is remarkable and very generous. Such insight is a priceless commodity. Hopefully you can take pride in knowing you have prevented someone else from having a similar experience. If it is of any comfort, my thoughts and prayers are with you, along with my gratitude.
GlobalStreamer,Thanks for sharing that. I myself have had a similar buying pattern with one of my holdings. Although, I barely escaped without having to liquidate.Just by reading your post, It seems evident that in the not to distant future you'll forget this event and look upon those losses as small change in comparison to what you will accumulate down the road.Best of luck,V>
Just so you know, I found this post via the Berkshire Hathaway board. Your experience is an absolute tragedy. But in reading it, I have decided to cancel a potential purchase of a stock on margin that had, until very recently, fallen quite far as well.I think yours should be the post of the month, it shows the vagaries of the market, the hazards of overextending, and that stock movements are not just theoretical constructs without impact in the real world.I'm sorry for your loss, but it has served as a valuable lesson to me, and hopefully many others.Thanks
I doubt it has as much to do with which broker Global uses as with how much over his margin call he was. Believe me, Schwab would have no trouble doing the same thing to you or anyone who was sufficiently over their margin call. The $29 trades don't buy you anything in my opinion except a smaller bank account.
Dear Global S..team ER , Couldn't you buy yourshare with a credit card. Will brokers accept theseBenKea THINks not. If not why not?I do like your honesty and frankness, AND i DOTHINK there Should be possibly a board for "MISTAKERS"AND and BANKRUPTCY SUPPORT BOARD.( I am quite seriousabout this... .Hey remember if you're young itseasier to start again..
Globalstreamer....I read your post and broke out into a cold sweat and more than a few teary-eyed blurs trying to look at the monitor....that is So Sad....I feel very badly for you, but, luckily, you are young enough to overcome something like this and you've learned a very valuable lesson.You'll bounce back in no time, I'm sure -- and much wiser (not Wiser<G>) for it.Best of luck to you,Sharyn
Another margin tragedy story:http://messages.yahoo.com/bbs?action=m&board=7078692&tid=mstr&mid=6764&sid=7078692Lost it all in the MSTR debacle. Very, very sad, if true.Ed
Dear Globalstreamer,As another poster commented, your original post has some qualifications of a 'Super Post' as it is a reminder that the market and the tools (margin) at an investor's disposal can expose the participant to some very real and serious risks.At the same time, I have to point out that there are some inconsistancies in your story. If one of our Foolish goals is to educate, then let the material be as accurate as possible especially when talking about sharp and powerful tools like Margin lest someone hold it the wrong way and cut themselves.As poster RyanD in message #9179 pointed out first, I too have a problem with your margin call numbers. Please explain exactly the steps and their timing that resulted in your total loss. As I understand margin, you should still have some of your investment left despite your poor buy/sell timing.As a more serious matter, I'd like to refer other Fools to your own post #227 of 2/27/2000 on the 'Rule Breaker Seminar/Assembly Line (A-B, 9-0)' board where you write.."my investment in Celera rose to the tune of nearly $60,000. (On Thursday, that investment netted me more than I earned working the whole of last year!) The fact that most of it is growing tax-free in a ROTH IRA makes it that much sweeter..."As I understand Roth IRAs, you are not allowed to trade on margin in one, so again I find it difficult to believe your story about how you lost all your money.I apologize for being suspicious (I'm trying to be a Foolish investor after all) while your general lesson is a good one and especially when you write again and explain to us exactly what happened.If however some of what you wrote was fiction then I'd kindly ask you to keep yourself to boards on some website dealing with prose or fantasy. There's already enough fiction in all the information us Fools have to sort through as investors.-Jacko
This post should be required reading for all investors.An expensive lesson but on the bright side you are really young. I was 10K in the hole at 30 in 1991 and am now in good finaincial shape. Chuck
Dear Globalstreamer,I read your post with an uneasy feeling in my stomach. My empathy goes out to you ( and the others who lost their wahzoo's the last week ). I must confess that I came very close to making a giant mistake as well. My wife told me about Celera several months ago anf we started our DD on the company. I had lost the Fools for about a year and was unaware of their RB strategy, and concluded that, based on "wise" investing strategies, that we would be crazy to invest our very hard earned money ito this company. Alas, I clicked on an old favorite bookmark, Fool.com, and what company did I see that had been added to the RB portfolio!!! With incredible returns and the blessing of Fooldom, I re-examined CRA. After reading the RB rules, and fully understanding that any RB is a risk, I dropped this years Roth IRA contribution into CRA. We got in at $151 post-split. We were tickled as it shot to $279! My wife caught me exploring home equity loans on the web. She knew what I was thinking and kindly aked me not to jeopordize our home and reminded me that we have three little ones that need a roof over their heads and alot of financial support. Only because I am currently the sole provider for a family of five did I not lay it all on the line. Something held me back, and it was my responsibility as a husband and father that did. Still I thought that WE were missing out, but then last week Clinton dropped the BOMB, although most who follow this board and did their DD knew it was an "empty" bomd, the market did not take it that way. As a clinical psychologist, the herd mentality ( yes, of which I have found myself wrapped up in too ) of the market is very interesting to me. I read the statement when CRA was at 180, and after my sell executed, I was relieved to realize that I sold at a small profit. I kept a few shares because I do believe in CRA, and I almost bought back in yesterday, but I bought stocks that I know and will provide a much less riskier increase to my hard earned dough. I may still but back in, but with money I can lose, maybe 10 shares or so.Anyhow, your mistake will remind me ALWAYS that when I get that feeling NO way can we lose on this one, that we just might. Denial of risk is dangerous and at the same time you can only profit by taking SOME risk, hopefully those of us who were touched by your post will make the assessment of risk based on reality and not fantasy. Thank you for sharing your experience with us. I have learned from it, as well as from all the people who post here frequently i.e. heihojin, azurefox, dave (welcome back) featherstone ( who I admire for his open and honest posts as well!), etc.Good luck and Fool on!Sincerely,Jim
Bulls make money. Bears make money. Pigs get slaughtered.That is an expensive way to learn this lesson.I wonder if the Fools-that-be should move you lesson up to the top of their list. Your young. You can start over.You will NEVER make this mistake again, eh?Best of luck!To the moon,RalphDisclaimer: Alice thinks I am an idiot
Global - there have been many replies and I probably can't add too much. Because I am your age and have recently learned the same lesson you have, however, I feel a connection with you. Mine is not as drastic, but I too lost money. Words probably don't mean much to you now, but I want to leave you with a brief message. I recently started reading "Think and Grow Rich." A classic and long-accepted novel written by Napolen Hill about being successful in life and wealth. One of the strongest points he makes in the book is that the wealthiest, most powerful men in the nation at that time lived through a huge "failure" before they became a success. He says:"One of the most common causes of failure is the habit of quitting when overcome by temporary defeat."He tells the story of R.U. Darby who stopped mining and sold all his equipment. The man who bought his equipment brought in an expert who told the man that Darby had been three feet from the gold. The man started mining and there was the gold. The point here, obviously, is that Darby used that lesson and became immensly succesful.If you have not already left fooldom for the time being and actually read this, I mean it when I say I feel for you. Take care and I wish you all the luck in the world. Ryan
Good luck to you... When CRA gets back to 138 you can bet I'm going to get out of this margin debt... I have never been sooooo stressed out over market activity, as I have in the last few days... Life is too short for that kind of stress.Nooooo NOOOO!!!!! You missed the point entirely!The margin call comes if the stock goes DOWN. To protect against the margin call you have to reduce your margin NOW!Take your losses like a Man ( or a Woman as the case may be). You shouldn't have margined in, and the sooner you get out of margin, the safer you are.To the moon,RalphDisclaimer: Alice thinks I'm an idiot
Hope the lesson **isn't** to avoid margin.Here are the "rule of thumbs" I've picked up on margin on the TMF:* No more than 10% margin.* Margin stocks with low volatility.* Pay off the margin "soon".Margin is like a credit card. Not inherently bad, but be careful how you use it.Meanwhile, on the Mechanical Investing board, someone used the high-risk Relative Strength strategy and quadrupled his money. It's a different topic, but still is a warning against any high-risk strategy.http://boards.fool.com/Message.asp?id=1030013011191000&sort=idWashu! ^O^
"Bulls make money. Bears make money. Pigs get slaughtered"Pigs get FAT. HOGS get slaughtered.One of these days, Ralph......Regards. Jim
As requested....Post #9288.
globalstreamer: You are not alone. I did the same thing 15 years ago at the advice of my BROKER. I hadn't educated myself enough to know that all my broker cared about was his commissions.I want to thank globalstreamer for having enough guts to share that story with our community. I told no one and it ripped me up for a long time. Further, I stayed out of the market for the last 15 years and missed what they are calling one of the greatest bull markets in history.So, globalstreamer, here's hoping that you read this, or that someone provides you with this link, because many people have done what you and I did, but most do not have the fortitude to first admit, and then second learn from, their mistakes; BUT, you do and you have. Just don't make the same foolish mistake that I did by staying away for the next 15 years. You have youth on your side and you will easily make it up.My new moto after my experience is: Education costs, but education pays.dessling
You guys made it to marketwatch:http://cbs.marketwatch.com/archive/20000322/news/current/all_aboard.htx
globalstreamer, I hope you will continue to monitor the boards. Your message is powerful and one that we can all learn from. Thank your for sharing your heartbreaking experience.Sometimes the lessons we have to learn in life are pretty hard come by. For me, the lesson was learned several years ago, but it, too, was not an easy one to swallow. The process, however, tends to make us stronger and wiser in the best sense of the word!God bless you.rositze
Thanks for writing this,brave soul. You are right , you will benefit more from this than you can know now.I have been there. You have the outlook and balance to succeed, many have not & there could be difficult times ahead.
globalstreamerThank you for your story. You have shared a valuable lesson with all of us and that makes you a great teacher. You feel like a beaten puppy today, but you have probably saved hundreds of other people from the same mistake. The stock market is very similar to gambling. Perhaps far more people make a little than lose a lot, but one should never borrow money to gamble. You are the stronger Fool for learning this in your twenties, and the greater person for having the fortitude to share with us. Thank you, and Bless you.Gretchen
globalstreamer,Hey man, I know that is not much consolation but man, you dang post has like 423 recomendations! That has got to be a record for one post and heck, it should make the fool hall of fame.!!!!! You'll be back I am sure.
Thanks for sharing your experience with us. It was well written and sincele. What struk me most from your post was that it made me feel for the first time a strong sense of community of our cyber fools. I would like to see more post exchanging experice -- good or bad.Re. margin trading, I thought about for a while and have contacted two brokers specialise in this areas, but never jumped the ship. It is high risk strategy. Your experience certainly teach everyone a lesson. But I think, we should not shunt margin trading altogether. It is useful instrument. The essential thing is to know when to cut loss and run. Keep disciplined and set a loss limit.Thanks again for sharing the experience. Please do not leave the fool community.
To Globalstreamer: I winced as I read your plight but thank you for generously recounting this very painful and all too familiar lesson which we all can learn from and which I too have suffered. However, I disagree with your analysis of the problem; that is that margin is the culprit. The use of margin can be a very useful tool if used properly. My mistake was not setting stop limits or trailing stops and, I dare say, you suffered from the same malaise. I now set stop limits as I struggle to get back on my feet and as each stock rises, I adjust the stop higher to protect my profits. If it tanks, I'm stopped at 8% of the previous day's close and live to fight another day. This system can be flexible based on your own daily criteria; mine are based on a charting tool called Telechart 2000. I hope you find this useful as you rebuild your portfolio. Good luck to you!
Great, great post, but such a downer for you personally to loose so much so quickly. I, like you, bought 100 CRA @ $195. I bought another 100 today at 115. But I buy straight up, never on margin. And this stock is only one of thirty some odd stocks, believing that diversification is not only the best way to go (at least for me) but is the smart way to go. I've made money on solid blue chippers over the years, saw them lose value the last six months or so, but held on because I knew they were solid companies with promising futures. Sometimes I added to these stocks after they fell "too far", but mostly I just held on. Once again never anything bought on margin. The last year I have begun to invest in more foreward-looking stocks; internet, technology, biotechnolory. I know there will ups and downs, but I look more at the long term, not the short term. I am 56 years old and depend on my stock investments to allow me to retire one day. I have been a dentist for 30 years, and to tell you the truth it is not as fun as it used to be. I did not even start investing until I was 40 years old, so many many things to pay for (school loans, office and equipment, house, etc). You are doing the right thing, even if it did turn out "foolish", to begin your investments early. Don't dispare. Do the research, believe in the companies that look strong now but even more so in the future, and don't be greedy. I wish you every success in the future.Kenneth L. Ramsey, DDSklrkkr@aol.com
Take heart globalstreamer.You have learned at 27 what most of us have learned at a much later time in our life. I think you are going to do just great.ALec JOnesMarietta GA
Dude!I feel very bad for you....I hope you learned a very important lesson.....If a company makes no money...let alone no revenue....what are you buying! I know it has promise but there are so many other companies that have great potential AND make money!!!!!
I don't own Celera(I barely know what they do),but it took 3 seconds to decide to read a post with 500 recommendations.After reading it, I see why it garnered so many rec's.(mine incl'd.)The original poster received many compliments,as he well should have. I don't care if this is cyberspace: anytime you "stand up," so to speak,and candidly say,"I lost $60 grand through my own stupidity!" you're gonna' get respect. Many lurkers who've been burned for only a few hundred(Yeah,thanks DELL...a "timer" I ain't) would grouse silently,cursing,but certainly never posting for the TMF community to behold. Well,count me in on one of the hundreds who took this poster's message to heart. He succinctly described the chronological unwinding of his port,painting himself as a margin-greedy 27 year-old with a hanging head. Thank you very much for your refreshing candor,original poster. I've got kids about your age and I certainly learned from you. I'd wish you best of luck,but as smart as you undoubtedly will be in the future,you won't need it!
Thanks for sharing this. It is a sobering warning to the over-eager investors among us (include me). You have youth on your side - you will be back, and wiser the next time.God luck
Globalstreamer,Your post is currently at 512 recommends. That ought to tell you how much people appreciate you! I admire your guts to tell your story. I can't say I know how you feel or that I would have the guts to tell the world, but I can tell you that if you haven't already noticed, you have found a valuable commodity - people. People who care about you!Keep in touch and in fact, I have been looking for someone with your experience. You would be a VERY valuable asset to my ongoing-after-seminar-discussion-group-for-stock-picks. Please say you'll be there!-MQ
Good Luck! Your starting again at an age when I was still thinking about next week. It is hard, and you'r right that a cleansing is the best thing now, so you can get going again sooner than later.You can do it, I can tell by your message that you will not give in the loss, but move on soon.
GLOBALSTREAMER,I'M SORRY THAT HAPPENED. I THANK YOU FOR HAVING THE COURAGE TO SHARE YOUR STORY WITH THE REST OF US FELLOW FOOLS. IT HAS HELPED ME TO RETHINK MY FUTURE INVESTMENT STRATAGY. GOOD LUCK TO YOU.
"Margin ultimately does this to everybody who usesit, and if I were king of the SEC I would ban it.Everyone thinks they have the discipline to usetheir 'power' wisely, but everyone goes crazy sooneror later."Egads, an enemy of my Freedom! Please ban gambling, liquor, cigs, guns, cars and lawn mowers also so that I might be protected from myself!Pete
Thanks for sharing your plight with us, globalstreamer. Your seminar colleagues are one in wishing you a speedy recovery.Fool on!Lee
Thanks for sharing. I will learn from you. I was going to start trading on margin. I had the same thoughts as to trying using margin to enhance my account. I had decided to learn more about it. Thank YOU for stoping my thoughts on the subject.
Your story will surely help others.There should be more talk about diversification. Some investment professionals say don't put more than 10% of your money even into your favorite stock.And lately I've been thinking that $1 of earnings is the same whether it is Campbell soup, Rambus, Celera, Apple or International Paper.Fool On
at least he learned this valuable lession as a 20 something!! it could be much worse , ive known a few in the last few years who have learned that lesson but its come when they were in there 40s and 50s with much less time left to try and get backon a sound footing !!
globalstreamer-(This is more of a personal message for globalstreamer, but all are more than welcome, and encouraged, to read on.)I'm sure many Fools will agreee with me, and so may have already said it, but I sincerely feel for you. Not only as a fellow Fool, but as an honest, respectable person. Reading your post gave me goosebumps. I am but a young Fool, 19, and I have learned about much more than investing at the Fool.com. This is without a doubt one of the best organizations that I have had the priveledge of participating in. Despite the fact that most of us are only words and thoughts to each other, there is a special, mysterious comraderie between each and every Fool that is and will be. I feel we are all family. I attribute this to the fact that as Fools we share the same goal: to educate, enrich, and amuse. Knowledge is priceless and you, as well as every other Fool, are more valueable than I ever imagined. As I know you understand, every failure, and success, is a chance to learn and enrich this precious chance at life that we have received. Again, I commend your honesty and I have the utmost respect for you.I know you may not be in the most jolly mood, and I mean no offense with this comment, but, in my opinion, you only lost numbers.Keep your face to the sunshine and...ROCK ON FOOLS!!lbmoney
If there is a silver lining in this, you'll save a few bucks on taxes next year!Sorry, couldn't resist. You da man.- Darell
globalstreamer >>>> account that was worth almost $60,000 and was full of 6 promising, fantastic stocks is now worth $0.In fact, it's worth less - I must send $1,500 to the broker.hi G,i feel sorry for your investment loss, and i applaud you for your courage to warn us foolish investors to the risk of using margins. Like you, I also use margin. My current margin is about 20% and I was trying to sell some stocks last week but I am not the kind of person who would take an investment loss. Luckily for me, the market is doing better, and so tomorrow will be a day for profit taking and margin reduction. Oh, I think these margin rates at 9.25% are compounded monthly .
Started to write, "Think positive." I should be smacked! Seems like greed and too much positive thinking are the problem. Not margin debt. I wanted to buy CRA at 39.00!!!!!, but did not have the funds at that time. If your initial investment was low, your profit at 276.00 would have been astronomical> How much money did you think you should make? Why on earth didn't you sell above 250? am writing this , as much for my benefit as for yours. I own GOTO, at 96.75, KOOP at 40.00, NBCI at 73.00, COMS at 107.00, CORL at 34.00. I have made a good bit of money this year on other stocks, but can't seem to get on the stick with STOP-LIMIT orders. You master selling at a good profit, and I will work on protective stop orders. I believe in margin, but paying lots of interest is for the birds.Good luck to you.Jundy
GS,Man, I so know where you're at. I was 27 in 1987 - in the crash of '87. I was also heavily on the margin, not even for stocks, but for credit... it was stupid. My parents had died in '82, and I was left with a fair amount of money, none of which I was qualified to invest, so I let a Wise investment manager take care of my assets. So, when the crash ocurred, I got hammered. Bad. And learned, as you have learned, the hard way. For a long while I shied away from the market entirely. And then my wife and I had kids, started doing the math, and realized that a naval officer's salary/retirement by itself wasn't going to get us where we wanted to be, reference college, retirement, etc. So we started small, dollar cost averaging, mutual funds (loaded, alas), and eventually built a big enough pile to move into stocks. And now, we're about half way to where we need to be. Our end is in sight in about eight years, if no new thing arises. But we are firmly out of the margin business. And we are maintaining a pool of cash, because you never know when something good might come up. You can get there from here - you will if bear down, and keep up with this site. I wish something like this had been around when I was 27.Good luck,Lexl
I also margined some additional shares of CRA and HGSI on the way down because I thought the prices were great. Unfortunately the bargans got alot better and I sold yesterday because the risk was becoming unacceptable. It cost me 25% of my bioteck stocks to cover at the lower price and I felt really bad for not guessing right with the margin. That was until I read the board tonight and realized how lucky I was to have only a minimal loss (I am not a large shareholder). I believe that margin can be used as an effictive tool but only at very conservative percentages and I was behaving like a kid at a candy sale.
With all the replies posted, you may never ever get to mine, but that's ok. Maybe this is more for me than for you...I bought at 240, and then again at 196, and ran out of cash. Luckily I didn't have nearly as much in it as you, and I didn't do it on margin. But your post -on top of my losses so far (I haven't bailed yet)- has taught me a lesson. I got caught up in this hype and bit hard. It felt a lot like shooting craps when you get on the Pass Line and hit 7 umpteen times in a row. Sooner or later you get 'crapped'. I was no Fool. I wasn't even Wise. I was an Idiot.When I read your post (thru David Gardner's mail), I let out a nervous laugh. It was a lot like watching a Soap, which I believe most people watch to make their lives look tolerable. Someone out there has a more horrific story than you, which -I don't know why- makes you feel better about your own mess.Global, you're human, as are we all. Mistakes are made. Your courage in posting that note makes me believe that your character will take you far in life. You'll be OK.Thanks and good luck.
Thanks for having the guts to post such a heart breaking story. I sincerely wish you the best in the future. Something tells me you're still going to make it big. Best of luck,scoobyfooool
This same lesson was given to me about 30 years ago, before I had a head of grey hair and grandchildren. I lost the whole thing through buying on margin, including my car, house, wife (she was really annoyed), and children. Then I started drinking and lost my job. I had lots of time to think about my investment lesson, but I chose to drink and complain instead of learning how to put my valuable lesson to work for me. Years later I came upon the story of Job in the Bible. I think he was the first man to learn this lesson. He lost more than I did, and he ended up covered in boils, too. But when he started to apply the lessons, it all came back to him. And it came back to me, too. And I know it will come back to you. This is a lesson you never forget, and you will always be comforted by it. Not only that, but you will be able to teach this lesson to others who might be tempted. Strange as it may seem, this is how great leaders are made: by their defeats, not by their victories.
Globalstreamer,It took courage to share this with us. And thank you for imparting another example of Foolish Wisdom, (painful at best), to those of us who like you have toyed with the idea of MARGIN. You are now wise, (no Foolish), beyond your years and unless I miss my guess will surpass many of us in truly Foolish endevors.Best wishes, Bulldog
Dear globalsteamer,This is my first post ever. I am moved by your lesson.Thank you for sharing your experience.I am 48 and only recently an investor, although my message to you is more general than about strictly investing. So far, I have learned that in life it is better to put yourself wholeheartedly in the game and take your licks and learn your lessons than to be safe and secure on the sidelines.I admire you for being the kind of person who can put himself on the line, and I am glad there are people like you in the world.In the long run, I suspect this difficult lesson will have a positive side that is not entirely visable now.My heart goes out to you.Cheyna
I looked at CRA myself back in January, but thought too risky. One thing your post did was strengthen and reaffirm my value investing philosophy. Thank you very much! You learned more in a short period of time than most learn in a lifetime. To paraphrase Warren Buffet on investing:"1) Never lose money.2) Never forget rule #1."Your post reminded all of us the difference between investing and speculating, that to get rich slowly may require more patience and perserverence, but it is much less risky in the long run. My hats off to your candidness. Your post probably saved other people a lot more money than you lost. Karma is definitely on your side now! (But don't count on it in the Market.)~Toddp.s. Don't forget to itemize next year! You and your girlfriend will have some hefty deductions!
Globalstreamer, I have just finished the RB course, but must say your testimony was the most eye opening words of wisdom I have ever read. The course was GREAT, both educating and amusing, but owning Celera and watch it plumet has made for a stressful week. Your honesty and sincerity will take you far in life. I had told my husband at one point that I wished I had bought Cra on margin at about $120, but your testimony certainly taught me a lesson. Believe me 27 is young and you will be a millionaire! Obviously you have the tenacity and intelligence to accomplish this feat. I would have been so proud of my son if he had the intelligence to have accumulated and lost $60,000 at such an early age.Wish I had started buying stocks at 27 instead of + + 27. Good Luck!!! Midlife Crisis Mom
This is my first post after following the Fool Boards for several years, but I was so moved by the candor of the person who lost all his money by buying Celera on margin that I felt the need to say, "Thank you,hopefully we will all learn from your experience and will be forever grateful for your willingness to share it."AKS
Ouch!Thanks for a gem of a post - sorry it had to come at such cost. Good luck
sorry this happened to you and very glad you posted it for all of us to read. thanks and good luck
You are 20 some nearly 30 some years ahead in your learning curve than I am. I know that doesn't make you feel particulary good but let me assure you that with your current knowledge, you will progress and pass me in a few short years. Good investing and stay that way. firstname.lastname@example.org
I have been sitting right where you're sitting,feeling the same feelings.. I ran over 40M down to 8M on a margin account.As disgusting as it is, it is a lesson better learnednow than if you had succeeded, run it up to 100M, or years from now to your dream level,,, and then learned the lesson..I eventually decided.. the market owes me my money back. I will be wiser, smarter, learn,, and get back in it. get it back.
Globalstreamer, your story is a sad but true account of what can happen to those of us (even Fools) when we get caught up in the moment. I own a very small amount of Celera shares and I too thought of selling some shares of good solid companies to buy more shares of Celera. One good quality that has been bestowed upon me by my parents is patience which turned out to be a money saver and a life saver at that for me in the end. I told myself to think about my investment strategy and just wait a while to think about the possible disadvantages selling shares to buy more shares. The only way I got through this whole ordeal was to compare buying on margin in an account to buying on credit with a credit card at high interest. To some this may seem like comparing apples to oranges but to me it is comparing apples to apples. At that moment I realized that I had used all of my Foolish knowledge gained in the Motley Fool books and website to truly understand the power and gratification of buying and holding onto stocks. I applaud your decision to post this message to educate the new Fools and old Fools alike so that they may truly understand what the value of their money can buy. Fool On!!jeffschuele
Read your posting, and wish you the very bestin your next turn of events. I am sure you will beback, stronger than ever.
Wow! I'm conflicted between the emotion of the story and the number of recommendations. They increased by more than a 100 by the time I read through the responses; to #9408. As to the few who doubted the numbers, inaccuracies and missing details come with such devastating confessions. Those super high recommendations are tempting me to make up a heart-breaker post, and since it would be fiction, you can be sure I would have worked out the numbers exactly.washu: Hope the lesson **isn't** to avoid margin.It should be for some. Know thy self.Here are the "rule of thumbs" I've picked up on margin on the TMF:* No more than 10% margin.If you have read all of the Fool you will see some columnists have defended up to 20%.* Margin stocks with low volatility.Or have a very diversified portfolio.* Pay off the margin "soon".There is no real need for this if your rate of return on the margin exceeds your cost of the margin.Margin is like a credit card. Not inherently bad, but be careful how you use it.Exactly. Suitable for some, but not for all. There is a lesson here to be careful with margin, but not to avoid it, if, and it is a big if, you can avoid greed and/or the feeling of certainty. These are present in everyone. It is only a matter of to what degree and how one keeps them in check.What globalsteamer did that was so dangerous is pyramid his position, using the profits from a single stock to buy more of that stock. What was worse was reducing his other positions to concentrate his position even more. I believe in the US you are allowed 50% margin, (70% in Canada on optional stocks!) but some brokers reduce this if you have a concentrated portfolio. That is where a single stock makes up say more than 65% of your portfolio. That alone says concentration is dangerous. They are protecting themselves. Perhaps I am not one to speak since lately I have been using up to 40% margin. But I have a large portfolio, anchored with large positions in Rule Maker blue chips and spread over way too many other stocks. And I have been very successful buying on the rise after a stock has bounced off the floor. I am comfortable with the margin but I will eventually let this work itself down. It is not something I would recommend to others at all. I don't even recommend margin at all unless I am convinced they won't be seduced by it.My cost on CRA is 13.17 and I have not been motivated to buy more. (No, I am not smarter than the Fools. I took much more risk to buy at that price.) I use my profits to buy other stocks. There is safety in numbers; even in volatile stocks when they are spread across different sectors. As well, for those aggressive investors venturing past 20% margin you should have other assets to call upon should the idea of being sold out by a margin call seem distasteful.So no, I don't see this as a lesson to avoid margin. It is a lesson to use margin prudently and a lesson to question one's self-confidence in a single stock. I always have at least ten "sure things," never just one.
Teachers that can reach many with their lessons sometimes are not aware of why or if they teach, they just do!Do not condemn this experience; you have within your grasp the makings of riches both monetary and otherwise...many of us will heed this, some will not. You will receive prosperity beyond your current immagination for sharing this experience! Nature guarantees it!
Thanks for having the guts to post this for us. I have never used margin, but I have seriously considered it several times. Fortunately for me the forms required by the broker were so obnoxious that I decided to pass each time.Thanks again.
Global,I am TRULY, truly sorry that you have had to experience this bitter "lesson", as you choose to call it, and hope that you are able to recover (both mentally and physically) from this horrible experience.Most important though (and it seems like you have chosen to try and put as positive and non-deningrating a spin on this experience as possible!)- DON'T beat yourself up over this. I know it would be very easy to do so, as I have been doing a little bit of this to myself the past couple weeks during CRA's fall, after I bought in at the top (around 245). In no way however, am I trying to compare my experience to the intensity or gravity of yours however.In the end, I think your attitude is fantastic, and I thank you for your willingness to share your thoughts with others on this board, even during the height of your disappointment. Compared to myself, you are still young enough to recover soundly from this experience, and still retire VERY wealthy! "When I was your age" I didn't even have any investments, nor did I have even the slightest clue re: investing in general.Thanks again- thats what makes this community so great!Cheers (hopefully), Al
There, but for the grace of God...With the recent drop in CRA I've found myself on more than one occassion realizing the fact that as much as I follow the Fool and recommend their lessons to others, I have been tempting fate. I was fortunate not to lose my shirt; it could have been quite ugly...about twice as ugly as what you described. Thanks for sharing your misfortune--it drives the point home for me. As a loyal reader of the Rule Breaker I've found myself nodding in agreement to the Fool's words regarding day trading. But like a President who know's it's bad, but can't help himself, I kept going back to what was enjoyable (and profitable)--quick, and not so quick, margin trades. I would usually hold CRA for two to five days; a lot of it, and at a high price: $210, $220, $230Now, I look back and get a bad feeling in my gut when I realize what could have happened if the politicians had just made some comments about the industry while I had all that margin just hanging out there. I can see my self falling into the same trap, buying more. I don't think I would have been thinking about how I was going to realize great gains. It would have been more like being in Vegas and hitting the ATM in hopes of only being down $200 instead of $500.So, thanks for bringing the point home. Sorry you had to be the one to get it, but there are others like you out there. You, however, are probably one of the few who realize it was a mistake; others will not have gotten anything out of it and are blamming others for their misfortunes. Fool on!
globalstreamer,Your story is a heartbreaker....I've never had to fight back tears after reading any of these posts before. But, you are young, you know how to pick stocks, you are on the cusp of unimaginable technological change, and all this will work in favor of your pocketbook in years to come. Thank you for sharing your story...you have helped save thousands of people from making the same mistakes. I was toying with the idea of margin before now. No more! Best to you,R. Martin
Globalstreamer,That was very brave of you to post such a painful letter to serve as an example for others. Best of luck getting back on the horse.--Jeff
Your post is, without doubt, one of the best I have ever read. It should be MANDATORY reading for every investor, young or old. I am 50. When I was in my twenties I had no money and no clue. Twenty-five years later I realized I still had nothing, but I had a clue. Fear has kept me from going down your path. When your 50 the end of the road is closer than the beginning. You have a learned a terrible and wonderful lesson. Consider this. Assume that everthing played out OK with Celera. you margined out and "got away with it". Assume you are now 40 with a net worth of $500,000 and the same situation presented itself. Would you flame out thinking "it can't happen to me? You just went to school. The tuition was $60,000. You now have your degree. You will profit from it the rest of your life. Good luck.Bill
With the balls (aggressiveness) you have to stretch yourself that thin, and with the intelligence and feel with which you wrote your post - $60K is nothing compared to how much your going to own in the future. Keep swinging mate....
sounds like a painfull lesson. I was about to explore the virtues of margin...I'll now think twice and evaluate my need for it. Historically a buy and holder I switched my Co. SEP to self directed IRA (up 28% vs down 4.58% in 3.5 months!) what need do I have to risk margin! thanks again...db
Globalstreamer,At my brother's encouragement, I thought I would write you and share my experience with margin. In 1996 I invested in a company with "great prospects." I just knew the company would do great and so I went out on margin and doubled my holdings. It was at a time when I was moving and was unpluged from the internet. I didn't know about the rumors of my company losing a major contract and even if I did I probably wouldn't have believed them. The night before my son's birthday, the annoucement came. The stock plummetted the next day and I started selling off my winners (including AOL) in order to pay for the margin. But I held onto this company that had been doing so well because I was a believer. Despite having sold everything else off, as I was leaving for work on my 37th birthday, the phone rang and it was my first (and only) margin call. Prior to this, my wife didn't even know I was out on margin or how much. I spent that day coming up with the cash to cover my margin. It was my worst birthday ever. I still refused to sell the stock, however. I remained sure that it was only a matter of time before things turned around. The stock bumped around and for a nmber of reasons it fell all the way to $1 per share. What was once a strong portfolio had essentially been wiped out. As many other companies were ripping up the charts, I spent the next several years rebuilding my confidence, improving my investment technique (I am a die hard LTBH investor who hasn't sold a stock since early 1997), and slowly rebuilding my portfolio. I actually bought more stock at a dollar a share and the company has been one of the great turn around companies of the last few years. I now hold a handful of stocks. Some of them are large cap tech stocks, some are non-tech stocks, and some are small cap stocks. I've been very selective in my purchasing (I'm only back to five stocks thus far) but all of them have done well and my portfolio is now worth over five times what it was worth prior to its demise.The last three years have been tough. It takes a lot to come back into the market after taking a heavy beating. There is so much to learn and so much discipline to develop. I'm convinced that I had to learn the hard way about margin and investing. Even though I had read about the danger of margin investing, I didn't believe it until it had happened to me. I now share my experience with my friends and family in an attempt to allow them to learn from my mistakes. I realize now that if I knew then...I'd be...But the fact is, if only's don't really count much. It's what you do after the beating, after the hard lesson that matters. It is possible to get back into the market. It is possible to build up a portfolio that gives tremendous (but realistic) returns. It is possible to learn from your mistakes, profit from your mistakes, and go on to become a great investor.You are young. The fact is, most 27 year olds are broke to near broke. Financially you're not that far behind but experience-wise you've learned a lesson that can only be taught by feeling the fire of experience.Good luck and never give up,Zero
globalstreamer Man that story sucks. I as a fool without the guts to margin wish you all the luck in the world. Take care, good luck and fool on. Steve
I have lurked on these boards silently and considered myself a member of this community for quite some time.I think this was your first mistake. Because had you tried interacting with other Fools, there's a good chance that you would have discussed your intentions or your actions and would probably have been warned about your portfolio. It's certainly not a good approach or a recommended type of portfolio. Also, margin should never exceed 15 or 20% of your portfolio. Nobody can predict the future.I'm sorry to read that you got hurt that badly. I wish you good luck on your next time around
Globalstreamer, you are very brave to share this sad story with us - it must be hard for you to go through it all again by writing it down for the rest of us to read.However, stories like yours do an awful lot of good to other people out there contemplating doing the same thing as you, so at least it serves an educational purpose.I just read David Gardner's RB report for the day and it says that you are still only 27. If this is the case then for sure you will have plenty of time on your side with which to recover this loss. I certainly hope this is the case with you.We wish you all the best of luck in the future - believe me you will have a good future because you have learned so much already, and thanks again for sharing your story with us - it will help a lot of people.Yours,Jonathan
<<I just read David Gardner's RB report for the day and it says that you are still only 27. If this is the case then for sure you will have plenty of time on your side with which to recover this loss. I certainly hope this is the case with you.>>..well, what really sucks is that he'd have already recovered quite a bit if they hadn't auto-sold his margin account....when stocks are dropping like rocks, margin calls are going off in a vicious cycle, like an uncontrolled fission reaction....I feel for the guy...especially in light of the strong rebound in CRA..
Globalstreamer: I just read your post. I'm sure that I speak for all the other Fools out there who feel your pain.What happened to you could have happened to any of us.You were just in the wrong place at the wrong time. Please don't be hard on yourself. The fact is you had to have been very smart to have amassed $60,000 at the "tender age" of just 27. When I was 27 I didn't have a clue what was going on in the stock market, nor did I care. Now at the ripe old age of 40 something I wish I had gotten into the stock market when I was your age.It may seem as little consolation, but you are still young and have plenty of time to benefit from your one time mistake. Because of your knowledge of the stock market etc you will probably outperform 99% of the people in your age bracket over the next 30 years.One of these days when you are old and grey and rich you will be able to tell the grandkids on your Knee how one time many years ago their very successfull grandfather actually lost everything in a few short weeks. It will be a great story, and hopefully a great lesson that they will benefit from, just as you have.Keep your chin up and we all wish you the best of luck.
You may not have a stock portfolio left right now, but you have something else that shines through your message--Courage, purpose, and kindness. With a remarkable combination like that, you'll achieve your life's goals, whatever they are. I have a hunch you'll also find ways to help others achieve their goals as well. I'd bet my own shares of CRA on that-- and on you. I'd also bet I'm not the only one on this board who feels this way.I'm truly sorry for the brutal lesson you got, but I'd rather see you lose $60,000 now than $60,000,000 later.
so sorry to hear about your demise,i really do feel for ya! it is too bad that some of us have to learn these lessons in life the hard way so some of us others can learn from them .your experience reminds me of a mini version of that infamous day of oct.1929, but i am glad to hear that your outlook is still positive. i guess this proves that you can't keep a real fool down for long.hey maybe after a nice rebound and some better luck( and i believe with wisdom and experience you make your own luck )one day you may even be able to laugh about this. from a novice fool
Call me, we'll talk.
globalstreamer wrote: Chin up, Fool on. I wish you all the best of luck and hope my lesson here helps save someone from doing themselves what I have just done.globalstreamer, my father left this short note for me to find after a visit with me a few years ago after I suffered a horrifying personal loss of my immediate family. He wrote,Bye,CHIN UP----Love, yourDadFor over four years I've lived in a deep depression and now finally after 5 years I stumbled across this note I had filed away. It now sits at the top of my desk and I cherish the thought of it as my life finally gets back to wanting to live again. I think I can speak from all your Foolish Family that our hopes and prayers go out to you. I just know from your salutation Chin up, Fool on that you will be back smiling amongst your Foolish Family and Friends helping those like myself with your Foolish knowledge. I too am taking the RB Seminar to learn from the Great Foolish Master/Teacher/Mentor. What David has shared with over 20,000 Fools is worth 50 times the amount of admission. I thank you along with all your Foolish Family and Friends for sharing with us your Post.After reading your Post I share d the link with my group in hopes to passing your message on. Many of them are new to the investment world. Lastly I added this to the my Post, since we are all 'Learning Together' to quote one of my favorite TMF Fools 'Spirit. What a tragic lesson to learn. This is the reason I find it so hard to invest in this volatile market with companies PE ratios well above 100 and many with 'no' earnings. It doesn't have to be just 'margin' losses. It could be just your real hard lifetime savings of pure cash.My heart goes out to all who have experience such a great loss in the past few days. All it took to set back a very high risky Industry was a speech by two Statesmen.Please let us all learn from this horrible tragedy. Everyday for the past 2 1/2 years I have been saying the market has to correct. It can't continue this crazy high 'New Economy' upward trend in the Tech sector. Then comes along a new sector called 'BioTech's', and it starts all over again. Sure I made a little along the way like many of you in the Tech stocks, especially since I was in that field a few years back. The BioTech's scared me because I do not know anything about them, even though I know they are the future to curing crippling and death related diseases. Each day that passes I think of the money that I could have made if I wasn't so afraid of this volatile market. Then I read something like this that assures my reasoning that the gain is defiantly worth less then the risk of losing ones life's savings!With all my Foolish Heart,TechFoolRon
Globalstreamer,Dude that sucks. I am 26 and have had my share of bad investing experiences, but never down 61,500, man that blows.I hope that you recover, mentally and financially, quickly. Best Wishes4site
Dear globalstreamer,it's approx. 5:00 AM in chicago and I'm having trouble sleeping, so i decided to check out the fool when i came across your post. now i don't think i'll sleep at all tonight after reading your story. after reading what you went through, i printed it immeadiately and put it up on my bulliten board. THANK YOU!!!!!!! i'm sure it must be painful to recount your misfortune, but i hope you can take some comfort in the thought that someone will avoid a similar fate thanks to your valuable lesson. by the way this is my first post to any message board on the fool, or any website for that matter. i was waiting until i had something really profound or at least significant to contibute, but after reading what you had to say i could't resist. my heart really goes out to you. buck up little camper, you're down but you're not out. there is still time to fight the good fight!!!!!Fool on indeed!
Sorry about your loss and a sincere thank you for sharing.I enabled my margin account about 1 month ago, but when I did I told myself, "20% of Portfolio Max". In early March, I was at about 9% of my portfolio, but the Nasdaq was doing great (I had most of my stocks there), and suddenly Kaboom! My Portfolio fell, the margin component jumped to 15%. Yikes, I have watched my two best stocks lose 35% and 30% respectively. Its really rough because they represent about 45% of my portfolio, and I know they are good stocks.Stay with the Fool, and really build on the lessons learned, I think you can really make a comeback, and what a comeback it will be!!!! Best of luck!Fool On!cmfool77
Well I finally decided to join the foolish crowd and signed on. I have been reading with great interest all the discussion here on Celera. I am fairly new to trading stocks and have been at it less than one year. I have not set up any of my accounts to allow trading on margin. I think after reading of your misery I will continue to do so.I have heard it said that experience is getting the test before you have had the lesson. The main thing of course is that we learn from our mistakes and move on. Wisdom is learning from the mistakes of others. I thank you for allowing us all to gain some wisdom so hopefully we will not make the same mistake.Take Care.
A few posts have questioned the facts. These posts have ignored how margin calls work. While the maintenance in a diversified is 35%, the maintenance in a non-diversified account is 50%. Additionally, brokers are free to require higher maintenance requirements for stocks they deem risky. Finally, during a margin call, if the stock is declining rapidly a broker can liquidate before the call is due, even during the day. This is my understanding.Fool onj.
Globalstreamer...Firstly, I send my heartfelt condolences on your loss - as a previous reply stated - it IS like a death, with all the emotional turmoil....I also commend you on not only your wonderfully crafted missive of revelation - but on the cahones it took to write it....your letter says it all, everything we like to think we knew already, but never quite understand the impact of until someone among us takes it on the chin like you just did...The most important lessons we can learn, we (hopefully) learn usually because someone else learned first - the hard way...But, secondly, I also want to congratulate you on an observation you already made yourself - you're 27 years old...I only began considering the wonderful world of investing when I was already the ripe old age of 30...but since then I have amassed (and continue to amass) a comfortable degree of experience, knowledge and return...not to mention, from time to time, humility....in spades...But we continue, and are wiser for it - and also richer for Fools, like yourself, who have the courage and positive attitude to share their most difficult lessons with each other while still maintaining the belief that they will rise again...as you most definitely will...Chin up, indeed...Fool on, and best of luck, man...
Re: the math on his margin callIn response to Ryno #9179I'm reading this and thinking to myself, man what a sad story, but the numbers don't seem to add up. Even if you bought all your shares at $170, which you say you did not, you wouldn't get a maintenance call until it got down below $57. And since when does a broker give a margin call in the middle of the day? And why'd they sell all your shares when selling a small amount would probably get you back above the 25% maintenance requirement?I don't think this has been fully answered yet, but there have been a bizillion replies to the original post.Ryno, I think you should have shown YOUR math, I think you may have just further confused folks. My calculations seem to indicate globalstreamer was right on...Here are his important statements:At 130, I sold every other stock I owned and margined myself to the gils. ...When Celera hit $85 a share, my online broker was forced to sell my entire positionOK, lets do the math.Assuming 50% initial margin requirement for BUYING stock, at 130 he margined to the max, or had $65 in actual asset value per share (.5 * 130 = 65).When the stock fell to 85, the question is what was is margin level at that point? His asset value is the price minus the margin cost, or 85 - 65, leaving $20 asset value per share. 20/85 = 23.5%, so that would be well below even a 25% maintenance rate. My broker has a 30% margin call, so it would have hit even sooner.So, how can you calculate at what point you would have a margin call? Margin can consist of 100% - maintenance%, or in the case of a 25% maintenance, you can have 75% margin in your portfolio. If margin is 75% of your value, then DIVIDE your margin cost by that to get total value, or $margined/((100-maintenance%)/100),which is in this case (shown on a per share basis): $65/(1-.25) = $65/.75 = $86.67 share price. So with a 25% maintenance call, he was expecting a margin call at $86.67 (assuming a margin of $65 per share).FYI, regarding Ryno's calculation, if he had simply bought all shares at 170 (apparently that was not the case), then the margin call would have been even sooner (170*.5 = $85 margin per share, so 85/.75 = $113.33 share price for a 25% maintenance).Hope that clears it up for everyone. I know margin can be a confusing topic, in fact, Newsweek's most recent issue has an incorrect calculation for margin! (I already e-mailed the auther and he said a correction is to be published soon).I am myself only a recent learner about margin, so if I incorrectly explained the math, PLEASE let me know!I would also like to echo washu's post, 9279, to state that margin isn't all bad. This disaster does not mean never use margin. It means, make sure to understand the math of margin, and use it conservatively as a tool, carefully understanding the risks, especially if the portfolio has high volatility. I personally have about 3% margin and have no firm plans to get rid of it. -nacohn
GlobalStreamer,I think everyone can relate to some aspects of your story. We've all made investment mistakes at some point. Thank you for sharing. I wish you well in the future. The last two weeks have been rough on everyone but they don't tell the whole story. Like life, investing is a journey. A process not a single event. You take the highs with the lows. In the end, the ups outweigh the downs. Stick with it.BradP.S. This is one of the best posts I've seen on TMF. Truly sincere.
You are so lucky,yes,lucky! You are lucky this lesson was learned at 20-something and not 50-something. Can you imagine this scene with $600,000 instead of $60,000? We're lucky too, that you shared this painful experience. Thank you so much for sharing it. Many of us (myself included) tend to talk about the good portions of our portfolios and sort of "forget" about or dismiss the negative parts (and face it, we all have something that isn't performing optimally at any given time). The result? Those we talk to feel like they aren't investing as well and jump into riskier ventures or give up diversification for that need to achieve what "everyone else" has. No one ever notices that not one portfolio out there consistently earns 50%(+), 100% of the time. It is called greed, my friend, as we all race to become millionaires or multimillionaires. It takes a lesson like yours to bring us back to common sense, that is, unless we kept our foolish heads from the beginning.
You have a lot of courage to share your setback. Most people would have hidden this away from the light of day. I want you to know that what you have shared will help many people. Remember, you're 27 and have a long time to regain this loss. But you have a discipline that very few people have - you save and invest. That makes you wise and a true Fool. This all may sound like a cliche, but I believe there's a plan for you. You didn't lose everything and you've done nothing you can't recover from. God Speed!
Man, is that a tough story to read - I can only imagine how badly you feel.As a relatively new, inexperienced Fool-in-training, I too am still learning about this concept known as long-term investing. And I too am making mistakes.I did something that I'm not too proud of with Celera, though not on the scale you did. I too got caught up in the run-up, panicked as the stock price dove, then, before I could do something I'd really regret, I turned my computer off!Anyway, as much as this probably is no comfort to you, there are those of us out there -- still in-training-Fools -- who read stories such as yours...and learn valuable lessons.Sounds like you learned one too - thanks for taking the time to post.
Dear globalstreamer,You have my sympathy. If it helps at all, most of us have "been there, done that"...which doesn't bring back your $$$$ but may help bring back your confidence. You have learned a really VALUABLE lesson about margin accounts....and I bet you will never get caught there again. And you can deduct your losses from Uncle Sam which will be a bit of a sweetener. Fool on!
Thanks for sharing your very unfortunate experience. Curiously, I was just considering utilizing my margin acct for the first time. I will not do so lightly, if I do at all. Thanks again
How refreshing. Someone who actually let the greed factor kick in and told us all about it. My hat is off to you for your truthfulness. Isn't it strange how no one goes to Vegas and returns with less?! Well the same can be said of the market today. No one will admit to a loss in the greatest bull market in history.(almost no one) I have done well these past few years and I do owe a great deal of that to the Fools. In years of past, I to have played a little too deep into the margin crystal ball. I do not need to tell you that it always came back to bit me.Experence can be expensive, but yet in time endearing. Don't let the greed factor be your guide. Time is on your side.
Global-First, please allow me to commend you for sharing this story with all of us. Human nature forces most people to hide from their mistakes. And those who learn from them usually don't share out of embarassment.I'm sorry that you lost this much money, but the fact that you've learned from it makes me think that you'll wind up way ahead.That said, I'm not sure that I agree with the lesson that this shock has taught you.On the way down, I began to sell my other stocks to get Celera, cheaper (and again, using that MARGIN)I couldn't believe it at 170 and I bought.I was stunned at 150 and I bought.At 130, I sold every other stock I owned and margined myself to the gils. The obvious mistake that you made is that you used margin to increase your risk beyond what you could handle. But at least margin compensates you for the added risk with the added return that you deserve.The bigger problem is that you weren't properly diversified. One stock, no matter how good, will always have horrible days. Even six stocks together will have pretty awful days. Imagine (and I know that hindsight can be a curse) that you invested in Celera, using margin, but you were diversified. So maybe 50% of your portfolio was in the S&P, and the other 50% was split up among your six stocks. Even if you had maxed out at 50% margin, you'd still be sitting pretty. Sure, one of your stocks (Celera) would have bled like The Shining, but at only 8% of your portfolio, you would hardly feel it - even with margin. And since the rest of the market has done pretty well over the same period, you might actually be ahead.I wish you all luck in the future,Mike
You Fools can sleep now that CRA is at a decent price. I mean a lot of you said you were having trouble crashing when the stock split and rose to 250 + per share. I'm not a very good writer so excuse the grammar etc in this posting. I just wanted to give some of you Fools a happy ending when it comes to not being Foolish as opposed the poor guy who lost all of his money buying on margin.I have for the last six months of 1999 had been reading and studying Foolishness. I had read these of the books by the Dynamic Duo, The Foolish Four, Industry Focus 2000, The Motley Fool Monthly, You Have More Than You Think, and Rule Breakers, Rule Makers. Being an ex president of an investment club in Las Vegas (yeah try and get a bunch of casino workers to buy for the long term) I understood the philosophy of the Motley Fool and appreciated that I had a place to go and get reaffirmation for my philosophy in this wild market of ups and downs and IPO's. My only trading account is an IRA account that I have with an Online Broker. Being 46 years old and looking for a comfortable retirement would hinge on my own investments. So here I am in the comfort of a bunch of investors who seem to think and invest like I would like to see my self doing, very FOOLISHLY. While looking at all of the Ports the Motley Fool have posted online I was drawn to the Foolish Fur to be the anchor for my portfolio. My next thoughts turned to the Rule Maker Port, which was going to take a little work, but I really love the concept of it. Occasionally I would wander into the Rule Breaker Port and look around in awe and amazement at the monster moneymaker. Then came the trade alert turned for me turned investing into a Jimi Hendrix version of “Were in the Money”. The buy report of the Rule Breaker Port's pending purchase of CRA. I read the report and immediately put an order in for 100 shares to be executed at market price when the market opened in the morning, hopefully around 80 per share. Then I began to read the rest of the buy report. The information Jeff gave appeared to be well thought out and the company appeared to be a Rule Breaker to the max. I looked around the CRA message board for a while then went to sleep.In the middle of the night I had to go to the bathroom and couldn't go back to sleep. I kept thinking about this pending purchase of mine that was going to cost me around $8000 dollars. It wasn't so much the uncertainly of buying the stock it is just that it broke the rules that I had swore I was going to follow in picking my stocks from now on. NEVER BUY A STOCK ON A TOUT! So I booted up my PC and cancelled my order. The next market day I watched the price of CRA go to around $89 and thought that I had missed the boat. Damn that would have been a nice little ride up of double-digit appreciation in just one day. But I had canceled the order and felt good that I did. Well the next day I started to research CRA in earnest and started to like the company more and more. My father had recently died of an immune system type of cancer and I had come into contact with all kinds of medicines that did him no good at all. If this company could do what they thought they could it would be a benefit to mankind. Damn it I'm going to buy some even if it doesn't fit my investment criteria. So I put an order in for 75 shares a market price the next day. Went to sleep reading the Rule Breaker chapters of the “Rule Maker, Rule Breaker” book.Woke up again in the middle of the night and canceled the order again. I still wasn't comfortable with this company yet. I needed to look at it some more. I checked the price of CRA the next day and it closed at $102. Shit now I really couldn't buy the thing it was already too high and the only reason that I could figure out the rise in the stock was because the Fool's had touted it up. Oh well I thought that I had missed good opportunity. Now I'm not the kind of guy who sweats my meager portfolio on a daily basis so I never even looked at my portfolio for the next several weeks. You couldn't help notice that CRA was going through the roof with all of the hysteria in the media as well as the Fool message boards. I didn't feel bad that I had missed the run up and I was still considering buying some of the stock. When I did access my online account something was very wrong about the account. Its valuation was way too high. Ok so I look at my position page and it says that I have 75 shares of CRA at a purchase price of $102 and a current valuation of over $300 per share. Holy cow somehow I did not execute the cancel of buy order. It was a gift from God. I'll hold on to this stock until the day I die and at the rate it is going I will be a millionaire in a couple of months. Ok so then the stock split and ran up to $270 per share. Now Hendrix is playing the song with his teeth, real loud! Ok God has nothing to do with investing in this day and age so I'm going to sell enough shares to double my money and still have 100 shares that I promise I will never sell. Then Clinton opens his big mouth and the 100 I still have plummet. Boy is I pissed. Read the Fool books again I tell myself and remember when you thought that you had missed the boat when the stock went up 15%. So be happy with my investment I tell myself. I really love the company now that it is all free. But to lose sleep because a stock has appreciated too much is not a problem for me. I was more worried early on that I had compromised my investment integrity. So I wasn't very foolish and I have learned a lesson and will be more diligent than ever when it comes to buying a selling stock. At least my story has a happy ending so far….Howard
A classic tale of the difficulties of margin-buying, well written. There comes that time that the buyer can't cover. One step worse is when the broker can't cover. Then it is a small step to when the bank that finances the broker can't cover, and we have a 1929-type meltdown.Bob Brinker said over the week end, that margin debt has doubled since October to $276 BILLION. And he says, "I don't think that money is invested in Quaker Oats !" This is a speculative time that calls for discipline and daily analysis to remind ourselves of the difference between investment and gambling. They are both addictive.Best wishes. You have the best variable in the world in your favor, in the long run. Your youth !
I wish you all the best of luck and hope my lesson here helps save someone from doing themselves what I have just done.WOW...Thanks for sharing... that took guts... I am also 27 and just starting out... and I'm VERY afraid of the concept of trading on margin. I will definitely think back on your lesson learned whenever I get excited about what I might perceive as a bargain buying opportunity.I wish you a Foolish and speedy recovery......Sillyboy
Ryno, I think you should have shown YOUR math, I think you may have just further confused folks. My calculations seem to indicate globalstreamer was right on...Here are his important statements:At 130, I sold every other stock I owned and margined myself to the gils. ...When Celera hit $85 a share, my online broker was forced to sell my entire positionOK, lets do the math.Assuming 50% initial margin requirement for BUYING stock, at 130 he margined to the max, or had $65 in actual asset value per share (.5 * 130 = 65).When the stock fell to 85, the question is what was is margin level at that point? His asset value is the price minus the margin cost, or 85 - 65, leaving $20 asset value per share. 20/85 = 23.5%, so that would be well below even a 25% maintenance rate. My broker has a 30% margin call, so it would have hit even sooner.I messed up. Here's what I did.Say he had 100 shares of CRA, then he bought all his margin shares at $170, so he has 200 shares of CRA and a margin balance or debit of $17,000. The amount of shares doesn't matter, but we'll use 200 in this example. To figure the point at which he would hit the 25% maintenance requirement, take the debit ($17,000) * 4/3 and that gives you $22,666.67 or the amount his account would have to be worth (equity plus margin balance) to be at the 25% threshold. Instead of just dividing $22,666.67 by 200 shares and getting $113.33, I subtracted the debit (17,000) from the total account value (22,666.67) and that leaves $5,666.67 equity. I then divided 5666.67 by the number of shares margined (100) and got $56.67. Wrong!Thanks for calling me on it nacohn, and my agologies to global for doubting him. Ryno
Dear globalstreamer,I feel for you. My first investments were futures. In that arena everything was bought via margins. What I did not know was that the margin could change overnight at the whim of the Chicago Board of Trade. I went from way ahead to $30,000 down overnight. I was phyisically ill. As I watched the price plumet I sold, and one tick later the price of the contract began the soar I had anticipated. I will never margin anything again. Two of my sons have been wanting me to open a margin account because I enjoy trading. What they do not seem to get is that I enjoy trading because I can only lose money I have in the bank.....not money I have to glean from somewhere else. I have forwarded your email to them. Thanks for the honest evaluation of a costly decision. Oh the roller-coaster of adrenilin.It took me 3 years to recoup and again enter the market. Take some Pepto Bismal and start over....soon. Good Luck....and make this an experience you will never repeat.Sweet.
Thank you sooo much for sharing your very painful experience. I'm a new investor and have already been tempted to over-extend thru margin buying. Now, I will never allow myself to fall in that hole....thanks to you. Your tale has made a strong and permanent impression in my memory bank.
Take heart! Your hard-learned lesson is resounding to the benefit of the thousands/millions tuning into TMF today (it made the front page). Surely your courage to make this post and the lesson you have learned will make your future successes even sweeter!In gratitude...TT
Wow. I think I speak for a lot of us when I say that could have been me. How many of us have thought those very thoughts of getting in on the low, buying all we can, and then riding it up. The only difference being, for what ever reason, we did nothing. Maybe out of fear, indolence, or lack of resources. I am glad that you shared your story. It illustrates the difference between trading and investing. I am also happy that you are not discouraged and will be far better informed in the future. Remember that some of the greatest furtunes were amassed by people who had lost everything at one point. They came back stronger, wiser, and more determined to not let history repeat itself. Fool on my Brother!
Dear globalstreamer, Thank you, Dear Fool, for your message. I, too, have engaged in extremely unFoolish investment strategies in the past, at one point losing $19,000 in two hours. My only consolation was, upon confessing this to my best friend, her look of total awe and her words, "WOW! I've lost that much money before...a couple of times...but NEVER in TWO HOURS!" Being that her life was in shambles at that point (from her own doing) it gave her a lift to see someone else suffering some (from my own doing). I was happy to amuse her. Glad to see you have your chin up. Lick those wounds, but not for too long. You WILL be back on top! I know it.
Dude,I feel for you. I have been there. Not quite to your point of having no money in an account, but I have watched well over half of my port. wiped out because of margin.I am sorry to hear of your losses. Hang in there. We are all here in this life to learn lessons. Perhaps that is the secret of life. I wish you nothing but the best and look forward to seeing you ride that horse again in the future.
Dear Globalstreamer,Thank you for your post. You are very brave and kind to share your experience so that others can learn from you. You have learned a hard but good lesson. We must remember to diversify and keep diversified. The unexpected can and will happen. It is good that you are taking the long view. You will be back and you will succeed! In 1987 I was in your position. I bailed out at the bottom of the crash. I got back in at the peak of the bounce and sold at the next valley. I doubled the losses of the crash! It was a tough but good lesson. I'm doing well now. You will come back and do well, too. Keep learning and trying!
Thanks for having the courage to post your margin story.
globalstreamer,Just keep in mind that there are many people that have been in a position such as yours ,tried again and have gone on to become very wealthy in this business.Sometimes it takes a couple of times of being broke but as long as you learn and move on success will follow. Don't ever give up,this is a great business!!!
dear globalsteamer as hard as it is -- it is only money and as david gardner says you are young and in the long run you will do fine.. hang in there and thanks for the warning.
God Bless You. You're young...you have a long way to go and I know you'll be okay...better than okay.Thank you so much for sharing this painful lesson with the rest of us. That took a lot of courage.
Your gutsy post should be a link on the Fool home page forevermore. It may be THE definitive lesson for everyone who visits these great pages--even those who haven't suffered the same cruel fate--on investing smart. Or dare I say Foolishly? I just wish you didn't have to pay the "tuition."Good luck. I hope your next post is how you are going to get it ALL back--and lots more--over the long haul.Essayons
Ahhh, I feel your pain my fellow fool. I learned a similar costly, but valuable lesson by loading up on margined AOL stock a couple of weeks prior to the infamous Time/Warner merger. After attempting to stop the bleeding, I sold in the mid 50s to cover a margin call only to watch the stock hit approx. 72 recently. I too felt this happened ONLY to teach me a valuable lesson.Thanks for sharing.
It takes a lot of guts and self esteem to make a post like this one I just read. Because of that you will come through this and go on to make more than all of us. My Foolish prediction.The old school of hard knocks is the best teacher of all. All the Fool Schools in the world can not teach what you just shared with all of us.Thanks for this very open hearted message.
Man I really feel bad for you. Thanks for sharing.Dad always told me stories about my uncle buying on Margin and not being able to sleep at night, and warned me not to do it. The bright side is that you are young and still have plenty of time to recoveryour loss.Joe
Globalstreamer:Thanks for the post. Though I hate to hear real-life examples like that, it serves to remind me of the course I should be trying to steer. Good luck.
Take Heart Young Man,In 1971 a 34 year old young man got crushed in his own personal bear market. The mutual fund company he started faltered and failed and he found himself with a net-worth of -$100,000 (that is a negative). He was a scrapper, though, and managed to turn it around through dilligence and effort. He even wrote a book that got me started called "How to be Your Own Stock Broker". his name is Charles Schwab. Trust me there is light at the end of the tunnel, it's just a very long tunnel. -sorry but I suck as a poet.Good Luck and God Bless,Gordo
Regarding the guy who margined to the max for Celera.I know how you feel to a point. Doing pretty much the same as you I lost 4000.00 and got physically ill. Had to have a heart to heart with my husband. A most caring and forgiving soul. But it broke my heart that the trust he placed with me I had so stupidly misused.But Life does go on. We have become very Foolish over the last two years and our investments our growing right along with our childern.It is nice to hear that I am not the only one who has fallen into the margin "get rich quick" trap.Best of luck to you and yours.Jo
My friend, I wish you the best. It took guts to admit your mistakes and keep a positive attitude. My good friend has been itching to buy on margin lately, and I'll recommend your post to him. Hopefully, reading your post will stop him from making the same mistake. Know that your difficult experience has caused some good!
globalstreamerYour message is recommended reading for all Fools overhere in the UK. I am sure I speak for many people when saying we are very sorry to hear about what has happened to you. You have courage to post about this and even more if you can pick yourself up and start again. Take heart, as you say there is a reason for everything and perhaps your story will save many other Fools from the same fate. I am sure you will go on to bigger and better things. Do not forget in life unless we experience pain we can never fully experience pleasure.A couple of books which make interesting reading are:Reminiscences of a stock operator - Edwin LefevreConversations with God -Neale Donald Walsch both of these may help in different ways over the next few days and weeks.Good luck and keep FoolishMagic Bat
I feel your pain.Last spring, when the market was up, and everything seemed right with the world, I put $10,000 in a brokerage account and, wisely, began trading options. I thought I couldn't lose. The market was up, and I was heavily into tech stocks. I made $1000 in one day on EBAY. (At a 110% gain, that was one for the record books.)Then the market turned down. I started losing money. I liquidated some positions, held others. My luck changed for the worse. If I was long on a stock, it folded. If I went short, it recovered.Now, a fool would have stepped back, consolidated, and waited until the market played out its little tantrum. But I was too smart for that.I can't really describe, or even understand the state of mind I was in. I watched as my portfolio tanked at the rate of about $1000/day. I kept thinking, "I have to get that money back." I kept buying, selling, and losing.I ended up with $200 in my brokerage account, in a little under two weeks. I was devastated. This was my 28th birthday present.I'm happy to say, I've since become a lot more Foolish. I invested that $200 in Forte, right after they announced their acquisition by Sun Microsystems. The 10 shares of FRTE I bought became 3 shares of SUNW. The 3 shares split and became 6. The 6 shares are worth around $600. I have no intention of selling. I have left that account as a perpetual memorial to the hardest financial lesson I ever had to learn.I recently scraped together $2000 and opened a Datek account. I am investing very Foolishly, thanks to Fools like you. My account was up 6.38% in the week it's been open. Fool on!
I feel your pain.Lost $23k in '97. Learn as much as you can from this.Watch your health (eat right, 'attempt to' sleep well, exercise more than usual) - at this point your future prosperity may depend more on your how quickly and the extend to which you recover your mental / physical health than anything else.also, the $23k I lost is no where near being the biggest mistake of my life. your mistake only cost you money. don't give up. there is life after a mistake.
Someone wrote that misery loves company...I think it was me.In 1997 I came into an insurance settlement, at the cost of my new car and relatively minor injuries to my wife and son.I suddenly had the means to jump into Wall Street, but I forgot to look both ways.I started day trading, made a few thousand and was convinced that I had found my niche in life. I was born to live a life of minutes and seconds, ignoring the passing hours. But I would be rich soon.ONCOR seemed like the next great invention. The savior of mankind. Hell, I didn't know what they REALLY did. The stock was only 4 dollars + and they were riding the headlines with some new FDA news or something or other....This was only the first of many wrong turns on this street. (I still have 200 shares worth about enough to cover the sell commission)Several months later came the Russian/Asian/Greenspan/Clinton era.My broker raided my account and was kind enough to sell all but $1200 worth of my stock.I took a deep breath and sought the solution that always seems to be in the last place we look.I remembered that FOOL site that used to be on America OnLine. THEY could make me laugh. Or at least stop the crying.So I clicked over there and eventually discovered The Rule Breaker Port.I bought all but the Foolish Four and started, instead, buying what I knew: IBM, CSCO, MSFT and the others thatare driving this magical thing that AL Gore re-invented.Nearly three years later I've got all my money back.But I used margin...don't hit me.And now I'm tempted to keep using my excess equity to buy the stocks that I KNOW will move higher.But my new friend is scaring me with his tale of truth.Was his only mistake forgetting about diversity?Yeah, that's the ticket...isn't it?Scott
Sorry to hear of your recent loss, but I have to THANK YOU for posting. Me, being a newbie to the investment world, your story drives home the point that the fool continuously makes "be sound, be smart, do your homework & don't get greedy". It sounds like you followed that philosophy, until recently -- and if it happened to you -- it could happen to me. I won't forget your little saga, as my investing life continues, and will try very hard to resist the temptations that created your (temporary) setback. Thanks again, you've reached at least one fool. Best of luck Ogives
Dear Globalstreamer:Thank you for your brave post of 3-21. It was very well written and I'm sure will impact many readers in a positive way. Betty
Thanks again--this story is one many of us needed to hear. I need to add my own, less harrowing but still sobering story. I maintain a more diversified portfolio, but have been recently investing in one of the SoS variants from the mechanical investing boards. I started in October with my "fun money" which rapidly grew all out of proportion to the initial investment. In fact it grew so far that it exceeded the Foolish Four investment I had at the same brokerage. So, last week on Monday morning I sold all of the Foolish Four and started to put everything into the five stocks I had selected for that week. I had been maintaining about 30% margin in this account ( I have a second account at another brokerage with margin activated but not used at all and figure I can always wire transfer between the two accounts in an emergency).Just after I placed all of the buy and sell orders, I checked my positions, and in the twinkling of an eye Datek had made three of my five stocks non-marginable.This pushed my account into a position where I had no more buying power at all and almost into a margin call. Fortunately I came out without ever getting the margin call, but the bottom line is that you don't have to have a big decline in one stock's price to get a margin call, it is perfectly possible to get one in a diversified account from having the broker make your stocks non-marginable. This won't wipe you out, but the loss sure can sting.
globalstreamer: I want to take my hat off to you for taking the time to reflect to all of us of your untimely demise! It shows what kind of character you have and it hopefully teaches all of us a lesson. It's so easy for any of us at times to get caught up in the market. When things are popping and going well we think we're invincible. I wish you good luck, good health, and future good investing!
I would like to commend you for your honesty as to your mistakes and thank you for sharing this with others.Perhaps you have the making of a true speculator (a word not too much in favor today). Depending on your reations to what has happened to you, you may decide to come back to the market for more.If you really want to make money, of course you need to go much deeper into the question of risk managment. There is nothing at all wrong with investing on margin but you must limit your risk as much as you reasonable can while preserving your opportunity for a large gain.This is a big subject and one not often mentioned these days. You have learned the hard way what ignoring it can lead to. But many of us have learned the same way and come back for more - wiser and more experienced.May I reccommend to you "The Zurich Axioms" by Max Gunther. It's out of print but you can search for a used copy. Although I don't agree with all Gunther says, he is on the right track and deserves attention.I've been in this game for a very long time (50+ years) and have been on margin for the last 20 - always hedged with shorts to various degrees. I have had painfull losses but overall have won a lot.You need a stomach (and a head!) for risk. If you think you have, then perseveer. But if you don't, then do not go beyound your own bounds. You must be able and ready to accept a certain level of anxiety. One of the things Gunther says that I like is that if you are not worried, then you are not taking enough risk.
Well written Globalstreamer!! Too bad it's not fiction. Good luck in the future.
Hello and thanks. I made the same mistake in 1997. I sold a house and decided to put the entire amount into the market until we were ready to buy again.As it was a large sum of money I was very excited aout the prospects of the market. It was October 1997 and I bought non-tech stocks as I knew very little about them. I thought oil and gas was a fabulous industry as I knew a lot about it and had been following many stocks.Need-less to say I lost the entire capital from the house!! (The margin was not called, but . . . .) Ugh, it too was a sad day. I had to sell the stocks at all time lows because we found the new place much sooner than anticipated.Lessons are that, lessons. I learnt that 'tis true, short term money needs to be in short term risk free vehicles!! Long term money can be in the market, but margin free.It's almost three years later and although I have not made up the losses per say, I am back investing. A much wiser (small "w")investor for the experience. I have even started an investment club so we can learn together!!Good luck and the best to you. Thank you for sharing with us all, if only one person learns from it we say thanks to you.
You are a brave man. I was very impressed by your posting and hope that you will recover (and multiply) your fortunes in the many years of investing ahead of you. Having started to save at the age of 29 (with nothing) I was, in a very loose sense, in your position - nothing in the bank. (I do realise the sense of loss you feel makes that cold comfort.) You learned - first hand - a lesson that would cause most people to lock themselves away and scorn the world. Your posting will serve as a concrete reminder to all about the financial facets of Murphy's Law and the strategies that can circumvent them. It takes a big man to admit his mistakes, and a bigger man to help others in the process.Jeremy
Thank you so much for telling your story. There are many, many of us who have made various errors and when someone comes along and shares it with us, it is of incredible help.Here's hoping you regroup quickly and once again prosper.
Thank you for your willingness to share this Mostpainful lesson. Dealing with this will come in stages, 2 steps forward, 1 back (w/ the reverse at times) and will unavoidably take time.The classic stages of grieving are: Denial, Anger,Bargaining, Depression and finally Acceptance. If there is any bright news here it is that at such a young age you were already light years ahead understanding the importance of saving, and because ofyour youth you have time to recoup. I know of many who learned this lesson much much later in life.Good luck and several years from now, I hope this is only a bad memory and not the nightmare it is for now.
Dear globalstreamer,I want you to know that it takes guts to post such a sad investment story.I am older and much more conservative than you in my willingness to invest. I sincerely doubt that I will ever make margin buys. I have always bought "long", and probably always will. I also don't carry debt on my credit cards. I just don't feel comfortable letting someone else foot the bill, even for a short time, because I think therein lies danger. I feel it in my bones.I would be surprised to find that the Motley Fool has ever recommended that people -- even wonderfully foolish people buying wonderful stock -- buy on margin. I think that they, too, are more concerned about risky investments.I am a rock climber. We have a saying: "Never free solo farther than you're willing to fall". Free solo is when you're climbing without a partner and without a rope. In buying on margin, you're basically gambling (there are many forms of gambling in the stock market; this is just a popular one). Never gamble more than you're willing to lose.Personally, I think this was a great lesson to learn at the age of 27. Thank your lucky stars that you're not 60 and gambling your retirement. I learned financial conservatism from my mother, who balanced her budget every month on the back of an envelope, and has never had a checking account (and has always been pretty poor). I'm sure everyone doesn't learn financial lessons at such an early age.Thanks for your post. Cheer up, it's only money.
Wow, my heart goes out to you, friend...At least you're famous (caught you on aol news!)Just a word of encouragement... DONT GIVE UP! You're young, you're obviously a saver, and you've got the ba**s to admit an error. Get investing again, and from a guy thats made a few mistakes too, I'd highly recommend the QQQ Index, and somewhat the Scudder S&P500 index. I Have 75% of my investments in these,(Datek kindly offered me margin without solicitation, how kind, eh?)And yes, I have Celera and several other "play" stocks. I think you and I both have long-term hopes for them, I firmly believe the biotech revolution hasnt even begun yet. I simply dont believe in "Playing" with more than a small part of my capital. So I'm sweating a little these days, but I waited till a 50% loss to double my stake. One last word of advice,... never sell a stock unless you have to, the taxes kill you. Buy and hold till its hawaii time!!!Good luck!
globalstreamer,Thanks for sharing what must certainly be a very painful experience. A few thoughts.First, you are 27 and had an account worth 60k at one point. Congrats. Most people never have that much invested.Second, you have learned a painful lesson that might be worth more than 60k. In the long run, as I am sure you know, it is almost never worth betting your entire account on one stock, no matter how right you might be, especially where, as here, you do not control the outcome; i.e., entrepreneurs might make such a bet with their own company, but they control the outcome much more than an individual investor. Think about what might have happened if your position was not sold. You might have been tempted to do the same thing again later in life with much more at stake. I suspect this is small consolation now, but you probably will save more in the long run by not making the same mistake later when you have much more to lose.Third, investigate options. If you had purchased CRA calls instead of more CRA stock, you might have weathered a short-term storm more easily. Options cannot be bought on margin; therefore, you don't have to worry about having your position closed for you. Options are also risky, but if you want to bet big, options are the way to go, especially as compared to margin. When CRA dropped below 100, I bought some September 200 calls, but I have not added to my initial CRA position. If CRA does recover, I will be loving life; if not, my only loss will be the cost of the options themselves (a fraction of the value of my CRA stock).Fourth, don't get scared away from being aggressive in the future. No guts, no glory. At 27, you have a long investment career in front of you, and I believe your instinct with respect to CRA was correct (well, not the selling the other holdings part, but you get the idea). I also am on margin. I bought CRA at 90 (45 post split) and RMBS at 87. When they started to take off, along with a bunch of other holdings, I started loading up on other things which was real fun until both CRA and, to a lesser extent, RMBS tanked along with the rest of the NASDAQ. In addition to adding a bunch of cash to the account, I had to sell several holdings to cover. Fortunately, most of my holdings have recovered, but I am a still down because of CRA. Although I am not a big fan of options (I had never bought one until recently), I did purchase calls to lock me in to some of the stocks I had to sell; e.g., I had to sell QCOM to cover the margin call, but by selling my entire position I had enough left over to buy some January 2002 QCOM LEAPS. Hopefully, this strategy will work. If not, I might be back here writing a similar post about how I got wiped out.One last thing -- you probably have the best recs to messages ratio in the history of the Fool. Good luck in the future and thanks again for the post.
I'm with Schwab and all they asked me for when it hit 85 was $720, which has since changed to $410 dollars and I have no doubt it will further decrease as the stock rises. They do some sort of calculation and then apply it my gain/loss. I feel blessed that the stock is back on the rise and that Schwab didn't call my margin when they very well could/should have. I'll pay $29 a trade any day to have that kind of peace of mind..My experience with Schwab is similar. When I first got a margin call, I called Schwab to ask what happened, and the guy laughed and told me they would never sell unless my equity position got to be in the 35 to 40% range since I am a good customer and that they would always call me before selling anything. I don't know if this is because I am a platinum customer (which is relatively easy to be) or if Schwab always calls everybody, but I agree that the $29.95 a trade is money well spent; not that I have a basis for comparison since I have never had an account anywhere else, but I have heard many horror stories about other discount brokers like Daytek recently deciding that certain companies where no longer marginable, thereby creating instant margin calls.
If it helps you cry in your beer look how my nonfoolish margin account went.I did the opposite of you and hedged all my money on a short sell of Celera after riding up and down five times and making a 150% profit. Being short at 290 before the split was not my worst mistake. Recieving a margin call at 450 took all my hard earned foolish dough. I sent $4,200 to cover my debt after I bought to cover my loses and sat back to watch my earlier inclination to go short come to full trottle.The lesson learned is this: Forget about all debt including margin and don't sit in a skillett unless you are ready to get fried.
I guess mostly everyone is going to shoot me down - but here goes.Sorry, I just don't believe it. It just does not stack up - despite all those recs.And I note some Fools have said "well, we have doubts, so justify yourself", but I can't see that you have.So, forgive me if you have justified yourself, and especially if it is all too true. It is just that without full chapter and verse, I can't believe that anyone apparently so clever as you could have been as greedy/stupid/ill-advised/etc. as this - after all, you had made a decent little portfolio by age 27, so you must have some nous - so why would it all desert you now?HyksosPS Forgive me if I am wrong, I am just a stupid, know-nothing Brit.
I also write it to educate (but not necessarily amuse of enrich) members of a community for which I have great respect.I am a lot older than you and I cringe when I read about the new investors that are making 20%, 30% or more a year. (At least in their projections. They are not balancing the risk. Your post will help more than a few investors.I have more than a few stocks that have fallen 50%+. Some several times. They are not short term investments and if they fail my current or future (retirement)standard of living will not be hurt.My first stock purchase went bankrup and I stayed out of the market for years (did get into mutual funds after a while). Big mistake. Should have gotton right back in with safer investments.The key is to take it easy and risk only a small part of your fortune. But then you, like a lot of others now know that.
Thanks for your post Globalstreamer,you have a lot of guts, and have probubly saved more then a few a simalar fate. I have never used margin and after reading your post I know I never will.I sold half my 200 shares of CRA after it doubled and reinvested it in my other IRA stocks, AMGN,NOK,JDSU. I still have 100 shares of CRA.Kind of un-Foolinshly I sold another 25 shares of CRA as it was going down and bought 25 more at a lower price and used the extra money to buy another 20 shares of AMGN. I don't really like to wheel-deal like this and don't plan on doing it again.
dear globalstreamer,I feel your pain. Not long after I started investing(and long before the Fool) the little hiccup in October twenty-some years ago occured. I remember very clearly sitting at a traffic light and thinking that I had lost about half of the value of my little portfolio. You have learned a lesson about investing and life at an age where it can really do you some good, if you do not ignore it. Stay invested, learn and remember, if it's too good,....dedjose
>>I'm reading this and thinking to myself, man what a sad story, but the numbers don't seem to add up. Even if you bought all your shares at $170, which you say you did not, you wouldn't get a maintenance call until it got down below $57.<<Some brokerages have >25% maintenance requirements (Datek's is 30%). Also, some brokerages require higher maintenance for 'volitile' stocks. Datek, for example has a list of 199 stocks which require 50% maintenance (yep, Celera is on the list) and another 28 with a 40% requirement.
Note the article on the risks of margin for this market in general in today's New York Times Business Section (Friday, March 24).Also, your post will be helpful to many people--so while your net worth is temporarily down, your self-worth (in my view) is up, big time.
wow. lots of people have already said this, but thanks for being so frank. i know the demon greed often haunts me. i will remember your story when i am tempted and though it may not save you, you will have saved me. thank you. russell
Excellent object lesson post. Don't agree that swearing off margin buying is correct, though. Simply temper it with CAUTION. Just as leverage pumps you up when times are good; it has the reverse effect when values decrease. I admire your candor.W.
Thank you so much for taking the time to share your painful story with others. Given what you just went through, I commend you for caring enough to spread the word so that others will avoid the pitfalls of investing.Shirley
RE:Some brokerages have >25% maintenance requirements (Datek's is 30%). Also, some brokerages require higher maintenance for 'volitile' stocks. Datek, for example has a list of 199 stocks which require 50% maintenance (yep, Celera is on the list) and another 28 with a 40% requirement."----------------------------Datek also makes no effort whatsoever to notify its customers of changes in margin maintenance requirements on stocks which they own on margin other that to post it in an obscure part of their website. (They COULD have their software automatically send e-mail notices or messages on their customers home pages, but they don't)Fortuneately I had already begun to both diversify (into stocks on which the margin requirements were not changed) and to greatly reduce my level of margin before Datek made the changes. But if I had not and had kept my margin at the max as some do, I could have gotten a margin call within minutes of a purchase! Dateks software will allow you to purchase more stock up to 50% margin EVEN WHEN THE MARGIN MAITENANCE ON THAT STOCK IS 50%! So even if the price then dropped a singe point you would be in a margin call situation.(Supposedly they give you three days to add more money or sell more off or for the price to increase enough. (I've never allowed mine to get below minimum for even a single instant, so I wouldn't know). But if it drops too far, they state they can (and presumeably will) liquidate whatever necessary AT THEIR SOLE DISCRETION! (That means that THEY choose what to sell and how much and when.)
Just wanted to thank you for your very enlightening story. It couldn't come at a more appropriate time. I'm sure there are many like you, which is probably the reason Canadian regulators are becoming more and more strict recently on margin account limits - I'm sure the U.S. is doing the same. This new wave of discount brokerages and creating "instant investors" has really overwhelmed the every day person, and the news is still focused on reporting on the "winners", not the stories like yours. It creates a false impression that it's easy to achieve high profits because they rarely show you the downside. I have recently been considering margin buying, and have been torn about whether or not to do it. Several people in my close circle do it without even thinking about it, and always come out ahead. "You have to borrow money to make money" they say. Some more distant acquaitances have even become multi-millionaires using margin, and we are all only in our twenties. On top of that, I sit and watch the market (certain sectors in particular) shoot up on a weekly basis, and I wish I had more money to play with. Everything I WANT to buy, inevitably goes up, and I sit on the sidelines and watch with regret that I'm not in on the remarkable gains. My own modest portfolio is doing extremely well - up 100% in the last 8 months, yet I still wish I had more to play with. I was raised to only spend the money I have in the bank, and not to borrow (except maybe to buy a house and car). It has really been a struggle to decide whether to risk borrowing money on the hopes of turning it into more. Your story has convinced me that even the best of us can get carried away once we open the "margin" door. I think for now, I will try to remain focused on the relative percentage gains my porfolio is making, rather than wishing the base amount in the porfolio were bigger. I think for now, I will just try to put more of my hard-earned money into my trading account and play with it then. It's hard to wait to accumulate money paycheck by paycheck while the market roars ahead without you, but at least I know I'll be able to sleep at night without having nightmares of creditors chasing me down. Thanks for your story, and based on the smart and honest words you wrote, I am quite positive you will build yourself up again; this time even smarter and better than before. Good luck Fool!
GlobalstreamerThat was a very good post and it took an awful lot of compassion to tell us all of your mistakes? I have just opened an account with an OLB and one of the things I told him was that no margin. The reason was that although high profits was possible,the risk was just as great for loss but the total risk was that you could wipe yourself out. I think that we sometimes jump on the glowing reports and ignore the warning signs along the way. I have heard and read that the best lessons in life are the ones we make. I wish you success in beginning again. Thanks for sharing you story with us.Walk with God, Walter
You wrote:Supposedly they give you three days to add more money or sell more off or for the price to increase enough. (I've never allowed mine to get below minimum for even a single instant, so I wouldn't know). But if it drops too far, they state they can (and presumeably will) liquidate whatever necessary AT THEIR SOLE DISCRETION! (That means that THEY choose what to sell and how much and when.)This requirement is a NEW YORK STOCK EXCHANGE requirement. Brokers have no choice, under painof discipline.They liquidate alphabetically, so if you want totake a lot of risks, make sure your "lessdesirable" securities are in the beginning of thealphabet, and they will make the decision for you.Regards. Tim.
Dear Globalstreamer:Thank you for sharing your painfully expensive lesson. I actually find myself in a similar position as I have just lost 100% of my portfolio and am currently investing with money from a home equity loan. How Foolish is that? I am 29, and am hoping my stocks will rise so I can break even and get out of debt. I will also be starting over. Somehow,there is comfort in numbers. Best of luck to you. Denise
Dear Globalstreamer, As a Newly Minted Fool (new with the millenium when I fired by worthless Smith Barney Full Service Broker), I am deeply grateful for the honesty and humility of your posting. Your experience, suffered alone, no doubt will result in different choices in your future life--but by sharing you indeed performed a gracious and generous act. Thank you, and I know with the humour and courage which you so clearly possess, you will surely soon experience abundance.Thank you!
Thanks for sharing your story Globalstreamer. I hope others will learn a lesson from this post. A couple of lessons from this post:1. Never average down. Don't buy more of a falling stock--when will it stop falling?2. Never risk more than a set amount on a given stock. People have different risk tolerances but suffice to say owning one stock and on top of that margining "to the gills" is not a good idea.3. Diversify--basically same as #2. Don't put all your eggs in one basket. Anyway, good luck to you globalstreamer. You are young so should bounce back fine. Eric B.
Dear globalstreamer,That's an awful story. I feel badly for you. But, I thin the good thing is that you learned this lesson early enough in life so as not to have wasted years of saving/riches. It really is too bad they made you sell your position. Time will heals your financial wounds. Fool on!
At 27 you have not been investing for some time. Try 20 or 30 years. Another example of not listening to the long term professionals. Gambling in the stock market is no better than gambling in Las Vegas. Buy quality stocks and hold for the long term (years). Find a good broker, pay his commission, and take his advises along with your own research. 60000 dollars will pay a lot of commissions. I an 60 years old and have followed this advise for my entire investing career and have amassed a large portfolio. Good luck in the future.
RE:"Supposedly they give you three days to add more money or sell more off or for the price to increase enough. (I've never allowed mine to get below minimum for even a single instant, so I wouldn't know). But if it drops too far, they state they can (and presumeably will) liquidate whatever necessary AT THEIR SOLE DISCRETION! (That means that THEY choose what to sell and how much and when.) This requirement is a NEW YORK STOCK EXCHANGE requirement. Brokers have no choice, under pain of discipline. They liquidate alphabetically, so if you want to take a lot of risks, make sure your "less desirable" securities are in the beginning of the alphabet, and they will make the decision for you."===========I believe that that requirement ONLY applies if the margin percent only drops a limited amount below the requirement.According to the statement you sign with Datek, they have the right if the drop below the margin maintenance requirement is great enough and/or market conditons warrant, they can liquidate immediately *at their sole discretion*.I would be very interested in knowing exactly what the NYSE requirements actually are.
I actually find myself in a similar position as I have just lost 100% of my portfolio and am currently investing with money from a home equity loan. That is not investing. Investing is when you take money you have and purchase assets which will throw some income at you and/or will appreciate over time.What you are doing is called "Gambling Addiction." I am 29, and am hoping my stocks will rise so I can break even and get out of debt. I am 29, and am hoping my horse will win so I can break even and get out of debt. Seek help while you still have a house.To the moon,RalphDisclaimer: I can be a real jerk sometimes.
I'm only a beginning Fool, and I'm sure this will sound "Wise" to the rest of the Rule Breaker community, but had you set trailing stops as your Celera stock rose, you would not have landed in this sad predicament. It has happened to me many times (though thankfully not on margin) with both "rule breaker" and "rule maker" type companies, and I have learned the value of a little technical insurance. Yes, you might "lose" your stock only to see it jump back up afterwards, but that's better than losing all your capital. You can always buy the stock again if the money is still there.
i'll have to admit i got a little misty eyed as i read your post (and that's not sarcasm).....yours is a tough deal.....good luck to you and thanks from a lot of folks for the painful advice.
This is my first post to this board so I will be brief.I was deeply touched by this post. I am thankful to the author for the generosity he has shown in relating this painful story. His courage in facing his mistakes and in continuing on is nothing short of remarkable. I have no doubt that I will read about this author one day in some business magazine as someone to listen to and emulate.Fool On! - Zakrzewski
Dude!That is such a bummer! But you've got a totally heroic attitude, and I'm sure you'll bounce back like flubber. Remember, you're only 27 years old. I didn't have a single financial account except for a checking and bank savings account until I was 28. Now I'm doing OK. I would totally recommend getting back on the Celera horse. I've got some Celera, too. I also started a biotech company with a partner two years ago. What we've learned in the last two years is that there's a shift going on toward more genomics-based drug discovery and development. Instead of starting from the indication (the disease) to determine product development, the pharmaceutical companies of the (near) future will start with the enormous wealth of information in the genome, and select drug targets from there. This genomic, and proteomic, information will be critical in future drug development. It's companies like Celera that are sitting on a pot o'gold right now. OK, dude, stay cool,Hidong
Thanks for the post. I've had the chance to get to know a fair number of successful people through my work. With few exceptions, they have all had significant losses of some sort or other. Some, more than one. What made the difference for each of them was the willingness to "get back on the horse and ride it again." Glad you plan to retake the saddle.From my personal experience, the seemingly bad has often opened the door to the seemingly good. Sometimes it takes a while to see the reason for a seemingly bad event. But eventually we see that it was necessary for the good that followed. The ability to see the good is often hastened by sharing the seemingly bad with others. We often find out we aren't the only ones who have had to shoulder such an experience.Chin up, Fool on!
I disagree completely. Margin stinks, period. Going into debt to "invest" is silly. You might make a killing if you're lucky but if you're not your screwed, and it's a bad habit to get into anyway.Sorry but I just don't buy the margin crap. It's like a credit card for stocks and that stinks. I'd love to see it outlawed altogether.
Dear Globalstreamer, i wish you the best of luck. Your future investments will do great if you just invest FOOLISH! Thank you for your story. Steve.
Dear GlobalstreamerThis is indeed a very valuable and timely lesson to share with your fellow fools. Like you, I find this forum the best I have seen, but I have read to try and maintain a broader perspective on the market, and not to get carried away with the fervour of the moment. I haven't attempted to learn all the rules at this stage, or to apply them. Why?? Because I recognise that I have a fundamental inability to rigorously follow rules. To this end, I am working on what I have to change in my underlying beliefs and consequent behaviours, as a pre requisuite to having appropriate trading strategies and rules.I am currently reading a book "Exceptional Trading - The Mind Game" by Ruth Barrons Roosevelt, which I reckon is pretty good stuff in this regard. You might find it helpful, and indeed your recent experience (which resonates to the bone as a fear some of us have) will be invaluable in working through some of her exercises. I'd encourage you to have a look at it - a very small investment (I got it through Pristine Traders) - before you step back into the ring.Aside from really feeling for you, the only other comment I would make is that history is full of people who have become extraodinarily successful as a consequence of really understanding, at a deep level, the reasons for their catastrophic failure and addressing these. Such lessons are so much more powerful than those we might distill from successes. It sounds to me that in your reflections so far, you have the foundations for such future success.As we say down under, hang in there and dont let the bastards grind you down.Cheers
Globalstreamer is a courageous man to admit to his mistake. He has learned a valuable lesson. It will make him a better investor in the future.In fact, he was so brave as to sell all his other holdings and reinvest the cash in a falling stock. This does not surprise me at all, it all went with his character.Good luck in the future my friend.Smurf on M.D.
Thank you for sharing this very difficult lesson. We all hear how one shouldn't use too much margin if any, but it really drives the point home when a real person shares his pain over it. I have been down a similar path although mine was with the futures market and I limited my loses to 20 percent of my total portfolio. It didn't take me too long to lose it all. I came to your post from a link that someone on the Workshop board posted. When you get back on the horse you might want to take a look at the mechanical investing approaches discussed there. I like the mechanical investing style because I am a lousy "emotional" investor. It might not be your thing but it does help to keep your buy and sell decisions more objective. Keep the faith and I hope you have some great success story to share in the future.
To GlobalstreamerI am replying to your letter and experience. I too have had your experience, only mine was at the hands of a "conservative" financial manager who specialized in bonds and "only used margin under optimal conditions". Guess what. He blew the entire bundle and then some. It was a very costly and a very emotionally painful experience. However I recovered and have gone on to become a successful investor.You will too. Thank God you are only 27. You have a lifetime ahead to recover. Many others out there will have a similar experience but will not have time to recover.Cheer up. Don't let it eat you up. You will recover and become a true foolish investor.All the best.Toddy
I am a new fool... been on the site since the 3rd week in January. Currently, I do not have a stock portfolio. Starting over similar to you, however, from the commodities options side of the house, in 1993...I purchased unleaded fuel options in the summer, and 2 weeks later, I received a phonecall from the broker stating that I had made an $8000 profit.... Then he suggested heating oil options with expiration dates all in October, just when winter is barely beginning...I was new, overwhelmed by the information, caught up in the emotion...So, I reinvested the initial investment, and the entire profit into the stockbroker's suggestions...eventhough I had a knot in my stomach... a sure sign that I was uncomfortable with the trade. I did it anyways. I watched the entire investment dwindle month by month until in November, the options had expired worthless. My saving grace....? I had bought the option, and not the actual future....I am here on the site, learning a new, Foolish attitude, acquiring research and stock presentation skills (rulebreaker seminar), so that in a few months (when I am emotionally relaxed and mentally alert), I will then establish a small stock portfolio, and begin again. I guess I just wanted you know, you are not alone in the experience..... and Yes, you certainly will do it Foolishly, when You are ready...!Best Wishes,Kyrna
I am so sorry to hear about your pitfall today. However, I commend you on your intelligence as well as your bravery. Not many can say that they been able to arrive to the point where you were today. I have just began to stick to a biweekly budget so that I may be able to save to invest the way you have. The result of your actions were unfortunate however, to be able to arrive to the point where you were is beyond commendable. Keep the faith- you'll be rolling in the bucks again in no time.Signed,(soon to be) financepro
Margin does not stink. Unfortunately, we are in a nation of people who think there won't be repurcussions when they can't pay off their debt. If people would use margin responsibly (as well as credit cards and any other debt instrument) there wouldn't be a problem. I do think they should lower the percentage that people can margin. Also, with all these online brokers making investing easy (the process, not the skill) maybe there should be an approval process by where you prove your worth to use margin. Some people just don't have the discipline to use it correctly. Why should margin be taken away from those who can use it responsibly? I don't want it taken away from me just because someonelse gets themselves in trouble.
globalstreamer: Thank you for your courage in sharing your story. My gift to you is, " The tuition is never too high if the lesson is learned". Joan M. Hall
globalstreamer,I am greatly impressed with your response to the recent past. You indicated that you were not sure as to all of your reasons for writing and baring your soul. It is clear that you do care about other folks in fooldom, and probably elsewhere.Clearly, our investments in the markets or elsewhere are not important when compared to the relationships created and nurtured as we travel through this life. Next week I will turn 49 years old, and I can also tell you that the integrity necessary to write and teach as you have for the benefit of others will, in various ways, pay you many times your recent losses over your lifetime. You must know also, that when you have recovered and created a new track record of investing success, you will be able to use your experience to further teach others. I believe that you have already taught many some lessons which will result in considerable enrichment, as I hope this message does also. Thank you.
I am sad to see that your portfolio was wiped out. I think many of us can truly feel your pain. What happened was that you went from investor to trader, but you failed to follow some basic principals of trading:
#1 Let you winners run, and dump your losers fast. You should've had a "stop loss" order in somewhere between 10% and 25% below the current market value and should've been actively changing that order as the stock price moved up. This would've locked in most, in not all, of your unrealised gain.
#2 Don't get emotionally involved in your investments. They are numbers on a piece of paper.
#3 You are not smarter than the market. So thinking along the terms of everyone else being stupid for bailing out was a big mistake.
It is unfortunate that you had to learn these lessons at such a cost, but at least you learned them while you were young enough to start over. You sound like a reasonable person and I'm sure you will take this beating and get right back up. Please just promise us all one thing....you won't make the same mistake twice.
Good luck and happy fooldom,
I am sad to see that your portfolio was wiped out. I think many of us can truly feel your pain. What happened was that you went from investor to trader, but you failed to follow some basic principals of trading:
#1 Let you winners run, and dump your losers fast. You should've had a "stop loss" order in somewhere between 10% and 25% below the current market value and should've been actively changing that order as the stock price moved up. This would've locked in most, in not all, of your unrealised gain.
#2 Don't get emotionally involved in your investments. They are numbers on a piece of paper.
#3 You are not smarter than the market. So thinking along the terms of everyone else being stupid for bailing out was a big mistake.
It is unfortunate that you had to learn these lessons at such a cost, but at least you learned them while you were young enough to start over. You sound like a reasonable person and I'm sure you will take this beating and get right back up. Please just promise us all one thing....you won't make the same mistake twice.
Good luck and happy fooldom,
Globalstreamer, I'm sorry to hear you got burned but we all do it. Don't get discouraged, just do your due deligence, and hopefully next time you will make money. Your attitude is good and you have youth on your side. You will recover. Good luck, and all the best in the future.
Sometimes the best lessons are the hardest to learn.At least you have the most valuable commodity on your side -TIME Fool on
globalstreamer,once upon a time far, far away in a distant life, ie 2-3 years ago, i did what you did and i'm 55. (55-27=28; so it seems to me you have a way to go?)how so one might ask, since hopefully, age should bring wisdom, we hope.a. when kimberly bought scott,i had profited, so when the same shepard went to sunbeam, i followed. with the same rationalizations you used i lost 66,000 on chainsaw. since then i've learned about averaging down, ie not 2.b. the morning the fool mentioned cra, i bought @ market. traveled from 82 to 116 with 2000 shares. couldn't sleep anymore, bailed.c. one day in february it was running, 1000 shares on margin for 4 hours = 37,000 profit.d. since the sunbeam lesson = mba. i've read the fool, subscribe to the fool 8 and because of the relative strength to ibd with o'neil's tape and books,and now sellars paper and shaugnessy's book of 'what works', came from amazon today, 3/24/00.e. previously been to omaha, visited with warren and charlie, done the daughter in law's book buffetologhy, have the computer.f. done dremen, graham and even even fischer.g. last year i got laid off from car sales.h. 12 = cars, 8 = unemployment, for 1999 just sent in 22,000 to irs.i. currently + 240,000 @axp with less than 3 months for 2000.j. moral = take heart, learn you lessons and move on.as we used to say in sales, the best way to get out of a slump is the GOYA theory. (get of your ass - turn off the computer, CNBC, and put your brain in gear)k. tis doable = look at metmf courtney