I Turned $3,000 Into $210,000

No, I actually didn't at all. But I read this article about someone who did, and it bears a striking resemblance to my own story.

Over the next several years, the stock went up and down, sometimes significantly -- but I held on. It mostly went up, and it split and split. I remember checking my portfolio regularly -- several times a day! -- to see how rich I was becoming. Near the stock's peak, I had a 70-bagger! My $3,000 investment had turned into $210,000. If it doubled in value only twice more, I'd be (almost) a millionaire! All from a measly $3,000 investment.

Did I sell shares along the ride up? No. (Some of us don't know when to cut our losses.) Did I sell at least some near the top, when my mom told me to? Nope. (That strange thudding sound you hear is me banging my head on my desk. The silence is my mom, biting her tongue.) I held on.

I started investing in 1998 as the dot-com bubble was nearing a peak. I was putting as much of my paycheck into the market as I could afford and the numbers just kept going up and up. I got into an IPO (for Allaire, if anyone remembers that) at $20 a share and the stock split and was trading at $120 a share. I don't remember how much my portfolio was worth but it was probably close to $150,000 from an initial investment of $40,000 or $50,000.

I had no experience investing and I was young and stupid and naive. When the bubble started to pop I held on, only selling as required to meet margin calls. I remember in September of 2000 my portfolio was worth about $100,000 and I was thinking I would sell if I could get back up to $120,000 or something.

As we all know the market continued to plummet, and I lost my shirt. I had to take out some money for living expenses. Right now that same account that once was worth 6digits is worth maybe $5,000 net. Granted I made some spectacularly bad decisions since then, and what could have been worth millions ended up losing me money, but most of the damage was done when the bubble popped.

Now I think I am too cautious of an investor. Whenever I take a risk it blows up in my face. A few years back, when Google went public I made 100% profit on some GOOG call options. I bought some more and lost not only the profit, but also the initial investment and then some. So I don't take too many risks anymore. The biggest risk I've taken in years is buying C when it was close to its bottom (I already had a position and wanted to average the cost down). Oh, and I bought some GM bonds for their high yield back when it looked like they would turn the business around a couple of years ago.

One of my coworkers was telling me yesterday that DRYS was trading at $120 a few months ago and now it is down at $5. He said if it made back even some of its losses it would be a big winner. I remember thinking the exact same thing about JDSU when it was down from $120 to $15. Now it's down around $5.

What kills me is that I could have still kept most of my profits from that first bubble if I'd only known about something as simple as stop loss orders. Of course then I try putting stop loss orders on my positions and they end up being sold after the price dips for one trade and then goes back to the normal trading range. And then after the stop is triggered the price shoots up. So then I stop putting stop losses and wish I hadn't.

So I no longer try to "play" the market. I don't listen to advice or recommendations from anyone. I didn't make much money in any of the bull markets since 2000. Lately I've been buying stocks with solid dividend yields, basically investing like a retiree. But I can sleep at night, even when my portfolio is down 50% (which was oh, about a month ago).

I'm a pretty smart guy, but it seems like every investment I make ends up losing me money, I guess I'm smart enough to not make them anymore.

Credit Crunch

If I knew enough about exotic derivates to have been able to go short mortgage backed assets I would be a very rich man right now. I've been telling everyone who will listen that exactly what is happening now was going to happen for about 3 or 4 years now. I had arguments with people on welfare who were putting all of their welfare checks towards real estate in the hopes of making a quick buck. When people on welfare are speculating on real estate you KNOW there is a bubble.

I knew that this whole mortgage thing was going to happen. I did not know how it would affect the hedge funds and investment banks, but all of the retail stuff happened pretty much exactly as I thought it was going to.

My parents bought a new condo a little over a year ago. They took out an interest only mortgage because they expected to be able to pay the mortgage off in full as soon as they sold the house they have been in for the last 30 years. Of course they are not able to sell that house so have been renting out the new one and losing money on it, I might add.

The only problem was I was expecting this meltdown to happen a bit sooner than it did. The real estate bubble popped pretty much right on schedule but I thought this mortgage meltdown would happen much sooner after the bubble popped.

It seems like the Fed is trying to shake out the bad mortgages, which is theoretically a good idea, but if you think about the poor people who are going to lose their houses it doesn't seem like such a good plan anymore.

I also did not expect the crash to have this effect on the stock market. I thought that money would go into the stock market as real estate became a less good investment. But the MBS crisis went a lot further than I thought it would.

Thanks hedge fund idiots who have been investing way more money than they have in MBS's. Due to your ridiculous overuse of leverage and investments in MBS's that any idiot could see were going to default you've turned a downturn in real estate into a crisis that is effecting the whole world.