patrick.net

bubblesburst says

I’ll preface my worst investing mistake by saying that like Patrick, I saw the real estate mess coming. I’m actually in the finance world and this was fairly easy to see for me when I saw my housekeeper, who could barely speak English buying a $300,000 house with no money down and no documented income. Like guys like John Paulson, I started short selling many financial companies, especially the bond insurers and banks. I shorted Lehman Bros (LEH) into bankruptcy as an example.
I did very well and made a good amount of money, but I made a big mistake assuming that the US government wouldn’t let the largest Thrift (Washington Mutual) fail. The day before it failed, I picked up a few hundred thousands of dollars worth of WM shares. I kept watching the US government bail out all the other banks leading up to WM’s collapse. Well, a day later after buying it at what I thought was the ‘bottom’, the US government allowed WM to fail and the FDIC essentially handed it over to JP Morgan. The stock was almost worthless overnight.
It’s a good example, even how when you are careful and think you aren’t “catching a falling knife”….. you can be. I lost a few hundred thousand dollars all in less than 48 hours! Very painful.
The fact that I made lots of money short selling the financials before that doesn’t take the sting out of losing over a quarter of a million dollars all in 48 hours. Ouch!

It was a insiders game. There was a guy in njrereport who works on Wall St. Ahead of time, he announced every company and bond that would get bailed out and bought in on the bonds for pennies on the dollar. No one believed him and today, everything he announced he bought, day by day is selling for 100 cents on the dollar and earning interest.

Yes and no about it being an insider's game. On one hand I TOTALLY agree with you that the easy money on Wall Street is an insider's game. The average Joe on the street can't begin to compete with all the insiders and big money. The market is essentially rigged.

The "no" part I only disagree with about is that even the little guys that were paying attention could have made quite a bit of money if they just saw what was going on around then and shorted the financial sector. I recommended to everyone and their brother to short sell companies like Lehman Brothers, Citibank, GE and many other companies that had so much toxic waste on their balance sheets. I always say that this was almost once in a lifetime type of opportunities to make money so easily short selling the market.

I've been waiting patiently for the real estate prices to fall the past few years. Now that I'm going to be relocating and most likely going to stay in my next house for the next 15 to 20 years...we're looking to buy. I am hoping prices fall a bit more in San Diego this year.

I sold 400 shares of AAPL at $25 to help my sister buy a house down in LA in in mid-2001.

They got divorced and the house is drifting in the current FC swamp.

Even though I had good market timing selling those shares when I did (coulda bought 'em back at $13 at one point), they now are worth $276,000.

I also got buffaloed out of my LEH puts in Sept 2008, about a week before they collapsed. Probably the only person to lose money shorting LEH that month. IIRC I shorted at $14 and they ran my stops at $17.

I bought AAPL calls when the stock was at $100, but got pushed out when it fell to $90, losing $2000. That was tough, and I think the lesson there is don't buy calls.

I was playing with BAC LEAPS calls in 4Q08 when the stock first fell below $20, betting on TBTF. I doubled down on that when the f---er fell to $3 and this double-down enabled me to GTFO the position when it recovered to $15 again. Pretty good trade altogether, holding during the crash, and discipline getting out the LEAPS when they still had time value. The last call option I traded out of in 2009 expired last month IIRC.

I also bought BAC-PL in early 2009 at $500 but got spooked out of it at $300, I sold that to distribute into my REIT holdings. Kinda dumb since BAC preferreds were saved in the bail out and I took a 50% hit instead of a 100% gain.

I like the honesty on this board.

Opportunity cost miss... instead of buying 300 ounces of silver in 2004-05 I should have bought 2000 (I could have afforded it.)

Worst %age: purchased a small quantity of PGEX at the insistent nattering of my SO at the time. 100%.
Worst $$$: former employer ESPP. Not another .COM, but a previous generation of Silicon Valley company spiralling slowly down the drain exact as described in "The Innovator's Dilemma". Only about 98% loss, leaving aside the foolishness of risking both investment $$$ and salary at the same time. Fortunately offset by gains in BRKb.

I just recently had a bad one - bought NVDA at 10.00 - great choice - went up to 15.00 - figuring a 50% return is pretty dandy sold it - 3 months later it is 24.00 - oops

Nasdaq Index Fund. I got hammered big time.

Webvan. It kills me that a couple of their warehouses were profitable. I still weep whenever I see one of their old trucks on the street.

@jvolstad

What year did you buy in? Was it the ETF QQQQ?

I haven't realized some of my losses from around 2000 yet!

Oh god WebVan, I'd forgotten that one!

American in Japan says

@jvolstad
What year did you buy in? Was it the ETF QQQQ?
I haven’t realized some of my losses from around 2000 yet!

It was a ETrade index fund. I also had one in their S&P 500 fund as well as Russell 2000. I'm no longer trading with ETrade.

@jvolstad

I wast an indexed fund? If so maybe the timing of it was bad. If you had bought the ETFs SPY or MSU in March of 2009, you could have done very well.

In HS I bought 10 really cool shirts at a racecar swap meet for $10 each and planned to sell them at the gas station I workd at on weekends for $15 each. Sold maybe 1 for $12. Sold maybe 3 for $10. Wore a few and gave the rest to buddies. Checked "sales manager" off my bucket list.

I had bought some options of a stock and screwed up the expiration year from 2011 to 2010. I lost about 4-5K in a month and decided never to touch options again. What pains me is that I expected it to go up in long run (which it did) but by the time my options exired, stock was getting hammered.

My house. Actually, my Mom's house.

I was 18, had a little bit of an inheritance from grandma (30k or so) and gave/loaned my mom the down for our/her condo in Rancho Cucamonga (the IE). I agreed to let her put my name on the docs for income verification and promise of a return. She died in 2006, I graduated college in 2009 and had to short sell it to avoid going belly up. I'm the world's biggest proponent of renting until you're either getting the house for free, or you are cemented into the ground in whatever city you are buying. I hate the housing market, but at least I'm young, no kids, no wife and can move on from this with way more knowledge than half the 50 year olds out there.

Kevin says

My worst investment was probably buying a house. Slightly negative return on a $120k+ investment.
I wouldn’t change it though.

Someone needs to read Patrick.net, a House should Never be considered an investment, it's a place to live.

As for me, I lost my shirt on BuyX.com, lost about 60% of the money I invested in it. That was the beginning of the Dot Com collapse.

Polycom (PLCM). I bought at 30, watched it go up to 77, and then did not sell as it fell all the way down to 11. Finally sold in the teens.

And it was my own fault: it had a P/E of 100. Huge warning sign, blinking neon letters. All the matters is earnings for stocks, and rents for housing. Everything else is hype and speculation.

My second Masters degree. Really, one was enough, especially when the second one came without full funding/a fellowship.

Sitting on 100% cash since 2008. Sure, I didn't lose any money, but I have been too terrified to do anything since the crash, even when my gut told me too. If I had done what I should have done I'd have way more in my retirement account than I need at this point. Makes me a little sick when I think about it.

Tude says

Sitting on 100% cash since 2008. Sure, I didn’t lose any money, but I have been too terrified to do anything since the crash, even when my gut told me too. If I had done what I should have done I’d have way more in my retirement account than I need at this point. Makes me a little sick when I think about it.

You know on the other side you could have lost a lot too. I have relatives who lost their entire retirement in the crash because of how they were leveraged.

ChrisLA says

Tude says

Sitting on 100% cash since 2008. Sure, I didn’t lose any money, but I have been too terrified to do anything since the crash, even when my gut told me too. If I had done what I should have done I’d have way more in my retirement account than I need at this point. Makes me a little sick when I think about it.

You know on the other side you could have lost a lot too. I have relatives who lost their entire retirement in the crash because of how they were leveraged.

I understand this. The problem is I knew enough to get out in time, but I also knew enough to get back in (but didn't). I am always questioning my ability to know when to get out again. Right now it really is a game that should be played by people who really know the rules and how to work all the fraud and monkey business to their advantage. I know those of us that cannot keep up will just get squashed.

Tude says

I understand this. The problem is I knew enough to get out in time, but I also knew enough to get back in (but didn’t). I am always questioning my ability to know when to get out again. Right now it really is a game that should be played by people who really know the rules and how to work all the fraud and monkey business to their advantage. I know those of us that cannot keep up will just get squashed.

The way we've been doing it is we basically invest and hold forever. We do sell, but rarely, only if we think the company is really not going to be doing well. It does work out long term if investments are right. So far doing all right; knock on wood.

I could have pulled out before the crash and saved more obviously, but I'm not a day trader so wasn't going to move a bit nor I really saw the stock market crash. I didn't know housing bubble was so entrenched into everything else, kind of thought it was just localized to a specific industry. At the end didn't really matter since almost everyone did the same, and when everyone feels the crash the same way the end result has no losers or winners.

Purchased WAMU and lost all the money.

I bought an emerging market mutual fund, unnecessary and a waste. International funds have enough emerging market exposure. My only stock mistake was buying about $3k worth of Sun Micro and not selling it when it was worth about $12K or so. Oh well. Not very exciting and I didn't lose money in this account anyway. I have 99% of my financial assets in mutual funds.

"mutual fund"

'nuff said. Anyway thanks for your story...

I have made money in my other funds, no complaints here.

@kimboslice

Fair enough. I do know that about 75% of mutual funds underperform the S&P 500 index over a 5-year period. In addition they of have hefty charges. You may know something I don't about certain mutual funds in that 20% category.

I was in a short ETF (SH for the past 6 months), but I sold 2 days ago (I should have waited just 2 days)!

American in Japan says

I was in a short ETF (SH for the past 6 months), but I sold 2 days ago (I should have waited just 2 days)!

I hear you, AIJ. I usually run a put on SPY for the past year, but my last one expired mid-June. #@$!@!.

FAIRX (Fairholme Fund) with the way it is going right now. I have hopes it will rebound though.

FortWayne says

Buddy you were gambling on that one, not investing.

Wall Street financial operations? There is no "investing" there any more except by accident.

You want to invest, loan a family member the scratch they need to start that restaurant or small business.

>Wall Street financial operations? There is no "investing" there any more except by accident.

LoL!

I think mine is when I shorted F in early 2008, held the short down to around 6 or something like that but then chickened out when it went back to around 8 early in the summer.

Then later in the year it bottomed around 2.

Probably not buying Google pre-IPO when they offered up to 5k worth for 50 cents a share. Stayed away from it because it seemed like an echo the dot-com bust. Coulda retired on that one!

msilenus says

I was working at Infospace back when the dot com bubble was bursting,

I bought Infospace at something like $4 and change, and sold for $8 and change. This was what, late 90's? Definitely before the bust by a long shot. Doubled my money but I think I only had 1000 shares.

I don't have one trade that tanked, but what I *did* really screw up was the the whole dot-com thing. I was in the software business in the late 90's and was very contrarian about the dot-coms. I kept telling EVERYONE to sell their silly 'internet' stocks. I used to talk about the companies with a business plan "written on a cocktail napkin".

I was finally right but the problem was I didn't take my own advice. I had a lot of 'growth' mutual funds - I was young and pretty lazy/naive about what was actually *in* my mutual funds. Had I taken the time to look closely, I would have cashed them all out. Naturally they were full of these stocks I told people to sell.

I'm still recovering from that one.

Sybrib says

I think mine is when I shorted F in early 2008, held the short down to around 6 or something like that but then chickened out when it went back to around 8 early in the summer.

Then later in the year it bottomed around 2.

I bought F at $5, $3, and $1.74. I wish I had put every penny I owned in it. I sold at what, $9 and change. I wish I had held it longer but did ok.

Now ask me about my mutual funds (oh wait, I already posted that debacle).

American in Japan says

I was in a short ETF (SH for the past 6 months), but I sold 2 days ago (I should have waited just 2 days)!

You do realize that SH is not intended for long-term investments and that you weren't really shorting anything, right?

Yes I do. It simulates a short.

American in Japan says

Yes I do. It simulates a short.

Not if you hold it for 6 months.

It only simulates a short if you hold it short-term with relatively low volatility -- its returns are based on the *daily* change. Because of tracking error and volatility drag, it definitely does not simulate a short over the long term.

SH is one of the better ones in terms of these factors, but its tracking error and drag is greatly increased in times of high volatility, such as now. The tracking error and drag are still not as bad as the leveraged versions, however.

Inverse funds are definitely not the same as shorting and do not simulate shorting.

billy269 says

FAIRX (Fairholme Fund) with the way it is going right now. I have hopes it will rebound though.

Isn't Fairholme one of the biggest shareholders of BofA? If I remember correctly, FAIRX bought large amounts of all the banksters -- Shitty, Goldman, and Morgan Stanley, also Notorious AIG, and even things like CIT and certain property managers like Brookfield. Basically, everything that they thought was distressed and possibly oversold. I'm assuming their theory was "at least one of these companies has to do well, right?"

What made you buy them?