PROFIT FROM EXPERIENCE
a yokel, a sucker, an idiot, and a fool
No one should profit from death but in July 1997, I inherited $5000. This presented a dramatic improvement in my financial affairs. I had an Individual Retirement Account (IRA) parked in a safe bank that had, in fifteen years, grown to $10,000. With the inheritance my net worth improved by 50%.
In order to settle my late friend’s affairs I had to enter into an investment world I knew nothing about. The Dean Witter brokerage house was a foreign country; its language, customs, dress and viewpoints made me feel as if I had mud between the ears and a cowlick for a crown. However, my late friend’s financial advisor was personable with a warmth and empathy that broke the stereotype of the cold, calculating, money-first human.
My main frame of reference about the stock market had been the crash of ‘29 and the collapse in 1987. But that was then, and this was now. And now was wow. Every market chart on display pointed skyward.
A yokel
Anyone, even John-boy, could have a piece of Home Depot, Coca Cola, Costco, Sony, Safeway, GE, Microsoft… What a great idea. Companies that I’ve supported as a consumer could now support me as an investor. Instant rebates. Stock graphs were all angled at 45 degrees up up up. Where had I been?
So, in addition to the $5000 gift, I transferred my IRA earning a measly 5% to the broker and the markets. The $150 early withdrawal penalty would be the first of many pains. “But look what you’ll gain,” his voice said to ease the transfer.
I was advised to diversify, start with mutual funds, don’t put all the eggs in one basket. Being from rural society, that analogy I understood. But which baskets?
The idea of owning stock with others in a ‘mutual’ way plugged into my sense of community. This was good. Like many conscientious people, I believed in labor, in helping others, in the common good, and wanted to be a thoughtful investor. For instance, I stayed away from funds with Tobacco and Big Oil holdings, even though many of these companies provide a solid, sustainable profit, like an antidote for a bit of poison and pollution.
The real dividend of stock investing turns out to be a closer attachment to the community, the country and the world. I began to see business differently. Before investing, a general apathy was in-place, a cynicism about business being an unequal arrangement with workers doing the labor while management got the rewards. Being a shareholder changed that perception. Good managers and good labor made good companies. Today many people, average working people, are invested in the market, either through 401k’s or pension plans. Labor/ownership is closer to being realized than at any stage of the Marx/Engels Commie Corporation.
I invested in three mutual funds: American Opportunities fund (U.S companies); European Fund (companies in the midst of European unity); Templeton Developing Markets fund (Third World enterprises). That I could use my own money to help fund projects in Europe and in developing nations felt good and positive, like putting money in a collection plate. Part penance, part entry fee into heaven (on earth).
The very first day the investments made $200. To a virgin investor, this was a windfall. Seemed almost sinful. I had always equated money with work, with labor. But here I was sitting back and making money doing nothing and profiting from it.
I began tuning in to the financial reports at 25 and 55 on the hour. The business section of the newspaper, which I had almost always discarded, became Grail-like reading suddenly. Tuned in, turned on.
After a few weeks of easy profits, and hundreds of dollars ahead, the markets started retreating in August. You can also lose $200 a day too. And so I did, and more. And sleep…
Late in the year the Thai currency became worthless and this destabilized Southeast Asia. The resulting financial fiasco clobbered the Developing Markets fund and I lost half of my investment suddenly. This brought all the markets down. The other mutual funds zigzagged the rest of the year and went nowhere.
The Shangri-la la la investment innocence ended. I had lost a substantial amount of money. What made it even worse was that at the end of 1997 I also got stuck paying for capital gains on fund profits made earlier in the year. Taxes are based from January first. I didn’t enter the stock sweepstakes until July, well after the winners had been established. The market had racked up big gains in the Spring. So even though I actually had lost money in the market, this yokel had to pay taxes on $3000 of imaginary profits.
In 1997 I learned to avoid capital gains and be on the lookout for unstable markets.
A Sucker
Okay. I would do better in 1998. I took on extra work and invested on a regular basis each month. This would make up for all the years of not saving anything except manuscripts, and for the recent Asian bug. The market again made steady gains until late August. Then the Russian ruble devalued. This derailed the markets, in particular, European funds. Here was a lesson already learned a year earlier. I would not stick around for a round of Russian roulette. I sold out and “jumped to the sidelines” as it’s called by professional profiteers.
How is a novice supposed to know that the Federal Reserve would counter the international crisis by lowering interest rates three times? That maneuver sent the markets stampeding right past this gawking non-investor.
In 1998 I learned the buy and hold strategy. Market timing doesn’t work. I would learn. Watch out for ‘experts’. The year ended as a financial wash. Luckily the American Opportunity fund offset the losses. Even though most stock charts showed those fabulous 45 degree uprisings, that 1998 arrow went straight though this sucker’s head.
An Idiot
1999 would be the year. I found more work and made more money than ever before and it all went into the market. I would recover from the Thai-Russo pillaging. Technology was the future; I was saving for my future; together we would team and conquer.
I cautiously got back in the market incrementally. Like getting into a hot bath. Cannibal soup. Though the markets were roughed up again in August (this was becoming a pattern, just like the rising at Spring time, tax time), the climate looked right to fully reinvest in September.
The NASDQ started to rise. That’s when and where I placed all my chips. I would bet on technology. In the next few weeks I made over 15% on my investments. Entering October I was sure the markets would fall back (October was another pattern; great crashes happen in October). So taking my winnings I sold out and waited for the market to drop and I would buy back in again at a lower and more profitable rate. This strategy went against what I had learned previously; it was becoming painfully obvious that no formula worked. There were reports of chimps picking stock winners better than fund managers. The marketplace acted more like a gambling parlor, so the get in and get out and don’t get greedy strategy seemed like a viable alternative.
I huddled on the sidelines and rooted for a quick short demise on the NASDQ.
But NASDQ kept rising. It went up 20, 25, 30, 35, 40, 50 %. It ended the year up 86%. I had missed out on the great surge. Buy And hold. I had dismissed that one mantra and it cost me hundreds, thousands of dollars of easy money. I took little solace for getting rid of my holdings before the funds made their capital gains distributions.
’97 yokel, ’98 sucker, ’99 idiot.
A Fool
Meet the millennium man. Schooled in the art and craft of investment management. A student of techniques and trends. Buy low, sell high; buy and hold; avoid capital gains with brains; spring surges, awful August, October collapses.
In ’99 I made an 18% return for doing nothing but worrying every day and making major miscalculations on market conditions. Now I was a seasoned investor.
Market fundamentals, price to earnings ratio, consumer confidence index, unemployment data, producer price index, cost basis, management fees, portfolio turnover rate, “don’t shoot where the rabbit has been” chasing returns, deferred sales charge, Morningstar ratings, cyclical stocks, sector rotation, diversification, CNBC, WSJ, long term investing, short term, bond ratings, stock pickers, market experts, fund managers, chimp choosers. Yes, I knew about all of these factors, but collectively it didn’t add up to the reality of the market.
NASDQ crossed into the millennium the only high-powered rocket in the shareholding sky. It was the new economy versus the old economy. Email versus snail mail. Internet versus paper-cup-and-string. Like many other investors, I was anticipating NASDQ to drop significantly from its stratospheric ascent before catching that next ride. But it kept soaring. By the end of January 2000 it was obvious I was missing out on something spectacular. I gave up waiting. And off we went, always on the lookout for an indication when NASDQ might run out of fool fuel. By March I had already realized an additional 25% return.
Investors were making more money in stocks than at work. Overabundance was distorting reality – people were setting goals of doubling money by year’s end; quadrupling it the next year. These were the good times, the golden age, the information age, the Internet age, the tech age, my age. The bubble age.
I didn’t hear or see the pop. In a three-day period NASDQ lost 20% of its value. The 20% going down was like 25% going up. (20% loss of 100 leaves 80; a 25% gain of 80 nets 100.) Profits disintegrated upon reentry into reality. I quickly sold again. The markets recovered somewhat, fluctuating through the summer with NASDQ again moving upward slightly. The forecast for year’s end had the markets going up. But I waited until the end of awful August before reinvesting.
In September I joined my brethren investors just in time to catch the markets in a long steady Fall. Even this seemed acceptable because I slowly distributed money into the markets as it fell. Buy low, sell high. By the end of the month I was fully invested again. As late as Nov. 3, the day before the Presidential election, I was doing okay. Certainly on the verge of the predicted surge.
Anticipate market conditions. Many so-called stock gurus predicted that the market would rise dramatically by year’s end. I listened and held. Buy and hold. I had missed the big parade by selling early, this time I would stay the course. And just in case, I knew all of the capital gains distributions dates; I would unload before that. Avoid capital gains with brains. Oh yes, as a back-up, the Fed was due to lower interest rates soon, that’s when the market stampedes. I was saddled and ready.
All of the lessons I had learned were at full utilization.
Now I know what deer-in-the-headlights means. A blinding light is coming at you, you’re about to be sliced in half, and you freeze. Mesmerized by the moment, wondering if it’s an illusion, instinct and common sense are forgotten as the brain runs thousands of calculations on what that approaching beam means. Then it’s too late. It was NASDQ in a fireball descent. That rocket was actually a missile.
From early November until today, April 1st 2001 , the NASDQ plummeted. This foolish investor stood there waiting for the Fed to redirect this approaching disaster (as it had done in a previous lesson). But not this time. The Fed couldn’t help. The annual spring surge went to hell, literally.
An Average Investor
I took a loss of 50% before heading for cover. And that has halved my investments, my future, my well-thought-out calculations. Many investors lost much more; many investors loss much less. For all the good they presented: Instead of CNBC I could’ve been watching the Weather Channel; instead of the Wall Street Journal I could have been reading the Farmer’s Almanac. Information mixed with manipulations.
As predicted, stock market charts continued at that familiar 45-degree angle, except with the pointer headed into the ground.
Tobacco and Big Oil did really well in 2000-2001. With most good wholesome companies tumbling it seems appropriately ironic that smoking and pollution would be the profiteers. This made for some serious ethically-challenged regrets.
All of the hard thought-out and sought-out profits and one third of my principal has vanished. John-boy learned some valuable lessons: Luck is the only financial guru; never invest more than you can afford to lose; diversify, because all previous lessons don’t count. No one is an expert. That definitely includes Dean Witter who changed into Morgan Stanley Dean Witter, then to Morgan Stanley. Dean got gobbled up along with half of my investments.
I’ve been through some name changes too: yokel, sucker, idiot, and a fool. An average investor. With much more than the initial $5000 gone, obliterated, vaporized, cremated, again I’m reminded that no one should profit from death. I certainly did not. Profit from experience. Maybe.
copyright 2000, John Kirkmire, from book Elementary Concerns
a yokel, a sucker, an idiot, and a fool
No one should profit from death but in July 1997, I inherited $5000. This presented a dramatic improvement in my financial affairs. I had an Individual Retirement Account (IRA) parked in a safe bank that had, in fifteen years, grown to $10,000. With the inheritance my net worth improved by 50%.
In order to settle my late friend’s affairs I had to enter into an investment world I knew nothing about. The Dean Witter brokerage house was a foreign country; its language, customs, dress and viewpoints made me feel as if I had mud between the ears and a cowlick for a crown. However, my late friend’s financial advisor was personable with a warmth and empathy that broke the stereotype of the cold, calculating, money-first human.
My main frame of reference about the stock market had been the crash of ‘29 and the collapse in 1987. But that was then, and this was now. And now was wow. Every market chart on display pointed skyward.
A yokel
Anyone, even John-boy, could have a piece of Home Depot, Coca Cola, Costco, Sony, Safeway, GE, Microsoft… What a great idea. Companies that I’ve supported as a consumer could now support me as an investor. Instant rebates. Stock graphs were all angled at 45 degrees up up up. Where had I been?
So, in addition to the $5000 gift, I transferred my IRA earning a measly 5% to the broker and the markets. The $150 early withdrawal penalty would be the first of many pains. “But look what you’ll gain,” his voice said to ease the transfer.
I was advised to diversify, start with mutual funds, don’t put all the eggs in one basket. Being from rural society, that analogy I understood. But which baskets?
The idea of owning stock with others in a ‘mutual’ way plugged into my sense of community. This was good. Like many conscientious people, I believed in labor, in helping others, in the common good, and wanted to be a thoughtful investor. For instance, I stayed away from funds with Tobacco and Big Oil holdings, even though many of these companies provide a solid, sustainable profit, like an antidote for a bit of poison and pollution.
The real dividend of stock investing turns out to be a closer attachment to the community, the country and the world. I began to see business differently. Before investing, a general apathy was in-place, a cynicism about business being an unequal arrangement with workers doing the labor while management got the rewards. Being a shareholder changed that perception. Good managers and good labor made good companies. Today many people, average working people, are invested in the market, either through 401k’s or pension plans. Labor/ownership is closer to being realized than at any stage of the Marx/Engels Commie Corporation.
I invested in three mutual funds: American Opportunities fund (U.S companies); European Fund (companies in the midst of European unity); Templeton Developing Markets fund (Third World enterprises). That I could use my own money to help fund projects in Europe and in developing nations felt good and positive, like putting money in a collection plate. Part penance, part entry fee into heaven (on earth).
The very first day the investments made $200. To a virgin investor, this was a windfall. Seemed almost sinful. I had always equated money with work, with labor. But here I was sitting back and making money doing nothing and profiting from it.
I began tuning in to the financial reports at 25 and 55 on the hour. The business section of the newspaper, which I had almost always discarded, became Grail-like reading suddenly. Tuned in, turned on.
After a few weeks of easy profits, and hundreds of dollars ahead, the markets started retreating in August. You can also lose $200 a day too. And so I did, and more. And sleep…
Late in the year the Thai currency became worthless and this destabilized Southeast Asia. The resulting financial fiasco clobbered the Developing Markets fund and I lost half of my investment suddenly. This brought all the markets down. The other mutual funds zigzagged the rest of the year and went nowhere.
The Shangri-la la la investment innocence ended. I had lost a substantial amount of money. What made it even worse was that at the end of 1997 I also got stuck paying for capital gains on fund profits made earlier in the year. Taxes are based from January first. I didn’t enter the stock sweepstakes until July, well after the winners had been established. The market had racked up big gains in the Spring. So even though I actually had lost money in the market, this yokel had to pay taxes on $3000 of imaginary profits.
In 1997 I learned to avoid capital gains and be on the lookout for unstable markets.
A Sucker
Okay. I would do better in 1998. I took on extra work and invested on a regular basis each month. This would make up for all the years of not saving anything except manuscripts, and for the recent Asian bug. The market again made steady gains until late August. Then the Russian ruble devalued. This derailed the markets, in particular, European funds. Here was a lesson already learned a year earlier. I would not stick around for a round of Russian roulette. I sold out and “jumped to the sidelines” as it’s called by professional profiteers.
How is a novice supposed to know that the Federal Reserve would counter the international crisis by lowering interest rates three times? That maneuver sent the markets stampeding right past this gawking non-investor.
In 1998 I learned the buy and hold strategy. Market timing doesn’t work. I would learn. Watch out for ‘experts’. The year ended as a financial wash. Luckily the American Opportunity fund offset the losses. Even though most stock charts showed those fabulous 45 degree uprisings, that 1998 arrow went straight though this sucker’s head.
An Idiot
1999 would be the year. I found more work and made more money than ever before and it all went into the market. I would recover from the Thai-Russo pillaging. Technology was the future; I was saving for my future; together we would team and conquer.
I cautiously got back in the market incrementally. Like getting into a hot bath. Cannibal soup. Though the markets were roughed up again in August (this was becoming a pattern, just like the rising at Spring time, tax time), the climate looked right to fully reinvest in September.
The NASDQ started to rise. That’s when and where I placed all my chips. I would bet on technology. In the next few weeks I made over 15% on my investments. Entering October I was sure the markets would fall back (October was another pattern; great crashes happen in October). So taking my winnings I sold out and waited for the market to drop and I would buy back in again at a lower and more profitable rate. This strategy went against what I had learned previously; it was becoming painfully obvious that no formula worked. There were reports of chimps picking stock winners better than fund managers. The marketplace acted more like a gambling parlor, so the get in and get out and don’t get greedy strategy seemed like a viable alternative.
I huddled on the sidelines and rooted for a quick short demise on the NASDQ.
But NASDQ kept rising. It went up 20, 25, 30, 35, 40, 50 %. It ended the year up 86%. I had missed out on the great surge. Buy And hold. I had dismissed that one mantra and it cost me hundreds, thousands of dollars of easy money. I took little solace for getting rid of my holdings before the funds made their capital gains distributions.
’97 yokel, ’98 sucker, ’99 idiot.
A Fool
Meet the millennium man. Schooled in the art and craft of investment management. A student of techniques and trends. Buy low, sell high; buy and hold; avoid capital gains with brains; spring surges, awful August, October collapses.
In ’99 I made an 18% return for doing nothing but worrying every day and making major miscalculations on market conditions. Now I was a seasoned investor.
Market fundamentals, price to earnings ratio, consumer confidence index, unemployment data, producer price index, cost basis, management fees, portfolio turnover rate, “don’t shoot where the rabbit has been” chasing returns, deferred sales charge, Morningstar ratings, cyclical stocks, sector rotation, diversification, CNBC, WSJ, long term investing, short term, bond ratings, stock pickers, market experts, fund managers, chimp choosers. Yes, I knew about all of these factors, but collectively it didn’t add up to the reality of the market.
NASDQ crossed into the millennium the only high-powered rocket in the shareholding sky. It was the new economy versus the old economy. Email versus snail mail. Internet versus paper-cup-and-string. Like many other investors, I was anticipating NASDQ to drop significantly from its stratospheric ascent before catching that next ride. But it kept soaring. By the end of January 2000 it was obvious I was missing out on something spectacular. I gave up waiting. And off we went, always on the lookout for an indication when NASDQ might run out of fool fuel. By March I had already realized an additional 25% return.
Investors were making more money in stocks than at work. Overabundance was distorting reality – people were setting goals of doubling money by year’s end; quadrupling it the next year. These were the good times, the golden age, the information age, the Internet age, the tech age, my age. The bubble age.
I didn’t hear or see the pop. In a three-day period NASDQ lost 20% of its value. The 20% going down was like 25% going up. (20% loss of 100 leaves 80; a 25% gain of 80 nets 100.) Profits disintegrated upon reentry into reality. I quickly sold again. The markets recovered somewhat, fluctuating through the summer with NASDQ again moving upward slightly. The forecast for year’s end had the markets going up. But I waited until the end of awful August before reinvesting.
In September I joined my brethren investors just in time to catch the markets in a long steady Fall. Even this seemed acceptable because I slowly distributed money into the markets as it fell. Buy low, sell high. By the end of the month I was fully invested again. As late as Nov. 3, the day before the Presidential election, I was doing okay. Certainly on the verge of the predicted surge.
Anticipate market conditions. Many so-called stock gurus predicted that the market would rise dramatically by year’s end. I listened and held. Buy and hold. I had missed the big parade by selling early, this time I would stay the course. And just in case, I knew all of the capital gains distributions dates; I would unload before that. Avoid capital gains with brains. Oh yes, as a back-up, the Fed was due to lower interest rates soon, that’s when the market stampedes. I was saddled and ready.
All of the lessons I had learned were at full utilization.
Now I know what deer-in-the-headlights means. A blinding light is coming at you, you’re about to be sliced in half, and you freeze. Mesmerized by the moment, wondering if it’s an illusion, instinct and common sense are forgotten as the brain runs thousands of calculations on what that approaching beam means. Then it’s too late. It was NASDQ in a fireball descent. That rocket was actually a missile.
From early November until today, April 1st 2001 , the NASDQ plummeted. This foolish investor stood there waiting for the Fed to redirect this approaching disaster (as it had done in a previous lesson). But not this time. The Fed couldn’t help. The annual spring surge went to hell, literally.
An Average Investor
I took a loss of 50% before heading for cover. And that has halved my investments, my future, my well-thought-out calculations. Many investors lost much more; many investors loss much less. For all the good they presented: Instead of CNBC I could’ve been watching the Weather Channel; instead of the Wall Street Journal I could have been reading the Farmer’s Almanac. Information mixed with manipulations.
As predicted, stock market charts continued at that familiar 45-degree angle, except with the pointer headed into the ground.
Tobacco and Big Oil did really well in 2000-2001. With most good wholesome companies tumbling it seems appropriately ironic that smoking and pollution would be the profiteers. This made for some serious ethically-challenged regrets.
All of the hard thought-out and sought-out profits and one third of my principal has vanished. John-boy learned some valuable lessons: Luck is the only financial guru; never invest more than you can afford to lose; diversify, because all previous lessons don’t count. No one is an expert. That definitely includes Dean Witter who changed into Morgan Stanley Dean Witter, then to Morgan Stanley. Dean got gobbled up along with half of my investments.
I’ve been through some name changes too: yokel, sucker, idiot, and a fool. An average investor. With much more than the initial $5000 gone, obliterated, vaporized, cremated, again I’m reminded that no one should profit from death. I certainly did not. Profit from experience. Maybe.
copyright 2000, John Kirkmire, from book Elementary Concerns