When people put all their eggs in the wrong basket

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abyan
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Re: When people put all their eggs in the wrong basket

Post by abyan »

And this:
I had a similar experience with AAPL LEAP options (100% all in) in fall of 2012 when it went from 700 to 360. Nearly wiped me out but I regrouped and learned from that painful experience (mainly not to have more than 20-25% of my portfolio in any one company and to always roll options out 3-6 months from expiration) and have made a nice recovery trading options on TSLA, MU over the last couple of years, and more recently, with GILD and INTC. From that near death experience in AAPL, I followed my rules and only allowed myself a 20% option position in GTAT (which I unloaded around $11 several weeks ago). I am not writing this to pat myself on the back, but to let others know there is life after an event such as this, and a recovery is not only possible, but highly likely.
Then another person:
The worst part of this to me, is the fact that most of us DID do our DD... we knew more about this company than our own finances (a stretch, but not much). While I (barely) stuck to my plan of only investing an amount that I could stand to lose... Never could I have imagined this knowing what we knew leading up to it... Looking back.. I honestly don't know if I would have done anything different.
Grt2bOutdoors
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Re: When people put all their eggs in the wrong basket

Post by Grt2bOutdoors »

TomatoTomahto wrote:
grt2boutdoors wrote:This one is the worst post so far: ...
It reminded me of a single mother who had been talked into investing most of her money in baseball cards, for the benefit of her son who was intending to attend college and med school. She at first didn't believe me when I told her that they were worth a small fraction of what she had paid. She assumed that they'd be worth 10x what she paid. I explained that, as a consignment seller, I'd be happy if I could get her that, but that in the end, they're pictures printed on paper, and worth only what someone else was willing to pay.

I don't know if the stories on that site are all true, but even if only a few are, they are heartbreaking. True, most of the people got greedy, but I don't see it as a character fail if you get greedy trying to provide for your child. Many of us here might know better, but there for the sense of a BH ...
A very good friend of mine, his wife "invested in fine china collectibles, limited editions, etc. from Germany, known only to those who belong to the "club" and bought these things". Spent thousands from the '80's on........then also bought some more trinkets from the Franklin Mint made of sterling silver. Long story short, they thought they had a "significantly appreciated investment portfolio of fine china and sterling silver" that they could liquidate for a nice profit when they struck bad times, they were beyond shocked when I told them the best they could likely get was 50% cost. They didn't believe me, so they went to an appraiser who dealt in this stuff on consignment and were told the best they could hope for was 40% of cost as there was tons of this stuff being dumped on the market at the same time, the melt value of the Franklin Mint silver was less than 1/10th the cost of the purchase price. :oops: Then, they tried a soft sell to have me take it off their hands........I felt bad for them and would have as soon as just written them a check and forget about it but their pride was too much to take it and they retracted their sell offer soon after making it to me. :oops:

No, it's not a character fail, it's just bad luck of trusting the wrong person, it's just bad luck they didn't investigate further as the auditor apparently gave them a "material failure of internal controls" opinion on the audited financial statements - huge red flag. All around, it's just bad for those who bought the Willy Wonka bar thinking they had the golden ticket, but in this case they didn't even get a consolation prize of chocolate, just a bad case of indigestion.
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swimirvine
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Re: When people put all their eggs in the wrong basket

Post by swimirvine »

I did a google search for "Jim Cramer" and "GTAT"

The results showed that in March and April he was saying that this stock was a great buy

http://video.cnbc.com/gallery/?video=3000265997

and

http://www.thestreet.com/story/12520445 ... -veev.html

This is when the stock was up to $16-$18 from around $6 18 months before. The stock has "room to run."

Even as recently as August 26th: “Talk about growth, they have the sapphire product that is going to go in the iPhone 6 launch… this is the stock I have been recommending”

It's too bad he has no accountability. I hope he had a lot of money invested in GTAT
The way I invest my money is not the right way to invest, it's the right way for ME to invest.
spectec
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Re: When people put all their eggs in the wrong basket

Post by spectec »

prudent wrote:
Grt2bOutdoors wrote:This one is the worst post so far:

I am totally numb...[snip]

Ugh! :(
That's heartbreaking. A person who KNOWS she is not experienced puts all the money into a stock and lets someone else call the shots, and resists her own instincts to bail out. Thinks she's going to lose her home.

I wonder who the "trusted advisor" was - a friend, a paid advisor, another member of that message board, etc.
Hopefully it wasn't a brother-in-law or some other relative. Can you imaging being THAT person and having to see her & the son at reunions, holidays, etc?
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers
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White Coat Investor
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Re: When people put all their eggs in the wrong basket

Post by White Coat Investor »

Great post, thanks for sharing the OP. When I think of "putting all my eggs in one basket and watching it closely" I think of investing in a business you own 100% of or investing in a few rental properties, not single stock risk. That's just idiotic. Remember what Buffett means when he says "watch closely", he gets himself into a management position where he can not only watch closely, but affect what the company actually does. A mom-n-pop investor simply cannot watch a typical stock closely.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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ogd
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Re: When people put all their eggs in the wrong basket

Post by ogd »

Wow. Just wow. The posts about losing retirement and being unable to face the family or stop crying are truly heart breaking. I've had my share of misadventures but nothing even remotely comparable. A lesson for us all.

However, I urge anyone who might be inclined to join their thread and tell them how wrong they were to do what they did to please abstain. Treat it with almost the same respect as a funeral because that's what it feels like to some of these people. Perhaps months from now when the pain has subsided, or in other high flyer forums to remind everyone that this can happen and they should at least diversify their lottery tickets, the message might have a better chance of being heard vs making the well-meaning poster look like an insensitive $#@##$##@#.
Wellfleet
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Re: When people put all their eggs in the wrong basket

Post by Wellfleet »

spectec wrote:
prudent wrote:
Grt2bOutdoors wrote:This one is the worst post so far:

I am totally numb...[snip]

Ugh! :(
That's heartbreaking. A person who KNOWS she is not experienced puts all the money into a stock and lets someone else call the shots, and resists her own instincts to bail out. Thinks she's going to lose her home.

I wonder who the "trusted advisor" was - a friend, a paid advisor, another member of that message board, etc.
Hopefully it wasn't a brother-in-law or some other relative. Can you imaging being THAT person and having to see her & the son at reunions, holidays, etc?
This has happened to one of my parents but I never knew how much. It was an inheritance from grandparents and was private stock in the hometown manufacturer. Uncle advised my parent to hold onto it so I'm told.

Company sold, stock apparently worthless now and has resulted in poor relationships for parent and sibling, and significant financial stress to my parent. We'll say it was a couple hundred thousand because whenever I mention my student loans my parent remarks "that $%^& stock was supposed to pay for your college."

One of many reasons I am learning to be a Boglehead.
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FelixTheCat
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Re: When people put all their eggs in the wrong basket

Post by FelixTheCat »

jfn111 wrote:GTAT, Enron, GM and a whole lot of .com's over the years. Some people never learn the lesson. :(
You beat me to the quote. :D It wasn't that long ago people lost their money in .com's and housing bubbles. I guess it's different this time. :oops:
Felix is a wonderful, wonderful cat.
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FelixTheCat
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Re: When people put all their eggs in the wrong basket

Post by FelixTheCat »

joe8d wrote:I just wonder how many people put their money in that stock on the advice of "Advisors"?
I lost 75% of my IRA based on an advisor. It taught me a valuable lesson to do my own investigation.
Felix is a wonderful, wonderful cat.
adamthesmythe
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Re: When people put all their eggs in the wrong basket

Post by adamthesmythe »

swimirvine wrote:I did a google search for "Jim Cramer" and "GTAT"

The results showed that in March and April he was saying that this stock was a great buy

http://video.cnbc.com/gallery/?video=3000265997

and

http://www.thestreet.com/story/12520445 ... -veev.html

This is when the stock was up to $16-$18 from around $6 18 months before. The stock has "room to run."

Even as recently as August 26th: “Talk about growth, they have the sapphire product that is going to go in the iPhone 6 launch… this is the stock I have been recommending”

It's too bad he has no accountability. I hope he had a lot of money invested in GTAT
Interesting. I watch Cramer when I'm on the stairclimber (time works out that way). I considered him entertainment.
TheGuitarMan
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Re: When people put all their eggs in the wrong basket

Post by TheGuitarMan »

The saddest part to me of the whole discussion on that forum is not the meltdown after the bankruptcy, but the posts before, even way before. If you go back and read the posts on that board just prior to the Apple announcement of 9/9, you can see that a lot of folks on that board were completely deluded. They were so caught up in their own hype that they discounted analysts projections as a "conspiracy" and "FUD campaign" against GTAT as though this was something that regularly happens.

Not only did they make the unfortunate choice of putting their entire investment portfolio in one unproven stock, but they then became completely blind to the reality of it and actively chose to forcibly deny any information or news that was contrary to their own invented reality. Cult of personality goes bankrupt. So very sad, but so very illuminating.
technovelist
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Re: When people put all their eggs in the wrong basket

Post by technovelist »

TheGuitarMan wrote:The saddest part to me of the whole discussion on that forum is not the meltdown after the bankruptcy, but the posts before, even way before. If you go back and read the posts on that board just prior to the Apple announcement of 9/9, you can see that a lot of folks on that board were completely deluded. They were so caught up in their own hype that they discounted analysts projections as a "conspiracy" and "FUD campaign" against GTAT as though this was something that regularly happens.

Not only did they make the unfortunate choice of putting their entire investment portfolio in one unproven stock, but they then became completely blind to the reality of it and actively chose to forcibly deny any information or news that was contrary to their own invented reality. Cult of personality goes bankrupt. So very sad, but so very illuminating.
I hate to pile on, but this is an example of evolution in action. I agree that case studies like this belong in the archives here along with the epic "market timer" thread about leverage...
In theory, theory and practice are identical. In practice, they often differ.
abyan
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Re: When people put all their eggs in the wrong basket

Post by abyan »

Talk about "past performance does not guarantee future performance."

With that stock going up 6.5x last year, and them inking that deal with Apple, it would have been difficult to avoid investing in this "sure thing" that was certain to be eventually bought up by Apple.

I called my nephew and told him about this, as he thinks he has the magic touch for individual stock investing. Just wow.

This is the past two years:

Image
sls239
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Re: When people put all their eggs in the wrong basket

Post by sls239 »

I worked at Worldcom the summer between high school and college. Many people there had stock options and were thinking about taking them, but were saying that the stock price was only $86 - they had me post it every day - and that it had been $95. I really really hope they did take them in time.
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SmileyFace
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Re: When people put all their eggs in the wrong basket

Post by SmileyFace »

Unfortunately if you read through that forum ignorance abounds. There are a number of posts like "Can someone with experience tell us what this means?"..."Do I sell?"...... someone claiming posting the a statement of bankruptcy being irresponsible after it was announced by the media, etc.
....I'm not one for government intervention but it makes you wonder if an investing-101 course should be required for any US citizen to sign up for a brokerage account as a form of protecting people from themselves.
Angrypuppy
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Re: When people put all their eggs in the wrong basket

Post by Angrypuppy »

Great post.

Reading the comments from the people that lost money made me sick, because it could have been me.

Before becoming a boglehead I was a speculator that thought I was investing.

I hope more people jump on the boglehead bus before they get hurt.
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greg24
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Re: When people put all their eggs in the wrong basket

Post by greg24 »

DaftInvestor wrote:Unfortunately if you read through that forum ignorance abounds. There are a number of posts like "Can someone with experience tell us what this means?"..."Do I sell?"...... someone claiming posting the a statement of bankruptcy being irresponsible after it was announced by the media, etc.
....I'm not one for government intervention but it makes you wonder if an investing-101 course should be required for any US citizen to sign up for a brokerage account as a form of protecting people from themselves.
One thing that thread made me think of was the concept of privatizing social security. Yikes!!!
barnaclebob
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Re: When people put all their eggs in the wrong basket

Post by barnaclebob »

Its amazing how few of them know the rules of the game they are playing. People talk about selling and then getting in on class action lawsuits ( i thought you had to keep your shares to do that) and then not knowing who gets paid first in BK.

Non of them talk about the technical issues with these sapphire screens. It seems the whole company was riding on getting them on the Iphone 6 which didnt happen.
TheGuitarMan
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Re: When people put all their eggs in the wrong basket

Post by TheGuitarMan »

This post personifies the attitude over there. It was made on Sept 9. Eerily prescient.

http://forum.thecontrarianinvestor.com/ ... post-20215
Not really. Investing in index funds would be a dangerous game for me:

If I put all of my money in index funds, I might be able to retire around 60 years old. But if I do focused investing then I might be able to retire when I am 40 years old.

On the other hand if my "focused" investing blows up and GTAT goes bankrupt and I lose all of my money, I can start from scratch and retire when I am 65 years old.

So to me, the "game" that I am playing has two options:

1. Play it safe and retire at age 60.
2. Play it "risky" and heads retire at 40, tails retire at 65.

IMO, option number 1 is a lot more "dangerous" game to be playing than option number 2...
Remarkable.
technovelist
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Re: When people put all their eggs in the wrong basket

Post by technovelist »

TheGuitarMan wrote:This post personifies the attitude over there. It was made on Sept 9. Eerily prescient.

http://forum.thecontrarianinvestor.com/ ... post-20215
Not really. Investing in index funds would be a dangerous game for me:

If I put all of my money in index funds, I might be able to retire around 60 years old. But if I do focused investing then I might be able to retire when I am 40 years old.

On the other hand if my "focused" investing blows up and GTAT goes bankrupt and I lose all of my money, I can start from scratch and retire when I am 65 years old.

So to me, the "game" that I am playing has two options:

1. Play it safe and retire at age 60.
2. Play it "risky" and heads retire at 40, tails retire at 65.

IMO, option number 1 is a lot more "dangerous" game to be playing than option number 2...
Remarkable.
Of course this assumes that the poster doesn't keep playing the same game for the rest of his life..
In theory, theory and practice are identical. In practice, they often differ.
Johno
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Re: When people put all their eggs in the wrong basket

Post by Johno »

swimirvine wrote:I did a google search for "Jim Cramer" and "GTAT"


Even as recently as August 26th: “Talk about growth, they have the sapphire product that is going to go in the iPhone 6 launch… this is the stock I have been recommending”

It's too bad he has no accountability. I hope he had a lot of money invested in GTAT
It seems I'm getting in the unwelcome habit of defending Cramer, but people really do quote him selectively and out of context. When I saw this thread I also searched Cramer and GTAT out of curiosity. But even one the montages of clips attacking him has him clearly saying (I think in the August comments) 'now this is very speculative'. And somebody mentioned above, I don't know if ironically or not, about people on that other forum saying it was foolish to concentrate more than 20-25% of portfolio in one stock, Cramer recommends 5 though doesn't say people have to have all their equity exposure in single stocks or not have non-stock assets. It's plain common sense that 20% in one stock means a realistic if small possibility of 20% loss with the market not doing much else, especially for a small cap stock (this stock was a below the normal upper limit of 'small cap', $2bil market cap, for a long time and just before it crashed, though I believe it was above when Cramer recommended it). But there's a big difference between taking a 20% hit and being wiped out, or more than wiped out.

It's a very bad stock call by Cramer ('very speculative' comment not withstanding), which are inevitable for stock pickers, and very bad calls in a 5 stock portfolio are quite painful. And perhaps even occasional incidents like that are enough to get people to give up on stock picking. But IMO there's still a disconnect between 'all eggs in one basket' horror stories and Cramer, who very specifically says not to do that with any of his picks. He has no responsibility for anyone losing 100% on anything IMO.
Last edited by Johno on Wed Oct 08, 2014 3:08 pm, edited 1 time in total.
5buffalo
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Re: When people put all their eggs in the wrong basket

Post by 5buffalo »

http://forum.thecontrarianinvestor.com/ ... post-20215
Anyway, it is not me you should be jealous of but my mom whose account I manage and has around 415k shares and probably doesn't know GTAT is on the Nasdaq. I have to set up separate accounts for her GTAT holdings so she doesn't see all her positions at once as she has been telling me to sell for it for more than a year and I have to keep telling her to wait and hide exactly how much of her portfolio is GTAT so she doesn't flip out about it.
OMG... from Sep. 9. I hope they are okay. I can't believe this thread.
ftobin
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Re: When people put all their eggs in the wrong basket

Post by ftobin »

TheGuitarMan wrote:This post personifies the attitude over there. It was made on Sept 9. Eerily prescient.

http://forum.thecontrarianinvestor.com/ ... post-20215
Not really. Investing in index funds would be a dangerous game for me:

If I put all of my money in index funds, I might be able to retire around 60 years old. But if I do focused investing then I might be able to retire when I am 40 years old.

On the other hand if my "focused" investing blows up and GTAT goes bankrupt and I lose all of my money, I can start from scratch and retire when I am 65 years old.

So to me, the "game" that I am playing has two options:

1. Play it safe and retire at age 60.
2. Play it "risky" and heads retire at 40, tails retire at 65.

IMO, option number 1 is a lot more "dangerous" game to be playing than option number 2...
Remarkable.
Even more interesting, the poster is labeled an Administrator & Staff Member on the forum.
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HomerJ
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Re: When people put all their eggs in the wrong basket

Post by HomerJ »

Traveller wrote:Anyway, my heart goes out to those who learned a very painful lesson.
Except that many of them don't appear to have learned anything.

Edit: I take that back...
I heard the news after getting off a plane yesterday. Ouch. I lost a lot of money. Probably the equivalent of me saving diligently for the next 12-15 years. Well, only myself to blame.
Lessons learned:
1. never, ever again, go "all in".
2. never trust what a company is telling you, if your gut is telling you otherwise. This is especially true for insider sales, which I had a bad feeling about.
3.do not be quick to dismiss the 'contrarian' view, which we as a group lacked, and were critical to, yes overly critical.
4. question everything you read.
Last edited by HomerJ on Wed Oct 08, 2014 4:00 pm, edited 1 time in total.
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Re: When people put all their eggs in the wrong basket

Post by Call_Me_Op »

DaftInvestor wrote: ....I'm not one for government intervention but it makes you wonder if an investing-101 course should be required for any US citizen to sign up for a brokerage account as a form of protecting people from themselves.
I hate to say this, but I think the industry would fight such a proposal hard.
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avalpert
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Re: When people put all their eggs in the wrong basket

Post by avalpert »

Or this accurate observation literally 7 minutes before the bankruptcy was announced:
Its not bad IMO, the company has lots of cash, its not going broke. Its either a major announcement having a serious impact on revenue or a buyout, nothing else fits IMO
Only goes to show, it really isn't a matter of just doing your research and spotting good value companies - the outcomes of any individual stock are arbitrary and random to a great degree.

Edited to add that the same poster had this observation 5 minutes after the announcement:
CIGTAT said: ↑ BANKRUPTSY!!!
That is entirely not possible and irresponsible for you to post
Last edited by avalpert on Wed Oct 08, 2014 3:31 pm, edited 1 time in total.
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William4u
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Re: When people put all their eggs in the wrong basket

Post by William4u »

The Australians have us beat. Their system is much better for 90% of people...
http://business.time.com/2013/04/22/man ... nt-crisis/
fposte
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Re: When people put all their eggs in the wrong basket

Post by fposte »

5buffalo wrote:http://forum.thecontrarianinvestor.com/ ... post-20215
Anyway, it is not me you should be jealous of but my mom whose account I manage and has around 415k shares and probably doesn't know GTAT is on the Nasdaq. I have to set up separate accounts for her GTAT holdings so she doesn't see all her positions at once as she has been telling me to sell for it for more than a year and I have to keep telling her to wait and hide exactly how much of her portfolio is GTAT so she doesn't flip out about it.
OMG... from Sep. 9. I hope they are okay. I can't believe this thread.
I think that's the worst one I've seen. Poor mom.
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TimesAWastin
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Re: When people put all their eggs in the wrong basket

Post by TimesAWastin »

You know, I read the news about this the other day and it didn't even occur to me to think of it in a market context. I don't know why. Then I popped by BH today and, damn! Reading some of the quotes from that thread reminded me of this doc I watched a while ago about Enron and specifically the stories about the former employees who lost everything because their retirement accounts were full of nothing but Enron ESPP.

I was in a similar position to those in Enron before I found BH. I never paid attention to my retirement accounts and everything I had was in company stock options. Once I became acquainted with and convinced by BH philosophy, I exercised the options and switched to index funds. I kicked myself a bit in the subsequent months because almost immediately after I exercised, the stock jumped up 30%, and within a year that was more like 60%. Subtract out my option price and the gains I had missed out on were in the 150% territory. It took some degree of mental toughness not to "do something" about it, but I held out and today I sleep well. Fortunately, I am data-driven, gambling-averse, and have some understanding of statistics. That helped, I'm sure.

Seeing news like this, I can see that it can go either way and the middle road is the right path to take.

It's important not to forget that these things happen.
Last edited by TimesAWastin on Wed Oct 08, 2014 3:57 pm, edited 4 times in total.
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Grt2bOutdoors
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Re: When people put all their eggs in the wrong basket

Post by Grt2bOutdoors »

avalpert wrote:Or this accurate observation literally 7 minutes before the bankruptcy was announced:
Its not bad IMO, the company has lots of cash, its not going broke. Its either a major announcement having a serious impact on revenue or a buyout, nothing else fits IMO
Only goes to show, it really isn't a matter of just doing your research and spotting good value companies - the outcomes of any individual stock are arbitrary and random to a great degree.

Edited to add that the same poster had this observation 5 minutes after the announcement:
CIGTAT said: ↑ BANKRUPTSY!!!
That is entirely not possible and irresponsible for you to post
Unless the poster was the treasurer of the company or CFO, how would they know what the tick by tick cash position is at any given time. Published reports are not that timely, therefore they were banking on outdated information. I also, fail to see their mention of the auditors material deficiency statement on internal controls - something that would put this company beyond the realm of speculation. Feel bad if the person with the autistic child really is real. Sad, just sad.
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Re: When people put all their eggs in the wrong basket

Post by bungalow10 »

Earlier this year I worked with two guys, both of who would have been long retired if they were Bogleheads, who had worked for an Enron subsidiary or supplier (details are fuzzy - company was Chicago-based), and they lost all their savings, and their jobs, when Enron went bust.
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IPer
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Re: When people put all their eggs in the wrong basket

Post by IPer »

Not sure if it is sad, it is trying to teach me something, however, I don't know what that is yet. My immediate reaction is that if I could get a small percentage of what these foolish acting folk seem to be willing to lose into my account and in an indexed portfolio I will be ok, as I said I still don't know what the lesson of this is for me, I have never had my eggs in one basket and would have blasted any of my "friends" had they given the indication that they had, though that has not come up, except one guy who had a lot in a recent IPO but he was smart enough not to mention to me how much it actually hurt.
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bhsince87
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Re: When people put all their eggs in the wrong basket

Post by bhsince87 »

The best way to avoid putting all your eggs in the WRONG basket is to avoid putting all them into ONE basket.

I took a massive hit to my net worth when the company I worked for got hit with a scandal. I had a huge amount of my 401k in company stock, (but thankfully, not all of it!) I was on the "inside" and even had meetings with the CEO, and I never saw it coming. Lesson learned. the hard way.

I even took some heat for this at my current employer. We're privately held, but we get phantom shares as part of our bonus some years.

I always sell 75% of mine at the first chance I get, every time. The owner took me aside once, and asked me why I do this. He was wondering if I had little faith in the company, or maybe needed the cash. He even seemed a little disappointed, because apparently almost no one else does this.

I replied, "Diversification!", and told him about my previous experience. I got a promotion soon after that, so I guess he understood!
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autonomy
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Re: When people put all their eggs in the wrong basket

Post by autonomy »

What a wild event. I heard about the sapphire screen rumours, but I figured betting even play money on it would be a silly thing to do. I just can't wrap my mind around how some people are willing to put all of their savings into a single, unproven company like that. Hope it works out for them in the end and that they learn the lesson.

Do agree about group-think - we are guilty of that here too.
pkcrafter
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Re: When people put all their eggs in the wrong basket

Post by pkcrafter »

bhsince87 wrote: I replied,
"Diversification!", and told him about my previous experience. I got a promotion soon after that, so I guess he understood!
I'm guessing he learned something important and is now selling off some of his own company stock. :happy

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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joe8d
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Re: When people put all their eggs in the wrong basket

Post by joe8d »

William4u wrote:The Australians have us beat. Their system is much better for 90% of people...
http://business.time.com/2013/04/22/man ... nt-crisis/
We have the Social Security system available to all who contribute and mandatory contributions are matched by the employer.Australia does not have that, instead a means tested Aged Pension.
All the Best, | Joe
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jmndu99
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Re: When people put all their eggs in the wrong basket

Post by jmndu99 »

Good evening all,

I sincerely am thankful for not even hearing about GTAT until now.

Thanks all Bogleheads for everything. Thank you for this reminder

J
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Sunny Sarkar
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Re: When people put all their eggs in the wrong basket

Post by Sunny Sarkar »

After I read Peter Lynch's "One up on wall street" (that was before I stumbled upon the old M* Bogleheads forum), I had convinced myself that the only correct way to invest was to put all my money into just a few stocks of companies whose products I like, and that the only way I'd get rich was if one of those companies ever returned 20 times the cost basis (a "twenty bagger"). Had it not been for the Bogleheads, I can easily see myself deluding myself that the company I worked for was exceptional (after all my top management always claims so in those town hall meetings), and put a majority if not all of my life's savings into my company's stock.
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle
HurdyGurdy
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Re: When people put all their eggs in the wrong basket

Post by HurdyGurdy »

It surprises me how armchair investors can spend so much energy, first looking for information, and second building mental models that supposedly explain and forecast this or that.

As examples:

pre-bankruptcy:
Given that we are still about 30-40% higher now than when Apple signed the deal, either some of the new tech is being priced in, or the market still has some sapphire priced into the PPS, but without conviction.

What has been shaken in the past few weeks is confidence in GTAT's ability to execute. No one is blind to the potentials at play here, but there is scepticism over managements ability to convert those potentials into tangible numbers, and I am wondering if us bulls here at TCI have an agreed-upon hypothesis for GTAT making 2014 guidance.

Naturally, the two camps to begin with are either 1) GT knew there was no sapphire in the iP6 (and guided accordingly), or 2) GT was blindsided by apple's announcement (and guidance most certainly will be affected).

Looking at timelines, the Q2 ER, the following 10Q, and a host of other information, the case for option 2 seems very weak. It would only be possible if GT had been shipping enough quantities of sapphire to cover the iP6, only to find out that it wasn't used. Q2 revenues hardly suggest this, and the fact that it was only august when they "started moving toward volume production", strongly negate the likelihood for such a surprise. Furthermore, it doesn't seem logical for Apple to use sapphire in their flagship products if GT has not met targets required to achieve the final milestone payment.
Post Bankruptcy:
What is GTAT doing? If it's true that Apple was surprised it could mean a few things:
1. TG's hands were tied about what he could divulge to shareholders. This move was made to put pressure on Apple to force them to release a statement instead.

2. They've now said they're surprised and are considering their next move. That means they didn't close the door on GTAT, but probably put GTAT in a bad position. That means withholding the last payment, putting TG in a position where he had no other choice.

3. This would mean that TG was playing with fire, did withhold risk from us in August and went all-in to meet Apple's terms and lost. Now he has $80m or so for operations and he's screwed.

4. This is his final play. He knows that Apple needs GTAT, confirmed by Apple's statement today. That means one of two outcomes:


-----------------------------------------

Instead, we assume that, as armchair investors, it is hopeless to speculate or to try to find more information about what is going on inside those companies. I know that I know nothing.
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Trevor
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Re: When people put all their eggs in the wrong basket

Post by Trevor »

If I didn't know any better, those armchair investors would actually sound convincing. I can see how inexperienced people end up drinking the Kool-Aid and investing their entire portfolio in this company.
WWJD - What Would Jack Do?
normaldude
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Re: When people put all their eggs in the wrong basket

Post by normaldude »

Trevor wrote:If I didn't know any better, those armchair investors would actually sound convincing. I can see how inexperienced people end up drinking the Kool-Aid and investing their entire portfolio in this company.
You also have billionaires like Mark Cuban saying "Diversification Is For Idiots" and "buy and hold is a crock of shit"

http://blogs.barrons.com/focusonfunds/2 ... ttractive/

http://www.businessinsider.com/cuban-on ... ots-2011-8

Plenty of people will think "Well, Mark Cuban is a billionaire, so he must know what he's talking about", and then follow his advice.
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Re: When people put all their eggs in the wrong basket

Post by Call_Me_Op »

normaldude wrote: Plenty of people will think "Well, Mark Cuban is a billionaire, so he must know what he's talking about", and then follow his advice.

Don't know Mark Cuban, but I believe that you should follow no person's advice blindly. If you haven't thought through your plan and fully understand what you are doing and why you are doing it (including all of the risks and possible outcomes), keep your money in a bank account.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
vested1
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Re: When people put all their eggs in the wrong basket

Post by vested1 »

5buffalo wrote:http://forum.thecontrarianinvestor.com/ ... post-20215
Anyway, it is not me you should be jealous of but my mom whose account I manage and has around 415k shares and probably doesn't know GTAT is on the Nasdaq. I have to set up separate accounts for her GTAT holdings so she doesn't see all her positions at once as she has been telling me to sell for it for more than a year and I have to keep telling her to wait and hide exactly how much of her portfolio is GTAT so she doesn't flip out about it.
OMG... from Sep. 9. I hope they are okay. I can't believe this thread.
Can you imagine trying to prepare for that conversation? Sorry mom, but your 415k shares that you asked me to sell a year ago when they were around 8 dollars a share ($3,320,000) are now worth nothing.

I wonder what price she bought them at? Heartbreaking.
supersharpie
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Re: When people put all their eggs in the wrong basket

Post by supersharpie »

Our family had a similar experience when my uncle invested a substantial amount of my grandmother's assets in Janus IT mutual funds during the .com bubble. I don't know how much was lost. Thankfully he sold before those funds lost all of their value and she was able to stay in her expensive assisted living facility until her death. She almost ran out of money, however, and very little was left to her heirs.
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TomatoTomahto
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Re: When people put all their eggs in the wrong basket

Post by TomatoTomahto »

vested1 wrote:
5buffalo wrote:http://forum.thecontrarianinvestor.com/ ... post-20215
Anyway, it is not me you should be jealous of but my mom whose account I manage and has around 415k shares and probably doesn't know GTAT is on the Nasdaq. I have to set up separate accounts for her GTAT holdings so she doesn't see all her positions at once as she has been telling me to sell for it for more than a year and I have to keep telling her to wait and hide exactly how much of her portfolio is GTAT so she doesn't flip out about it.
OMG... from Sep. 9. I hope they are okay. I can't believe this thread.
Can you imagine trying to prepare for that conversation? Sorry mom, but your 415k shares that you asked me to sell a year ago when they were around 8 dollars a share ($3,320,000) are now worth nothing.

I wonder what price she bought them at? Heartbreaking.
Someone who would hide his mother's position from her when the news was good will not all of a sudden start telling the truth now that the news is horrible. It is heartbreaking, but I think the damage was done years ago.
I get the FI part but not the RE part of FIRE.
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Re: When people put all their eggs in the wrong basket

Post by B. Wellington »

barnaclebob wrote:Its amazing how few of them know the rules of the game they are playing. People talk about selling and then getting in on class action lawsuits ( i thought you had to keep your shares to do that) and then not knowing who gets paid first in BK.

Non of them talk about the technical issues with these sapphire screens. It seems the whole company was riding on getting them on the Iphone 6 which didnt happen.
FWIW...I was part of the class action lawsuit with a publicly traded financial company. I sold "early" and got out. Losing "only" a couple thousand. Lesson learned. After getting all of the paper work together and months later I believe a got about $300 back.
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Re: When people put all their eggs in the wrong basket

Post by jstrange1970 »

bhsince87 wrote:The best way to avoid putting all your eggs in the WRONG basket is to avoid putting all them into ONE basket.

I took a massive hit to my net worth when the company I worked for got hit with a scandal. I had a huge amount of my 401k in company stock, ...
Events like this always cause me to revisit my own situation. I have a long-standing position in Altria [MO] in a tax-advantaged account that I'd historically reinvested dividends in, with the early idea that I'd keep it at a managable and shrinking percentage of my overall portfolio (<20%). The problem was that with splits, spin-offs (PM Intl, SABM, and Kraft), and a healthy dividend stream, it kept growing faster than my other holdings (and outpacing new contributions) and growing as a percentage of my portfolio. It was hard ... very, very hard ... to stop reinvesting the dividend stream in MO and switch that over to ITOT and IXUS. It was even harder to modify my investment plan and mandate quarterly sales when my stake exceeds 12.5% of the total. It continues to be a challenge as MO continues to out-perform and I'm forced to complete those sales. I'm positive I've left money on the table in doing so but I view it as essential to manage risk. At this point, however, even if MO was to go the same way as GTAT (which I personally view as highly unlikely over any time horizion relevant to me personally), I'd be ahead just from the prior income stream and spin-offs.

Only time will tell if I made the right decision but I definitely sleep better at nights.

Similar but much less material issue with BRKB
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Re: When people put all their eggs in the wrong basket

Post by bpp »

That thread is horrifying. It makes Jim Cramer's 5-stock diversification plan look prudent.

I agree that it is best to give them time to lick their wounds first, before suggesting better diversification. Otherwise, it will be taken as rubbing salt in the wound.
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swimirvine
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Re: When people put all their eggs in the wrong basket

Post by swimirvine »

Johno wrote:
swimirvine wrote:I did a google search for "Jim Cramer" and "GTAT"


Even as recently as August 26th: “Talk about growth, they have the sapphire product that is going to go in the iPhone 6 launch… this is the stock I have been recommending”

It's too bad he has no accountability. I hope he had a lot of money invested in GTAT
It seems I'm getting in the unwelcome habit of defending Cramer, but people really do quote him selectively and out of context. When I saw this thread I also searched Cramer and GTAT out of curiosity. But even one the montages of clips attacking him has him clearly saying (I think in the August comments) 'now this is very speculative'. And somebody mentioned above, I don't know if ironically or not, about people on that other forum saying it was foolish to concentrate more than 20-25% of portfolio in one stock, Cramer recommends 5 though doesn't say people have to have all their equity exposure in single stocks or not have non-stock assets. It's plain common sense that 20% in one stock means a realistic if small possibility of 20% loss with the market not doing much else, especially for a small cap stock (this stock was a below the normal upper limit of 'small cap', $2bil market cap, for a long time and just before it crashed, though I believe it was above when Cramer recommended it). But there's a big difference between taking a 20% hit and being wiped out, or more than wiped out.

It's a very bad stock call by Cramer ('very speculative' comment not withstanding), which are inevitable for stock pickers, and very bad calls in a 5 stock portfolio are quite painful. And perhaps even occasional incidents like that are enough to get people to give up on stock picking. But IMO there's still a disconnect between 'all eggs in one basket' horror stories and Cramer, who very specifically says not to do that with any of his picks. He has no responsibility for anyone losing 100% on anything IMO.
I agree with what you're saying. The biggest issue I have with Cramer is that his show makes investing in the stock market seem like a game. It makes it seem like a strategy game that can be "won" by anyone and everyone if they follow his advice. I would have no problem with Cramer if his show had a disclaimer: "the majority of your money should be invested in a balanced portfolio of mutual funds with low costs. This show is designed to help you pick individual stocks for a small portion of your overall portfolio with which you feel comfortable taking on an extremely high level of risk." I don't think any economist in the world would agree that having your retirement savings in 5 individual stocks is a good idea for anyone yet he does this every day.
The way I invest my money is not the right way to invest, it's the right way for ME to invest.
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Re: When people put all their eggs in the wrong basket

Post by Call_Me_Op »

jstrange1970 wrote: Only time will tell if I made the right decision but I definitely sleep better at nights.
You are confusing strategy with outcome. You definitely made the right decision, regardless of the outcome.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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