Continued from this entry…
1998 started off with a bang as AAPL hit a bottom and began climbing back up; I finally was break even. I funded yet another online brokerage account (this time, at Suretrade). Why the multiple accounts? At the time, I didn’t really want all my money with a single brokerage for a variety of reasons. I continued accumulating in 100 share increments (as opposed to buying a larger chunk all at once).
I also had an account at Datek Online which I had setup specifically for the purpose of day trading. Unlike my other accounts, this was one was a margin account. Basically, it allows you to borrow against the equity in your portfolio (i.e. your buying power increases). There is significant risk involved which I knew all about. Going this route though, I was quickly able to grow the amount of cash I had in a relatively short period of time. I took $15k and turned that into $35k. With that, I sunk it into AAPL….
At this point, I was losing track of exactly how many shares I owned. I knew I was heavily overweight on AAPL. On top of that, I was either buying or trading a variety of other tech stocks. Back then, this whole day trading thing was sort of like a Las Vegas casino except playing the right cards (the internet ones) was usually, a sure 20-30% gain (especially when stock splits were announced). It was all just a balloon which was being pumped up (and eventually, would burst big time). This was the exact thing me and my college classmate discussed 10+ years earlier; a scenario I wanted to avoid by going just the buy and hold route. When you’re finding yourself making money though, it is almost like an addiction where you can’t stop. In retrospect, it sort of was like playing a hell of a game of chicken.
I can’t find most of the rest of my brokerage statements for 1999 but I was accumulating even more AAPL along the way while trading the stock in another Datek account. I managed to find my 1099-B for the 2000 tax year (one page of it below) and noticed I ended up selling 1580 shares of AAPL while trading it. As mentioned, hindsight is always 20-20 (or in my case, my crystal ball has some cracks and is therefore, defective). Had I just followed my original plan of buying and holding, just those 1580 shares that I let go via short term trading; at todays (Feb 8, 2012) price of $475 per share, that amounts to $750,000 left on the table. But wait, this isn’t taking into account the 2005 2:1 split… in others words, 3160 shares x $475 or $1.5 million of lost opportunity.
Looking through the pages, there was one other particular issue that jumped out at me… ARMH. I had a crapload of this since I tossed $10k at it when it was something like $2.50 per share. In total, I had over 4,000 shares of this at one point (that number is pre stock splits). There were splits in 1999 (4:1) and in 2000 (5:1) so I literally had an obscene amount of shares of this tiny company that very few heard of or knew anything about (here’s the amount – 80,000 shares if I had held). The following is its chart from September 1998 to the end of 2000. Do the math… see why these posts are entitled, the investing adventures of a dumbass…
The reason I bring this up is because this is the same ARM Holdings whose chip designs now power the majority of mobile devices including the iPod touch, iPhone, and iPad. The stock took a dump like most other tech stocks after the bubble burst, but had I held on to just even a quarter of what I originally had… Like I said, my crystal ball is defective (foggy and cracked).
In 2000, the whole dot-com bubble climaxed and was ready to pop — the markets and individual equities were hitting all time highs. Then the correction came. Then the crack appeared with Apple. The problem? The Power Mac G4 Cube. It was an example of hubris rearing its head and a perfect example of the sign of the times during this period (lavious free spending). Apple totally miscalculated the price they thought people would pay for one of these. I bought one mainly as a collectors piece but folks like us were the exception. The general consumer did not jump at these and the end result was it had an impact on Apple’s earnings for the quarter that ended in September 2000. Apple had to pre-announce of lower than expected revenues and that sent the stock tumbling 50% in after hours trading. This represented the loss of gains back to 1998. This sent a large portion of my AAPL heavy portfolio underwater (because I had been accumulating a lot since 1998-early 2000). To exasperate things, in my day trading account, some of trading positions were leveraged against AAPL. Whammo – margin call. When you play with fire, sometimes you will end up getting burnt. And because of market conditions, this was one of those scenarios where the broker automatically liquidated securities to cover the margin call.
This took out a chunk of my winners that were in that day trading account including AKAM, ARMH, and QCOM. It’s worse when you knew this could happen. Like many things in life, you have to sometimes go through some pain to learn and (hopefully), come out better later on. The bottom was also coming off the entire tech sector market since the dot-com burst was impacting lot of Silicon Valley heavyweights including Sun Micro and Oracle. To make a long story short, the paper gains were getting smaller and smaller. Then came the September 11, 2001 attacks which whacked everyone hard. Like many other traders at the time, our accounts were decimated to the point where day trading in general came to an end. What was once huge paper gains were now nice losses on paper (to the tune of six figures in my case). I say paper gains and losses as they are just that either way. You don’t actually lock in profits or losses until you actually sell. But even the most risk averse just reaches a point where they want to tap out and that is what I eventually did where I liquidated a nice chunk of my portfolio to make that paper loss disappear. In hindsight, this was probably one of the dumbest decisions I’ve made because that meant I dumped almost all my AAPL shares that were purchased from 1999-early 2000.
Because so many had been taken to the woodshed, beaten up, and ass kicked out the door, online brokerage firms who made their money via all the commissions found their businesses hurting to the point where many began to consolidate; I ended up consolidating my non-trading AAPL shares onto E*Trade (which was an IRA account) and Scottrade. Since I also had no play money left (the adage remains, only play with what you can afford to lose), I stayed out of the market and like most everyone else, watched my accounts languish (and from 2001-2007, pretty much ignored the stock market and found other things to keep me occupied; or more truthfully, trying not to remember the humbling bitch slapping many of us received).
つづく 〆(･_･｡) – to be continued
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