A Trade A Day

I thought it would be interesting to share my first blowup with you.

Since I was thirteen, I’ve had a love of the stock market. I’m not sure I can tell you exactly why. Maybe it’s the thought of making money out of nothing. Perhaps, it’s the ego boost that goes from making money from your decisions. I don’t really know. Suffice it to say, that I have always enjoyed stock market investing.

And it was investing that lead to my first blow out. You see, I was not a trader. I didn’t learn anything about technical analysis or market timing until much later in my stock market career.

But let’s take a step back and set the stage. It was the summer of my 16th year. The S&P was trading in the 400’s and Ron Insana was new to CNBC. After school, I came home to listen to Pearl Jam’s “Ten” and GnR’s “Use your Illusions I and II”. It was the beginning of one of the greatest bull markets of all time. It was a good time.

When I first started keeping what would become my “trading journal” I was 16 years old. I didn’t have a method at this point. I fictitiously bought shares of well-known blue chips: MMM, BA, IBM. It was a bull market so most of my “trades” made went up each day. I thought I was a genius. I had no trading plan. I don’t think I knew what “trading plan” was. All I knew was that I couldn’t wait to get my hands on some real cash.

Fast forward two years. It’s my first year of college and my Grandfather, magnanimously gives me $21,000. He wants me to put it in a CD. His goal is for each of his grandchildren to have $30,000 by their 21st birthday. I don’t remember what interest CD’s were paying back in the day. But Grandpa wanted me to put it in a CD so I would have $30K in 3 years. I had different ideas.

Before I had received the money from my Grandfather, I had a couple of grand in mutual funds. If I had just put that money in my mutual funds, in retrospect, that 21K could have become 50K or more by the time I was 21. However, I was destined for a different path.

I remember looking at my little journal and thinking I had the key to wealth. According to my journal results, it was too easy to make money in the market. There was no way I was going to put $21K in a CD when I could make 50% or more investing in stocks.

I ran into a problem. I was 18, so I had trouble finding a broker. Finally, I was able to open an account with K. Aufhauser, which would merge with Ceris Securities to become Ameritrade which would then become TD Ameritrade.

So I was set to begin my investing career. I had my method of buying NYSE blue chips, I had 21K in my account. I was ready to go.

Then I got a call from my Father. Dad told me about a stock that was set to explode. Of course I trusted my father. He must know what he’s talking about. He’s my Dad. Anyway, Dad had it on good authority that a company named International Taurus was going to hit it big. They had just received the results of their latest drilling, and they expected big results from some potential gold mines.

International Taurus was trading for pennies on the dollar. Literally, I think it was trading for .30 to .50. Dad had bought 1000 shares and he thought it was a good buy.

So, it was with those pearls of wisdom, I proceeded to call K. Aufhauser and place my very first order:

Me: Buy 10K International Taurus, please.

K.Aufhause: You want a quote on that?

Me: Uh, yeah sure.

K.Aufhauser: (something unintelligible)

Me: Ok, just buy 10K at the market.

K. Aufhauser: Ok, later schmuck! (Ok, they didn’t say that, but they should have.)

So a couple of days later, I received my fill in the mail 10K shares at $2! Huh? 20K?
Well, I remember looking at a chart of International Taurus. I’m pretty sure I bought at the top. I ended up liquidating the position a few weeks later for pennies on the dollars.

I have a few regrets about this experience:

1. Even though my method of buying NYSE bluechips, just because they were bluechips, was asinine, I didn’t even stick to that method when I actually got some money. I swung for the fences with a stock that trades on one of the most corrupt stock exchanges in North America, the Vancouver Stock exchange.

2. I probably had a few grand after my big purchase and sale. Knowing what I know now, I could have gotten back to even in a couple of years or less.

3. Despite the fact that we were in the beginning of the biggest bull market in recent history, I was not able to participate. There were so many great buys. If I had just put all my money in CSCO, MSFT, DELL, HD, or WMT, I would have made 10’s of thousands. Sure the logic would have been just as flawed as what I did, but who knows what I would have learned during that time.

Anyway, I liquidated my brokerage account with a few grand left, and I think I spent the money on a trip to France or something. Ugh.

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