If you have overinvested in a dog of a stock (or other bet), you are in good company

[MumblesBadly]

Superstar investors have forgotten investing 101 - CNN
https://apple.news/A9z_uo4n4RJGwGUbhuO5RhA

Never wager excessively on one stock. That's investing 101.

It's too risky. If that stock tanks, you lose big time. A great example of just how wrong it can go is playing out right now on Wall Street.

Several of Wall Street's star investors (sometimes called "masters of the universe") bet a lot of money — billions of dollars — on a Canadian drug company called Valeant. Unfortunately for them, Valeant stock plummeted from over $260 a share in early August to $31 now, a nearly 90% drop.

The company just admitted "improper conduct," fired its CEO and warned that it might default in April. On top of that, Valeant is under investigation by the U.S. Congress, the Securities and Exchange Commission and a few state attorneys general. The company's strategy to buy older drugs and raise the prices isn't sitting well with regulators.

The stock's stunning fall is tarnishing the reputations of hedge fund kings Bill Ackman of Pershing Square and John Paulson of Paulson & Co., and mutual fund manager Robert Goldfarb, among others. After a stellar 45-year career, Goldfarb is suddenly retiring because of the bad bet. Investors in his Sequoia Fund aren't pleased with the losses.

These masters of the universe command Cadillac-style fees. In return, investors expect turbo-charged performance. Ackman's fund Pershing Square is down 40% in the past year.

"He has wiped out three years of performance," says Raul Moreno, the founder of the iBillionaire, an app that tracks the investments and performance of many high-profile investors like Warren Buffett and Ackman.

What sets Ackman's fund apart is that he is a "high conviction" investor. That's a fancy way of saying he only owns 10 stocks or less in his fund. A typical fund owns 40 to 50 stocks. When one of Ackman's stocks soars or tanks, it has a huge impact on performance.

"I have always had my reservations since he has a very concentrated portfolio," says Moreno. "He's one of the riskiest managers in the industry for sure."

It's possible that Valeant stock will turn around. Ackman himself has joined the company's board, vowing to "identify new leadership."

Ackman still manages about $12 billion. In a letter to his investors in January, he wrote that great money managers need the "humility to recognize when you are wrong." But what's happening with Valeant stock is a warning to all investors on Wall Street and Main Street of the pitfalls of getting too excited about one company

[Belly Buster]

Do you have any analysis to go with this you-don't-fucking-say article.

Other than a guy called Goldfarb lost money?

[simpdog]

Do you have any analysis to go with this you-don't-fucking-say article.

Other than a guy called Goldfarb lost money?

Never invest or trust anyone with that name

[Sanlmar]

Do you have any analysis to go with this you-don't-fucking-say article.

Other than a guy called Goldfarb lost money?

Never invest or trust anyone with that name

They didn't lose their money. They lost their investors' money. So, on the whole, they were pretty savvy.

You want juice? They gave you juice. No tears.

[DJ_Chaps]

Looks good on Ackmann. Now can we get some of the filthy short hedgies like Einhorn's Greenlight to blow their loads?

[snake_in_the_ass]

Looks good on Ackmann. Now can we get some of the filthy short hedgies like Einhorn's Greenlight to blow their loads?

Ackman blew up his previous hedge fund. He is on pace to blow up his current one and Einhorn will probably do the same. Arabs blow themselves up with suicide vests and Jews blow up their hedge funds.

[MumblesBadly]

Never invest or trust anyone with that name

They didn't lose their money. They lost their investors' money. So, on the whole, they were pretty savvy.

You want juice? They gave you juice. No tears.

Those hedge funds managers typically get paid a percentage of returns above a target, and can have a substantial amount of their own money from previous fees earned invested as a means of qualified for the "carried interest" tax treatment. So the managers also likely lost a bundle, in actual terms and opportunitu costs.

[MumblesBadly]

Pooh, Back in early 2000, a fellow finance academic colleague of mine had 100% of his 401k funds from the previous 3 years invested in a NASDAQ heavy managed portfolio. Over the next year, his 401k portfolio fell by over 70%. Meanwhile, my more diversified portfolio only lost about 30% during that period. And over the next few years, our portfolios returns were similar (in the black). Meaning, he unwisely gambled on too concentrated a portfolio for passive investments and got burned.

You'd figure that since he was formally trained in the value of diversifying a passive investment portfolio, that he wouldn't have fallen into that trap. But, alas, his ego at the time convinced him that he was smarter-than-the-average-bear. And he ended up making a significant investing boo-boo.

 

https://vine.co/v/eut5nI3BFXL

[Pooh]

Pooh, Back in early 2000, a fellow finance academic colleague of mine had 100% of his 401k funds from the previous 3 years invested in a NASDAQ heavy managed portfolio. Over the next year, his 401k portfolio fell by over 70%. Meanwhile, my more diversified portfolio only lost about 30% during that period. And over the next few years, our portfolios returns were similar (in the black). Meaning, he unwisely gambled on too concentrated a portfolio for passive investments and got burned.

You'd figure that since he was formally trained in the value of diversifying a passive investment portfolio, that he wouldn't have fallen into that trap. But, alas, his ego at the time convinced him that he was smarter-than-the-average-bear. And he ended up making a significant investing boo-boo.

 

https://vine.co/v/eut5nI3BFXL

Keep in mind your colleague's portfolio was likely ten times higher than yours because he was able to ride the nasdaq bubble while your faggot fund was probably in the money market. So when he lost 70% he still had around five time more than you in addition to a decent personality and non truck driving in his future. I'd take his life over yours and I don't even know him.

Have a happy Easter.

[snake_in_the_ass]

Diversification is for suckers. Impossible to get rich doing that. Still have yet to find one rich person with a 401k. That means you got a boss. No thanks.

[MumblesBadly]

Pooh, Back in early 2000, a fellow finance academic colleague of mine had 100% of his 401k funds from the previous 3 years invested in a NASDAQ heavy managed portfolio. Over the next year, his 401k portfolio fell by over 70%. Meanwhile, my more diversified portfolio only lost about 30% during that period. And over the next few years, our portfolios returns were similar (in the black). Meaning, he unwisely gambled on too concentrated a portfolio for passive investments and got burned.

You'd figure that since he was formally trained in the value of diversifying a passive investment portfolio, that he wouldn't have fallen into that trap. But, alas, his ego at the time convinced him that he was smarter-than-the-average-bear. And he ended up making a significant investing boo-boo.

 

https://vine.co/v/eut5nI3BFXL

Keep in mind your colleague's portfolio was likely ten times higher than yours because he was able to ride the nasdaq bubble while your faggot fund was probably in the money market. So when he lost 70% he still had around five time more than you in addition to a decent personality and non truck driving in his future. I'd take his life over yours and I don't even know him.

Have a happy Easter.

Actually, it wasn't. When he started saving into his 401k, he was putting mostly into money market for the forst two years, as he wasnt sure that he would need the cash if he didnt get a tenure track job. But in the third year, he felt bad about losing out on the dotcom boom and switched it to the NASDAQ heavy portfolio. And that was near its peak. Then the big "Oops" happened over the next year.

As for the part about trucking... Well, somehow I grew a conscience in my late 40s/early 50s and realized that I no longer wanted to teach aspiring greedy business/finance students how to play the finance game. Too many of them just reminded me of myself when I was a completely self-absorbed finance major/prick.

And trucking is a actually a job where my attitude of being of service to others goes a long way to make my company's customers happy. And that recently included cutting hometime short to complete a load that another driver couldn't finish. The dispatcher was so happy that I did so, he threw me an extra C-note+ for me helping to keep the customer from rejecting about $10,000 worth of perishable product.

[MumblesBadly]

Diversification is for suckers. Impossible to get rich doing that. Still have yet to find one rich person with a 401k. That means you got a boss. No thanks.

My oldest brother worked as a craftsman in various factories in a particular industry for about 30 years starting from when he was about 30. Over that time, he saved diligently, and invested his 401k contributions (plus matching) in a diversified stock portfolio. Starting about 10 years ago, he retired in his early 60s, and each year since has been going on tours with his wife to places all over the world... Paris, Italy, St. Petersburg, Patagonia, Instanbul, the Danube, England, etc. His house is paid for, and they won't run out of money for another 30+ years as long as the economy doesnt completely collapse.

But if you work for yourself, you should at least save through a Roth IRA to save on taxes. And invest *that* money in a diversified portfolio. Else, you might end up like Marty... Needing to move to Mexico to scrape out a living playing on Stars.

[Sanlmar]

Heart-warming nostalgia. Middle class factory worker buys into a growth economy via mutual funds.

I'll tell ya a story about a guy in Boston who took his covered wagon west and homesteaded some farm land in Iowa.

Don't be encouraging the young-uns to buy a covered wagon. Different eras have different opportunities.

Let's see. I could write a novel. How about this. China and their government directed economy mastermind the greatest bubble in the world's history. Fire up your pal google and read about the empty cities that were built and created massive industries like steel that now... well.

That bubble, which hasn't really even begun to deflate.

Our casino economy. Our 19 trillion dollar debt which couldn't possibly be even serviced if interest rates ever climb.

Next you will be advising folks to buy real estate as a long term investment. Another quaint idea. Truman is dead.

If you want to use your brain and trade transient opportunities then you are a baller. If you want to blindly trust then you are blind and dumb.

The world and America are changing. Did you catch the Obama speech in Argentina (after the Cuba love-in) where he talked about identifying the best parts of communism and capitalism? I just shook my head. The best parts of communism? We are moving toward embracing socialism as a safety net for our lost middle class.

Capitalism is a merit based concept. Beautiful anarchy. Our founders tempered anarchy & pure capitalism with democracy. The idea that "everyone" gets a say - not just those that merit. We are drifting further and further from capitalism. We are undisputedly closer to communist notion of a government directed economy than ever. And closing in fast.

Personally, the closer to anarchy the better. I don't even support light regulation. I am grudgingly willing to give people votes in a democracy. I am not a prick. But what the fuck good is your vote today? The Russians always had a vote. Vote your favorite preselected communist. What is different in the US now?

What the fuck is your vote worth?

Trump and Sander's are the last middle finger to party politics. The party leaders (like the Russian politburo) didn't pick them for us.

The greater good is busting the corrupt 2 party system. I could give a fuck relatively speaking about Trump's politics. He really has none. He just working the room - masterfully.


Shit's a warm mess. But some guys still chant USA USA and throw there hard earned cash on that bet then I am here to fade that.

Happy Easter from a heathen.

[Sanlmar]

Lurker, constructive and often overlooked idea.

Murder has always been an accepted tool for US foreign policy.

Political assassination has been part of the game since the beginning of recorded history. We've grown a little soft with our convictions as a society. No one cares.

You think the CIA is tooling up for the summer?

Kids spend hours on the shoot em up video games but Adele & Taylor Swift are the wrong sound track. It's like practicing five hundred baskets a day and not trying out for the varsity.

I have harkened back to the summer of '68 - feels like the potential for similar unrest exists. But kids were made of tougher stuff back then.

"The game is the game"
-The Wire

Cry no tears for dead politicians.

[MumblesBadly]

Heart-warming nostalgia. Middle class factory worker buys into a growth economy via mutual funds.

I'll tell ya a story about a guy in Boston who took his covered wagon west and homesteaded some farm land in Iowa.

Don't be encouraging the young-uns to buy a covered wagon. Different eras have different opportunities.

Let's see. I could write a novel. How about this. China and their government directed economy mastermind the greatest bubble in the world's history. Fire up your pal google and read about the empty cities that were built and created massive industries like steel that now... well.

That bubble, which hasn't really even begun to deflate.

Our casino economy. Our 19 trillion dollar debt which couldn't possibly be even serviced if interest rates ever climb.

Next you will be advising folks to buy real estate as a long term investment. Another quaint idea. Truman is dead.

If you want to use your brain and trade transient opportunities then you are a baller. If you want to blindly trust then you are blind and dumb.

...

Happy Easter from a heathen.

Here's the thing about most guys who try this: They usually aren't good enough at it to make up for the extra transactions costs. Pretty reliable research shows that men, as a whole, are pretty bad at trading such opportunities versus women.

Mind you, I'm talking about the average of men, not like the less than 5% or so like yourself who have a gift for doing so. Unforturnately for most guys, they mistakenly *think* they can be ballers like you, and they piss away wealth excessively trading. That is a fact supported by solid research that is over a decade old.

For example, I had the opportunity in the late 1990s to hear Terry Odean discuss his then-ground breaking research with his co-author on the matter while the work was but a working paper.

http://faculty.haas.berkeley.edu/ode...er/gender.html

Boys will be Boys: Gender, Overconfidence, and Common Stock Investment
Brad Barber and Terrance Odean

Abstract

Theoretical models of financial markets built on the assumption that some investors are overconfident yield one central prediction: overconfident investors will trade too much. We test this prediction by partitioning investors on the basis of a variable that provides a natural proxy for overconfidence – gender. Psychological research has established that men are more prone to overconfidence than women. Thus, models of investor overconfidence predict that men will trade more and perform worse than women. Using account data for over 35,000 households from a large discount brokerage firm, we analyze the common stock investments of men and women from February 1991 through January 1997. Consistent with the predictions of the overconfidence models, we document that men trade 45 percent more than women and earn annual risk-adjusted net returns that are 1.4 percent less than those earned by women. These differences are more pronounced between single men and single women; single men trade 67 percent more than single women and earn annual risk-adjusted net returns that are 2.3 percent less than those earned by single women.

But, hey! Keep encouraging the hopeful here who want to be like you in their trading prowess but who just don't have what it takes. You're being a real pal to 'em.

[Sanlmar]

Your response is men vs women as success traders? How is this germane to anything discussed so far?

Please delete and try again. You get a holiday mulligan.

[Tellafriend]

There is no thread too big or too small that he doesn't feel the need to comment on.

[MumblesBadly]

Your response is men vs women as success traders? How is this germane to anything discussed so far?

Please delete and try again. You get a holiday mulligan.

It's relevant because there is at least one male member on here who touts his investing/trading prowess but who doesn't know what the fuck he is doing, and was too ignorant (or proud) to dump a bad position before losing a sizable portion of his passive investment portfolio. And then *still* keeps a huge portion of that portfolio in a questionable stock to try to make up for all of the losses. He may be great at making money at his *business*, but has shit the bed with the money he saved from it. He might as well take 20-30% of the money he saves from his business and use for a campfire and sell roasted marshmallows to passersby.

Oh, and post the video on YouTube to earn ad revenue from the stunt.

[JACKDANIELS]

There is no thread too big or too small that he doesn't feel the need to comment on.

To be fair he did start this one

[Tellafriend]

There is no thread too big or too small that he doesn't feel the need to comment on.

To be fair he did start this one

Doesn't change my premise.