How Could I Have Been So Stupid?

Want to hear an investing secret? It's a very important secret, and if you don't know it then your investing efforts will likely lead to an immense amount of frustration and hair pulling. Ready for it?

No investor gets them all right.

You read it right. Nobody is a 100% investor. Not Warren Buffett, not Peter Lynch, not George Soros, not even the folks at Motley Fool Rule Breakers.

So obviously, I've made my fair share of bad calls -- both investing in things I shouldn't have and deciding not to invest in things that I should have. The thing is, I absolutely love my job, but one downside is that many of my worst calls have ended up being very public.

Since it's the beginning of the new year and a time for turning over new leaves, I thought I might take a moment to review a few boneheaded moments and see if I can at least pull out a few good lessons for 2011 and beyond.

Battling bonds
Summer of 2009, I published this article, highlighting my skepticism about the Treasury market and the future of bond prices. In the year and a half since then, I've continued to talk down Treasuries both publicly and privately and put my money behind my view by buying ProShares UltraShort 20+ Year Treasury (NYSE: TBT  ) -- an exchange-traded fund that more or less acts as a short on long-term Treasuries.

Thus far I've seen a bit more than 20% of my investment evaporate as low rates declined to even more impossibly low rates. Of course that wouldn't be all that bad if I didn't lay a hefty bet right from the start.

Had I done what I normally do -- that is, start with a partial position and add to it if the price gets more attractive -- I would have felt good about putting more into the ETF. As it is, I had a full position from the start and because I don't want it to be an overwhelming part of my portfolio, I missed out on opportunities to improve my position by averaging down.

The boneheaded move here? Letting ego get the best of me and assuming that I had beat the direction and timing of the Treasury market. I still think the position will work out over time, but it could have been much better if I left myself room to buy more at lower prices.

The king of networking
It was early 2007 when I published this article calling Cisco (Nasdaq: CSCO  ) "the ultimate rule maker." At the time, the stock was trading at $26.30; today, the stock trades at less than $21. Sure, I would still point to Cisco as the big dog in the networking industry today and the price decline alone doesn't mean that my analysis was wrong.

So what is it about my past call that makes me groan? This:

Even though Cisco is up nearly 50% since the lows it hit in mid 2006, the stock is still only trading at 25 times trailing 12 months' earnings, or a PEG ratio of 1.7 times. Sure it's not exactly "value," but when it comes to true Rule Makers, it can be tough to find them in too many fire sales.

While saying that a price-to-earnings ratio of 25 is a worthwhile buy price may be forgivable -- if and only if the growth absolutely justifies it -- a PEG ratio of 1.7 is just not an investable multiple.

The lesson? Valuations were much higher prior to the crash, and I apparently took off my sober-judgment hat when thinking through whether that was a reasonable price for Cisco's stock. More recently, I took another look at Cisco's valuation and think that I was a bit more level-headed this time around.

The casino kings
Much to their chagrin, Las Vegas Sands (NYSE: LVS  ) fans have recently read about the fact that I'm not a buyer of the company's stock at today's price. But I haven't always had that view.

In the summer of 2009, I published this article, detailing my thoughts on four major casino stocks -- MGM (NYSE: MGM  ) , Wynn (Nasdaq: WYNN  ) , Las Vegas Sands, and Ameristar -- and suggesting that MGM, Wynn, and Sands looked like good buys. I also gave all three stocks an outperform rating in my CAPS portfolio.

But what didn't I do? Actually buy any of those stocks. Disaster! Sands has since become my best pick ever in CAPS, with a return of 380%. Wynn (which I picked a few months earlier) climbed 263%, and MGM has gained 128%.

The all-too-painful lesson here is that analysis isn't worth much if you don't bother taking action on it.

One mistake to rule them all
Of course of all the boneheaded calls that I've made there's probably not one that I'd rather have back as much as my thumbs down on Ford (NYSE: F  ) back in 2009. There were no two ways about my view in early 2009 -- I put my foot down and said that Ford was going to be one of the worst stocks for 2009.

Done laughing yet? As we know now, not only was Ford one of the best performing stocks of 2009, it's also returned more than 800% since the day my article was published.

So where did I go wrong? At that point, the country was not only mired in the worst of the recession, but the U.S. auto industry was in a pretty bleak position. General Motors (NYSE: GM  ) went bankrupt, but Ford was most definitely not General Motors. While GM had been burning cash for years, Ford was actually producing significant amounts of free cash flow prior to 2008. And while Ford's EBITDA-to-interest ratio (a measure of solvency) was in the relatively safe range of 2.9 in 2008, GM wasn't even producing positive EBITDA.

The lesson here is to make sure to take in the entire picture when evaluating an investment. I got hung up on the magnitude of Ford's debt (to be fair, it was a lot of debt), but failed to realize that the company appeared able to deal with that debt. Fortunately for Stock Advisor subscribers, David Gardner and Karl Thiel didn't miss out on the high points at Ford and they recommended the stock in late 2009.

Anyone else?
As painful as mistakes can be, there's often a useful lesson at the other end. Anyone else out there have a lesson they've learned from an investing mistake? Head down to the comments section and share your thoughts.

Dividends are great, unless you use them incorrectly. Find out how to avoid letting dividends ruin your returns.

General Motors is a Motley Fool Inside Value choice. Ford Motor is a Motley Fool Stock Advisor pick. Ameristar Casinos is a Motley Fool Hidden Gems pick. The Fool has created a bull call spread position on Cisco Systems. Motley Fool Alpha owns shares of Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer owns shares of ProShares UltraShort 20+ Year Treasury, but does not own shares of any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy prefers dividends to a sharp stick in the eye.


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  • Report this Comment On January 12, 2011, at 3:01 PM, Shoefundforwifey wrote:

    I bought CMG at 66 and sold ALL at 132-140...should have reduced by 1/2 and kept some skin in the game

  • Report this Comment On January 12, 2011, at 3:22 PM, eatmeee wrote:

    Yep, bone headed would be the operative discription. Just another reason why you guys are not to be taken real seriously, you know, the bone headed part. never trust an analyst, they are agenda ridden and ego driven. Just my onservation, especially the last 5 years.

  • Report this Comment On January 12, 2011, at 3:25 PM, rrhutchchapp wrote:

    Please don't feel bad about Ford .. I did buy it .. but the day I did I spent 30 minutes on the phone with a stockbroker who tried to talk me out of it.. finally had to explain that I understood the risk and was willing to take it. Purchased at $1.98 and still holding....

  • Report this Comment On January 12, 2011, at 3:49 PM, BuyemHoldem wrote:

    purchased at $1.46 and more at $1.20 and still holding as long as Mulally is CEO. Mulally for President (of the USA).

  • Report this Comment On January 12, 2011, at 3:57 PM, simonkho wrote:

    I start investing since 2002, and I made money the first time and after that I lost more than 80% of my investment. My Lesson is never use stock as investement, it is like gambling. I decided to do my investemnt in tangible assets. I bought 2 houses and renting them. The prices doubled since i bought them 2006. The reason I didnt loose money in real state because I bougt the house to have fixed income and not for speculation. Stock is virtual even preferred shares. I feel playing in casino ir better bet than in stock. At least I know the casio commission in each game. In stock, when a company goes Bankrupcy, you ll never recover you loss even if you are diversified. the stock commission is way more than casino. house will protect you against inflation, will give you return, for sure not buying house in place where there is no people or pay way more than what is worst. So the lesson I learn is have patient, dont get burn. sometime bubble make investement hard for years, it will come back and nothing not normal will last....

    I still love to play with stock but i see it as casino and call it play not invest...

  • Report this Comment On January 12, 2011, at 3:59 PM, ozzie wrote:

    So right, Matt - I can empathize with nearly every opinion you expressed. After decades of investing, I have learned I can pick the direction of almost any stock, just not the timing. And sometimes the timing can be off by decades (I liked GE in the 50's, back in 2000 - I averaged that one all the way down to $6 and still am not break-even, but I'm sure I will be eventually! :-). Compounding matters is that ETFs like TBT sometimes wear down over time due to expenses, so you can be spot on with the direction of Interest rates, but if you don't get the timing right, it may not help you much. Another ETF that reflects a commodity that will inevitably increase ("some day") is UNG, but fees and contract adjustments may see that go to 0 before NatGas goes the "right" direction.

    Thanks for sharing!

  • Report this Comment On January 12, 2011, at 4:07 PM, Fundament wrote:

    Don’t matter what the market is doing. CSCO is the best player within the network market and the market volume is growing in the long-run. As you mentioned, cash is King and CSCO has USD 38 billion of it! Cisco is no mistake, casinos and car manufacturers are mistakes. I am no brilliant investor or something else. I am the same fool as you but I researched some ideas for long-term investors that could perform better as your picks by the end of year. Here is a table of 25 dividend and growth picks for 2011:

    http://long-term-investments.blogspot.com/2010/12/25-top-div...

  • Report this Comment On January 12, 2011, at 4:08 PM, TMFKopp wrote:

    @shoefundforwifey

    First of all... fantastic screen name!

    "I bought CMG at 66 and sold ALL at 132-140...should have reduced by 1/2 and kept some skin in the game"

    Yeah, that can be so tough. As has been said in a number of ways, the market can stay irrational for much longer than you'd expect. This can make it darn tough to figure out how much profit to take when a stock has exceeded what you think is a fair value. Unfortunately, since it's simply psychology and sentiment taking over at some point, I don't know that there's a really great answer to that, but you're probably right that slowly selling off a position is a good way to go.

    Matt

  • Report this Comment On January 12, 2011, at 4:10 PM, TMFKopp wrote:

    @rrhutchchapp

    "Please don't feel bad about Ford .. I did buy it .. but the day I did I spent 30 minutes on the phone with a stockbroker who tried to talk me out of it.."

    Haha! Thanks, at least I know I wasn't alone in my boneheadedness on that one!

    Matt

  • Report this Comment On January 12, 2011, at 4:14 PM, TMFKopp wrote:

    @simonkho

    "I start investing since 2002, and I made money the first time and after that I lost more than 80% of my investment. My Lesson is never use stock as investement, it is like gambling. I decided to do my investemnt in tangible assets. I bought 2 houses and renting them."

    While I don't agree with you about the casino being better than stocks (and living in Las Vegas I know a thing or two about casinos...), when it comes to investments it's important to stick to what you understand and are comfortable working with. It sounds like you've found that in real estate.

    Matt

  • Report this Comment On January 12, 2011, at 4:40 PM, jordandrahota1 wrote:

    Ford was a good one for me - I doubled my money after getting it under $2 and got out - I should have been more patient - Same with Visteon!

  • Report this Comment On January 12, 2011, at 4:40 PM, Borbality wrote:

    I bought F when it was at about $10. Still great, right? No. I only put in about a hundred bucks!! I was just playing around on my first online brokerage with some free money it gave me for signing up. I wanted to see how it worked!!

    never added to the position either.

    I am young so i still have plenty of time to lose a lot of money!

  • Report this Comment On January 12, 2011, at 4:49 PM, Varchild2008 wrote:

    "Of course of all the boneheaded calls that I've made there's probably not one that I'd rather have back as much as my thumbs down on Ford (NYSE: F) back in 2009. "

    Heh and I was Steaming Mad at you if I recall for down thumbing Ford. STEAMING MAD at a number of boneheaded articles I read on Motely Fool trashing FORD as it was happily paying off its debt in that year.

    FORD that year issued new shares and used that to pay off debt.... Afterwards it kept paying off debt without the need to issue any more new shares.

    I wrote article after article screaming to everyone that FORD is a buy and hold....long term stock.

    *sigh* I'm wrong quite often myself but I am not wrong when I get as emotional over a stock like FORD.

    I bought $3,500 worth of FORD stock at about $6.00 average cost unit.

  • Report this Comment On January 12, 2011, at 4:50 PM, Varchild2008 wrote:

    Oh and I plan to keep holding the FORD shares for another 4 years per Valuemoney Challenge.

    Valuemoney dared me to hold onto FORD for 5 years. 2010 was Year 1 since the start of the Challenge I believe.

  • Report this Comment On January 12, 2011, at 4:50 PM, orttgt wrote:

    I try and not to over simplify my reason for buying a stock. (F) But this was simple for me...Alan Mulally! I was aware of his management style and success at Boeing.

    Enough said...up 98.41% and am holding "long" Ford.

  • Report this Comment On January 12, 2011, at 5:44 PM, paolovia wrote:

    Nice article, Matt, thanks.

    Here's what I think I've learned over about 20 years as a casual investor.

    1. We whip ourselves more over our missed gains than our actual losses (so it's better to be in the game).

    2. After all the analysis is said and done, it is a leap of faith (so you have to believe in yourself).

    3. No one can help you with the leap of faith. There will be opinions on either side of every idea. If you seek help (likely because you don't really believe) then you will listen more to opinions that confirm your fears and not act. (Kudos to the Ford Fool who believed in himself and ignored his stockbroker - that is rare.)

    I have dozens of woulda-coulda-shoulda stories, here's one that breaks through my forward-looking resolve every so often:

    1996: Network Solutions (NSOL) (Internet domain registrar) was trading at $8 when everyone and his brother was registering URLs. I asked one of the actual inventors of the Internet about it. He said they might soon lose their gov't monopoly on registrations. I asked my cousin who was working for an ISP, he wasn't excited about it. The next day it was at $16, so I figured the story is out there, I missed it. NSOL traded at $600 or so before it was bought for I can't remember what.

  • Report this Comment On January 12, 2011, at 6:43 PM, 10HighSigns wrote:

    I argued with my wife about buying the Sands

    when it was around $1.95,,,we still disagreed

    when it was in the $5 dollar range. Women....ugh!

    I started buying by the thousands in the 8 and

    9 dollar ranges......we traded and have continued

    with LVS selling on the ups and buying on the

    downs and have no regrets.....

  • Report this Comment On January 12, 2011, at 7:19 PM, TheHungryBear wrote:

    I feel my biggest mistake was in April of 2009.

    I bought a substantial amount of shares of Apollo Investment Corporation at the bottom (March 17, 2009 at 2.17 per share -- couldn't have timed it better). At the time it was paying a dividend of 0.26 a quarter per share which would give me thousands of dollars a year for just holding the shares.

    On April 7th (about 3 weeks after I bought them) the share price rose to around 4.00 per share and since the market was pretty turbulent at the time, there were many naysayers that the market was going to crash again. I got spooked and sold almost all of it. Not too bad to nearly double your money in 3 weeks. But compared to what I would have had now, it just makes me sick.

    The stock is up to nearly 12.00 a share now (which is almost 6 times my initial investment) and is now paying 0.28 a quarter in dividends. I have lost over $15,000 in dividends alone.

    Lesson learned... Never sell on an impulse after you buy at the bottom when great dividends are in the picture!

  • Report this Comment On January 12, 2011, at 8:12 PM, secretgreg wrote:

    Well I can tell you I am not a lucky person. I went to Atlantic City once and lost my butt in 2 hours (300 bucks). The only thing i know I did right was when I bought a few stocks that dropped way down for my first investment. Those three stocks were American Express, Google and John Deer. I done this all with $20,000 and all bought in March of 2009. Sold them all about 2 months ago and payed my house off of 87,000. I won the lottery but I do regrete selling them becasue they all could go up more but why waste my time in paying the home loan interest.

  • Report this Comment On January 12, 2011, at 8:34 PM, 5000monkey wrote:

    In March of 2007 WaMu was trading about $40 a share, the credit bubble was just starting to deflate and no one had quite figured out how bad the subprime mess was going to be. I had originated 10's or millions of dollars of option ARM's for WaMu and knew that they had billions of those toxic loans on their books. I started preaching to my friends to short WaMu, I scraped together some money for the trade and then the stock dropped to the low 30's. Well after a 20% drop I figured I had missed my chance at the short and never put in the trade.

  • Report this Comment On January 12, 2011, at 9:32 PM, JEx9 wrote:

    gosh - well - congratulated self on timing the Google peak to the second in early November (627) - didn't know about shorting then or options so actually sold the shares (to buy back at lower price)

    only to inexplicably panic and buy back two days later in time for a big (if temporary) decline

    a big loss really in terms of lost opportunities

    and this is flaw exposed in several other 'Sell' situations - I panic more if a stock I've sold to buy back goes up a lot or down just a little - and want to get back in !

    more frightened about missing the gain than an actual loss

  • Report this Comment On January 12, 2011, at 9:42 PM, Ozcutty wrote:

    Hi Matt, my sympathies, FORD is a bad investment, long term, but every dog has its day and over the last year and probably next couple they will outperform. Long term 10yrs+, their performace will be poor as the whole industry has terrible dynamics i.e. spend billions developing new car, sell it for less than the old one!

    People get excited about the new Fiesta, but in 2 yrs its old, in 3 ford will be spending billions on its replacement.

    I've made plenty of mistakes too, i'm learning though.

    I bought heavily in 2007 for a start and then there were a few companies like UNH that i didn't have the confidence to double down on. Also should have researched some smaller, faster growing companies at the bottom instead of sticking with blue chips as they've bounced much higher.

    My big wake up though this has been to invest in companies that are not cyclical at reasonable PEG's and you want to hold long term 10-20 yrs. Even if you just plan to hold 1 yr and take profit or if you buy at the wrong time, you can at least hold them and you will get you're money back eventually.

    My target is to buy with a peg of 0.8 ish, FWD P/E less than 13 and i will sell if peg ever reaches 2.0. In the mean time i will hold

    Amazingly, even with the rally, V, AFL and TEVA in my portfolio still have peg's of around 0.8.

  • Report this Comment On January 13, 2011, at 12:45 AM, daveandrae wrote:

    My largest position going into the 2007-2009 bear market, at a 50% margin ratio was Citigroup!

    I finally sold out altogether around 18, but the damage was already done. Years and years of savings down the drain.

    The really painful part was that when I look at my investment notes from that time period, I recognized that we were in a bear market as early as November 2007, yet I still continued to average down on my positions, while STILL on MARGIN!!!!

    What valued lessons did I learn?

    1. Over diversification does not work.

    2. Under diversification does not work.

    3. Stay far away from leverage.

    4. The market can stay irrational much, much, longer than you can stay solvent.

    5. A 50% decline completely offsets a 100% advance.

    6. Selling your winners to fund your losers is a mistake

    7. Bond funds DON'T WORK!

    8. Wall street makes its money on activity. You, make your money on inactivity. Thus, stop trying to "beat the market". Stop messing with your portfolio. Stop trying to "tweek" it.

    9. If you are truly long an outstanding stock, then have the fortitude to ride the share price down to ZERO. Don't sell out at 40. Don't sell out at 20, don't sell out at 10. Don't sell out at 5. Keep buying. if it drops more, pound the freaking table and BUY MORE! If it is truly an outstanding company, it WILL bounce back like a bat out of hell. I learned this valuable lesson with Dow Chemical during the last bear market.

    10. And finally.....Never, ever, let your cost basis dictate your investment decisions. The very moment you recognize that the next major market move will be sharply downward, get completely off of margin, raise your cash position to at least 50%, and do so with a great sense of urgency.

    One of the best things that an investor can do is to study his mistakes very, very, carefully. Shine a HUGE light on them. It is both worthwhile and extremely informative.

  • Report this Comment On January 13, 2011, at 1:13 AM, sttho wrote:

    @shoefundforwifey

    Again, great moniker!

    You turned a good profit; don't regret cashing in because you could've made more. You did pretty well. I didn't buy @ $72.00 because I thought it had topped out. Oops! I used to live across the street from the original Chipotle's in Denver 25yrs ago, and I knew how fabulous they were (and still are).

    My other bonehead move was that I got cheap (greedy?) with VTR about 2 1/2 years ago when their stock was at $27.00 and decided to buy once it went to $26.50. It never went that low. It's double now. Sometimes we just need to set a market price "Buy" and not worry about 50 cents. I know I missed out on that one.

    Of course, I DID buy NVDA in November, thanks to the Fools. Phew!

  • Report this Comment On January 13, 2011, at 2:03 AM, ET69 wrote:

    When Citibank started to fall I thought gees it will never be this cheap again so I bought in at about $35....then I lost my butt and followed it all the way down to its bottom - a 90% loss. The ole lady said," well sell it and get something back at least "---so naturally I started to laugh and doubled down and bought more Citibank at a little over a buck. . Sort of a "damm the torpedoes " attitude. Even when it was in the tank I told everyone "its too big to fail" - the gov CAN'T let it fail or we will go into a true depression. Lucky me. To date I'm only down about 20% on it ! keep laughin! Its only money!

  • Report this Comment On January 13, 2011, at 2:07 AM, ayaghsizian wrote:

    Why did I sell all my Apple stock at 159? All I needed to do was go into an Apple store to see it full of customers.

    Like Matt with Sands, Apple is my best score in caps with 280% or something crazy like that, but a mere 30% in real life. At least I re-bought a little at $250 and made a couple of bucks...still imagining the tens of thousands I could have made if I had just kept my finger off the sell button a couple years ago.

    And why didn't I buy Sirius at 10 cents? We all missed out on that one. Oops.

    Ara

  • Report this Comment On January 13, 2011, at 5:41 AM, lcmjr555 wrote:

    I was all in with TBT also and lost a boat load of cash. sold ford at $7 after buying at $10.

  • Report this Comment On January 13, 2011, at 10:27 AM, burg6390 wrote:

    Twice I have bought a natural gas etf and twice I have been burned by biting the bullet, taking a loss, only to watch natural gas make an astounding come back at the first sign of cold weather or rumors of a bad storm season. The natural gas markets have been the most unpredictable of any industry and that is because there is unprecedented supply with the shale finds. I was not expecting upwards fluctuations based on a cold winter because any idiot can tell you that winter is cold but apparently the natural gas price still had some fight left in it.

    The moral of the story is that there are no fundamentals in the natural gas industry or any industry with such abundant supply. So when dealing with one you should trade in the short term and based on conclusions drawn from a more technical analysis. Try to play short term 10% gains while the stock is between an upper and lower band and after it bounces 6 times and breaks the range, unless you're on the good end of it, get out.

    Natural Gas Is Hurtin!

  • Report this Comment On January 13, 2011, at 10:43 AM, simonkho wrote:

    Greenspan once said, Economy use to drive market, now Market drives the economy, meaning big investor, media controler, etc can play on ppl psychology and drive the market the way it works for them. Best example is the S&P, it was 10 years ago better than now. who plan to make money in 15 or 20 years. no small investor with limited resources can time when to buy or sell.

    People are talking Ford now, what happen if they bought GM, or Leh or one of the best company ever AIG.

    What happen if you start accumulating as someone mention in GM.

    My point was not to say that casino is better than market, my point is that investing in market and playing casino are similar.

    I would like to challange any one that can show me one strategy in market that can work for real. it is all speculation but fun to play with it and saying invest better word than gambling..

  • Report this Comment On January 13, 2011, at 11:42 AM, FoolishJayhawk wrote:

    @daveandrae

    <i> 1. Over diversification does not work.

    2. Under diversification does not work.

    etc </i>

    Good points. Bear markets exactly that -- everything goes down. The problem is distinguishing a bear market from an ordinary correction before it's too late. How do you do that?

  • Report this Comment On January 13, 2011, at 12:08 PM, Friendlysurfer wrote:

    just one word.... CEU

  • Report this Comment On January 13, 2011, at 12:23 PM, MegaEurope wrote:

    Matt, you are wrong about TBT. It was not just stupid to open the position - it is also stupid to continue holding it. Compare its performance to the inverse of TLT or TMF and you will realize that TBT, like all ultra ETFs, is a structurally flawed product.

  • Report this Comment On January 13, 2011, at 12:26 PM, MegaEurope wrote:

    "While saying that a price-to-earnings ratio of 25 is a worthwhile buy price may be forgivable -- if and only if the growth absolutely justifies it -- a PEG ratio of 1.7 is just not an investable multiple."

    Tell that to the folks at Rule Breakers - being realistic about growth, their average pick's PEG is probably well over 2.

  • Report this Comment On January 13, 2011, at 1:38 PM, Mstinterestinman wrote:

    Buy Ebix if you want a cheap growth stock peg of .5

  • Report this Comment On January 13, 2011, at 1:45 PM, TMFKopp wrote:

    @MegaEurope

    "TBT, like all ultra ETFs, is a structurally flawed product."

    Alas, this is true. Got a better way to play the "bond market will fall" thesis?

    Matt

  • Report this Comment On January 13, 2011, at 1:49 PM, TMFKopp wrote:

    @simonkho

    "My point was not to say that casino is better than market, my point is that investing in market and playing casino are similar."

    I actually would agree with you... to a degree. When considering casino games that involve probabilities and expected outcomes *and* non-random results -- I'm talking poker and parimutuel betting -- there are a lot of similarities to investing. Hitting the craps table or roulette, not so much.

    "I would like to challange any one that can show me one strategy in market that can work for real. it is all speculation but fun to play with it and saying invest better word than gambling.."

    Two words: value investing. For starters, you can read this: http://www4.gsb.columbia.edu/null?&exclusive=filemgr.dow...

    Matt

  • Report this Comment On January 13, 2011, at 1:53 PM, TMFKopp wrote:

    @daveandrae

    "The really painful part was that when I look at my investment notes from that time period,"

    Wanted to highlight this in particular -- kudos to you for keeping investment notes that you can refer back to. I don't think nearly enough investors do this and it's an invaluable tool for thinking through your investments on the front end and being able to learn more from them on the back end.

    I keep notes on the majority of my investments, but have at times let some slide without doing it. "I'll remember why I bought/sold/etc" I'd tell myself in those situations. WRONG. The human mind is very tricky and can easily distort things when looking back after the outcome has been set. That's why it's so important to get it down in writing.

    Matt

  • Report this Comment On January 13, 2011, at 2:57 PM, Vbatwork wrote:

    I used to use Morningstar research to help narrow down the universe a bit. I purchased AIG @ about $45 which was rated 5 star at the time and highly praised. I sold it again at about $40 (course that was after the 50-1 reverse split). I don't expect anyone to get every call right. If I did, my portfolio would have one position. But I now try to add weight to whether I think the analysts truly know the aspects of the company to which I don't have visibility. I steer clear of anything I question in the slightest. There are always plenty of alternatives. I am no longer a Morningstar member having gone completely Foolish the last couple years.

  • Report this Comment On January 13, 2011, at 4:03 PM, simonkho wrote:

    @Matt

    I m PHD in IT, and i m not bill gates. Yes some gambler win and other loose. it is 50/50.

    It works for Buffet, inflation help and his strategy also was buying tangible asset and transform the company. This investment I like and support. but who can do that?1 of million

  • Report this Comment On January 13, 2011, at 4:20 PM, TMFKopp wrote:

    @simonkho

    To be clear, I'm not trying to convince you that you need to be investing in stocks. For those that aren't comfortable doing it, it's best to either stick to index funds or hire somebody else to handle any stock investing for you (or invest in another medium as you have).

    But a few additional thoughts just to continue the discussion...

    "Yes some gambler win and other loose. it is 50/50."

    Well, not exactly. When it comes to the games of chance like craps or roulette, you're more on the money with your assessment, though over time, pretty much all players lose and it's just the house that wins.

    In poker and parimutuel betting (such as horse racing) there are folks that have been able to consistently make money. This is not by blind luck but by careful analysis of odds, money management, and a sober, logical approach to the task.

    "It works for Buffet, inflation help and his strategy also was buying tangible asset and transform the company. This investment I like and support. but who can do that?1 of million"

    As the article I included above notes, there were a slew of investors that all studied under Benjamin Graham that have all produced much better results than the broader market. So while Buffett may be the standard-bearer for the group, he's far from the only one who's been able to show value investing as a successful approach to the stock market.

    Also, while Buffett's investment approach began similar to Graham's -- that is, a focus on investing in stocks trading below net asset values -- he modified his approach over the years and ended up investing in a lot of companies based on attributes like quality of brand and management.

    Matt

  • Report this Comment On January 13, 2011, at 8:29 PM, MegaEurope wrote:

    TMFKopp wrote: "Alas, this is true. Got a better way to play the "bond market will fall" thesis?"

    Short TMF, TYD or other bond funds. I have executed this trade successfully and will probably do it again if bonds strengthen again.

    I recommend Interactive Brokers as they have the best short availability, cheapest trades and cheapest margin rates.

  • Report this Comment On January 13, 2011, at 8:31 PM, TMFKopp wrote:

    @MegaEurope

    Thanks! I'll take a look into that.

    Matt

  • Report this Comment On January 14, 2011, at 10:47 AM, simonkho wrote:

    @Matt,

    I know you r not trying to convince, we are having discussion and sharing ideas and experience.

    There are some strategies in casino that works and proved mathematically. but casinos put some rules to breaks these strategies.

    In stock also same rules applies especially when we r talking about accumulating in a pyramid way.

    My point was to show that stock is not good investement based on analysing the data i have which is since 1986, which i believ no one plan to invest for more than 26 years. I take an example the S&P, which is simple and represent the market exactly. You always have good management and the bad, but since no one can pick always the good so i looked at the avarage.

    even buffet said that investing thee days is harder than b4.

    I m sure the trend will go up at some point, but th data show that nothing is sure....

  • Report this Comment On January 16, 2011, at 2:04 PM, rgafb wrote:

    Thornburg Mortgage........you were so convincing......... 'nuff said.

  • Report this Comment On January 18, 2011, at 12:24 PM, wallyworld55 wrote:

    I felt that buying Catapillar at 28.00 was a great bargain, but I thought that 35.00 was a good time to sell. What's it at now? I think 92.00

  • Report this Comment On January 19, 2011, at 11:03 AM, Cressida wrote:

    Oh man, I love all you Fools for having the guts to tell it like it has been/was/will be.

    Yeah, I'm right there with you, but even worse.....

    Netflix. I'm the biggest fool there is, definitely lower case.

    I, a movie junkie, signed up WAY back, and bought a few shares, 3 I think, and ordered DVD's every two days because they were so speedy, and when streaming came along, I bored all my (then) friends with how GREAT Netflix was. A couple of times I even called the company to complain when the movie didn't play quite right (it was my laptop, not the DVD)

    They were always friendly, helpful and upbeat re my silly calls. Once, when the stock went up to 30 plus, one said "Yeah, we're doing great!!"

    So, I went on another cruise, disregarded the stock and just went right on expecting my next old classic in the mail, and watching streaming's every night, yes, every single @$#% night. It was my "fun"

    .

    Right. Holy Sugar....instead of those fairly meaningless cruises, over two years, (35k), if I had put even half that into Netflix, I could have

    had a couple hundred k's in my portfolio and still taken some extra cruisey-cruises.

    How could I have been so stupid.

    Crazy Cressida

  • Report this Comment On January 19, 2011, at 9:10 PM, blackie45 wrote:

    as far as dow chemical,love the company not the ceo.I bought in at 22 after he reaffimed the divi. He overpaid for roman-haas and cut the dividend 60% I bought on the way down at 9.Sold whole positon @ 27 never to touch it again. Kraft is next

  • Report this Comment On February 23, 2011, at 7:26 PM, Mstinterestinman wrote:

    I bought 50 shares oF KO at 42 dollars I'll probably double my money without the dividend but the yield on cost will be the sweet spot.

  • Report this Comment On February 23, 2011, at 7:41 PM, Mstinterestinman wrote:

    I agree with the regrets of having not bought netflix or in my case selling it at 100. I bought back in at 200 will hold a small position and if it ever has a big dip add to it.

    My three best investments came around the panic:

    KO,DAR and GE.

    I am holding KO,NUE and RMCF for life, MKC depends on its growth prospects. My favorite holdings are still Ebix and Contango Oil and Gas I also have positions in for Profit Education and Steel. Anytime someone is bearish on a sector start digging Buffet taught us to be greedy when others are fearful.

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