Post of the Day
July 12, 1999

From our
My Dumbest Investment Folder

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Subject: I've got all of you beat!
Author: alpines

I'm in a state of shock at this writing trying to figure out how to get myself out of the mess I am completely responsible for in my financial life. I can't blame my husband and I can't really blame the broker. I'M IT!

June of last year I decided that the money my business had accumulated could do more then just sit at the bank. I was unhappy with my broker because he didn't stay on me enough. He didn't offer me any ideas. He was satisfied with the 15K I had in Mutual Funds. I thought that was thoughtless since I had more then 200K to invest in something. What? I had no idea. 80K long term and 120K with a 6 month horizon.

I got a phone call from an aggressive young broker and I liked him. He had ideas and wanted to help me make 10% on my short term money and invest the long term savings in more Mutual Funds. I had no idea of what to do with all this money. The only experience I had was in saving for a rainy day that wasn't a flood. My business had taken off and here was all this money. Now what's a good steward to do with all this excess?

"Before I knew what happened there were buys being made without my approval."

I went along with his plan. I gave him 30K to start one account for stocks. The 80K was placed in mutual funds in a separate account for the corporation. From June till Dec the stock account made about 4K. I thought this was a nice return on that small amount in that time span. In January I added 100K with a one year horizon as is was untaxed capital. I had no idea about how capital gains worked. I was looking for 10% on this money in large cap companies to hold for one year, no more and made this very plain before I gave him the check. Before I knew what happened there were buys being made with out my approval. 2500 shares of First Plus Financial, 1000 shares Iomega, 1000 CHS Electronics, and 500 shares of Star Telecommunications. This all occurred in the 2nd week of February. By May I was at the end of my rope with this guy. His buys were not studied. They not cautious and they were extremely expensive. Some of them he charged me $400.00 a pop. Then he informed me this was all my responsibility. I was completely ignorant and in water so far over my head... I went into shock.

Now what to do? Living in the middle of a nightmare I knew I had to do something but was so ignorant I didn't know what. I talked to his trading partner who informed me that my broker didn't usually trade stocks in the accounts, he did. He didn't understand why my broker had taken this stand with my accounts. Seems my broker had this other man trade his account because he couldn't stand the volatility of the market himself. But my account he insisted on doing all the trades.

Why? Could it be that I am a woman? I had Zero knowledge of what I was involved with? That he could charge me whatever he wanted to up to 2.5% of a trade because that's the fee he told me and I accepted it? Can it be that he thought he was so good looking and me being a middle aged house wife that I would not notice that my money was leaving out the back door while he smiled at me? These are the feelings I get.

I hired him because he was aggressive. I needed to be moved off my dead butt on my dead feet and do something with this money.

I thought this is what he does for a living. I own a plumbing company. I do not expect my clients to know anything about plumbing when I come to their home. My people are the professionals not the homeowner or business owner... That is what I thought this investing stuff was about. Why would I be expected to pay such high fees if the man were not a professional? He is supposed to know more then I do.

The first 6 months was a good experience why wouldn't this be? Ignorance is not bliss. I knew so little about investing that I didn't understand the the stock price splits when the stock does... We are talking totally in the dark here!

Outcome to May... My portfolio went from being worth 114K to being worth less then 70K. I lost it.

Thus I started with his trading partner. Why didn't I change brokerages. I had 3 prior experiences with brokers and none of them were good. They were either like the guy that blew my account away or they were dead. That was my experience.

I met the trading partner. He was older. His father was a trader all his life in options for someone. He grew up with the market. He took me under his wing and started to teach me about the market. Moving averages, leverage, filling gaps. He is a momentum trader.

He offered to charge me minimum commissions until the account is straightened out. He has recovered some 10K and we were almost even until CBSI came out with earnings warnings this week.

I am happy with my relationship with this man but am trying to move myself into a position to trade for myself at a much slower pace. Companies I like because they are sound. Not because day traders are moving them up and down.

I have made one pick for myself so far. I bought Yahoo at 148 and sold at 175. I'm learning day trading over here. This was not my intention!

I am a business owner. I didn't get where I am being stupid. I am capable of learning anything I set my mind to. This is overwhelming while in the middle of a roller coaster ride. I have a feeling that I should just STOP! Sell everything and start over. Take the loose as a college education and move on to bigger and better things. As long as anyone else is trading my money I have no control. They do things I don't want them too. Even if it works out well. They are not my own informed decisions.

Here is an example. I got a phone call from the trading partner. He said, "Vic, I have something here, Customtracks. I can buy 500 shares of this stock at 50 and get us 23 points on a Jan Call. That will put you in this stock at 27." Now given what I've told you, what do you think I said? I said, "Do you think this is a good move? Okay, if you like it."

"I am a business owner. I didn't get where I am being stupid. I am capable of learning anything I set my mind too."

Next thing I know there are posts all over the internet that this is a concept not a company. I'm just amazed... He then called me and told me things don't look good we need to cover with puts for july at 40. Zoom... that went right over my head! "Yes, go ahead if that's what I need to do!"

Now I have Puts 5 @ 40 for 1 3/4 expiring in July. He now wants to sell them. I checked my account the sale hasn't been made. This is Friday. Did he forget or did he not do it for a reason. I haven't got a clue. I don't even really know what they are.

With options on the account how do I move it when I don't know what to do with them? That is why I haven't mailed the paper work into Discover the new brokerage house I want to use.

I'm afraid until I get rid of these options. I can handle the stocks. I can make informed decisions on that level but Options for crying out loud, what do I do with these? It's too big. They have complicated it probably to get me to stay.

I will pull sooner or later Options or not but I am in a state of amazement right now and don't know what to do.

So, do I have you guys beat or what? Do you have any idea how many people that this same thing happens too?

I met a couple in Miami that trusted their broker and they had to sell their home and went bankrupt to cover their margin.

People that work want to hire a professional to manage their money.

I am losing so much time from my work that I don't even know what's going on there anymore. It's crazy. I am spending all my time studying and trying to keep up with these people and my hard earned money.

Thank you for the forum to vent my frustrations. My husband doesn't know the first thing about stocks and doesn't want to learn. When I told him how bad it was he said and I quote, "Handle it babe!"