August 26, 2007
Posted by Jay Livingston
One final thought on fortunes and the dot.com bubble – along the lines of “private troubles” and “public issues,” biography and history. In putting together those graphs on income a couple of days ago, I realized something weird: I felt the effects of the Internet boom and bust, felt them deeply – the giddiness of sudden riches, the despair of getting wiped out. But my biographical changes are not in any of those historical graphs.
I made a lot of money in the late 1990s. Oh, not a lot of money by the standards of the people in those graphs. But a lot for me. The value of my stock portfolio nearly doubled. I constantly watched my stocks on Yahoo in those days. It was great fun. One day when I noticed that one of my stocks had just gone up, I started to type an e-mail about it to a friend who also owned it. By the time I finished the message, the stock had jumped another 25%. (By contrast, Dan Myers, in these calmer times, is justifiably impressed that his son’s imaginary portfolio has gone up 3.3% in a week.)
If I’d closed out all my positions at the start of the 2000 baseball season, I’d have fewer financial worries today. It’s called “realizing” a profit – i.e, making it real. But instead, I watched as all those on-paper profits slipped away.
As a result, none of that money shows up in the data. My private troubles and triumphs would have become part of the public-issue statistics on income only if I had cashed in my profits in the 90s and then cashed out my losses in later years. But I didn't, and so I remain the invisible investor.
6 comments:
Buy GOOGLE! I heard this weekend that it's going to go up to $700/ share by years end, it will split!
Problem is...it's tooo expensive! I think it's around $500./share.
Crazy eh!
What's that all important saying: "Diversify, not all your eggs in one basket"-very true.
I bought RIM (Research In Motion)awhile back. It was a time that alot of my friends were trying their hand in the market. The company's based in Kitchener-Waterloo ON Canada. People would know them as the maker of the Blackberry. At the time, they weren't popular and I did exactly what you're not suppose to do...I picked them because I liked their name.(a very stupid thing to do) Thought it was soo cool...Research in Motion. I could visualize the motion and thought anyone naming their company such a neat name was surely going to be successful...well, needless to say, the name turned out very well ;)
Sarah, A stock that more than triples in value in a year -- you can pick stocks for me by name any time.
With the idea of "on paper" profits, there is a big difference between liquid profits (those someone could have cashed in but did not) and illiquid profits (those someone didn't really have the option of cashing in). Not that they both aren't maddening and saddening in their own ways.
Jeremy: yes, both of those would be maddening, but a good broker should be watching those things for you or at least you would think so. Sometimes there's not enough time to take action.
With such volitity in the market people tend to panic and cash out, taking their loss, but it's better to ride the storm since the markets are cyclical in nature.
Jay I didn't tell you about the other nice name I picked...Cream Minerals. I thought the name was equally as nice as RIM and my best friend encouaged me to "go for it" I was thinking peaches & cream, creme de la creme... ohhh did I get creamed! In fact it doesn't even exist anymore. The best philosophy on playing the market is not to play with money you can't afford to lose...and I think it was Warren Buffet who said that once he bought something, he'd forget about it and never sold it. Long term! ;)
I signed a contract with a dot-com three days before the bust began. It actually turned out ok, but I remember watching the news the morning the bust news broke, and hearing the cartoon "wah wah wah wah" sound in my head.
Dave, Losing paper profits isn't quite the same thing as losing a job. I have a friend who has a similar story. He quit a steady job to go with a dot.com which then went bust in a few months. He scrambled around and finally got something similar to his old job.
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