Bearing up in the stock market.
The recent fuss in the stock market has reminded me of the fellow who invested half his money in paper towels and the other half in revolving doors and was wiped out before he could turn around. And of course you remember the unfortunate New York businessman wiped out in the crash of '29 when someone jumped from a 30th-floor window and landed on his pushcart.
Not that I haven't called a few wrong shots in the market myself. "It's my broker's fault,' I tried to explain to my wife and head bookkeeper as I was adding the certificate for 500 shares of Glass Casket to my wall decorations.
"You should have seen through it,' she quipped, handing me a thumbtack pointy end first.
When I first plunged (and I choose the word without hesitation) into the stock market, I didn't know a bull from a bear. Nor did I care. I was going to be a hog. Buy at the bottom, sell at the top. Models and starlets competing for my favors. Rolls-Royces competing with Austins for parking space on the winding drive of my spacious country estate. His-and-hers yachts tethered in the private marina outside my French Riviera condo. That sort of thing.
Today, I am not a hog. Neither am I a bull or a bear. I am a chicken. I've been plucked so many times I'm right down to the pinfeathers. And, baby, it's cold outside.
The first stone in my Davidic slingshot with which I would bring the stock-market Goliath to its knees went by the name of Israel American Oil. It was being touted by the cleaning woman in our office, whose niece had only recently returned from a ten-day tour of the Holy Land. On September 16, 1960, I took on 600 shares at 5/16 (the old "buy low' theory) for $187.50 plus the broker's $12.00 commission.
Don't fall in love with a stock, the experts say. Embrace them, yes, but be ready to let them go without looking back. Not me. Not even the first annual report, which listed current assets at 1.57 over current liabilities, could break up our relationship. Not that 1.57 is a discouraging ratio, but in checking the footnotes to see if that 1.57 was in millions of dollars, or perhaps even billions, I discovered it was neither. A buck-57--that was it. And if the value of the company president's desk hadn't been included with the assets (no kidding), liabilities would have won out by exactly $74.43.
By a stroke of luck, before I could reach a decision on whether to take my money and run, Israel American Oil bought the Paradise Mattress Company (you can check it out). So instead of selling, I bought another 400 shares at 3/8, or $150 plus $8 commission.
Talk about sitting pretty. How much prettier can a man sit than on a cushion of 1,000 shares of oil stock with the parent company owning a subsidiary bearing the irresistible name of Paradise Mattress?
What the cleaning woman in our office didn't anticipate, however, was something called "reversible split.' In this case, it meant taking 17 of my shares and doling out 1 share, leaving me with exactly 66 shares and change. The split shares I eventually unloaded for 1 5/8, or $100.54, giving me a net loss of $256.96. Welcome to the wonderful world of his-and-hers yachts]
Undaunted (unfortunately, I don't daunt easily), I took the advice of the market sages, sager than I, at any rate, at that time, and bought ten shares of ten different stocks. Three would possibly go down, four should tread water, and three would go up was the wise men's theory. And the three uppers would more than offset the loss incurred by the three downers and maybe a buck or two on the four hold-their-own-ers.
For today's novice who might consider giving this strategy a shot, I recommend instead hanging a stock-market page on the wall and, blindfolded, sticking a pin in the paper ten different times. The reason I recommend this: turn to the stock listings in your local paper and look for Atlas Sewing Centers, Great American Industries, Unitrode, Muter Co., and Cinerama. Or how about those giants of industry known as Gas Hills Uranium, Nuclear Corp., Miniature Instruments, Gulf American Land, and Thompson Starrett? That's right, the fat lady has sung for all ten. Only by chance did I unload two of these losers on my son for a Christmas present while the old girl was in her dressing room warming up.
If any of the remaining eight should one day show up, removing the stock certificates from the wall of my study certainly won't help the decor. Especially Miniature Instruments, with its lovely heliotrope border. And it contrasts so beautifully with the four orange-trimmed Atlas Sewing Centers $1,000 bonds I snapped up for only $25 each, with dividend coupons still attached.
About this time I decided that a change of brokers might be the answer. True, I was a little embarrassed, because a couple of outright dogs, as they are known in stock-market circles, were kenneled in my portfolio. But certainly they gave the broker no right, after appraising my holdings, to smart off to one and all: "Yes, I'll handle this stuff, Mr. Stoddard, but not before I've had a rabies shot.'
The bell now tolling with regularity for my investments, I began to rely more and more on the old "bigger fool' theory, hoping, that is, that the cleaning woman would dig up someone dumber than I to buy my shares before the clapper came through with its final bong.
Richmond Homes, though not exactly of blue-chip status, was by no means a mutt, either. Not at 2 1/2 bucks a share, at which point I had added 200 shares to my holdings. Nine months later I got out at 2 5/8. After paying commissions, this left me with a net loss of a mere $7.70.
I didn't do quite so well with Fotochrome, buying at 100 on July 27 for 7 3/4 and selling on August 14 for 7. Instead of falling in love with this one, I barely had time to kiss it hello. But the point for you young investors to remember is: knowing when to dump a stock is more important than knowing when the cleaning woman is just kidding around.
Another point is this: if you buy a stock at $2 a share, $2 a share is all you can lose. A few hundred shares at two bucks, of course, can add up, but even then it beats taking on a prima donna such as, say, Crime Control.
"It's an $80.00 stock]' my broker breathed into the phone. "I've just added another 17,000 shares to my own account.' So what more proof does a his-and-hers yachter need? The stock was priced at 19 1/2; it didn't take an Einstein to figure that 19 1/2 from 80 would leave a neat profit of--just a minute--$60.50 a share. I ordered 100 shares and immediately splurged on a new suit on the strength of the impending profits.
When the stock dropped to 14 1/4, I called the broker for a little reassurance. "It's a buy opportunity,' he reassured me. "Load up.' So I loaded up with another hundred shares. Last month, Bank One, who handled Crime Control's bankruptcy payoff, mailed me a check for $150--my share of the remains. Crime control indeed]
Upon recovering from this disaster, I decided I'd go whole hog only on those tips coming directly from the horse's mouth. I mean, I had a friend--at that time-- associated with a company called Alphanumeric, and he was buying up their stock at a prohibitive, for me, price of $54 per. Sure enough, I watched the stock begin a steady climb into the wild blue yonder of a nifty 74, at which point it reversed direction. When it hit 17 1/2, boy oh boy, I couldn't wait to blow the rent money on 100 shares. At 3 7/8 I nailed down another 100.
After selling these 200 at two bucks a share, I bought 500 at 14[ and six months later added another 500 at 11[. The last quote I had on it, a year later, was 2[ offered, no takers. And the certificates are not all that pretty.
When it comes to taking a beating in the stock market, one has a choice of two alternatives. It can be done my way, buying low and watching the company head for the shelter of Chapter 11. Or it can be done the more popular way: having the stock appreciate until the taxes on the profits bring you to your knees. And I've had a few pretty close calls here, too.
Resorts International was one I escaped paying taxes on only by the skin of my teeth. A quiet little real-estate company in the Bahamas, with a gambling facility or two on the side, the outfit warranted a play, I thought. So I took on 200 shares at a price of 2 1/2. After waiting a reasonable length of time for the stock to get on a roll, but no dice, I unloaded at 2 1/8. This was the signal for the company to open a casino in Atlantic City, and you know the rest. If you don't, I can tell you: they began raking in profits that made the Las Vegas people scramble for a piece of the action. After Resort's stock shot above the $100 mark, I stopped looking. But can you imagine the taxes I'd have had to pay on that rocket if I hadn't jumped off when I did? I still engage in aerobic sleeping just thinking about it.
An Indiana stock gave me an even closer call. Realsilk Hosiery, in a lax moment, let me buy into the company at $25 per. After paying two dividends, they offered to take the stock off my hands at $49 per. The taxes on my ten-share, $240 windfall were not all that bad. But if you have a chance to look at a listing of Indiana stocks before the recent stock-market slaughter, run your finger down the list to Realsilk Hosiery. That's right--$410 bid, no seller. How the IRS people would have been rubbing their hands had I hung on to that baby just a little while longer.
Growing older, I have found, has more rewards than just a senior citizen's 10 percent discount card at Hardee's. Today, I am not only older but wiser in stock-market manipulations. Instead of being a speculator, I am an investor, putting my money only in sure things. In fact, I heard of one just this week. My grandson has a roommate at Indiana University whose dad says there's an electronics company in the Philippines--oh, no, I'm not going to broadcast it and run the price up until I've got my shares tucked away in the old lockbox.
I just hope the taxes on this one won't wipe me out.
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|Author:||Stoddard, Maynard Good|
|Publication:||Saturday Evening Post|
|Date:||Jan 1, 1988|
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