How I Lost 55 Million Dollars

Editor’s note: Unlike most Daisybrain stories, the following events are true.


In September, 2000, I had moved back in to my mom’s basement. I had a couple of part time jobs in video production which made me enough money to supply my chocolate habit. I wanted to film documentaries, but I didn’t know how to make a living at it. I had recently discovered that I had inherited stock in several “blue chip” companies, like IBM. Being an anti-establishment sort of guy, I wasn’t happy about owning stocks in corporations that I thought were evil. About this same time, do-it-yourself online stock investing was becoming a thing; companies, like Ameritrade, were making it possible for people to invest in the stock market without the aid of a stock broker. To be honest, I had no comprehension of what stocks were, or how the stock market worked. I’ve always had trouble understanding anything that has to do with money. But I knew that I didn’t like these “blue chip” companies, and there was a company that I did think was pretty cool: Apple Computers.

Back in the 90s, before iPhones, iPads, iPods, or i-Anything, Apple was the computer company with the rebel aura that artists knew was better. Squares (ordinary people) and The Man (ordinary government and businesses) just didn’t get how much better Macs were than PCs. In the press, Apple was getting a bad rap. There were reports all the time about how the company was sure to fail soon. It was like the way the press had predicted the fall of Castro’s Cuba, pretty much daily, for the previous few decades. But I knew that Apple made superior products and that Apple customers were insanely loyal. And so, I went online and followed the instructions to buy stock in Apple.

One morning in mid-September, I bought $100 worth of Apple shares. Or so I thought. I was, remember, completely incompetent when it came to investing in the stock market. I quickly discovered that instead of $100 in shares, I had agreed to purchase 100 shares of Apple. Apple was about $58 per share. This was a very big oops, and I was scared. I didn’t have $5,800 to pay Ameritrade. I had, perhaps $38 in my savings account, and I had planned to pay for the Apple stock as I paid for everything else: with a credit card. I decided to call Ameritrade and explain what happened. After all, this must have been a common mistake, what with all the new people trading online. They would understand.

I called from work when no one was in the room with me. I explained to the friendly Ameritrade dude what had happened and asked if I could undo my purchase. “Are you sure?” he asked. “You’ve already made a small fortune today.” I had? But I didn’t have the money to pay for the stock. Not to worry! The Ameritrade dude told me that I could buy the stock on margin, which meant that I wouldn’t have to pay anything for it. They would just lend the money to me. All I had to do was to fill out a margin agreement, which he would send me.

And so began my brief career playing the stock market. I immediately sold all of my inherited stock, much to the dismay of the broker who had controlled it all those years. But why pay some guy a fee to buy and sell stock, whatever stock was, when I could do it myself? I found out that you could look up charts that showed if a stock was going up or down and buy the ones on their way up. I looked for socially progressive companies to invest in, but mostly I invested in Apple. After all, if 100 shares made “a small fortune” in one day, imagine how much money 1,000 shares would make! And it was all free, since after selling and reinvesting the money from all my inherited stock, I was buying everything on margin.

I was on a roll. I quit one, then both of my part time jobs. I figured that the stock market would give me the money to devote myself entirely to art. I could also start a foundation to help other artists. I even had a name for it: The Slacker Foundation. I would pay the rent for original bands and artists so they wouldn’t have to get boring day jobs. I was giving investment advice to anyone who would listen. When I was hanging out at rock shows, I’d be talking to punk kids in the back of the room about how find good stocks to buy.

I had noticed that buying huge amounts of stock in a small company would actually boost the price of the the company’s shares – you could see the value jump a few hours after the purchase. To have that effect on a company as big as Apple, of course, I’d have to buy a lot more stocks. But why not? It seemed pointless to make a few dollars in a day when you could make a few thousand. So, on about September 27th, I made my largest purchase yet. By this time, I owned several hundreds of thousands of dollars in Apple. Pretty good for someone with no money, huh? Then something unexpected happened.

On September 28th, Apple stock plummeted. It remains the single worst day in Apple’s financial history. Apparently, the company had hinted at lower than expected earnings and boom – all the non-believers dropped Apple. I learned the next day that this had happened after hours. That is, trading continues after people like me are shut out at 5:00 pm. Suddenly, Apple stock had lost about 51% of its value, and had dragged down the entire tech sector with it. It was the irrational burst of the even more irrational tech bubble.

I saw this as a great opportunity; now Apple stock was even cheaper! The one thing I had heard about the stock market was that you were supposed to “buy low, sell high.” I couldn’t sell high at this point, but I could certainly buy low. I immediately started buying huge quantities of Apple stock, on margin, of course, in anticipation of its value increasing. And then, smugly satisfied with my prescience, I went on a trip across the country to visit friends.

The next day, in San Fransisco, a call came for me. It was Ameritrade. I was impressed and a little freaked out that they had tracked me down in California. They wanted their money back. They told me that the margin agreement stipulated that if a stock lost over 50% of its value, the buyer would have to immediately pay back all of the margin funds. I tried to explain the logic of letting the stock value go up first, but they would have none of it. “Give us our money.”

I sold whatever stock I had, and borrowed an enormous amount of money from my parents. This kept me out of Ameritrade jail. I swore off the stock market. Over the years, I thought more and more about this incident. Some might emerge with the lesson of not getting involved in things you don’t understand. Some might realize that a balanced portfolio is wiser than putting all of your eggs in an Apple. Others might start living by the rule, “Never invest on margin.” That’s all good advice. But, the thing that gnaws at me the most is my bad timing. If I had just figured out how to invest in the stock market about a week later than I had, I would have bought all of that Apple stock when it was around $20 per share. It has since shot up, steadily, to $130 per share. More than that, Apple “split” its stock three times: two times at two for one and once at seven for one. That means that whatever stock I would have purchased in 2000, I would now have 28 times that number of shares. If I had invested, say $300,000 on margin after the crash, I would now have roughly 55 million dollars, instead of roughly zero dollars.

What would my life had been like as a multi-millionaire philanthropist? I could have released and promoted records by brilliant unknown punk rock bands. I could have started a free restaurant. I could have influenced elections with “dark money.” But, who knows if I would have even met my wife and had the wonderful family that I do, so it was probably all for the best. The next time a once-in-a-generation innovative company comes along that’s decades ahead of its competitors, I’ll wait till their stock crashes before I buy.

In the meantime, read this:

dasy1

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