Are you in the mood for a case study resource for your own investment policy manual? If so, brace yourself because this one is heartbreaking.
I found it courtesy of one of you — thanks Andrew! The night I followed the link, I spent the entire evening going through the or so pages, mesmerized by the delusion.
Before we get into studying it, and I publish the link for you to begin your own case study, I have a request: Please do not go onto that forum and comment. GTAT was supposed to be the primary supplier of sapphire glass to Apple, which everyone thought was going to include it on the iPhone 6 and iPhone 6 Plus. Plans changed as GTAT management was unable to execute on time, so the sapphire glass, instead, was going to be used on the upcoming Apple Watch and then in later generations of the iPhone.
The company had a positive net worth, hundreds of millions in cash at the last quarterly filing, a good probability of making a lot of money in the future, and management reiterating earnings guidance only a few weeks ago. How could such a thing happen? Primarily, they funded long-term operations with short-term capital, negotiating a nine-figure, multiple-installment working capital loan from their most important customer, Apple, and then gave Apple the right to demand accelerated payment at virtually any time.
There were no major contingency plans or back-up capital sources available if the iPhone 6 and iPhone 6 Plus launches were missed. The CEO allegedly had a history of what seems to be a near megalomaniacal desire to swing-for-the-fences, already having run one business into the ground. Apple had no minimum purchase commitments, and no exclusivity contract, so demand projections were entirely speculative.
This was a case of the right idea being in the wrong hands. Every imaginable portfolio error can be found in its pages. When Andrew sent me this link, he first pointed to this pageabout a month before the bankruptcy announcement, when people were talking about how foolish it would be for them to own index funds or invest in a traditional sense. That bankruptcy has been declared. That the conference call they were expecting had been cancelled.
Between it page and the end of the forum when I read ityou see all five stages of loss and grief — denial, anger, bargaining, depression, and acceptance. According to his profile, he is 44 years old. There was no reason for this gamble. He could have spent every one of the rest of his paychecks for life on luxuries and still ended up okay. There are too many.
You need to go read them for yourself. It works so well for rational, disciplined people. Meanwhile, others who work hard and are good folks but lack the temperament or experience to manage capital, lose everything. If this werenone of these people would have had access to their retirement money in the first place. It was a better system for most men and women, I think. Just like Senator Roth introduced the Roth IRA, were I a Senator, my primary objective would be to introduce the Kennon Pension.
I think it is possible to create mobile, portable pension plans that move from company-to-company with workers. It would take only a slight tweak to the tax code, and very draconian rules for financial institutions that offer them e.
You could make contributions and buy additional income for life. What is fascinating is multiple people on there have done this before and learned nothing. Lost their entire savings on one company, recovered, and put all their eggs in one basket again. These people absolutely have a gambling addiction, and are causing their families as much heartache as someone working the slot machines every night.
I am just in utter disbelief that people can have such a poor grasp of risk and risk management. I may have mentioned this before, but this reminded me of one of my coworkers.
Definitely nothing like the people in this forum, but every day he talks about what the stock market has done for the days session. Way up, way down, not quite panicked, but certainly concerned. I keep telling him he has at least 5 years left until retirement, so it really means nothing until he is ready to start spending that money. I tell him he should be glad stocks are lower until he is ready to retire.
He is an engineer. He should know better. I really like the personal investment savings system over pensions. I like knowing that my savings exist as long as the US government is still around. I always fear that my pension could be decimated if my company were to go bankrupt. Anyone who needs more, I can highly recommend this. I started doing this for 2 yrs and it helped me when I was in depression. Now I have fullfilled my many expectations. I used to think it was merely an issue of education and for a lot of people, it is, which is one of the reasons I write so much.
For people like you, me, and most of the readers of this blog, the personal savings system is far superior because we can tailor our retirement allocations to specifically what we want to accomplish, taking other considerations, including our non-retirement assets, into account.
Still processing all of this, but this post has an interesting insight:. When I buy a bond fund or a blue chip, it is like somebody punched me in the gut, as I feel any idiot can do that. I recently bought a boatload of HIMX at 6, and that is totally unnecessary and probably should play it safe, but it is hard to change who you are and what has got you to this point.
The poster seems to get an ego high from profiting off risky stocks, maybe because he feels like it proves how smart he is to everybody. It basically hints the utter difficulty, if not impossibility, to speculate, and points to like index funds as a common sensical tool. Therefore I just put money in index fund, spending very little time, and harness the results of the economy. By doing this, I feel very smart.
So, yes, buying blue chip, anyone can do that, but, no, buying index fund and knows exactly why, not anyone can do it. A few pages after the bankruptcy hits, one of the posters suggests that people could recoup their losses by going short on GoPro. I have friends — otherwise smart business executives, who do this sort of thing all the time.
One of them loaded up on RSH Radio Shack! Yes, the tax loss credit thing is nice.
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He said diversification is also idiotic. He proclaimed to the masses how stupid that is. He says to keep your money in cash and then buy puts and calls,etc. Now to me, Cuban is an example of what is wrong with investors mindsets.
He is a cowboy literally, a maverick. His attitude and style however seems more about luck than brains and reason. But, as with most things in America, the majority follows his type of sensationalism, and ultimately will rely on luck and government for their future. If I remember correctly, I think I saw an article stating that Mr.
Cuban recently acquired a large block of NFLX, due to him writing puts on it. It took me a long time to actually form an opinion on Mark Cuban.
Now 50, additional shares of netflix to Mark Cuban is like me spending a hundred dollar bill, so he can afford to absorb a loss. Cuban made his fortune through starting and selling tech companies — and I respect him for that. I also find him very entertaining — especially as the Mavs owner. I did my homework on [my investments, and knew certain asset classes were undervalued.
I mean, this is a guy who was famously interviewed on CNBC after he sold Broadcast. First of all, I was very sad to read about this. One thing that always puzzles me is the fascination with Apple suppliers. A friend of mine made the analogy that always trying to find the next hot Apple supplier is like being fascinated with the people who supply onions to the Michelin-rated restaurant.
It, like other blue-chip stocks, should make you rich eventually with dividend reinvestment. I suppose the appeal of getting rich quick blinds people to the possibility of getting rich slowly. Imagine delaying consumption for over decade sonly to lose it all.
But surprisingly, some of them handled the loss pretty well. Well, better than I would have in their shoes. How money, although lost, is just money Not to minimize their suffering — painful as it was. And that in the grand scheme of things, there are still other important things that they have not lost like their family and friends. Warren Buffett and the Business of Life.
I can still remember that book. I got a lot of stuff from it. I can remember talking about the laws of capture in petroleum, and the Bessemer processes in steel.
I devoured that book. Anyone here know which book Warren was referring to, as it seems like a pretty good text on introduction to industry. What a sobering read. The Intelligent Investor should be mandatory reading for anyone investing in the stock market.
At the very least, people should be able to recognize the difference between an investment and speculation. People are wired to buy high and sell low. William Bernstein recounts a great story about this issue. He is sitting in a conference room talking to the CEO of a company which is terminating its pension plan. While they are talking, the catering staff comes through and cleans up lunch. Forcing everyone to purchase a Vanguard total stock market fund?
That sounds exceptional and certainly not in a good way, particularly if it were a public plan governed by the newer ERISA rules. I can hear Charlie Munger narrating those messageboard posts with bits from his lecture on Cialdini that I have listened to countless times. However, on a particular messageboard I follow, there are folks who have their entire life savings riding on this company and I cringe.
I repeatedly warn people to not take such stupid risks, but they have long since want buy bankrupt stock prey to the fallacies and biases that helped cause such irrational behavior in the first place.
I have seen my holdings tank and soar since all while holding. During the same timeframe, others buy high, sell low and burn the midnight oil, hoping for a moonshot. One person risked their house down payment and sold it at a huge loss because they were speculating. Had this individual held for another year, instead of a week, they would have profited handsomely.
Honestly, at the beginning it would be tough, in the future it stock option sale 1099-b linger in my mind, but I would get on with life. I really liked the response of a user named Sam Gidwani post In the face of total ruin, I think his reaction is the only way to recover in the quickest possible timeframe.
You realize you made make money with jewelcrafting 4.3 mistake, take responsibility, allow yourself to grieve, appreciate what you have left, come up with a plan, and move forward toward rebuilding.
Sometimes, mis-steps can turn into the greatest blessings or opportunities in life. The owner of that building then kicked him out at the end of the term and turned over the property to his own family, who opened a store that thrived upon the traffic that Sam had built. While he had his savings, he lost his primary cash generator and had to start over again. Starting stock market graphs and charts middle age, he ended up building one of the greatest retailing empires in history and his heirs are richer than Bill Gates and Warren Buffett combined.
There was one billionaire on the Forbes list Gta online money earning tips remember reading about years ago. He was fired or laid off from his job during the Great Depression and decided to go to work for himself.
It was the company rbi foreign exchange rates as on 31st march 2014 founded, with practically nothing, that ultimately made him his money.
I wish I could remember his name but it escapes me at the moment.
Warren Buffett was rejected from Harvard Business School. He talks about earn money blogging india hard of a blow it was, emotionally.
Those are just the high profile examples of people who hit the proverbial jackpot. Even if you end up a small town business owner who never makes the newspaper but enjoy financial independence, sometimes, the things you think are your greatest failures can turn out to be the foundation of everything you ever wanted in life.
It depends upon how you react to it. Disqus is being weird, again, this afternoon. If the attached screenshot of the response I mentioned appears broken, click the broken image box bhel call put option it will load.
I took a job working for a city public works.
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When we the new hires were gathered to go over our retirement, we were told we have an irrevocable choice to make between a pensionk hybrid, and a k the pk hybrid invests money beyond the citys cost of the pension into a k. When polled, ALL new hires, myself included, opted for the traditional k. It goes against the very definition. Limit your exposure to echo chambers. Another example to study is the fallout of the Mt.
And anyone with just some basic knowledge could understand why. The stockholder and management virtually have no control of the company, they are at the mercy of the customer in this case Apple Inc. In other words this business had done a complete Originally the company was a solar company going back to Going from solar energy to sapphire glass tech is not exactly synergy. This would be like Coca-Cola selling its soft drink portfolio to into the auto industry.
Clearly putting the company into the realm of speculation on that note alone. This was not due to temporary asset impairments, one time legal fees, or minor accounting settlements, this was due to core structural reasons. Point is I sincerely doubt we will be using iphones 10 years from now.
And GTAT would go as quickly as it came in. Point being, you did not have to be a college professor or the next John Templeton to figure out this was not a investment. And that was the sort of average price for And internet forums can be manipulative and can create a monkey see monkey do effect, eg: I am going to hit it rich! If he is doing it, he must have done enough research to have the guts to do it. Independence of thought, and ability to just change your mind is tough to practice.
I just worked my way through can you make money as a secret shopper 50 pages and feel awful for these devastated people. They should certainly not be managing their own retirement money.
Some of the key sentences were buried after long blocks of legalese. This canwest global stock price market watch the alert business owner less than 2 months to recover capital before bankruptcy. I usually see conference calls show up as news items on SeekingAlpha or Google Finance, so I should make sure to get the Qs each time these show up.
But yes, there were red flags at every level. I was reminded of my own education. I was just so naive. That earn money autosurf plus having a death in a family just around that time kept me depressed tips bermain forex aman few months.
However now I see it as great education after 3 years. I started extensive reading on investment, frugality etc. Also having a very well paid job, promotion in and frugal spouse helped me. Lucky for me I hit ca ftb stock options figure net worth just recently.
I am so careful now that I immediately sell any RSUs or ESPP shares from my employer as soon as they vest and invest immediately in index. Reading posts above, many people lost much more than I did invery sad. I also had a shaky up and down record when I first started investing quiz to win cash in india of college.
Then I realized that short term profits and a quick, risky buck was not investing. I created a personal investment policy statement based on this site and bogglehead. I still have to mentally train myself to avoid a similar circumstance to the one above. Once I buy shares in a certain stock I feel so good about the decision that I want to pile more and more into it. After a short time my feeling fades so I know it is just irrational thinking.
And I thought it was bad when my Mom sold off a good chunk of her k at the bottom of the recession. Nasdaq premarket active stocks are no shortcuts, it is a real crime that people are not forced myb money maker crack take basic investing skills in high school.
If we are to be expected to manage forex vs option trading retirement, the average Joe who is not going into the world of finance should be given the basics needed to make sound decisions with their money. So last night I got some chicken tortellini soup, shrimp marinara over spaghetti, garlic bread and a raspberry lime seltzer sorry shareholders, I dont drink cokeand proceeded to rewatch the Cuban interview.
You see, I am usually more easy going and agreeable on a full stomach. To me, when investors act irrationally it seems to stem from emotion greed,fear,even loverather than sound reasoning.
These people usually get their idea from somewhere. Take the lady with the special needs child. Do you think she did an in depth financial analysis in gtat after stumbling across the company while searching for solid blue chip stocks? All she was thinking about was securing a future for her so after she dies. Then I want to see what other paths they follow after they made obscene amounts of money.
People like Phil and Willie Robertson, Carl Icahn, Kevin Oleary, Vanilla Ice, and on and on into people diversification. So just like I see a man like Mark Cuban touting a cookie company he invested in on Home Shopping Network by saying he doesnt eat meals, just an average of 22 cookies a day yes he said it repeatedly and the cookies sold out ,or Regis Philbin pushing Micron Technologies stock ,for months and months, I think that they should just leave the shoemaking… They are doing more harm than good.
They are great at building brands but bad at other things. Ultimately thoughpeople are responsible for making up their own minds, however unfortunate that is for many. But I will continue to rethink my position on Cuban because his pretty and seductive smile is loved by so many. Oh and Scott, I only offered the previous post as a better explanation of where I was coming from.
My joke at the end was not directed at you personally. I respect your opinion and see where you are coming from. On a human level I feel for those that lost money. On a economic level, they were greedy and stupid and those two traits have terrible how to make money as a member on runescape when mixed.
I wont waste pity on someone that put all of their savings into one, very speculative stock. Just having the knowledge to open a brokerage account that allows you do something this moronic means it is almost a sure thing you have been exposed to advice not to even contemplate this sort of investment.
It was a lack of knowledge that did most folks in. This alone would have spared any of them from a high odds catastrophe associated with an emergent company devoid of earnings, proven products, and credible management.
As other noted, confirmation bias prevailed. Authors of articles also made overly optimistic projections. The biggest red flag of all with GTAT? It was indeed Tom Gutierrez selling 2 million shares since October of Interestingly enough, a good number of GTAT posters defended Tom in this.
That spoke volumes about risk and imaginations gone wild. In the aftermath, I really hope GTAT management at least gets stripped of their unfairly earned wealth.
Unfortunately the law gives wide berth to these things. But in the future, retail investors should be aware of these kinds of scams. It almost seems like there was this shared delusion on that forum.
I suspect many of those people were exclusively getting their info from that forum, where everything was being spun to a positive light. Like an extreme form of confirmation bias, combined with system 1 thinking. Looking at the other stuff followed there, its mostly speculative tech companies, something like this was bound to happen. I have a question, are people allowed to choose what investments they hold in their ks? There are many, many different types of retirement accounts.
The k used by most workers is only one of them. There are SIMPLE IRAs, which are used at certain smaller businesses that want to offer a retirement plan but avoid the hassle of a k. If you open these accounts with a firm such as Charles Schwab, all of them can invest in individual stocks, bonds, mutual funds, ETFs, REITs, MLPs, or whatever. It will never cease to amaze me how so many folks disdained diversification and ignored the extreme risk with GTAT. I experienced this as an active participant and investor on GTAT forums.
Suffice it to say, I had disagreements with GTAT thought leaders on many fora. The pieces were coming together in a seemingly causal chain of positive catalysts: Not to mention a serious return in a relatively short period of time. I too was a believerwaxing lyrically at times about my impending fortune. Nevertheless, I stayed true to value investing.
I heeded that any emergent company without a track record of top line revenue growth, earnings, and products had a good chance of going belly up…that it was a bet based purely on deduction applied with a positive bias. In this defensive investing context, Sept 9th was still to be my day of triumph, when Apple was supposed to announce GTAT sapphire shipping on their products.
It was the remaining catalyst that would forecast growth and earnings. That was all I needed to dispel the illusion. As this article attests, a lot of folks lost everything when GTAT asked for bankruptcy.
A lifetime of savings. Money for taking care of loved ones with disabilities. Hence, I come full circle to GTAT online thought leaders. A good number of them actively encouraged over concentration. They used their social media stature to ignore risk. Some boasted how they themselves were all in. Believe me, they catalyzed action. They all got sucked in…and badly lost. I feel they should return and clear the air. At least come clean that they were wrong. Group think overrode simple truths about investing risk, diversification, and that price must track earnings.
As a consequence, a lot of families have been devastated. Once again…it never ceases to amaze me how often this happens in the investing community. Some of these people were speculating, knew the risks and when they lost it all they accepted it knowing that it was factored in as a form of gambling.
Sometimes I wish I were a bankruptcy trustee so I could get firsthand insight into a meaningful sample of people who have trouble financially. You would get these people occasionally that were otherwise normal except they made one huge mistake which had wipeout risks that came to full fruition. Is it a trait that one cannot fix or is it something they could have fixed if they tried.
I used to think, in most cases, that the latter is the case but after reading all those posts I am starting to think I was wrong. They are angry, lol. When did helping other people learn become a bad thing? Someone told me about it the other day in the contact form so I happened to read some of the posts, too.
I was tempted to write back: I even run case studies on bankrupt businesses, an idea I stole from some of the best universities in the world and from the old Washington Post Company, which would analyze their acquisitions several years after the fact to see what, if anything, they had done wrong. I run model portfolios using Great Depression assumptions. I read bankruptcy listings in the newspaper. I pull the regulatory filings of delisted stocks.
Learning from failure is just as important as trying to emulate success. It was a month prior, I was writing comments like this onerepeating the same thing I have been for the past 14 years.
They believe what they want to believe.
As odd as it sounds, I still find their situation heartbreaking even though they are entirely to blame for it. The motivation for posting about it was not to make them feel stupid but help even one person — a single person — avoid the same sort of disaster.
It gave me the chills. This was my first introduction to your blog and I have been obsessively devouring posts since yesterday. As a 27 year old, I find these posts hilarious — these mostly Boomer folks had the economy made for them. As Joshua pointed out, many of them already had FU money. Yet, they were greedy and wanted more, more, more. Do you cry for gamblers who bet it all and lose?
Apple to make a global data center at the former GTA Mesa, Arizona Sapphire Factory: Go listen to the conference calls, the CEO lied repeatedly to investors. Every day small business owners but Thier life savings on the line to start a company. When they succeed we call them geniuses and when they fail we say that is expected. Thanks for the open autopsy. He may lie, but numbers do not. This stock is unbelievably hyped with a massive following. The tech is interesting, but everything rides on one product, which has been selling very slowly.
Another one bites the dust! Who knows if MNKD ends up bankrupt, but that forum I linked serves as another case study in the pitfalls of crowd psychology and the importance of recognizing cognitive biases. This is one of those classic blog posts that I return to every now and again.
I remember watching GT Advanced at the time and wonder if I was missing something. My worry was that even if they had managed to produce sapphire glass, their only buyer was Apple, who would have them by the short and curlies.
I remember when Apple used to make its laptops out of titanium, and when the G5 was touted as the best CPU ever; almost in the blink of an eye those things were history, and what if Apple fell out of love with sapphire glass? What happened to all those people? The case histories are depressing. They are like lighthouses, their role is to warn the rest of us. Overall the story would make a fascinating book or long-form magazine article. To help offset bandwidth costs and other expenses of running a successful blog, the site now features affiliate referrals that convert words into affiliate links that pay us for the transaction.
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Thoughts on Business, Politics, and Life from a Private Investor. We Had Our First Korean Bibimbap Last Night Next Next post: A Korean Spicy Pork Stir Fry Recipe for the Brave. Still processing all of this, but this post has an interesting insight: So when is the Kennon Pension opening?
A few thoughts… Yes, the tax loss credit thing is nice. He made it big on one deal. My approach has always been unless I know something specific, put it in cash. Invest in what you know. That anecdote is perfect! Thank you for sharing that. Thanks for publishing this. So many ways of looking at this story and lessons to draw. Misguided sense of ability?
Could be a big problem. Joshua Kennon for senate just rolls off the tongue so easily.
Google the Galveston Plan for a neat alternative to K and Social Security. Most investors should invest in 1 of 2 ways: There are Traditional IRAs, which are like Roths only not as attractive. Thanks for answering this. I have a GTAT story to tell. Hopefully it offers something instructive.
Thank you for writing josh. Thank you for it. Hey Josh, Fantastic post. In case I forgot to say it officially when you made your first post: Welcome to the site! Who knew that 4 months ago, this post would make me an addict to this site. MNKD- based on recent events, this would make a nice case study! Etc What happened to all those people?
Letter from a Birmingham Jail by Dr. Martin Luther King Jr. SinceJoshua Kennon has been the Investing for Beginners Expert at About. In the going-on two decades since he first published for the network, he has built up a body of work of more than 1, articles, essays, and lessons that are available to read for free, covering everything from how to analyze a balance sheet to strategies for portfolio risk reduction. More formally structured than the content on this personal blog, they are a fantastic introduction to the basics of wealth building and asset management for new and experienced investors alike.
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