Jay - what a great example of what can happen on margin...
I had something similar happen to me back in..was it '97? I was in margin and even on extended credit-card credit. Big part of my holdings was Oracle, about 1,300 shares I think, which I strongly believed would beat Informix and recover from the 30s and 20s and "run". Well, then came the big October correction and on top of it, I lost my job. It sure was not fun. You don't sleep well when you are extended to the limit and over and the floor is shaking under you. It's not just a permanent depression, but you become a zombie. I had to sell some ORCL with a loss and some at cost, at 31 or so.
I still made profit that year, but..wouldn't you know it, some time after I happily sold off the rest of my Oracle position, still scared, ORCL started to run, all the way to 80 or 90 I think. I was right about the Oracle/Informix battle, but being forced to sell because of the margin/credit cost me tens of thousands of dollars in profit.
The pain is a great learning experience and unless you go through it yourself, you don't appreciate the risks associated with margin. So, when the current downturn came, I was ready for it, not in margin, but 50% cash and my biggest holding was a gold stock... |
