The joke's on Nortel
By LINDA LEATHERDALE
While I was away vacationing on a secluded island, near my hometown of Orillia -- away from phones, TVs, computers and, heaven forbid, newspapers -- this Nortel joke was making the rounds via e-mail.
My real estate buddy Alan Silverstein sent me a copy, and jokingly added that our Bay Street friend, Fred Ketchen of ScotiaMcLeod, would likely get a laugh from it, "after crying in his beer."
THE BEER STORE
This is how the joke goes:
On July 26, 2000 -- two friends, Jim and John, each got a $1,000 bonus from their boss, Nortel Networks.
Jim, being an intelligent, financially-conscientious person, put the whole $1,000 in Nortel Networks' stock. With his $1,000, and the transaction cost of $35, he was able to purchase seven shares at $123 each. Having watched the Nortel stock price climb and climb, he felt very good about this investment, happy that he was preparing for the future.
John, being a more care-ree sort, did something very different with his money. John borrowed a friend's truck, drove to The Beer Store, and bought 33 cases of beer. John also felt very good about his investment - 33 cases X 24 = 792 bottles of beer. John, also being an intelligent guy, calculated that he could drink about 15 bottles a week, and wouldn't have to buy beer for a whole year.
Jim, of course, was appalled at John's purchase, and constantly berated him about it. As months went by, Jim excitedly watched the stock prices, and saw Nortel shares were slipping. "It'll go back up," he'd say to John. John, who was reaping the benefits of his investment on a daily basis, would reply, "ya, it will. Hang in there buddy."
The value of the stock continued to fall, while there was the beginning of a noticeable dent in the beer pile.
Midwinter came. Jim's stock had dropped to about half of its original value, and John's beer was about half gone.
Jim, sure that Nortel's shares had hit rock bottom, was still berating John for his frivolous purchase, telling him, "Your beer will be gone in six months! Who knows what my stock will be worth?!!"
Well, summer came, and hard times hit at Nortel. Both John and Jim were laid off. Just weeks ago, desperate to raise some cash to help him through the rough time, Jim sold his seven shares at that day's value of $12, and got $84. But after paying a $35 transaction fee, he was left with $49.
Jim stopped by John's house later that day (everyone needs their friends during tough times), and as luck would have it, there were two bottles of beer left. John, being a compassionate friend, offered to share his last bottles of beer with his friend.
Jim appreciated the gesture, and enjoyed the cold beer on a hot summer's day, but he felt a bit guilty. "At least I got $50 out of it -- you now have nothing."
SPEECHLESS
John replied, "that's okay" -- then asked his friend to help him load up the truck to return the empties. Off the two drove to The Beer Store. John went to the counter to collect his refund on for the bottles. The clerk said, "now let me see, 33 cases times 24 bottles, at 10 cents per bottle, that comes to $79.20."
The clerk handed him the money. Jim was speechless. Can you imagine how the poor guy would feel after discovering that over the course of the last year, his $1,000 stock investment left him with $50; while his friend's investment in beer left him with $80?
The author of the joke then leaves it up to readers to come up with their own "moral to the story."
After reading the e-mail, I was on the line to Ketchen.
"You've gotta read this joke," I urged my friend, who at my RRSP seminar last winter, predicted Nortel shares would bottom out at $29. Yesterday, after hitting a new low of $9.25 in mid-day Nortel closed at $9.30, down 35 cents on the day.
Ketchen said the joke had been making its round in brokers' offices all along Bay Street. "It's a funny story," he replied.
Still, Ketchen remains bullish that this stock will not bite the dust, and, believe it or not, could hit its lofty $124.50 high again. "It may take 10 years, though," he cautioned, "if it increases at 30% a year."
If investors aren't willing to hold on, Ketchen offers this trick. "Let's say you've cashed in some investments and enjoyed capital gains. To offset the taxes, why not sell your Nortel shares and claim a capital loss."
Bottomline, says Ketchen, is this bear market, that began a year ago, is getting long in the tooth, and can't last forever.
"Since the 1970s, we've had five bear markets, which averaged eight to nine months. The longest one lasted two years," he said. "We've survived them before, and we'll survive them again."
Then he quipped, "Linda, did you see how well your CIBC shares are doing?"
canoe.ca
In a fair and just world, this post would mark the bottom. Unfortunately, the world isn't really fair...
Regards, Rob |
