Hi Patroller, I read that story with interest as well as most of the responses. It occurred to me that such stories are the basis of the "prudent person" laws in many states.
It's remains nearly impossible to uncouple Risk and Reward. Pushedup forgot this basic tenant. Margin buying offers great leverage and increases the potential for reward. Does it not also increase the potential risk? Mr. P. had some sort of "plan" in mind. However, it would appear that his plan was flawed. If he had been running a warehouse for equities, would he have managed his inventory in JBL the way he did? Maybe a better plan is in order.
I'll bet his brokerage doesn't have nearly the sympathy that was displayed by the other readers on Yahoo. Can we assume that Mr. P was a novice investor? I'd be surprised if he were, seeing as how there was already a nice accumulation of assets there before his plan went off the deep end.
I would think that he could be made whole again if he'd be willing to sell into any rally JBL has. Each sale would reduce his margin debt, and, most likely on a LIFO basis, be profitable. Not knowing how much he added as he averaged down, it's impossible to make a complete suggestion. I would think that if he added 10% profit (LIFO) to each of his individual purchases and sold each piece IMMEDIATELY upon reaching those points, he could work his way out of this.
The story reminds me of one of the basic reasons that I invest. In the stock market, it isn't necessary for one person to lose money for another to make money. Very moral!
Best regards, Tom |
