The Toughest Trade I Ever Made


It was 2005 when The Tough Guy decided to start trading stocks to try and prosper a little more. The market was ripping on a consistent basis. Tight stops were the order of the day. And a 2-3% rise in a day or two for many stocks was a common occurrence. In the first two years of trading the portfolio went from $25k to $40k and paid for the vacation of my life in Maui. Things were great. The plan was working. At that rate, The Tough Guy would be retired by 58, a millionaire.
But all good things don’t last. The bubble burst in ’07. Financials tanked, commodities fell even worse, and eventually the S&P hit 666. And my home run stock sunk to the 50’s from over 128.
Being a rookie, and really not understanding the difference between a stock correction, crash, and entire market correction, The Tough Guy tried to hang in there, and even bought more to average the price lower. The fundamentals were great, and it was in a niche that peaked in the last half of the year. Even paid a divvi! It’s gotta bounce back. Biggest mistake of my life, monetarily. The news was terrible all the time. This bank going bankrupt, that company closing. But the focus was only on the companies in the portfolio. One third of the portfolio was dumped and reallocated to “sure thing”. And then it was margin. And more margin. Until it was time for the first margin call.
It was one of those shitty eye openers. ” How can I owe this much now?” Being forced to liquidate everything possible and then doing the unthinkable, borrowing to pay off debt. That sucked. It hurt. Still does to this day. Until the debt is finally paid, it always will. So the portfolio went from 12 stocks to 5 penny specs and $1k to play. It has grown in the 5 years since. Not by leaps and bounds. Mainly because it is trying to pay off the debt by itself. But still makes a difference. Want a definition of the average small
Investor? Look no further. We spend hours doing our homework. And for the most part, it works. Lesson learned was to never, ever, use margin for more than a day. And while averaging down a price is good, it just didn’t work in ’08. Oh, and the stock that was so stubbornly and disasterously held? Potash of Satskatchewan, $POT.
Don’t sell in May and go away. Stick around and selectively short. That what The Tough Guy Sez today.


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