Triple whammies hurt, even when they are more like two whammies and a flounder. The beginning of August has been atrocious for my portfolio. Dendreon missed its numbers and the stock, DNDN, tanked. My net worth dropped about half and my semi-sustainable lifestyle is at least temporarily threatened. It’s time to look for a job.
I wrote the book Dream. Invest. Live. because I have decades of experience in stock investing. My investing has enabled a return to college, houses, early retirement, and a new career. Friends pointed out that I could explain personal finance and investing in practical terms, so rather than continually answer questions verbally, maybe I could put them into a book. I did. The basis of the book wasn’t just investing though. Investing is teamed with optimism and frugality. Frugality makes early retirement more likely and more sustainable. Looking at companies frugally provides a perspective that makes personal investing easier.
Investing can be made easy, but it can not be made risk-free. That’s true of stocks, bonds, anything.
I prefer a diversified portfolio, and I tend to invest in companies that I can understand but that may be mis-understood by the mainstream financial institutions. My strategy gives me the opportunity to buy companies when they are small and sell them when they have grown large, and their stocks have finally caught up with the company’s value. It is a risky way to invest though because stocks are risky and misunderstood stocks swing more wildly through the market. A diversified portfolio lessens the chance that they’ll all be down at the same time and increases the chance that some will be up when the others are down.
The chances worked against me. My three most prominent holdings, AMSC, DNDN, and MVIS are all down at the same time. Each has had recent bad news. In each case I think the market has over-reacted, but the market is tending to over-react because fear is peddled in massive quantities since 9/11. The details of each story can fill this blog, but I’ll direct you to my post, “Semi-Annual Exercise“, which has links to the pertinent discussion boards.
I am an optimist. I think American Superconductor will probably see the delayed orders restarted and the superconducting cable business or its other projects begin to generate revenue. I think Dendreon is onto a major innovation in biotech, but the change is so dramatic that medical and insurance institutions are finding holes in their understanding of the treatment. The rest of the pipeline is being treated as if it was worth nothing, which is probably not the case. Microvsion sits and waits for a cheap green laser, which existed but wasn’t cheap enough, and then was delayed, but is hopefully ready any month now.
In the meantime my bills must be paid, and my years of saved living expenses has drastically diminished. Don’t worry too much. Even amidst this dismal period I have enough to take care of bills for at least a few years, especially if my books sell (the other ones have nothing to do with finance), or my photos sell, or if my classes continue to do well. Like I mentioned in an earlier post, I have many “Lines In The Water”. But for now, those revenue streams aren’t enough to pay my mortgage. Very soon I may have to dip into my IRA, years ahead of time; and unfortunately, my IRA is basically those stocks I just described. Maybe they’ll come back. Maybe GGOX.OB will come through strong.
Times like these are when frugality is a comfort. I know what my expenses are. I know what I can cut back. A frugal lifestyle means that it won’t take much money to make a big difference. A job that pays as well as my time as an engineer would dramatically re-establish my comfort level.
I blog because the content of any finance book rapidly ages, with few exceptions. I blog because personal finance can sound abstract and distant, and I think it is important to show the reality, both good and bad. The best way to do that for me is to pass along my experiences. I also blog to openly disclose what I’ve done and how it’s affected me. I don’t want to hide, though I also don’t want to look at my portfolio right now either.
This has not been a pleasant experience. My emotions have churned my stomach and my thoughts have contributed to a headache, but I recognize that it is all temporary. For many stockholders, their reactions are more severe. Some will be scared away from stock forever. That’s why I emphasize that very few people should invest in stocks, but that those who have the skills and particular flavor of fortitude necessary can find a way to possibly fund their life. DNDN went down over $22. The possible range of news could have equally likely risen the stock that much. I’ve got champagne for that.
As I wrote this a friend replied within an email thread. She was checking on how I was doing. I mentioned that with everything going on in my life, “I give the universe the opportunity to positively amaze me. ” She agreed, and she plans to amaze the universe. That’s optimism plus.
To any stockholders in AMSC, DNDN, MVIS, or other beaten-down stocks, I sympathize. To anyone considering investing in stocks, check your risk tolerance. And as I write this I realized that, despite such a dramatic drop in DNDN, the price is above what I paid. I’ve been down here before and I now know the path that we may travel again.
In the meantime, if you know of a good job that could use the skills of a writer/photographer/speaker/innovator/ex-aerospace-engineer, send me a note. And I’ll fire up the word processor and update my resume.
“Never give up. Never surrender” – Galaxy Quest