My friend, I fully admit it… I make mistakes investing, just like everyone else.
People get the impression that because I’m a well-known investment writer I somehow don’t make mistakes in the markets. That’s crazy!
Everyone makes investment mistakes… The more important factor is how you handle them. You must do two things:
- Learn from your mistakes (so you don’t make them again).
- Limit the pain (the losses) from your mistakes as soon as you recognize the mistake.
Sounds easy… But it’s harder than it sounds.
[ad#Google Adsense 336×280-IA]Today, I’ll share with you my biggest mistake, and what I learned from it.
It’s important today because what happened then is happening again today.
I want you to learn from my mistake, so you won’t make it too.
Here’s the story…
On June 17, 2004, Vladimir Putin said “[we] aren’t interested in seeing Yukos go bankrupt,”
My big mistake was I believed him! I recommended the stock! I wrote:
“Until Putin claimed he didn’t want to push Yukos into bankruptcy, the oil giant was either a zero or a home run. Now the prospect of a zero has been taken away.”
Yukos, if you don’t know, was the Russian oil company that – at the time I wrote the story – had more oil than Exxon or BP. But it was dirt – I mean DIRT – cheap… trading like it was going out of business.
Our upside potential was easily hundreds of percent. And our downside risk had been taken away. I said “we know what we need to know… Putin won’t send the company into bankruptcy.”
What a fool I was! I took a politician at his word. That was the crux of my investment thesis.
Putin forced Yukos to go bankrupt not long after. The assets owned by Yukos were sold for next-to-nothing to oil companies controlled by the Russian government.
The only silver lining here is that I used a trailing stop when I entered the trade – a 50% trailing stop! I don’t remember exactly what we ended up losing on the trade – but I’m sure it was darn close to 50%!
It was the worst trade of my career, in my opinion. I say this because this trade really sticks with me as the one where I failed my readers the most. (This isn’t the biggest loser of my career… I recommended a basket of three tiny gold stocks once. I said buy all three. One of the three crashed more than Yukos, but the other two went up by triple-digits. One went up 995%. I don’t feel I failed my readers on that one.)
This week, Vladimir Putin said “I have no intention of invading other regions of Ukraine.”
The casual observer might think, “That’s nice of him – he’s done with his invading for now.”
But what do you think?
Isn’t Putin’s statement similar to what he said about Yukos in 2004?
The most-likely goal back in 2004 for Putin was to get the international community off his back. I’m guessing he has the same goal today.
The general lesson today is simple.
- Never base your investment on a promise from a politician!
- Use those trailing stops! They can and will save you!
Will Putin invade “other regions of Ukraine”? I don’t know… But I do know enough – after getting stung badly – to not take him at his word.
Trust me on this one…
Please, be extremely careful if you’re going to use a promise from a politician as the crux of your investment thesis. And learn from your investment mistakes! This one was from 10 years ago… And it still stings today…