Strangest thing happened...

On Monday I was browsing through my RSS feeds and saw that ETrade's stock dropped 50% of its value. It was about 3:00 EST and I was like, "This would be a good experiment on the idiodicy of the short term market."

What I read was that Etrade (NYX:ETFC) had a bunch of bad mortgages on their books and they were going to write it off. Although, I don't use Etrade as a bank or brokerage, I am familiar with their service. Their website is cool and they get a lot of competition from other discount brokers, but come on 50%?

ETFC has a p/e now of 5.33. ETFC has millions of users and a lot of money in deposits. I believe they are worth at least $11.00. It would be a great time for a rival to buy up ETFC and merge all the accounts.

I got ETFC at $3.95. Unfortunately, I did not have a lot in my brokerage account, but maybe if I did have more I would not have bought. It is a fun learning experience. The next day it was up. I almost sold the next day but after I looked at the fundies I knew this stock was worth more than what it was selling for this day. I'm going to hold onto this and see what happens for the next month or two.

Blast From the Past

I like to read articles printed in the past that tell the impending doom of the world. It keeps my mind sold that no one really knows anything.

OPEC: Pumping all they can?

The gist of the article is that, oil prices are at a record high ($42 in 2004 but $98 today), and that it is decreasing consumer spending and increasing inflation. It also talks about OPEC's potential inability to pump more oil.

Inflation sucks. Inflation makes it so that the money you made yesterday is worth less today. The good thing is that many people can make more money today.

What the problem is is not inflation. Of course rising oil prices will cause inflation. Almost everything we produce is tied to oil. Food, transportation, packaging, consumer items, heating, and electricity (a little bit).

But inflation is not the real problem. Inflation my erode money but it does not erode wealth. The creation of wealth is what is important. What made the oil crisis of the 1970s so bad was not the prices but the shortage of supply. Without oil or any shortage of core energy wealth will not be created, and that is what truly will hurt the economy.

Some mistakes, some revelations, and some experiment

I bought more stocks this month and sold some I did not feel entirely comfortable with. I have the mindset that you don't learn until you fuck up. Well I fucked up with a few stocks. I thought I knew the companies and the industry that the stocks were in but in reality I did not. I believe in diversification but smart diversification. Don't buy shit you don't know. For example, I know nothing about clothes or fashion. The last 3 shirts I got was from my girlfriend after she got a free shirt from various volunteering. Should I buy stock in H&M because I heard a special report about them on NPR? Hell no!

In October I bought Proctor & Gamble (PG) because I thought I understood household items. I hate buying things so what would I know about them? I also bought Anheiser Bush (BUD) because I like drinking beer. Never mind that I never drink Budweiser products! If I want cheap American beer I will order a Miller Light. If I want good beer I will get a Newcastle, St. Arnold's, or a Shiner (my favorite).

Oh I'm not done. I got a little overzealous and also bought IRobot (IRBT) and Johnson & Johnson (JNJ). I read an article by Bill Gates that talked about the future and he recommended robot companies. IRobot makes things for the military but they also make that robot that goes around your house and vacuums. I don't have one but I heard it was cool. The vacuum I have is probably 10 years old. I'm also a big fan of Isaac Asimov. There should be a law against naming companies after science fiction books.

I do like JNJ but I think the company was too big for me. And after I learned from my mistakes I started to read into companies that I knew things about. I sold JNJ because I bought Isis Pharmaceuticals (ISIS). I am working on a Ph.D. in molecular evolution and work closely with RNAi and other molecular tools. After reading the technology Isis works on I was ecstatic. It looks really and it is something I would love to be apart of. I bought 15 shares for $16.56 and then bought 4 more for $15.55.

Now don't get me wrong. It is not like I think BUD, JNJ, IRBT, or PG are bad companies. They are just not companies that I feel I have enough information on to invest in. BUD controls something like 50% of the beer market. They are going to get a lot of competition from SABMiller and MolsonCoors with their joint venture in USA, MillerCoors. They have been losing market share to microbreweries over the last few years (I should know I drink that beer). But with hops prices skyrocketing these microbreweries are going to be hurting. Maybe one day I will be more familiar with the market and be able to buy, or maybe the Gambrinus Company, the makers of Shiner, will go public one day.

So I made a loss on PG, JNJ, and BUD, but surprisingly I made a profit on IRBT.

I'm not going to be very conservative in my investments. Later I'll tell how I bough into a company that lost over 60% of its value in 3 hours and then went up 40% the next day.