I don’t know if you’ve noticed, but capitalism in a crashing market is not as much fun as capitalism on the way up. It can be hard on manners, mood and general decorum as you watch those Pina Colada’s melt away with each new bar graph.
Fortunately, I have never been burdened with sufficient surplus
funds to get me into any kind of real trouble. My brief, almost accidental forays into the market have been so absurdly unsuccessful, it is a natural safety harness. I prefer to lose my money making bets on actually buying or starting new companies, than trying to figure out how well someone else is going to do in their business.
That doesn’t mean I don’t get to live on this roller coaster with the rest of you. The psychology of the markets always trickles down to the rest of us civilians and that is happening now.
I have this little investment that is getting littler by the minute called March Networks. I got the shares as part of the consideration for a business I sold some years ago. A couple of years after the transaction, the shares were worthless.
I didn’t feel badly about the value at the time because I knew the risk, which is why I sold the business in the first place. Then the company changed management, got a life, and went public at $11 a share. This was a miracle and I was thankful.
I was so thankful I sold half those shares immediately and the next day the shares started to make an inexorable climb to $39.
I found it hard to feel good about the 11 dollars a share, which was a gift from heaven after witnessing the 39 dollars a share I was missing on the half I had sold.
When it got to $39, I knew it was time to sell. I called to give the sell order to my stockbroker and he said hang on. You don’t need to sell he said and you should always have some speculation in your portfolio. I neglected to tell him I had no portfolio. I just said there is no way the stock is worth $39 or would be in my life time again and then took his advice and kept it. There is no solace in being right.
The other day as it slid down past $8.50 (probably five bucks by the time you read this), I declined to calculate how much I had left on the table, but as you can imagine for a man of modest means it was not inconsiderable. I’ve decided to ride it as low as she goes because although it would make sense to sell it now and cut my losses I would need therapy if it ever goes back up to $39.
Anyway, my day was not half as distressing as my friend Pierre Karl Péladeau, owner of Quebecor. Well, I say friend in the formal sense. I spent a day with him in my car 15 years ago traveling to southern Ontario, looking at some 20 newspapers I owned at the time, which were for sale and which he was interested in buying, although not at the price I was asking. As I recall, of course I recall, the markets had plummeted much like today and my manners were being tested.
Since that drive, Pierre has been busy buying stuff and he now owns more than 200 newspapers in Canada including the Sudbury Star. Although the paper side has gone well the value on the printing side of Quebecor (Quebecor World) has been destroyed. What was worth $40 a share a few years ago is worth nothing today. The company has sought court protection.
I’ve always admired the idea of markets, but the problem is they are run by people.
Even at a farmers market down the road where the first bushel of apples on Saturday morning is $38, the last price of the day will either be $55 a bushel because everybody is making apple pie or $10 a bushel because it snowed, and no one showed up. Markets don’t lie, they just get distorted. The farmer in the end does not want to go home with perishable stuff. Come early and you pay a fair price that has a reasonable relationship to the cost of goods or come late and you get hosed or you get a deal.
Brutal but efficient. Tip. If Mick Davis (chairman of Xstrata plc) says it is time to sell. Sell. Even Mick might have missed the $39 moment this time round. We’ll see. Happy Capitalism.
Laurentian Media Group