I’ll never forget those few months in 2002 when I was a day trader on Dow Jones options. I was a validation contractor at a Pharma company with 2 or 3 other folks and we didn’t have much work to do, so this guy John and I started talking about the stock market and he taught me everything he knew.
We studied the Dow every day and watched it rise and fall and rise again. He taught me about Put options and Call options, and in March of 2002 I convinced Erica to let me have $600 and I opened a Datek online account. Over the next 5 months I spent most of my workday reloading Yahoo!’s Finance page. I made a few bad buys, but I made more good ones. By September I had turned my $600 into $2200. I thought I was getting the hang of it.
Then the 9/11 anniversary came up and the market didn’t react like we expected it to. We thought it would bounce up once 9/11/02 came and went, and it did the exact opposite, losing almost 1000 points. (chart shows the Dow for the 2 weeks after 9/11/02)
Just like that my $2200 turned into $686 and I was done. I cashed out my $86 profit and have never had the desire to trade stocks since.
The thing that scared me about the market back then was that it was totally based on speculation. There were no concrete ties to a company’s performance. It was supply and demand based almost exclusively on speculation.
The whole thing made me flash back to high school when i realized that just because Beckett Magazine said this cardboard picture of a baseball player was worth $40, it didn’t mean it was worth $40. It wasn’t long before I realized that a $20 bill in my pocket was much more useful than a Will Clark rookie card in a plastic case, and I sold my entire card collection (which might have been worth $250 in Beckett) for $80 to a neighborhood friend. Some days I regret that, but mostly I don’t.
The market is taking a beating these days, and analysts say they don’t know where the bottom is because truly, they don’t. Eventually folks will probably start to see the cheap stock prices as a great opportunity to buy, and the market will head back up again. But there’s no guarantee.
It’s all just speculation, and it reminds me of a Bible verse.
“Some trust in chariots (stocks, bonds, gold) and some in horses (real estate, jobs, bank accounts), but we trust in the name of the LORD our God.” – Psalm 20:7