Yup.
I don’t think ANYONE saw the bankruptcy event coming, and if they did, I would challenge them to prove it. And be ready for my follow-up questions.
I know GTAT pretty well and just a few weeks before the bankruptcy filing, management had gone on the road saying business was good and their cash balance was fine. Granted they probably lied because insiders had been selling stock but not materially more than they’d done all year. Capex was always a concern as was the leverage, but it didn’t seem like AAPL had a reason to pull the plug on GTAT. Nevertheless, somewhere down the road, something went horribly wrong in that relationship. Things started to go south when sapphire wasn’t in the new iPhone and GTAT had to postpone its business update a couple weeks back, but the stock sold off on this news and I don’t know how one would have inferred that the reason for this was because they’d be filing for Chapter 11 bankruptcy.
The stock was pretty heavily shorted and borrow wasn’t cheap, but you don’t go from a $1.5 billion market cap to bankruptcy in the blink of an eye. That only happens when the market is surprised.
We were short GTAT and this was probably the best outcome imaginable but proves that sometimes it’s better to be lucky than good.
^ To expect mom and pop to understand 1/4 of that is a huge stretch, which is my argument. Not that I have a good solution to this problem but it is a problem. I’m sure if some of the guys here had to plumb their basement, a bunch of plumbers on the plumbing forum would probably be laughing their asses off at the results. Guys like us understand the risk, but folks like this don’t. Instead they’re sold a story, complete with auditor sign off and the sell side screaming BUY BUY BUY! Mom and pop don’t stand a chance in the markets. But no participant along the way has the nerve to tell them. This is why I support passive investing even though I don’t believe in efficient markets. For 99.9% of the population, they’ll be utterly screwed trying to play this game or even hiring a pro to do it for them. The cards are stacked against them and the guardians of the market are asleep at the switch.
I wasn’t predicting bankruptcy and I wouldn’t have called GTAT a fraud. It simply had totally unsustainable numbers. I thought it was clear they could never make guidance in under 1 hour of research. That’s not meant to be bragging since I only had a small position. If I had that much conviction it would gap down 90% I would had a much larger bet on it. It was just a stupid hype stock and I got lucky on the huge gap down. I think the stock would have sold off anyway over time without the gap down though, and that’s why I was short.
There are lots of companies committing fraud but I wouldn’t have pegged GTAT as a fraud, but maybe we’re about to find out otherwise.
higher std.
That forum is depressing reading, fair enough chuck in all your ringfenced cash into some single stocks but don’t gamble money assigned for kids education etc.
personally, I now have the majority of my cash in private ventures. I figure, I’ve already got a sizeable pension pot, high human capital, good standard of living, why settle for passive or benchmark+3% return? Few get rich doing that.
Private ventures? Such as? Things you’re running yourself?
Regulation should start with mutual fund fees. The highest in the world are right here. Some index funds charge close to 1%. I would have thought that the mutual fund industry would have adjusted to the billions of dollars of outflows to ETFs, but it hasn’t budged. That’s what’s hurting the small investor more.
Not running anything myself but trying to soak up some experience with a view to doing so later on. getting tired of this long only equity stuff.
I hear ya. I’m always looking out for investments outside of equities. Private ventures are where you make real cash. I had a 250% return on what I put into my landscaping venture this summer (it did require some work too). So I’m always on the lookout for such things.
I’m into this too. Q4 07 sold all my stocks. Stayed cash for a long while, then instead of going back in 100%, started looking at people I personally know who are certified awesome, who need financing for their idea. There are people who just plain kick ass, who have non-fantasy solid ideas that are near-certain to throw off cash and at least get me back to 1x (there are also people with some really bad ideas).
Not interested in running anything myself though, too much work!
geo / purealpha, will let you know once i will need some startup seed capital
You’re going to laugh, but I’ve been thinking about starting a wood business on the side, as a hobby.
I just love to crack shit open with an axe, I love making fires, I love being in forests, and I love the natural production of energy.
I guess a little lumberjack sleeps in me 
Who knows, maybe something like this can be profitable ?
I also like the idea of having a revenue-generating activity which is not correlated to the banking sector.
^ There is a Canadian wood company named Stella Jones that has easily been one of the best performers in the TSX over the last five years. Now, that’s not firewood but more railway ties and utility poles. I don’t mind the landscaping stuff but I wouldn’t do the physical stuff full time as it takes a serious toll. I helped out my crew (my partner in the biz was the onsite foreman) when they fell behind and I coordinated supplies and ran the back office. It was hugely successful though. But landscaping season here is only 5-6 months so now that’s done. Considering snow clearing next but unsure if I want to make that jump. That business is pretty much do nothing for weeks, then work 90+ hours straight full out. Then nothing for weeks. Repeat. Repeat. But a Quebecois lumberjack Viceroy? That shouldn’t come as a surprise. Maybe hit up the maple syrup business while you’re at it.
Good to hear from some like minded individuals.
I’ve made a good return from investing with an old mate who is now a tradesman and needed some specialist machinery to take the next step.
The other 2 are longer term, now that the CFA is over I’ll hopefully be able to get more involved in the day to day.
I’m trying to get a very small scale property management/development group together as a source of non-finance income. Something that would ideally turn over 2-3 properties a year from the outset- evening and weekend work for most involved- with some rental management as well. I’ve got a fair amount of the labor on board(a licensed general, a plumber, electrician and a few other subs I know), I’ve turned over 2 properties on my own over the last 5 years, clearing around $80K on each, but what I need is more capital, as cash is king when it comes to actually getting a crack at the distressed properties.
Failing that, I’m going to start making cabinets and tables in my garage and taking a loss on each piece.
Yeah I wouldn’t say that it’s in my DNA, because I don’t believe that one is born with a predisposition for stuff just because his ancestors did it, but I do feel weirdly at ease in forests, chopping wood, etc.
Fuck, some of my (yours too, as you mentioned) ancestors (the voyageurs / coureurs des bois) literally slept in holes in the snow doing the furr trade with natives. That’s pretty badass.
Anyhow I’m drifting, what exactly is your motivation for getting in the snow clearing business , if I may ask ?
I’ve got 2 buy to let properties, both needed a lot of work but could have flipped them fast and locked in a short term profit but decided to hold onto them. very little day to day rental management as I dipped my rent slightly below market and vetted tenents, both sets are low maintenence.
I thought about it long term but as you say, it is hugely capital intensive and highly leveraged relying on banks. also, all tradesmen will eventually let you down, i’m sure it’s different in different geographies but where I am it’s difficult to manage them as they will just drop you in an instant for a more profitable job even if you have a relationship.
The properties I’ve done have been “slow motion” flips, in that I buy them, work on them while I live in them for 12-24 months, then roll the profit into the next place or into paying down student loans. I’m likely moving again next spring/summer and if the real estate market is anything like it was the last 2 months, I could conceivably be 100% debt free for the 5 minutes between selling my place and buying another one.
I find these are great investments. I find tradesfolk generally don’t have great business skills and don’t have the financial resources for expansion into higher margin endeavours. Getting involved in these is a winner. Also why I think a plumber with business sense is likely doing better than your average finance guy. Its easy pickings if you’re good.