My boss (who really knows almost nothing about investing, but he doesn’t know that he doesn’t know), owns 6,000 shares of Wynn Resorts. That means that he “lost” $66,000 today.
He told me, “It’s not a real loss, because I haven’t sold anything yet. You only lose when you sell.”
Does anybody actually believe that crap?
He has an unrealized loss. Perhaps he refers to realized loss and he doesn’t know he is referring specifically to it? You should educate him about unrealized loses and gains, good luck on that mate…
^Edupristine? Is that you?
That idiot named Warren Buffett.
I guess if you check Zillow or similar, you gain and lose hundreds or thousands of dollars on the house that you live in. Panic now!
Please show me where he said that “paper losses” aren’t real (or some derivation thereof).
^I believe he was talking about reacting to short term volatility. If your boss had an interest in a non-listed private company, he probably would not even be aware of a change of valuation. 10% is nothing in the world of single stock long term ownership.
It’s not a true loss, only an opportunity to lose more!
I generally tell people “If you would still invest the current position size in the company at today’s price, stay in. Otherwise, cut your losses.”
I think investors shouldn’t worry about noise in the share price. But if there is material negative news announced about a company and its share price falls as a result then that is a loss whether you choose to sell or hold.
I think the comparison with a non-listed company is a good one. If a competitor of Wynn was looking to buy out the company and take it private, would they pay less now after yesterdays news. Honestly, I don’t know enough about the situation to say with confidence but I wouldn’t be surprised if the answer is yes but that the decline is less than the initial sell-off in the public market.
For a more exaggerated example, look at Volkswagen’s 3 year share price chart.
Greenie, you don’t belong in personal advisory. You belong in institutional. Unfortunately, whatever tumbleweed-ridden backwater you’re in out in west Texas doesn’t have anything, so you’ve done the best with what you’ve got available. And I say that not as some left-coast liberal elite snob, but as a man that sank a number of years myself in flyover country.
Thus, until you move the family somewhere serious, you’ll be forever condemned to listening to the senseless rationalizations of some bolo tie and dinner plate belt buckle-wearing, cigar chomping, cowboy hat-sporting huckleberry who thinks he has the world under control. And in some sense, he does, since there are no natural predators to shut this fool down out where you are.
I have had to interact with advisors who spout s#!t like this all the time, and I find myself in shock that these people are allowed to operate in the industry unchecked, putting the financial futures of people like my father and mother, grandparents, etc. at risk without knowing the most trivial things about investing. These people should be run, run, run out of the industry.
^i would actually agree with the boss. What he is able to do is perhaps safe his clients - or his personal wealth - from emotionally driven actions.
Greenie gonna run West Texas some day when he decides to do his own deal. Keep collecting these little gems and use them to mock the competition when you’re pitching new clients. Stay sharp in the meantime, don’t fall into their pattern of thinking, which could be convenient when dealing with their clients. Start preparing your future now. Your bosses will not like you soon if you do not fall in line.
I thought it was interesting that bossu has $600k invested in some random casino stock. I wonder what the rest of his portfolio looks like.
The way I look at it is, I lost if my thesis does not play out and loss of value is more important to me than loss of price. If thesis is still in tact, may add more to the position. With that said, I scrutinize myself pretty hard if I have a paper loss and will have to take into consideration the opportunity cost. You’re essentially turning a liquid instrument into one that is locked up until it plays out, if it ever does, so all the risk and cost, must be considered. I think it was Graham who said something like, the market is there to serve you. I won’t let it tell me I’ve lost anything. Probably a bit twisted, but that’s how I think about it.
That way of thinking is fine if you can predict the future, or can do so with a much greater degree of accuracy than the stock market. This is unlikely to be the case, however, even if every person thinks they are genius and can somehow do it.
Ask him if he’d say the same thing if the issuer went bankrupt lol.
^I thought about that (the bankruptcy thing).
I also like CvM’s line, “Pay no attention to that sucking sound coming from your bank account.”
I also like “Have fun with your $66,000 loss.”
He’s a tax accountant, right? So in his world, there’s no loss until it’s deductible.
There’s also some validity to his thought process if you view it in a different context. If the 'Boys make it to the Super Bowl and are trailing 21-17 with 5 minutes left, did they lose the SB? No, not yet because you can’t win or lose the game until it’s over. In the investing context, you could say that the game isn’t over until you actually sell. You can be ahead or behind, but you haven’t gained or lost until you sell. Not saying I agree or disagree, but I wouldn’t be so quick to dismiss the idea as uninformed.
What is the stocks gain / loss YTD?
Higgs has a good point. There are contexts where this interpretation is less crazy than others.
Does he also say “You only win when you sell?” That would be a consistent (albeit unconventional) position. Most people know that paper profits are less secure than realized ones, but they still like to count them. If they count their paper wins but not their paper losses, that’s a problem.
I agree with hpracing that the real question is whether the original investment thesis has changed materially during the period of the loss. If not, it may make sense to add to the position, but if so, and the change is negative, it makes sense to reduce or eliminate the position and eat the loss. In most trading scenarios, the key question is the degree to which drawdowns are considered the effect of noise versus material changes. Don’t react to noise, do react to material company or macro changes. Figuring out one vs the other is tricky, but if you’re not even trying, then you’re just investing with your emotions, which is a bad formula in general.
^He also has a hard-and-fast rule where, if any position drops by 10% for any reason, you sell it automatically.
But I guess that only applies to his clients, 'cuz I don’t think he has any intention of selling.