worst-decisionsEven though I am YOUR GOD (why aren’t you bowing?!?!), your boy Nelly has made a few mistakes in his day, and I’m not just talking about not wrapping up a certain package that one time, if you know what I mean. (I shipped something I sold on Ebay with poor wrapping, which didn’t turn out well… What did you think I meant?)

I don’t talk a lot about my worst financial decisions, because the memories are just…too…raw…dammit. (2 hours and many tears later) Okay, I think I can finish writing this. I am strong. Let’s do this.

Lending money to friends…sort of

Luckily for me, I got this worst financial decisions out of the way early. This one happened way back in 2002 when I was 19.

I had a very rudimentary understanding of the payday loan system. Like a chump, I thought charging 25% for a loan for just a couple of weeks was too much, so I lowered the rate to my co-worker who needed $500 to pay rent to 10%. Next paycheque he would totally pay me back $550. I was the benevolent lender of last resort.

You can guess how this went. 13 years later and I’m still waiting for the cash. He left town and looked very uncomfortable that one time I saw him across the street about five years ago. So I did what any good lender would do — I waved at him and when he waved back I did a cutting motion across my neck.

Never forget, y’all.

Surprisingly, I didn’t let my first failure deter me. I lent several other co-workers and friends money over the next year or so before my friend decided he was going to charge me money for driving me around if I was going to charge interest on loans. We got into a heated discussion about it, mostly because he drove me somewhere and then refused to unlock the doors until I paid him for his taxi service.

After that, I restricted my money lending to strangers. It’s better that way.

Total loss: About $200-$300

That Chinese stock that was too good to be true

Sometimes it’s a little embarrassing to go back deep into the ol’ FU machine and see just how naive and stupid I was back in 2010 when I started this thing. Cynicism for the win, baby!

Back in late 2010, I did a stock analysts of Duoyon Printing, a small Chinese company that was trading for below the cash value on the balance sheet while having ridiculously good earnings. I ended up buying 800 shares at about $2.70 each.

There were warning signs which I ignored, even though Holy Potato tried to talk some sense into me in the comments. The company had $90 million in cash, yet it had just opened up an operating line of credit for $14 million. Why would a company flush with cash need a bank loan? And there were many other Chinese companies who did reverse takeovers of U.S. listed stocks that ended up being massive frauds.

The obvious ended up happening and it went to zero. No surprise there, at least to anyone with a brain.

The good news is the lessons I learned from Duoyon helped me avoid Greenstar Agricultural, which had many, many things in common with Duoyon.

Total loss: $2500

Harebrained business schemes

You know that guy who is always thinking up of new business ideas, but never ever follows up because of some BS excuse? I AM THAT GUY and I hate myself for it.

Over the years I’ve thought about all sorts of terrible business ideas, and not just the ones I’ve mentioned on this blog either. At one point in 2004 I thought I was going to sell vacuum cleaners (mostly Roombas back before they were in stores). I was going to order in Dell computers for people who didn’t know how to use the internet and then include installation of the computer as a separate fee. This was going to be accompanied with a reasonably priced (like, $20 per hour) service teaching old people how to use their computer.

It’s not that these business ideas were necessarily bad. I just didn’t have the ambition to stick through with them to the end. It’s why I’m very careful these days to only even think about new businesses with very low barriers to entry. I probably shouldn’t even bother.

Total loss: probably a few thousand over the years, at least

Buying U.S. stocks on margin

My mistake wasn’t necessarily buying on margin, it was paying too much for that margin.

My online broker (Qtrade) was charging me something like 6% per year for margin on my U.S. account. I had the Canadian money sitting there, but I decided to not exchange it because Qtrade was going to charge me 1.5% to convert the money and because the 6% was a tax write-off somewhat offset by dividends. I also had plans to invest the Canadian cash, which I never ended up fully doing.

(These days I just use Norbert’s Gambit to cheaply exchange CDN to USD)

I ended up holding the stock for a few years. The stock more than tripled over the time I held it, which was partially offset by paying for that margin loan for longer than I should have.

Total loss: About $1,000, less the tax benefits

Betting on U.S. financials in 2008

Betting on Citigroup had the potential to be my worst financial decision, but luckily I was smart enough to make it a tiny position. I only ended up losing about $1000 when I took my tax loss finally earlier this year.

But I more than made up for it by buying a far bigger position in General Electric. I won’t brag about that though, since Nelson of 2009 had no idea how toxic GE’s balance sheet really was. I got lucky picking GE and not something like Lehman, Washington Mutual or Wachovia.

Total loss: $1,000, but could have been $5,000 if I didn’t get lucky picking GE.

This was fun. Stay tuned for sometime later and I’ll talk about all my financial near-misses, both good and bad.

Tell everyone, yo!