08/24/99

48 Hours: A Web Editor Goes Day Trading

Toe in the Water (Page 2 of 3)

Anyway, by sometime late last year, I'd managed to form the dim notion that possibly I, too, could become an investor, despite my temperamental and educational handicaps. So I took money that had somehow escaped being spent on food and shelter and clothing and computers and essentials for my son, like Pokemon trading cards, and filled out some forms and wrote a check to Etrade for $1,000 to stick in an account. I was taking on faith that Etrade would not spend MY money on advertising or tee shirts or Etrade coffee mugs, or whatever it is they need to run an online investment business.

And they seemed to be pretty decent about the whole thing. They sent me reams of paperwork and information on various, entirely new, speedy and convenient ways in which I could fritter away my $1,000, with some small and reasonable amount of my loss accruing to Etrade as compensation for tracking my mistakes along the way. $19.95 is what they charge per stock transaction - call it $20. You can trade cheaper, and you can certainly trade more expensively. But Etrade also gave me $50 for signing up, presumably enough to nudge me toward some wheeling and dealing. Hah. So now I had $1,050 - I'd already made five percent, or more than I would make on a savings account over in the parallel, non-Internet economy. Fat city, huh?

So I sat tight, and watched, and waited, as the stock market boomed in the first half of 1999. To annoy myself, I calculated how much I would have earned if I had blindly taken a flying leap and bought shares of any of the technology stocks I had started to follow. From January to June, I would have made 40 percent on my worst choice of investment, nearly 300 percent on my best. I sat tight.

From about June 10 or so into August, I smugly watched the stock values drop back to where they had been, without ever having an inkling as to the true worth of anything I was studying. Thanks to compound interest, I now had $1,084 at my disposal. Psychologically, it no longer felt real, as though it was the price of a down payment on a car or the cost of a new computer. Perhaps my detachment contributed to what came next.

I had wanted in on the Red Hat Linux IPO as my first investment. Unfortunately, everyone else in the entire world also wanted in on Red Hat, and $1,084 does not exactly buy you a foot in the door on most initial public offerings, even if it takes no more than a mouse click to move that money from one place to another. So I was unable to buy Red Hat Linux stock Aug. 10 at $14 and sulked as it rocketed above $50 by 4 that afternoon. "Buy some anyway," said friends. But no -- I was back to thinking that it was ridiculous for Red Hat to suddenly have a market value of $5 billion or so, and I wanted no part of it. So I watched resentfully Tuesday morning as RHAT (NASDAQ) soared upward another 20 points before dropping down slightly.

It was time to Do Something. I was tired of watching.

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