# Bre-X



## james4beach (Nov 15, 2012)

I have this theory that these forums (as great as they are) give a somewhat misleading view about the stock & investment world, to new investors. It ends up making things look a lot easier and a lot safer than they really are.

The forums are a self-selecting group. People who have done well come here; people who have been *lucky* come here and post about their amazing results (often mistaking their pure dumb luck for investing acumen). But people who got ruined, lost tons of money to fraud, lost money due to stupidity, do not hang around here.

To help protect new, especially novice investors stay realistic about stocks can do for them, I want to bring up the issue of Bre-X. This was a very, very popular Canadian stock in the 1990s and was gaining rapidly. Many retail investors became interested in it, but eventually it crashed and everyone lost everything.

CBC story: Bre-X lawsuit dismissed 17 years later

This lawsuit was just dismissed, so nobody will get anything back.


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## Eclectic12 (Oct 20, 2010)

You can add to the misleading part that by and large (like everyone else) ... the people here want to talk about their successes and not their mistakes.

You can also add to the list:
Laidlaw ... http://www.cbc.ca/news/business/laidlaw-files-for-bankruptcy-protection-1.273380
Nortel .... http://www.businessweek.com/bwdaily/dnflash/content/jan2009/db20090114_375628.htm
Corel .... http://www.itworldcanada.com/article/corel-to-settle-class-action-lawsuit/20425

(I always was amused that I kept getting offers to join the lawsuit ... I didn't see how it could work for me as I'd bought for something like $3 and sold out for $7.)


Cheers


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## james4beach (Nov 15, 2012)

Of course, that's the thing about bragging. You have to focus on your successes and conveniently omit your failures.

Also people who get destroyed by stocks, and disillusioned, stop participating in groups like this. I just worry that new investors who come along can get this idea that -- hey -- everyone is getting rich in stocks, I'm going to do it too!


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## Eclectic12 (Oct 20, 2010)

My co-worker and I started investing in the same year.

He "knew" tech stocks so that's all he invested in. He gave up nine months later as he was down to something like 70% of his original amount. He asked how I could stand the drops and I replied, "what drops? My insurance and pipelines are up so they exceed the few tech stocks that are down".

If he followed through, he is now using an a financial planner.


Cheers


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## kcowan (Jul 1, 2010)

DW lost $2600 on Bre-X. Part of her learning experience. She also sold Microsoft in the early 90s for profit-taking (advice by her broker). I immediately bought an equal amount and sold them 16 months later for a nice gain on TD Greenline.


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## Jon_Snow (May 20, 2009)

Why would anyone hold enough of one stock that if it went to zero they would be "ruined". I am probably overweight in one particular Canadian energy company, but if it tanked it would hardly destroy my finances.

Hopefully people have learned enough not to put their eggs all in one basket.

And of course I would rather talk about my investing successes such as POT, FUN, BTE, CPG, BCE, than my dogs IMG and LTS. Human nature.


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## doctrine (Sep 30, 2011)

This problem is solved by a little diversification. If you have 20 stocks in a portfolio, and each one is around 5% and certainly not more than 10%, then you won't be wiped out. I use up to 25 stocks in my portfolio which means the average position is 4%. If I lost a company in a year, I could make up the difference just in dividends from the others. Avoiding speculative companies can help too - ones without solid after-tax profits and dividends. The closest thing to a technology company that I own are Telus and BCE .


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## Eclectic12 (Oct 20, 2010)

Jon_Snow said:


> Why would anyone hold enough of one stock that if it went to zero they would be "ruined". I am probably overweight in one particular Canadian energy company, but if it tanked it would hardly destroy my finances ...


You don't to be "ruined" or own only one stock for a drastic impact to happen to one's portfolio.

The game developer I chatted with was definitely not ruined but his financial status would have been a lot better if he had harvested some of his Nortel gain. Because he didn't keep up with it, at one point his shares were over $1 million and when he looked again much later, it had dropped to a tiny fraction.

I don't recall if he held to the bitter end.


As for diversification - it has to be across sectors as well. As per the post above, the novice investor who stuck to tech stocks had around twelve but since they were in one sector, it wasn't helping him much when the sector crashed.


Cheers


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## Toronto.gal (Jan 8, 2010)

james4beach said:


> *1. **To help protect new, especially novice investors* stay realistic about stocks can do for them, *I want to bring up the issue of Bre-X.*
> *2.* these forums (as great as they are) *give a somewhat misleading view about the stock & investment world, to new investors*
> *3.* But people who got ruined, lost tons of money to fraud, *lost money due to stupidity*, do not hang around here.....


*1.* You [partially] mean well J4B, but how exactly are you protecting novice investors with this old case & article that simply talks about the dismissal of the lawsuit, which is not exactly a cautionary tale? What lessons do you want investors to learn from it? Had you made such points, that would have been more helpful. Had you listed more than just this rags to riches back to ruin 1997 stock example, would have been even better. But your message most times seems to be that stocks = FWMD. 

This article tells a bit more about this penny stock story.
http://www.businessinsider.com/bre-x-6-billion-gold-fraud-indonesia-2012-7?op=1

*2.* This anonymous forum is not responsible for the actions/understanding of the less than inquisitive types. Those that ask & wish to learn [not simply imitate the failure/success of others], receive top-notch help here from various members, who are extremely patient I might add; even with those that never say please & thank you. I take my hat off to all of them! CMF even chases away the 'tell-tale pumpers' with great success, and for free. :biggrin:

*3.* You said it, people are responsible for their own 'stupidity', not the forum, so you're contradicting yourself a bit by saying that that type does not hang around this forum.  Perhaps if they had, they would have learned to make less stupid mistakes, like for example, learning from the beginning, rather than copy others. As well, there are many who hang around here, that will tell you that they owe part of their success to CMF. Right JS? :wink:


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## Jon_Snow (May 20, 2009)

Word. :encouragement:


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## james4beach (Nov 15, 2012)

Good points, Toronto.gal.

Yeah I'm trying to illustrate caution, generally that's my aim. It's so easy to forget about risk when you're seeing stocks rise so fast like they have been lately.


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## Hawkdog (Oct 26, 2012)

How about the tech bubble!

I still have remnants of 360 networks, one of the first stocks I ever bought, in my account as a daily reminder!!


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## james4beach (Nov 15, 2012)

Good point, of course the tech bubbles and financial bubbles were the big ones. Many stocks wiped out to zero.


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## Eclectic12 (Oct 20, 2010)

I still am amazed as I bought a tech stock that then tanked and then to capture the tax losses it couldn't use, they spun off an junior oil stock.

I would have to check but I don't believe I lost much, without adding in the new junior oil stock.


Cheers


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## Islenska (May 4, 2011)

Speaking of BreX a fellow in this area, part time geologist knew the original crew and he invested in the start-up but baled out `$10 range as he wasn't keen on gold stocks.

Long story short he was moaning the run-up over $100 (whatever it was) but of course as it turned out a lucky move!

There many long shot mining deals in the Precambrian and some huge winners.................but..............can really get burned too


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## sags (May 15, 2010)

GM...........once the biggest corporation in the world.


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