When I was overseas in 2011, something dawned on me in an early-morning hour. The Big Revelation was that Fannie and Freddie were STILL backstopping millions of mortgages across the U.S., and I could scoop up FNMA and FMCC shares for pennies apiece. Yes, there was no guarantee they would ever be worth anything more, and yes, there's a reason sane people advise other sane people to stay away from de-listed stocks.
Still, I scooped up a few thousand shares and just sort of sat on them. I watched the temporary fluctuations and realized that if they ever somehow regained even a fraction of their initial value, my life could become very, very different.
But I would see them do a "run-up" and flirt with the $1.00 mark, only to run back down. I saw it time and again. Last week, I did something impulsive.
I sold the entire pile.
When they were around $1.40, I just cashed the heck out. I figured the common shares were about to take another dip down, because they were hitting the peak heights from March. Now was the time to pull my chips off the felt, take a few free mortgage payments out of it, and call it good.
Last I checked, they're flirting with five bucks. Each. If I were still holding that entire pile, I could NOW cash it it in and never make another car payment. If they were to double again, and I were still holding, I could pay off my entire Stafford Loan, too. Two more doublings -- still holding -- and I could send Wells Fargo a check. For my entire mortgage.
No, I'm not joking, and please don't call me Shirley!
I feel like the casino analogy is appropriate, because unless someone knows something I'm not privy to, there's simply no guarantee that Fannie and Freddie profits will return to common shareholders. This is not the same thing as a BAC, C, or AIG investment back in 2009.
I realize I didn't really *lose* anything.
But the lesson I'll take is to exercise some discipline when selling into a rally. Hindsight has that special Splendid Splinter sort of visual clarity, but I woulda could shoulda done something like this: Dump 500 shares at $1.50. Dump 500 more at $2.00. Dump another 500 at $2.50. And so on. That would've meant nice piles o'cheddar along the way without missing out on all the upside of the roulette wheel that just keeps hitting someone's lucky number. Had I shown some discipline, and done this, I'd still be holding shares, and progressively ticking off the bills I wouldn't be paying again.