Tuesday, August 27, 1996
If Your Boker Hands You Lemons, Thank Him.
by Loberweger

I've never been big on the aphorism "if life hands you lemons, make lemonade." It's not that I'm a pessimist or that I have any particular disdain for citrus. It's more an unwillingness to admit that life hands you anything. I've always believed in the notion that you shape your own destiny, that you create your own fortune -- good or bad. Last year, however, I had an example of that oft-used expression lobbed into my life like a hand grenade. Only with slightly greater impact.

My foray into the lemonade business began last December. For years, my husband and I had had a very distant relationship with the money in his family's "partnership" account with a certain brokerage. After all, the money had been generously put there by my father-in-law and so we felt no real attachment to it. We received annual statements, looked them over, shook our heads over the amount of money his siblings had withdrawn (and cringed at the sums we had taken), and went more or less blithely on our way. The money in the account remained pretty consistent over the years, which upon reflection is a real trick considering that at least 20-25% of it was withdrawn annually to fund weddings, down-payments, vacations, nose jobs, etc. (Hey, don't look at me. My nose is fine.) The money didn't grow much, but that was okay. We were happy with the status-quo.

Until last year. We received our traditional year-end statement. I opened the envelope and my heart started palpitating. Our account's value had dropped over 60%. Sixty. Six-Oh. In four month's time. A few years before, we had transferred the account from the family's long-time trusted broker to another guy, an up-and-coming friend of my sister-in-law. One who wasn't so stodgy and conservative. One who knew how to "make the bucks." For the first couple of years, he did just that, increasing the value of our account in spite of the family having made some heavy withdrawals. We loved him for it. In 1995, however, he lost it all back, along with another gigantic chunk. Or gigantic to me, anyway. No, on second thought, and on a pure percentage basis, I'd say it would be universally recognized as GIGANTIC by all.

How did this happen, you ask? We've asked ourselves the same question. After all, it would seem to be a particularly unfortunate person who was capable of losing that much money in a year when the market was up so much. Basically, he accomplished this dubious feat by chucking the concept of diversification completely out the window. He just kicked that sucker right out and watched it make a big splash on the concrete below. Yuck. He invested us almost completely in one type of stock -- health care. Apparently, the end of 1995 wasn't a good time for health care stocks. Or at least not these particular ones. He also seemed to churn us in and out a good deal, and also showed an uncanny knack for selling the winners and hanging onto the losers. In a way I can't blame him for that. Because of our family's constant withdrawals, we probably forced him to sell more often than he would have. The remaining money which wasn't invested in these crumbling stocks was socked away in some of the most mediocre mutual funds I've ever seen. Proprietary mutual funds. Which meant that the process of extracting ourselves was doubly arduous. But extract ourselves we did.

So, I'd like to thank him. He handed us lemons (60% fewer lemons than we'd had at the end of 1994, mind you), and we were put in the position of having either to make lemonade or season a whole lot of shrimp. It was the kind of wake-up call that comes infrequently in life -- the kind where someone snaps up the shade and douses you with cold water. My husband and I were forced to take matters into our own hands. We were pushed to teach ourselves everything we could about the stock market. Our education led us to the Motley Fool area and the rest, as they say, is herstory.

We were also compelled to examine our own goals and dreams and recognize that it'll be mighty difficult to send a kid to college (once we have one) or go on an exotic safari if we keep taking money from our account. We had to prioritize, get our credit situation in line, really think about what that money meant and what our responsibilities were. We also had to make a commitment to add to that money rather than subtract. It was, and continues to be, a better education than four years of college. Where we had once been complacent we are now active -- studying, discussing, researching, calling for investment packages, subscribing to "Investor's Business Daily" and slowly learning what all of those numbers actually mean. In short we are making lemonade. Only time will tell how good it is, but the process itself has proved that something bitter can be made into something awfully sweet.

--- Lorin Oberweger

Transmitted: 8/27/96