Today is another of my money diary stories, this one is “How did my gold mine investment pan out?” And, Happy St. Patty’s Day to you! May the luck of the Irish be with ye! If you want to check out some of the other money diary articles after this post, check out the ones below.
My First Investment
The Chain Letter Scam I Fell For
I Had a Dream that the Stock Market Crashed
Gone to the Dogs
The Lottery Secret I Used to Make Money Every Week
Taking Bitcoin Profits, Going Down in Flames, or Holding On
Panning for Gold in a Coffee House
So, this money diary story starts sometime in the late 90s. At that point I was part of a group of about 5-15 guys that would get together once a week at a local coffeehouse/bakery restaurant. We would sit around for hours and talk about all sorts of things just generally laughing and having a good time. One of the things that we talked about were stock and investments.
One of the guys brought us an opportunity one time that sounded interesting. He had a friend who knew a guy that was looking for startup capital for a Nevada gold mine investment. I know, a friend of a friend of a friend. Sounds totally legit right?
Now, this friend, I’ll call him DT for anonymity’s sake. DT was pretty well liked and was a sharp guy. He did on occasion seem to fall for less than credible schemes – like the belief in not paying taxes, or HYIPs (high yield investment program scams). For instance, the just mentioned notion that paying taxes was only voluntary was one of his beliefs at the time. That idea, while totally false, and routinely thrown out in the courts is still making the rounds today.
Dubious Track Record
However, back in the 90s there was a whole subculture of folks who would present seminars and sell books touting the idea. It was popular in the anti-government militia circles. After a few years those running the seminars would land in jail for not paying their taxes and a new group would come along touting the same ideas and selling their books.
Be that as it may, this guy had done quite well for himself and if he had an inside line on an investment that could prove to be a gold mine in more than just the literal sense a lot of us were interested. Also, like I said, he was a smart guy and generally well-liked in the group. I do think he was genuinely interested in helping his friends make a lot of money.
Gathering Funds for The Gold Mine Investment
So, DT brought the group the investment particulars and we all read through the various papers. Truth be told I can’t recall the extent of the particulars and just how much literature was involved. I do recall DT saying that this gold mine investment was going to be a real gold mine for all who invested in it.
The investment itself was for a company looking to take over a non-working gold mine operation out of Nevada. They had done an assay on the gold mine in question and found it had real potential. From what I recall they were looking to gather funds to purchase the mine and equipment. Once they got the mine up and running the plan was to take the mine public. At that point we would all get paid in shares which we could then sell.
At that point, being a gambler by nature (see my Gone to the Dogs article above) I decided to take a thousand dollars and roll the dice. Truth be told I would probably have done more if I hadn’t seen some of the other things he was touting at the time. But in all other respects he was a stand up guy and this investment seemed like it had possibilities.
Ponying Up the Cash
A number of the other guys in the group shoveled money into this as well. Looking back, mine was one of the smaller investments. Another friend of mine put in a couple of thousand dollars and his girlfriend at the time put in $10,000. There was a guy KS who put in somewhat over $1500 and he was a pretty conservative guy. So, a lot of the guys were really banking on this thing paying off.
Just in our little circle of friends we came up with thousands and thousands of dollars. Makes you wonder how much total capital the top guy was able to raise via all of his contacts. What a rewarding scam if that is what it turns out to be, I thought.
After we all put in the money, a lot of the guys, like myself were pretty stoked at the potential, though. Now, I was less stoked because I didn’t have as much invested but also less worried should this gold mine investment not pan out.
And Then We Waited…and Waited…and Waited
So, we were all initially under the impression that this could take several months or even as long as six months before they started really getting going. In the beginning, DT would give a progress report every couple of weeks. As the months stretched on the reports were fewer and farther between. Six months rolled into 9 months which rolled into a year.
After a year, some of us were getting a little worried. But, DT kept us all informed and assured us that things were progressing. As the months rolled on one by one, many of started giving up hope that anything would ever materialize. One year rolled into two years which rolled into three years. Apparently, the operation ran into one problem after another. We were all tired of listening to the excuses no matter how plausible they may have sounded.
After three years of waiting, when any of us brought up the Gold Mine Investment most of us would start to laugh. After four years I think pretty much all of us had given up any hope of ever seeing a nickel out of that thing.
The Gold Mine Investment – A Glimmer of Hope
At about 5 years, DT noted that the owner of the gold mine had filed for a new corporation name and that there was a possibility that this thing could go public on the over the counter market. I’ll believe it when I see it I thought. But then, a few weeks later, he reported that things were starting to happen with the company.
As a couple of months rolled by every few weeks brought more stories that seemed to indicate that this once dead-in-the-water investment might just be getting resurrected. Most of us were pleasantly stunned. Of course, we didn’t know what it meant in an actual dollar way but we still held out high hopes – or even medium hopes!
And, then the day came when DT told us that we were going to be issued shares based on our initial investment that we could deposit into our brokerage accounts. He laid out the amount of shares that everyone would receive and gave us the paperwork to sign. At that point we still didn’t have a sense of what we could make but it looked like we were all going to make something – or at least that is what it looked like.
Holding Fool’s Gold or Striking it Rich – The Choice is Yours
So, we were all issued shares and told that on a certain day they would be available to trade. We were also told that if we want to make the most money possible we should hold our shares and let them appreciate. Evidently a lot of folks were expecting big things from this Gold Mining Company. Most everyone in the group was going to hold their shares hoping for future appreciation and telling others they should do the same. I think they were worried about if we all started selling our shares that it would drive down the price.
So, when the day came that we could actually sell our shares I got a call from my friend KS. He told me that he had sold every share he had. Through the grapevine I heard some grumblings from others that they weren’t pleased that he sold. But, hey it was his money and he made a tidy profit.
Sell or Hang on?
As they say, a bird in hand is worth 2 in the bush. KS now had his bird in the hand. And, there was no way of knowing if those 2 birds in the bush were going to stay there, or for how long if they did. That move by my friend, cinched it for me. I decided I was going to sell 75% of my position and then hold onto the other 25% and see if I could make lightning strike.
When I sold off 75% percent of my position I was actually more than pleasantly surprised. My initial $1,000 investment netted me $23,000! It took awhile to see any return but in the end it was worth the wait. And, of course, my friend KS who had invested more than me and sold 100% must have netted somewhere around $40,000.
But, what about the 25% I had left you ask? Ah yes. That is another story entirely.
Pigs Get Slaughtered in This Gold Mine Investment
So, one of investment guru Jim Cramer’s favorite sayings is that “Bulls make money, bears make money, but pigs get slaughtered.” In other words, if you are holding out for completely unrealistic gains on a stock you might just get slaughtered. That is essentially what happened to my other 25%, not to mention the investments of my friends. In a few words, it was total carnage.
Now, that is not to say that these guys were pigs in any sense of the word. In fact, they were all great guys. They had been told to hang on and that great things were coming for this stock. In fact, within days of the stock opening up, the share price of this gold mine investment started to sink. If memory serves, I don’t think the share price ever got up to the price of what it was trading at after the first day. In fact, I’m not sure any of my friends got out at a price even remotely close to what those who sold on the first day got out at.
What is 25% of Zero?
Sadly, I believe many of my friends watched this stock crater completely. What is my 25% of that gold mine investment worth today? Zero, zip, zilch, nada. A complete goose-egg. If I had sold all of my shares on that first day that we could like my friend KS I would have had an extra 7 or 8 thousand dollars to play with. But, all in all I was happy with the 23 to 1 payout and the decision I made.
From time to time I do think about those who got in but didn’t get out. For instance, my one friend’s girlfriend would have made $300,000 had she sold on day one. I believe when all was said and done she didn’t make anything. That was a shame. I’m not sure how much DT made if anything but I do believe he held for way too long as well. Hopefully he made some money from it but I don’t really know.
Lessons from a Gold Mine Investment
And, that is the lesson for today. Learn when to take profits and when to hold on. Not sure if I really have that lesson learned totally yet or not to be honest.
In the end, this was one of my crazy investments that actually worked out. I’ll forever be grateful for my friend DT for getting us in on this opportunity. Years later I “rewarded” him by letting him know about a similar investment I had gotten into. It didn’t have quite the potentially satisfying ending as this one did. In fact, it was an epic disaster. But that is another money diary story for another time.
Hope you enjoyed today’s money diary story on my gold mine investment. If you have any money diary stories or investment tales of your own I would love to hear them in the comments section below!
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