Sunday, December 31, 2006

The day I went to Prison

The day I went to prison turned out to be highly profitable.
No, I didn’t go as an inmate. It was in connection with something else.
My wife and I went to a privately operated prison in Venus, TX. One of the prison employees mentioned how well the company stock had been performing.
It made a lot of sense: Crime is a GROWTH INDUSTRY. Why not invest in it?

My wife and I each invested about $ 3000 in the stock of Correction Corp of America. Almost every day the stock went up. I felt like Clark Kent—“Up, up and away!

Before long my $3,000 investment was worth over $ 30,000 and my wife’s was worth another $ 30,000.

At about that point, I began to wonder if this could go on forever. The stock was selling for over 100 times its earnings. I decided that the prudent thing to do would be to put in a stop-loss order. I convinced my wife to do the same. But to keep from being “whipsawed” I put the stop in at 15% below its last price. That still left me a sure profit of over $ 30,000.

In a day or two my stop-loss order was executed. The stock kept dropping and dropping. I don’t know how low it finally dropped, probably to about the price I bought it for or less.

This experience convinced me that you should never fall in love with your stocks. Better safe than sorry. I could not predict whether the stock could have rebounded after it dropped 15% or if it would keep on dropping.
Tlhere is an excellent article on playing it safe when a winning investment heads south at
The price you pay for safety may cost you a little on occasion but can save you a ton of money on other cases.

Link to IRS forms and publications:


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