Schwarzman: Woulda Shoulda Coulda

If you've been around the markets for any length of time, odds are you've taken a healthy loss on something. When you've been around as long as I have, you've taken a few puke-at-your-desk losses over the years. Losses are just a part of the game. You do what you can to mitigate the risk and limit your downside, and you resign yourself to the fact that you'll come out ahead in the long run provided you have more winners than losers.

There's more than one way to be wrong in the market, however, and watching something drop after you buy it (or go up after you short it) is far better than the alternative. Here's what I'm talking about:

They say you should trade without emotion, and I can spout investing platitudes with the best of them. But there's a tiny bit of emotion I haven't been able to divorce from my trading in all the years I've been doing it. I suspect it is the same for many, evidently including Steve Schwarzman. To my way of thinking, the only thing worse than buying something and watching it drop is selling something and watching it go up.

Call it a character flaw of mine, but when I sell a position a little part of me wants the company to file for Chapter 11 bankruptcy five minutes later and for the stock to plummet. I realize that's infantile (and more than a little uncool), but I can't help myself. It's not enough for me to be right. I want the other guy to be wrong.

It's kinda like punching out of a relationship. No matter how cool you leave things, no matter how much well-wishing you part with, a part of you still wants to see her homeless in the gutter six months later (or is that just me?). At the very least you hope she picks up a dose of the crabs somewhere down the line.

So what does any of that have to do with Schwarzman? A lot of you are too young to know this, but Blackstone and BlackRock were once the same company. Well...sorta. Blackstone actually started BlackRock, back in 1988. Blackstone gave Larry Fink $5 million to get started, in exchange for half the new company.

The relationship went south from there. Schwarzman thought Fink was giving away too much equity to new hires (thereby diluting Blackstone's stake) and after four years he'd had enough. Blackstone sold that stake in 1994 for $240 million.

"That was certainly a heroic mistake," Schwarzman told Arthur Levitt on Bloomberg Radio, in an interview that will air on Sunday. "We all stumble on and have some success. But it's a humbling experience to see what you don't do right."

You can probably figure out why it was such a mistake, but to just what degree of a mistake it was may still astound you. That 35% stake the company sold in 1994 for $240 million would today be worth over $16 billion. Schwarzman's end of it alone would be worth over $4 billion, versus the $25 million he pocketed in 1994,

If that's not a kick in the nuts I don't know what is.

It's not like Schwarzman is hurting by any means, but still. That is an almost incomprehensible screw up. I threw up in my mouth a little when I first read about it.

Do any of you feel the same way I do when it comes to selling something? You want it tank, right? Maybe not wholeheartedly, but a part of you does. Or am I just a psycho? I can't even imagine what I would do if I left tens of billions on the table. That would be like one of my ex-wives marrying Xavier Niel and then finding a cure for cancer.

Who's with me???