Growing Rich With Bre-X

1994 -1997

This story begins and ends with Ellen Roseman the celebrated consumer finance writer who appeared for years in the pages of the Toronto Star.

Ellen, a family friend, sat my wife and I next to Ted Carter at her son’s bar mitzvah in 1994.

Ted was a soothsayer. He published a penny stock newsletter from his home in Calgary. He told me that all I needed was $195 and a fax machine to become one of his rich subscribers.

The best way to describe Ted was to start with his shoes. Here we are at a fancy dinner with men in dark suits and women in little black cocktail dresses and Ted’s not even wearing shoes. He’s wearing Birkenstock's over woolen socks. Appropriate for a tree hugger doing sun salutations in the Calgary winter but not right for a Toronto bar mitzvah or the muslin sport jacket and dockers he was wearing. Now winged tipped lace ups wouldn’t have been right for Ted either. He was a scrawny man with a scrawny beard and seven wisps of hair. I think if I had ventured outside his 1963 two tone VW van would have been easy to spot. All in all definitely not a Bay Street stock analyst.

At this time I had a small self administered RSP. We had recently moved homes and the tax rules at the time allowed me to cash in that RSP to buy the new house. There was some money left over. I thought it was mine to play with.

I have an addictive personality. Whenever someone pays attention to me or I do some activity that produces endorphins I easily get addicted. For example I’m a gym rat. Exercise produces endorphins. I’m addicted.

When I subscribed to Ted’s newsletter I became an addicted penny stock gambler because Ted was a good stock picker.  He had a well researched profitable paradigm for predicting the future fortunes of low priced stocks on the highly volatile Vancouver Stock Exchange.

Of course I'm no fool. I tested Ted’s acumen for a few weeks with small bets. Big mistake.  I should've made big bets. Virtually everything he sooth said turned to gold.

My confidence in Ted led me to be pretty vocal about my success. I told everyone who’d listen and some people paid attention and voted with their life savings. What a powerful feeling. My nephew Rob made a killing in Sungold Gaming a small company that had a business plan to build a casino on a remote peninsula in Korea. He made enough money to buy a new family van.

So by the time Bre-X showed up as a recommendation I was ready to break the bank.  Bre-X was a gold mining start up with a developing situation in Borneo. And it was still under the radar.

I was pretty sure when I plunged this time nothing was going down the toilet.

I bought 12,500 shares at 75 cents each. An investment of about $10,000. A lot of that was winnings from earlier smaller plunges.

My timing was pretty good. The price of the shares of Bre-X started heading north soon after I got in. I remember one day telling my wife that “I think we made $18,000 today”. It wasn’t like that every day, of course, but it was exciting.

The whole story of Bre-X is one of the great stock frauds in Canadian history. In 1997 the price of the stock reached the equivalent of $268. It was a wild ride all the way up. Headlines in the newspaper almost every day.

Finally the bubble burst when the majority owners of Bre-X tried to sell their stake to a major mining company and some real due diligence was done. The potential buyer discovered that all the claims Bre-X was making were phony and the mine was worthless.

I had sold most of my shares about a third of the way to the top. So at the end I only had a token position and missed out on the top of the market. It wasn’t so bad. I still made about $300,000 on my speculation.

When I told my son about all this, his reaction was to focus on the two thirds of the potential windfall we missed out on. His typically precise quip was “Do you mean, dad, if you had gone into a coma two years ago we'd have $2,000,000 now?”

Oh yeah back to Ellen Roseman for the end of my Bre-X story. On the day Bre-X collapsed she wrote the front page story in the Toronto Star about the debacle. I was her go to interview for someone who had been in the scam from the beginning to the end.

By the way I didn’t keep the $300,000. By the time I made all this money Ted had gone out of the business and like most addicted gamblers I thought I knew what I was doing and started making some reckless bets. I’ve lost all the money back and maybe a few dollars more.