Podcast Episode - Don't Be An ‘If Only’ Investor

Listen to Podcast Episode:

For this special Thursday edition of Suze School, Suze continues the lesson from the previous episode about ExxonMobil’s purchase of Pioneer Natural Resources (PXD).  You’ll learn why being an “if only” investor is one the biggest mistakes you can ever make and what you may expect, should this deal close.

Podcast Transcript:

00:00:28
Suze: October 12th 2023. Welcome everybody to the Women and Money podcast as well as everybody smart enough to listen, Suze O, here.

00:00:40
Suze: No, I don't hear little KT's voice. Wanna know why that is because KT somehow two or three days ago came down with a horrific, horrific cold and cough where she is coughing almost all the time. So she can't do today's podcast.

00:01:04
Suze: And I don't know if you can hear it in my voice, but I think I took that from her. Not that I took it away from her,

00:01:12
Suze: but I don't wanna say she gave it to me because KT would never give me anything that wasn't good for me. But because it was my choice to stick around her when she was coughing and doing everything else, feeding her and on and on. I think I took it, I took it and made it my own as well. So we'll see, hopefully that will not be true. But if KT gets better

00:01:37
Suze: then what will happen is she will be back on Sunday and Sunday, we will make it Ask KT and Suze anything and today will be Suze School for those of you who want to ask a question and hopefully KT will pick it. That's when we answer the questions you write in on, Ask KT and Sze anything

00:02:02
Suze: all you have to do is write to ask Suze - Suze podcast at gmail dot com.

00:02:10
Suze: And if KT picks it, I will answer it on this podcast. Now, before we begin Suze school

00:02:20
Suze: today, I just want to say my heart, KT's heart goes out to everybody in Israel.

00:02:29
Suze: I mean, I can't even imagine

00:02:33
Suze: what the parents are going through, what people are going through there. But let's keep our fingers crossed that something happens for the good sooner than later. But I personally do not like how it's escalating in many ways. So we have to watch it also for many, many reasons. But I just wanna say that before I began Suze School.

00:03:01
Suze: So since today is Suze School, take out your little Suze notebooks.

00:03:07
Suze: I'll give me a second to do that since you weren't expecting a Suze School today. Although you should probably always listen with a Suze notebook and write down things even with Ask KT and Suze Anything. But what makes me laugh a little bit here is that I have a niece by the name of Alexis Tandy.

00:03:27
Suze: And I know Alexis, you're listening and you're just, I can just see your little face right now going oh no. What is she going to say? And the other day Alexis wrote me and said, Suze, I have an idea for you. Why don't you create a little Suze notebook and you can have things in it, like definitions and everything and sell it to everybody.

00:03:54
Suze: And I said to her, Alexis, Suze Orman doesn't sell tchotchkes, which means little things that aren't necessary that you are being offered to buy. But really you don't need to buy them at all. Suze Orman doesn't sell things like that. I never sold

00:04:14
Suze: you are approved or denied t-shirt. We gave them away. I never sold a Suze Orman show cap on my CNBC show or a mug or anything. I know all the shows did that and that's how they make money.

00:04:30
Suze: My job is not to make money off of you. My job is to get you to make money off of your own money and not to buy things that you don't need. There is nothing wrong with you writing on the back of scratch paper. I don't care where you take your notes and put it all in one place. But no, I am not selling you a Suze notebook. It's really just that simple.

00:04:58
Suze: But for this particular Suze school, I can tell you you're going to need it and the reason that you're going to need it is that this Suze School is a continuation of last Sunday's podcast where I tried to educate all of you on what was happening with pioneer natural resources

00:05:19
Suze: or PXD, which was one of the stocks that I've been recommending now for approximately three years. And the main reason that I recommended it was for its dividend. Same thing with Devon and same thing with Fang. Um all these other, you know, oil stocks and XLE the ETF. But anyway, Fang, by the way, is Diamondback. That's its symbol FANG.

00:05:48
Suze: But that's why I did that when the stock prices were so low

00:05:52
Suze: and their dividends were so high.

00:05:56
Suze: That was like, how do you lose on that?

00:05:59
Suze: So since that time

00:06:02
Suze: right now, you have a stock here. PXD

00:06:06
Suze: that is being bought out by ExxonMobil on Sunday. We did not know the exact details of it. Was it going to be an all cash deal? Was it going to be cash and shares? Was it going to be all shares? How much were they going to give you in shares? How much would they give you in cash? We did not know any of that.

00:06:31
Suze: But yesterday morning, they officially announced that Exxon is buying out PXD at $59.5 billion. And essentially that comes out to about $253 a share for PXD. Put a pin in that for a second

00:06:54
Suze: on Sunday

00:06:57
Suze: when we were talking about this PXD had closed at $237 a share.

00:07:06
Suze: And for many of you, because you bought PXD so long ago and you dollar cost averaged into it as it went up and then it came back down again and everything that was a tremendous profit in that stock, especially when you include the dividends that they were paying you over the time that you owned it.

00:07:33
Suze: And my advice to you at that time was that if it were me, I would probably sell it.

00:07:41
Suze: And the reason that I gave you that advice on Sunday is I am an investor. I am not a trader

00:07:49
Suze: once I see a really good deal on the table that I was not expecting because the truth of the matter is I didn't want PXD to be bought out. I wanted to keep that stock for a long, long time because why, because of the dividend?

00:08:09
Suze: Isn't that why we bought it? Isn't that what I would say to you? You're doing it because of the dividend,

00:08:16
Suze: however, all right, it got bought out now

00:08:22
Suze: back to Sunday. So when I see something like that happen and I see a stock jump from $215 a share to 237 on the news, I'm like, I'm out of here, I'm taking it.

00:08:37
Suze: It is how it is. So that's how I think about money.

00:08:43
Suze: I'm not a trader. I'm not a gambler. I am an investor and I have never lost money taking a profit.

00:08:54
Suze: I've also seen too many of these deals absolutely fall through where all of a sudden something goes wrong. The people striking the deal, they decide, wait a minute, I'm not gonna do this and then the stock plummets and who knows how long it stays down there.

00:09:15
Suze: But given that it was a solid deal and I kind of had a feeling that it would go through but not knowing what was the structure of the deal going to be?

00:09:27
Suze: Was it going to be all cash? Was it going to be stock? Was it going to be stock and cash? I decided, you know what,

00:09:37
Suze: there's other places right now that I think one can invest money do equally as well and just move on

00:09:46
Suze: come Monday morning,

00:09:49
Suze: many of you sold and you wrote me and you said you got $241 a share,

00:09:56
Suze: many of you wrote me

00:09:58
Suze: and you said I'm just gonna hold on and I'm going to see what happens. You now were playing the, if only game

00:10:10
Suze: and the, if only game is one of the most dangerous games you can play when it comes to investing and I'll get back to that in a second.

00:10:23
Suze: You said,

00:10:25
Suze: I'm gonna wait and hold and see what happens. Then what happened was after the stock traded Monday morning at 241 it went to 240

00:10:39
Suze: 239, 238, 237, which is what it closed at on Friday.

00:10:48
Suze: And as the stock then went down to 236 and it started to go down, the people who decided not all of you, but some of you decided, oh, it's going down. Now, I missed it. I could have gotten 241. If only I had sold it at $241 a share. But now it's at 236 I'm just gonna sell, I can't take it anymore. And so you sold many of you wrote me and said

00:11:17
Suze: you sold at 236. And then all of a sudden the stock started to go back up again

00:11:25
Suze: and it was, oh, if only I had waited, if only I had been more patient, I could have gotten $241 again,

00:11:37
Suze: then the announcement came out

00:11:40
Suze: and then the emails came in. If only I had waited, I could get $253 a share. If only I had waited, then there were those who wrote me and said,

00:11:53
Suze: I'm going to wait and I'm just gonna get 253 $260 a share

00:12:00
Suze: again last night. By the way, PXD closed at 241 again. So it seems like it's trading right in that area during the day. Yesterday, it went down 237, 236 and then back up to 241.

00:12:17
Suze: So I don't know where the stock is going to go, but you just need to see that it is trading around this area.

00:12:26
Suze: Well, here's what I want to tell you. Number one,

00:12:31
Suze: you are not to be if only investors because if you do that,

00:12:38
Suze: there will come a time where maybe you should have waited because maybe you would have gotten $253 a share.

00:12:48
Suze: And even though you made money at 237 or 241 and you made good money on it,

00:12:57
Suze: especially again with the dividend

00:13:00
Suze: and in your head, you're saying, if only I had waited, I would have gotten 253. The next time, something like this happens, chances are, or even if you see a stock that you own going up and maybe there's news on it, you're not gonna sell it even though you have a profit in it because you're gonna remember back to what happened in this particular scenario

00:13:25
Suze: and you are going to wait,

00:13:27
Suze: but probably in that circumstance, it will go down and down and down.

00:13:36
Suze: And so you have to base your decisions when it comes to buying and selling stocks on. Are you happy with the gain that you got? Was it an unexpected gain you have to make decisions on, are you sad that you lost some money?

00:13:58
Suze: But you're not gonna wish and hope that it just goes back up again

00:14:02
Suze: because some people have written to me and said things about Devon that if Devon, which is, uh, another energy stock that I had all of you buy for the dividend. Well, if only Devon wasn't in my retirement account, I would have sold it.

00:14:24
Suze: I'm so sick and tired of waiting for that stock to go up. But the excuse then was, if only it wasn't in my retirement account, what is wrong with you? Are you crazy if you don't want to own a stock because it's going down and you don't have faith in that stock anymore? Sell it. Why would you keep a stock simply because it's in your retirement account

00:14:51
Suze: and you don't want to sell it because you can't take a loss off your taxes as if you had owned it outside of a retirement account. What kind of thinking is that?

00:15:03
Suze: So one way

00:15:05
Suze: that you can kind of decide, should you be buying or selling a stock?

00:15:12
Suze: Is this

00:15:14
Suze: if you didn't own that stock and you had the amount of money that you have invested in that stock, but you had it in cash, would you buy that stock right here? And right now?

00:15:30
Suze: And if the answer to that question is no, I would not. Now, what are you keeping it for?

00:15:38
Suze: If you wouldn't buy more of it? You need to sell it. If the answer to that question is, yes, I absolutely would buy more. You keep it, if the answer to that question is, I don't know, sell half,

00:15:54
Suze: you don't have to be an all or nothing investor. Do you hear me?

00:16:02
Suze: So you have to really stay calm, keep your head and not try to get every single dollar out of a stock.

00:16:13
Suze: Obviously, every time you make a decision you have, when it comes to selling a stock, you have to decide what will you get after taxes. Now, the example that I gave you Sunday was if you owned PXD in a Roth IRA, because that's where many of you own the stock.

00:16:37
Suze: When you own stock in a Roth IRA, you need to write this down because many of you have gotten this wrong.

00:16:46
Suze: When you own stock in a Roth IRA,

00:16:50
Suze: there is no capital gain and there is no loss because what's in there is essentially tax free to you when you go to take it out later on in life.

00:17:04
Suze: So even if you sell a stock in your Roth IRA, as long as you've left the money in there, you haven't withdrawn it,

00:17:14
Suze: but you've left it in there. Let's say

00:17:17
Suze: there's no capital gain, there's no ordinary income tax. There is no loss. So a lot of you have gotten confused on that.

00:17:28
Suze: So taxes do not come into the equation of selling a stock when you own it within a Roth IRA or truthfully a traditional IRA or a 401k for that matter if you happen to sell a mutual fund or whatever you own in your 401k plans or 403b or TSPs out side of a retirement account,

00:17:55
Suze: if you own a stock for less than one year

00:18:01
Suze: and you go to sell it and you have a gain,

00:18:05
Suze: it is taxed as ordinary income to you.

00:18:10
Suze: Once you have owned a stock for over one year and you go to sell it, it's taxed at the capital gain rate, which is a whole lot less than ordinary income in most cases. Ok.

00:18:29
Suze: Also, if you have a loss outside of a retirement account,

00:18:35
Suze: you can sell a stock that you have a loss in

00:18:42
Suze: at the same time or any time during the year. A stock that you sold where you had a gain in it.

00:18:50
Suze: And if you sell the stock that you had a loss in any time within the year that you took a gain where you sold the stock that you had a gain in,

00:19:02
Suze: you can offset some of the gain with all of the loss or maybe you could offset the entire gain with the loss that you took. All right. The only thing you have to know is if you do that and you sell a stock at a loss to offset a gain outside of a retirement account,

00:19:31
Suze: you cannot buy that stock back for 30 days. If you do the offsetting of taxes will be disqualified, that means you can't buy it back even in your ira in a different account, you cannot buy it back. So many of you are thinking that if you have a stock that you have a loss in, outside of a retirement account

00:19:58
Suze: and you sell it, you could then offset the gain

00:20:03
Suze: on PXD. That's in your retirement account.

00:20:07
Suze: No, it doesn't work that way because you don't have to pay taxes on the gain

00:20:14
Suze: in the retirement account. Got that everybody. So, so many of you are asking that question, that's why I went into it again.

00:20:25
Suze: You should mark this podcast so you can go back and listen to it over and over again. So you can understand exactly what I was talking about. Let's go back to PXD for a second here.

00:20:40
Suze: So here we are. And the deal right now is pretty official

00:20:46
Suze: that ExxonMobil will be buying pioneer pxd for $253 a share. Here's what you need to understand. This deal is not going to happen until sometime in 2024. Number one. So it's not gonna happen overnight.

00:21:09
Suze: Number two, this is a deal where they are going to buy it out in shares of ExxonMobil. This is not a cash deal. Now, I would have thought with all the cash that ExxonMobil has on hand, it could have been an all cash deal, which means they would have given you $253 a share if that was the final price.

00:21:36
Suze: But it's not, this is an all share deal, which means for every share of pxd that you have.

00:21:51
Suze: If you keep it,

00:21:53
Suze: when this deal happens, if these figures remain the same,

00:21:58
Suze: you are going to end up with write this down 2.3234 shares of ExxonMobil.

00:22:11
Suze: That is what you are going to end up with. Now, the good news about that is because let's just say for whatever reason, you have decided that you want to keep PXD and you're fine owning ExxonMobil, it's a good stock, you want to own it for whatever reason and you just keep it.

00:22:34
Suze: What you have to be aware of is the difference between if it was an all cash deal

00:22:42
Suze: and if it's an all share deal, which it is, if it was an all cash deal

00:22:50
Suze: and you owned PXD outside of a retirement account, this does not apply to you if you have PXD in a retirement account. But if you own PXD outside of your retirement account,

00:23:06
Suze: and if this were an all cash deal,

00:23:10
Suze: you would owe taxes immediately.

00:23:14
Suze: Um, the difference between whatever your cost basis happens to be in PXD and the amount of money that ExxonMobil pays you in the end for your stock right away, you would owe taxes no way around it.

00:23:33
Suze: However, because this is a share deal,

00:23:39
Suze: you will not, hopefully will owe any taxes whatsoever at the time

00:23:48
Suze: that your shares convert to ExxonMobil. All right. Listen, most stock based mergers, which is what this is, are not taxable events to the shareholders of the acquired company.

00:24:06
Suze: So if you own PXD

00:24:09
Suze: in most stock based mergers, they're not taxable events to you.

00:24:16
Suze: However, this is what has to happen to make sure that is true. In this case, ExxonMobil must first secure that the tax free exchange with the government is going to be allowed. Now, with all the research I've done,

00:24:41
Suze: I'm not sure this has been cleared yet. So I cannot tell you at this moment. But as soon as I know, I will that for those of you outside of a retirement account,

00:24:55
Suze: if you decide to stay in it,

00:24:58
Suze: that when it converts to ExxonMobil, I don't know if it's going to be taxable to you or not, chances are it will not be. But again, first, ExxonMobil must secure that tax free exchange with the government.

00:25:17
Suze: You just need to know that.

00:25:21
Suze: All right. So you understand that now. So how many shares are you going to end up with? Number one? How do you figure that out? And number two, what is your cost basis in ExxonMobil? If you decide

00:25:40
Suze: to keep PXD and convert it? And you need to really know this for people who are outside of a retirement account.

00:25:51
Suze: So let's go back to my example that I did on Sunday, which is you own 100 shares of PXD

00:26:02
Suze: and your cost basis on that is $200 a share or $20,000.

00:26:11
Suze: So first to figure out how many shares you are going to get what you would do, you would first multiply the number of shares that you have. Write it down. In this case, you have 100 shares of PXD.

00:26:30
Suze: You would times 100 by 2.3234. So what that means in this example, if you stay in and it converts at that rate to ExxonMobil, you are going to end up with 232.34 shares of ExxonMobil. Just that simple.

00:26:58
Suze: But now you need to know if it's outside of a retirement account. What is your cost basis in ExxonMobil? What is it that you purchased it for? And really you want to know this no matter what. So you know, if you're making money, if you're losing money where you are,

00:27:19
Suze: so the way that you do that is you take the amount of money that you have invested in PXD at your cost basis. So you know that your cost basis

00:27:35
Suze: if you have 100 shares and your cost basis is $200 a share, you know that you have $20,000 as your cost basis to figure out what your cost basis is going to be for ExxonMobil, you're going to take that $20,000

00:28:01
Suze: and you're going to divide it by the number of shares that you are going to have in ExxonMobil when it converts, which in this example is 232.34 shares. And if you divide 20,000 by 2 32.34

00:28:23
Suze: you will find out that your new cost basis in ExxonMobil is $86.08 a share.

00:28:33
Suze: That is how you do it and then you would know what your gain is. So it's just that simple. So you have now learned

00:28:45
Suze: how to know how many shares you're going to have in ExxonMobil. If you stick with it, you now know what your cost base will be in ExxonMobil if these numbers still hold

00:29:02
Suze: and now you just have to decide, do you or do you not want to stick it out? I cannot make that decision for you. I've said before, I do not know enough about your situation, your tax bracket, what you're in anything like that.

00:29:21
Suze: So just something for you to think about for those of you. I do just want to say this who have PXD and you have it at a lower cost, but you have not owned it for at least a year and you are in a high income tax bracket. And if it is true

00:29:44
Suze: that if you were to hold it and they issue the shares, it will be a nontaxable event for you

00:29:52
Suze: and your holding period. Will be with ExxonMobil when your holding period started with PXD,

00:30:02
Suze: depending on how much you would lose in ordinary income taxes for some of you. And you need to talk to a CPA about this. You may just want to say, oh, maybe it's worth it for me to just let it convert sometime next year.

00:30:19
Suze: And if I decide to sell it at that point, then I'll only have to have capital gains tax if in fact, I owned it for over a year. But this is something that you need to discuss with your CPA. How much are you? Absolutely gonna lose if you sell it right now to ordinary income taxes? And how does that offset it if you hold it in ExxonMobil

00:30:45
Suze: and then your holding period becomes more than a year? I hope that made sense to you. So I have now educated all of you

00:30:55
Suze: and you're gonna have to decide what you are going to do. But I think you have some incredible Suze School information here to make sure that you do the right thing for yourself. There's really only one thing that I want you to remember to do every single day and that is to say out loud today, wherever I go,

00:31:24
Suze: I will create a more, loving, peaceful and joyful world. And if you do that,

00:31:33
Suze: I promise you you will be unstoppable.