My First Hour Conversation with An Ex-Colleague

I am sitting at Singapore’s Changi International Airport. It is middle of the night, and I come to know my flight is delayed by four hours for technical reasons. I was contemplating what should I do. Made few personal calls and then I decide to munch on unhealthy burger and some fries. I was getting bored, so I started browsing the internet. I log into my blog’s wordpress interface and opened another tab with my blog. I was hoping to answer my emails and blog comments. That just remained a hope.

While I was reading comments, an Indian gentleman came and said, “may I sit here” pointing a chair just across me. I said, “sure, be my guest”. We exchanged few more pleasantries, and then each of us continued doing our own stuff. He started playing with his blackberry, and I turned my eyes to my computer. At the same time, I am thinking, there is no one around in this cafeteria, tons of empty chairs, so why this guy came just next to me. Usually, we just go and sit in an empty space.

I said to myself, “hmm, forget it, why bother”. I went back to reading comments and emails.

Few minutes later, he stops playing with his blackberry. He is looking around. I can sense he wants to talk to me. The moment I raise my head, he says, “The blog you are reading is awesome. Isn’t it?”

I give him a blank look for few seconds, trying to figure out what hit me. How did this guy know it’s my blog. I blur out, “yeah, I like it too”.

He says, “I just wish I had such discipline and patience”. He continues, “sometimes I doubt if what he say is really true, and does he really mean it”, “it seems too good to be true”.

By this time, I recollect my thoughts and become little more composed. I ask him, “what makes you doubt it”, “any particular reason that makes you not believe it”.

He says, “nahh, no particular reason, and that’s the whole point”, “what do you think?, do you believe his posts?”

It was natural for me to say yes. I blabbered little bit and said, “yeah, I tend to believe it”.

He says, “you seem to be interested in stock market”, “how do you play it?”, “do you trade?”.

With a surprised tone, I asked, “play the market!”, “no, no”, “my philosophy is to look for good business and try to buy them at cheap”, I continued, “I try not to sell”

“you are part of those clichéd value investor brigade who ape Buffet or Graham”, he says.

I nod to agree.

He continues, “who most of the time are negative about markets and keep cribbing about overvaluations”.

“I do not understand what you mean”, I interrupted with a smirked smile.

He continues, “at 15000, these value investors say it is overvalued, it still keeps going up”, “at 17000, they still say it is overvalued and markets will crash”

I am looking at him with raised eyebrows but I keep nodding.

He goes on, “how different are these value investors than brokers and agents,” “they are wrong as often as the brokers are,” “aren’t they?”

Sensing a level of hostility towards value investors, I ask, “You probably had some bad experience”. I am thinking what makes a stranger talk like this, frank, opinionated, tending to be brutish, with an argumentative bent to the discussion, “Do I know him? Probably I do? Who is he?”

“Bad experience, yes, but it’s not about my bad experience” he said. “Ok you seem to be value investor, what’s your philosophy”, he takes a pause hoping I will respond.

“hmmm, well….” Before I can say anything else, he starts again.

“great opportunity if the stock is less than 12 PE, heard from some business pundit about growth, mix the two, woila, I recommend the stock because its value”, “isn’t that what value investing means to all these pseudo – Buffett followers”

I am listening to him, and at the same time thinking, there was no way a stranger sitting at an international airport, in the middle of night, engage in such an argumentative discussion. By this time, I am almost sure. I tell myself, “I probably know this guy”, “He knows me too!”

He just does not want to stop, he goes again, “I would like to ask these pseudo Buffeters, have you forgotten what Buffet says”, “Buffett says, buy it never to sell”, “individual investors should just buy the index fund and….”

I interrupt him, “wow hold a minute”, I take my glasses off and pretending to clean it, “do I know you?”

He retorts, “what do you mean [expletive]”. At this point, I am sure, I know him.

Few more expletives latter, I knew who he was. He was one of my ex-colleague from a company I used to work 13 years ago. This is a guy who 13 years ago was tall lanky guy with glass, always wore formal trousers and shirts. I think I worked in that company for two years, and never saw him in T-shirts or jeans. And now, he is still tall, but without glasses, wearing a t-shirt, jeans, and had put on lot of weight. This was the justification I was giving him for not recognizing him.

Let me give you little background.

Thirteen years ago internet access was not readily available. We paid Rs 20 for one hour access in a cybercafé, a far cry from today’s easy accessibility. I used to bring newspaper, i.e. Economic Times, to my work place and we used look for stock prices. In a nutshell, discuss what to buy next, what to sell next, mostly focusing on newspaper stories and recommendations of gurus. My friend (his initials are DS) was fanatic about stock market investing (a.k.a. trading). DS was very passionate about analyzing stock related stories in newspaper and then trying to correlate it with somebody else or read another business newspaper. We both were completely naïve about stock markets. Long term was alien to us or rather I should say limited to 3 months! Understanding business was not part of our vocabulary. It was my first year of working full time after my under graduation, and I think second year for DS. We both stayed with working parents and hence no responsibilities. Salary was basically free money for us. We did not know the difference between investing and trading. Graham and Buffett were non existent for us. Two years down the line, I went back to school. DS stayed back for one more year and then went to top class B-school. In terms of returns from stock market, after two years, I was under the impression I came out with positive returns. DS also had same thinking that his returns were positive in three years. Now when I look back for those two years, I actually was negative considering transaction tax, brokerage, and taxes (not including inflation). Brokerage was very high in those days and concept of Demat was still being implemented.

I recall sometime in early 2005 we had exchanged couple of emails and he was actively trading and was very ecstatic that his trades were making him good money. At one point he mentioned he made almost half of his yearly salary in one year. Even after taking his education from good B-school, he was thinking of leaving his full time job and do a full time trading. I vividly recall I had written to him that I do not trade anymore. I have become a very cautious, risk averse, investor. And he pulled my leg on the concept of long term investing, and stock market being risk averse. I never responded to his this email and ignored it. Now, coming back to the DS at Changi International Airport…

After reminiscing few old stories, he asks me, “are you still in the market?” “Did you learn new styles like technical analysis or swing or positional trading?”

“wow, you trade and not invest”, I said. I take a little pause, and then continue, “what happened to investing that we used to do 13 years ago”.

“Nahi yaar, I am sick of trading and losing money”, he takes a pause, and then continues, “the constant pressure of timing it properly was stressful”, “with a full time job I could not manage”, “I do not trade anymore”.

I interrupt him, “so you are out of the market”, “last time when we exchanged email you were planning for a full time trading profession”, “you wanted to leave your well-paid full time job”

“I do not know how to answer”, he says, “after breaking my head for 10 to 12 years in trading, I realized I have not much to show”

“What do you mean by not much to show?” I ask in a subdued voice.

He says, “when I say not much, I mean, less than 10%”, “I am still positive overall”, he takes a pause, “but is 10% really good for all that effort?” “hmm, nah, not worth it”, “what a waste of time and effort”

I could sense that DS is still passionate about investing in stock market. Both of us did not make any special effort to talk on this subject, it just naturally flowed into the conversation. But does it make sense to talk about investing when you meet after such a long time? And this was one sided conversation which was going no where. I was waiting for him to pause, so I can break this conversation.

I interrupt DS, and ask, “hey, do you want to have a coffee?”

He agreed.

I pick up my trash from the table. I still had my plate with little bit of left over burger. The fries have become soft and soggy. My coffee became cold and I wanted to throw that too.

I close my computer, put in my carry on bag and ready to go.

DS noticed the coffee cup and asks me, “you just had a coffee”, “you are up for it again!”

He did not know my motives for a coffee break. I wanted to break the conversation. Coffee was just an excuse. So I said, “No, this one has become cold and does not taste good anyway”, “this time, I will have some other type”. While walking towards the coffee shop I ask him, “how about you?”

“I will skip coffee, it will make me hyper active” he said and continued, “but I will take hot chocolate to give you company”.

We buy coffee and hot chocolate. This time we go back to different place with soft chairs. The table and chair kind of setup was not required for our conversation.

DS asks me, “hey, what about you?”

“What about me”, I ask with little surprise.

He says, “Do you still have that zeal and passion like old days”, “do you still keep track of markets”, “what’s your style”.

All this time, I am thinking, walk for a coffee would break this conversation. But I was wrong. This was the DS of old days who is like a chatter box when it comes to stock market.

I said, “look DS, as we age, we mellow down, you learn more, I do not trade like we used to do 13 years ago”, I take a pause.

DS interrupts me, “wait a minute, don’t tell me you have joined the bandwagon of clichéd value investors”, “I did get an inkling based on the blog you were reading”

I am looking at him; literally give him a stare to show my anger. DS is a guy, I can tell him to F’off and he would laugh it off without taking any offence.

I say to him, “I don’t know what my style is”, I continue, “But what I do now-a-days is focus on dividend paying companies, I look for buying at fair values, I look for sustainability”.

“now I buy stock to hold it forever”, It is his turn look directly into my face. I continue “off course the stock should continue to perform”

He says, “I am trying to do something very similar, like, buy at low price and holding it forever”, “hmmmm, but not dividend or classic value investing”.

I nod to show him that I am getting what he is saying.

He adds, “it is really difficult to figure out what would be the value based on classic principles of net-net, intrinsic, etc, etc.”, “you know what I mean, right?”

I nod in agreement, and say, “yeah, it’s the same dilemma I have”

I ask him, “what happened to your trading?”

He says, “whatever I made in last 10 years or so, I made similar on percentage basis in one year in 2009”, “when you are into this daily business or short term focus, you get stressed out, you will get winners, but you get more losers” “overall it is a negative preposition”.

“more so, if you are working full time and have a family” he continues, “this concept of buy and hold seems to work” “but I still need to figure out when to buy”.

At this time, my phone rings. It was my wife. Before DS met me, I had tried to call her to inform about my flight being late. I could not reach her. So she was returning my call. I think I talked to her for three minutes or so.

He says, “Isn’t it strange, we both were crazy young idiots who thought they knew what they were doing”, “13 years down the road, we both drift towards something very similar”, “mind you, both independently, not knowing what each other is doing!”

I nod in agreement. What else could I have said; it was true what he was saying. We thought we knew everything. We thought we could cook up some crazy trading strategy and it would be the only way to get more money. At that time, we did not realize how dumb and wrong we were.

DS starts again, did I say he is a chatter box?, “You know for few years in middle, hmmm, I think 2003 to 2005, I had tried my hand at having two portfolios”.

I interrupt and blur out, “don’t tell me, one for trading, and one for long term”

“you got it”, he said.

At this point, I couldn’t stop myself. For quite sometime, I have wanted to talk to somebody and get some honest opinion about how this works. I have been wondering if I can find somebody with some level of experience who has used this approach and has done it for few years. It has been my experience that people always tell you successes, never negative aspects. Over the years, all my conversations with people have lacked true reflection to admit they failed. Almost always, it is about ideas and strategies. When I ask how they practiced it, do they follow their own advice; I never get a good experiential aspect. Why? Because our ideas are for others to execute, we are scared to practice our own ideas. We are not convinced enough to execute our own ideas. We need someone else’s approval. Knowing DS, I was sure to have an honest opinion.

By this time, it was almost 50min we have been talking. I still had few more hours to kill, and DS also had few more hours to kill. But when DS is around few hours are nothing for him, particularly when it is about stock market. We went on to talk for three more hours. I will continue this in future posts. In future posts I will present:

1. DS’ experience of maintaining two portfolios. He shares with me his experience about getting confused. There is this tendency to buy and sell at slightest hint for profit, and difficulty to remain objective. He mentions how the failed stocks ultimately end up in buy and hold portfolio (never returning to profits), and winners get traded out due to quest for booking profits.
2. DS took TIP Guy to task. While he does not question TIP Guy’s integrity, but wishes that somehow there is a way to validate it. In his own words, “why is he hiding behind pseudo character?” It was natural for me to provide my supporting arguments, although, I did not feel he agreed to my arguments. He also had some very constructive suggestions to grow TIPBlog. At that time, he did not know who he was really talking to. But after reading this story, I am sure; he would be looking for that first opportunity to kick my rear end.

(Photo Credit)

beginners guide, conversation, investing process, investing styles