Jump to content


The Tale of Frost and the Golden Goose


  • Please log in to reply
8 replies to this topic

#1 Frost

Frost

    PowerPC Inside

  • Forum Moderators
  • PipPipPipPipPipPipPipPipPipPip
  • 5234 posts
  • Steam ID:CaptFrost
  • Location:Republic of Texas
  • Pro Member:Yes

Posted 13 February 2012 - 05:46 PM

Repost from my G+ profile. Thought I'd share it incase some of my friends here find it at all interesting.

---

I am in a reflective mood today because of something that happened. This is by no means a short post, but you might get something out of it if you have the time.

Let me tell you a story.

Once upon a time, I was an eager 15 year-old. My dad worked with a Chinese computer programmer who was a stock trading genius. We'll just call him "Ed." Ed didn't need his job at all; he made enough on stocks and then some. He held the programming job to give himself something to do and to have a regular salary to pay bills and expenses so he didn't have to cash out any investments. Whenever the company needed Ed to write a program, he did. The rest of the time he sat in his office and did research and watched his investments over the company T1.

One day, Ed got the idea in his head that, since he and his wife had no kids and were approaching the age that they wouldn't have any, he wanted to pass along his hard-won knowledge and experience to someone. He talked to one of his co-workers whose kids were hitting adulthood, and wanted to tutor them and teach them what he'd learned.

Well, this went over like a lead balloon. After less than a handful of sessions, Ed had enough, because this man's kids didn't have the aptitude, and much more importantly, the attitude to really absorb what he wanted to teach and learn from him. They mostly didn't care, and like any master craftsman who wants to pass on his trade, that Ed could not tolerate.

Even though I was younger, Ed's attention fell to me next. He evaluated me by inviting me to mow his lawn for cash, which I did, and then help out with some construction projects around his home, which I did. Either before or after each job Ed and his wife would have lunch or dinner with my dad and me, and he'd talk to me and get to know me. I guess I did well because in short order he wanted to pick me up as his protégé. He started me off by giving me a few introductory sessions just to introduce me to the basics, and then for a few weeks assigned me some homework: find some companies I like, for one reason or another, and then get their stock information, and watch them. Make a spreadsheet showing their stock price movement over the weeks I was watching, and turn it in to him at the end. This I did as well.

After that, Ed was impressed and went over the spreadsheet with me, told me what could be extrapolated from their performance, and I think that's where he made the final decision I was the one he wanted to tutor. I started going over to his house for lessons regularly, and this went on for a good while as he taught me just about everything he knew. We're not talking some useless business class at college here, where a professor who has never owned a share of stock drones on teaching you largely nothingness that he pulled from a textbook, and assigns piles of useless busywork to fill up your time so it feels like you're doing and learning something. This was one on one at my own pace with a master who knew his stuff and had profited greatly from it.

One day, these lessons came to an end. Ed felt he'd passed on everything he could. His evaluation of me was positive, and in fact he gave me an assessment that most folks would probably find grossly irresponsible to tell a teen because of the huge letdown it can set them up for. He told me he thought I'd be a millionaire before I was 30. What's more, if I ever did become a millionaire, all he wanted in return for his part in it was for me to take him out for a five star dinner.

As luck would have it, only three years later my family's lives were upended by a series of events that aren't really important to this story except in that they put $225,000 of capital into my 18 year-old hands via my dad's severance package. My dad decided to take a gamble on me and on Ed's training. He gave me the information for his account at Fidelity, put every penny of his severance package in my hands, and gave me carte blanche. I could buy, sell, and trade with it however I saw fit.

My biggest one day gain was made in the first few days: $13,000. Most gains were much smaller than that, and I had my share of bad calls and losses, but overall, they were gains. Big gains. In payment, I could occasionally cash out some to buy something I really wanted, as long as I could make up that amount and the tax penalty could be paid. The highlights were I bought a new computer that was one of the world's fastest at the time. I also picked up my first car, a black 1997 Trans Am WS6.

Because of this, I didn't started college until I was 21, almost 22. Instead I put in 8-12 hour days doing research and trading stocks. Before long, that $225,000 had become $305,000 just before 9/11. Then OBL came along and slashed that number by $65,000, erasing almost everything I'd done. You're probably thinking this is where I lost focus due to the huge loss, attacked the problem rashly like a gambler who can't quit, and a death spiral started that ended in me being wiser but penniless.

Not even close. I doubled down on my efforts and I made it all back within 6 months.

During this time, I was mostly day trading, but I was also working on a master investment plan based almost wholly around long-term investment in a handful of companies that I thought were going to do well. The company selection was based on the not-insignificant 2000+ hours of research I'd put in as well as the input of a handful of in-industry contacts I'd made who could keep me abreast of some upcoming developments that financial journalists didn't have the foresight to pick up on even though it was all publicly available. I was going to transition to that plan when I started college and didn't have time for this stuff anymore. This plan had to be able to sustain itself with minimal action or oversight by me for at least a few years.

As soon as I thought it was ready for prime time and I'd picked the right horses, I put it into effect right away using 30% of my capital, and continued day trading with the other 70%. Shortly thereafter, I had an epiphany when I looked at my balance sheet after about 6 months of trading: it had been a bad few months and I'd made a small net loss on my day trading efforts. However, my long-term investment plan was growing quickly and reliably with no input whatsoever from me.

I called it quits on daytrading, and 100% went into the long-term buy & hold investments. It was time to get cracking on my education anyway, I could have already had a bachelor's degree by then but instead didn't even have one credit hour (but I didn't and still don't regret the time spent one bit).

This is where it goes wrong. Not for reasons you'd think; time has borne out my investment plan as being about as close to flawless as you can ever hope to get. On the contrary, things started going wrong on the home front. First one thing, then another, then another, then another. $5000 was withdrawn here. $10,000 there. $7500 there. These weren't the real problem; the real problem was huge, big ticket Act of God items where my parents faced the decision of nearly or possibly losing our home or gutting our investments. Personally, I wish we'd lost our home rather than killed the goose that was laying the golden egg. I had enough input into the situation that I could have possibly influenced decisions in the right direction, but I didn't.

It's a long and convoluted story, and there's little to learn from the telling so I won't. It ended in the account being empty. On the positive side, what I had to show for it was a nice computer that was rapidly becoming out of date, a nice car, our home being safe, and a place to stay with my parents with no rent paid and no questions asked as long as I wanted since we wouldn't have even had that house without what I did. On the negative side, I had no money and no education beyond high school, and most people my age were about to graduate from college.

I'm not going to bore you with my biography beyond that point other than to note that it was a special trial to, as the years went by, watch my now-unfunded investment plan go on to hit several hundred thousand dollars in value. Then a million. Ed was right, I'd have been a millionaire before 30; about 24 or 25, in fact. Then two million. Five million. The 2008 financial crisis would barely have even touched me, which is more than you can say for Warren Buffett.

Every now and then I'd check it and calculate current values, just to see what the payoff for working extremely hard for those four years would have been. Around the beginning of this year, the eight figure mark was surpassed for the first time. That's right, if the investments had been left alone and the plan left in place, it would have hit $10,000,000 in January of 2012. I decided to write this today because I did another one of those checks after watching a huge jump by one of the companies I was heavily invested in, and as of this morning it would have crossed the $11,000,000 mark.

I am 29 years-old and I have a meager income and am not really worth much, net worth-wise. Even so, Ed, if you're out there, you were right, and you'd have had your five star dinner. If the investments could have been left alone, I'd be worth $11 million at 29. Thanks for believing in me and teaching me.

I'm not griping, I made my peace with the situation years ago. The only thing that truly angers me anymore is when someone suggests that my picks doing that well was due to luck, and that nobody could have known. I did know, and I dedicated a good part of my life to finding out.

I've told this story before, in person, and mostly the response is people overlaying their own desires and lamenting over all the cool and expensive toys I could have gotten, or how I could already have retired and never had to do anything but have fun, and been rich and content with my richness.

I don't really view it in that light. I see it like this: If I got married my wife would never have to work unless she wanted to. My kids would never have to worry about money like I always had to. My parents could have been comfortably taken care of and enjoyed their old age.

I'd have never driven a million dollar car. I'd have never bought a million dollar house. I don't care about showing off. Most importantly, I wouldn't have retired to a life of leisure. I'll retire the day I die. I'd have kept growing it, and finding new things to invest in. I've already seen a couple extremely good ideas come up and die because they had no angel investor, and I could have been there for them. Wealth is only a great thing to have if you can use it to help others join you in it.

That's something every person dreams of, but few ever truly come close to. When you've been a hair's breadth from it, it's hard to say goodbye to.


What's the moral of this story? I'm not sure, but what I took away from it was, if you ever find yourself in possession of a golden goose, literally everything short of your family's lives should be expendable to save it. Don't let it die just to save your current standard of living, or avoid even a severe reduction in lifestyle. Ten years later, you'll kick yourself.

Thanks for reading.

P.S. I'm not going to share what the plan was or who the companies involved were, so please don't ask. Suffice it to say, when I do tell someone, they say, "Oh, well of course!" or something to that effect. The companies weren't even close to "of course" back then when I bet on them though. The majority opinion was that if they even existed in 2012, they'd be on life support. It took years to see where things were going to go. Hindsight is 20/20, but foresight is a riddle in the dark.
Cypher (PowerMac G5 Quad) – 2x2.5 GHz PPC 970MP / 16GB ECC RAM / 1TB WDC Velociraptor, 2TB STX Constellation ES.2 / QuadroFX 4500 512MB
Kestrel (Falcon NW Tiki) – 4.2 GHz Ci7 4770K / 16GB RAM / 512GB Crucial M550 M.2, 2x480GB Intel 730 (RAID0), 3TB STX Barracuda / GeForce GTX TITAN 6GB
Chromium (MacBook Pro Early 2008) – 2.6 GHz C2D T9500 / 4GB RAM / 960GB Crucial M500 / GeForce 8600M GT 512MB
Antimony (PowerBook G4 Titanium) – 1.0 GHz PPC 7455 / 1GB RAM / 480GB OWC Mercury Legacy Pro / Radeon 9000 64MB

Eric5h5:
When there's a multiplayer version, I'm going to be on Frost's team. Well, except he doesn't seem to actually need a team...I mean, what's the point? "Hey look, it's Frost and His Merry Gang of Useless Hangers-On!" Or something.

#2 The Liberator

The Liberator

    Liberate Tutemet Ex Infernis

  • Members
  • PipPipPipPipPipPipPipPip
  • 3684 posts
  • Steam Name:Meriones
  • Steam ID:Meriones
  • Location:Melbourne, Australia

Posted 13 February 2012 - 08:58 PM

This could make a good memoir one day.

…seriously though, thanks for the read. :)

Liberator.

P.S. That was some good writing too…

iMac: 2.8GHz i7 | 8GB RAM | 10.8.2 | ATI Radeon HD 4850M | 512MB VRAM

Custom: 3.4 GHz i5 | 16GB RAM | Win 7 SP 1 | nVidia GeForce GTX 660 OCII | 2GB VRAM


We hang in D.C. with them CIA killers

Baraka Flacka Flames - Head of the State


#3 badger2d

badger2d

    Heroic

  • Members
  • PipPipPipPip
  • 369 posts
  • Location:San Francisco

Posted 14 February 2012 - 12:48 AM

Very interesting story, thanks for sharing.

I find myself at the end of the story with a big question in my mind. If you could do all this once, can't it be done again? You could've been a millionaire at age 25. But popsnizzle happens. So how about being a millionaire at age 50, since you know how to get there?

#4 Thain Esh Kelch

Thain Esh Kelch

    Uberspewer

  • Members
  • PipPipPipPipPipPipPip
  • 3071 posts
  • Steam ID:ThainEshKelch
  • Location:Denmark

Posted 14 February 2012 - 02:26 AM

Good read!



....I'm still quite curious as to what the general rules of your investments were. ;)
"They're everywhere!"

And now, time for some Legend of Zelda.

iMac 2011, quad 3,4Ghz i7, 8GB RAM, 2GB Radeon 6970m.

#5 Janichsan

Janichsan

    Jugger Bugger

  • Forum Moderators
  • PipPipPipPipPipPipPipPipPipPipPipPip
  • 7207 posts
  • Steam Name:Janichsan
  • Location:over there

Posted 14 February 2012 - 02:53 AM

View PostFrost, on 13 February 2012 - 05:46 PM, said:

P.S. I'm not going to share what the plan was or who the companies involved were, so please don't ask. Suffice it to say, when I do tell someone, they say, "Oh, well of course!" or something to that effect. The companies weren't even close to "of course" back then when I bet on them though. The majority opinion was that if they even existed in 2012, they'd be on life support. It took years to see where things were going to go. Hindsight is 20/20, but foresight is a riddle in the dark.
I would be surprised if one them hadn't  been Apple...

"We do what we must, because we can."
"Gaming on a Mac is like women on the internet." — "Highly common and totally awesome?"


#6 Thain Esh Kelch

Thain Esh Kelch

    Uberspewer

  • Members
  • PipPipPipPipPipPipPip
  • 3071 posts
  • Steam ID:ThainEshKelch
  • Location:Denmark

Posted 14 February 2012 - 03:13 AM

View PostJanichsan, on 14 February 2012 - 02:53 AM, said:

I would be surprised if one them hadn't  been Apple...
I invested ~2000$ in Apple when the stock was around 30. Some time later, I sold at ~80. Taking the falling dollar into account, it gave me my money back, and payed for the Macbook Pro that I'm writing this on.

I believe those 2000$ would have been worth around 25.000$ now, if I had waited. But then I wouldn't have had a computer for college and university.. What to do, what to do...
"They're everywhere!"

And now, time for some Legend of Zelda.

iMac 2011, quad 3,4Ghz i7, 8GB RAM, 2GB Radeon 6970m.

#7 DaveyJJ

DaveyJJ

    All hail Bastet

  • Forum Moderators
  • PipPipPipPipPipPipPipPip
  • 3846 posts
  • Steam Name:DaveyJJ
  • Location:Inside Bastet's secret temple preparing for the catpocalypse.

Posted 14 February 2012 - 05:49 AM

Oh, great. Shattered. Dude, you were supposed to be a nebulous figment of my imagination. An anonymous, sometimes witty, always smart, right-hand-man-of tBC sort of character, perhaps even a 13 year old girl. A wise-cracking forum member on some electronic outpost I spend far too much time on.

Not some real guy whose life story was worth reading every damn word of and got me contemplating the important stuff before 7AM on a cold winter morning. Every damn word worth reading.

Sheesh.

Now I have to wait for tBC to get all grumpy on the thread to return my life to a near normal state of obscene uncaring.
Raven 27" i3 iMac 3.2GHz | 12GB RAM | 1TB HD | 512MB 5670 ATI Radeon HD
Crow iPad 2 | 32GB WiFi


"Not my circus, not my monkeys." -- Polish folk saying
"In ancient times cats were worshipped as gods; they have not forgotten this." -- Terry Pratchett
"I love cats because I enjoy my home; and little by little, they become its visible soul." -- Jean Cocteau

#8 the Battle Cat

the Battle Cat

    Carnage Served Raw

  • Admin
  • 15799 posts
  • Location:Citadel City, Lh'owon
  • Pro Member:Yes

Posted 14 February 2012 - 09:24 AM

Joseph D. Ball aka the Alligator Man was my mentor, and boy would he be proud of me now!
Gary Simmons
the Battle Cat

#9 Frost

Frost

    PowerPC Inside

  • Forum Moderators
  • PipPipPipPipPipPipPipPipPipPip
  • 5234 posts
  • Steam ID:CaptFrost
  • Location:Republic of Texas
  • Pro Member:Yes

Posted 14 February 2012 - 05:50 PM

View Postbadger2d, on 14 February 2012 - 12:48 AM, said:

Very interesting story, thanks for sharing.

I find myself at the end of the story with a big question in my mind. If you could do all this once, can't it be done again? You could've been a millionaire at age 25. But popsnizzle happens. So how about being a millionaire at age 50, since you know how to get there?
That's still the goal, I've far from given up.

However, getting handed $225,000 is not something that happens often. Doing it the hard way and amassing the capital needed to make real money (i.e. enough to live on, or more) without picking stocks that jump 500% or more per year while also eating and paying bills is no easy task, though, nor is finding the time to do the research needed to be able to make the kind of picks I did back then. Making the actual trades was easy. Creating the knowledge base to be able to feel like I knew for sure what was going to happen somewhere when WSJ and Forbes would have probably disagreed at the time was... not.
Cypher (PowerMac G5 Quad) – 2x2.5 GHz PPC 970MP / 16GB ECC RAM / 1TB WDC Velociraptor, 2TB STX Constellation ES.2 / QuadroFX 4500 512MB
Kestrel (Falcon NW Tiki) – 4.2 GHz Ci7 4770K / 16GB RAM / 512GB Crucial M550 M.2, 2x480GB Intel 730 (RAID0), 3TB STX Barracuda / GeForce GTX TITAN 6GB
Chromium (MacBook Pro Early 2008) – 2.6 GHz C2D T9500 / 4GB RAM / 960GB Crucial M500 / GeForce 8600M GT 512MB
Antimony (PowerBook G4 Titanium) – 1.0 GHz PPC 7455 / 1GB RAM / 480GB OWC Mercury Legacy Pro / Radeon 9000 64MB

Eric5h5:
When there's a multiplayer version, I'm going to be on Frost's team. Well, except he doesn't seem to actually need a team...I mean, what's the point? "Hey look, it's Frost and His Merry Gang of Useless Hangers-On!" Or something.