Tuesday, 2 June 2015

June 2, 2015, First Post

Welcome to my blog!  My objectives are twofold:

1) Documenting my journey in building a stable dividend portfolio over time, and

2) Holding myself accountable for any investment decisions I make in constructing my porfolio

I've been inspired by reading the ongoing writings of bloggers like Dividend Mantra (Jason Fieber), and The Conservative Income Investor (Tim McAleenan Jr.), and I feel capable of creating my own blog.  Hopefully I can put a Canadian layperson's spin on North American dividend investing, and hopefully, there's enough room in cyberspace for yet another dividend growth focused blog...

I've been interested in all things market related since my mid to late 20's, but it's taken me a number of years to put it all together (and I say this with the utmost humility and caution as there's absolutely no guarantee that I've actually put anything together at all, or figured anything out).

What do I mean by putting it all together?

A bit of history first:

In my mid to late 20's, my introduction to the stock market was driven by a fascination with whatever moved.  I somehow ended up working on the Institutional equity trading floor at CIBC World Markets as a settlements reconciliation clerk (translation: whipping boy for the traders).  This was between November 1999 and April 2000.  The Nasdaq was well on it's way to 5,000 and, as I recall, there were limitless gains to be made by buying absolute trash overnight and selling the next day.  I guess I wasn't technically day trading per sé...more swing trading.  And I had absolutely no idea what the heck I was doing.  It was an absolute frenzy.  Everyone and their uncle was trading.  We were all trading the same garbage.  Even the guys off the floor who had nothing whatsoever to do with trading, were trading.  It was fun while it lasted, being up 15/20/30% overnight and not knowing why (or what) we had just bought...and then, in March 2000, the music stopped, almost to the exact day that Jim Cramer went live on the idiot box and professed that Berkshire Hathaway was ripe for the banging...

You can see the original article here...it's a riot:

http://www.thestreet.com/story/898904/1/weekend03-10-00.html

In case the link ever gets deleted, here's the original article:

"Wrong! Dispatches from the Front: The Hybrids and the Brand Names Get the Hook
By James J. Cramer 

3/10/00 5:27 PM ET
So I step out of the office for 15 minutes, I come back, and some sell program has taken the market apart. But then I look closer and, of course, it is not the market, it is the Dow Jones Industrial Averages! Those nasty little relics. And thank heavens forIntel (INTC) and Microsoft (MSFT). Who knows where it would have ended without those two horsemen?
This will forever be the week where people realized that those brand name stocks were doing it all with smoke and mirrors. The growth for the Cokes (KO) and theP&Gs (PG) was always suspect. Some was cost cutting. Some was tax rate. Some was currency. There was always something going their way.
But the string ran out this week and we discovered that single-digit growth, mid-single-digit growth, is not enough to support a growth multiple on earnings.
This was a devastating week for the hybrid folks, the ones who thought they could own the highest growth nontech stocks. Only tech is generating the kind of growth this market is paying for. Any company that is trying to maintain low double-digit growth and can't will be similarly crushed as P&G was.
At the end of the week I found myself repeatedly drawn to shorting Berkshire Hathaway (BRKa). That premium-selling repository of brands that once sold at a premium seems ripe for the banging. But I can't go there. There are plenty of other ways to skin the brand cat."
So, in a nutshell, my introduction to markets was idiocy.  It was the polar opposite of building wealth over time.  My entire experience was predicated on TRADE TRADE TRADE!

And TRADE TRADE TRADE I did!

At one point in early 2000, I had parlayed initial capital of $5K into over $100K!  But this wasn't a function of skill.  It was a function of idiocy and luck.

Nothing I owned was worth owning beyond March 2000.  It was all garbage.  And post March 2000, is when my education really began.

I continued meandering along post March 2000, trying to trade in the same way I had pre-March 2000, but the market dynamic changed.  Garbage actually traded like garbage.  Risky equities plummeted.  I even left CIBC in April 2000 and tried my hand at day trading with a colleague of mine.  We funded an account with $25K each and basically lost it all over a year.  The silver lining to the story is, I managed to cash in a good chunk of my chips on the way down and paid off 100% of my student loans all in one shot during 2000, which was quite a relief.

So what was I to do, unemployed for almost a year, confidence rocked from being schooled, and no money?  I got a job at Amex Bank of Canada and decided, at the ripe old age of 29 to go back to university part time and finish the necessary prerequisite courses to go through the process of becoming a CA (now CPA, CA).

Fast forward to 2006.

I passed all of the CA exams (CKE, SOA, and then the UFE), and was well on my way to obtaining my CA designation, and I decided, why not enrol in level one of the CFA program?  I passed level one of the CFA program in the summer of 2006, and guess what?  None of the above translated into my thinking about investing like a business.  None of it automatically translated into investing success.  My best guess is that the scars and biases I had developed between 1999 and 2000 had left a lasting impression on my psyche.  I was always looking for the short trade.  For the blow-up story.  This was a psychological echo of my experiences in 1999 - 2000, and I was living it over and over again.


4 comments:

  1. Hey,
    Since we've been in one of the longest bull markets in history 7 years and counting I can almost see this as a repeat of your future. I'm in my late 20's and have been experiencing 15-20% market gains year over year. Trying to self educate now before the market has the last laugh. Nice job cashing out some gains to pay off school though, that was +1 smart.
    -Rich

    ReplyDelete
  2. Thanks for the comment Rich! As long as you learn how to manage risk, and develop a methodology that suits you, you should be fine. The older (and hopefully wiser) I get, the more I've gotten interested in value investing. Not for everyone, and certainly, not equivalent to trading.

    If you really want to self educate, you can do a lot worse than starting with the Intelligent Investor, and then reading Value Investing - From Buffett to Graham and Beyond by Bruce Greenwald. These books have nothing to do with trading, and everything to do with developing a framework for understanding how to evaluate businesses.

    Keep in touch!

    ReplyDelete
  3. Do you have a page with your portfolio holdings? Curious to see your U.S. and Canadian stocks.

    ReplyDelete
  4. Hi Keith, thanks for dropping by. Not as of yet. Suffice it to say, currently, I'm about 75% cash, 25% equities across all of the accounts I manage, and looking to put cash to work on an ongoing basis. The 25% is spread across typical large cap dividend payers. Companies like Rogers and Telus in Canada, JNJ, Coke, Pepsi, Hershey, Walmart, Microsoft, & McDonalds in the US.

    I will put together a page of holdings at some point in the near future. One issue I'm having right now is the cost of buying US stocks in Canadian $'s. It's getting prohibitively expensive to pay 1.30 for US names if one doesn't already have a funded US investing account. That leaves us Canadians behind the 8-ball by the exchange and opens up two elements of risk, foreign exchange and unsystematic risk.

    ReplyDelete