High Point Trailered Holdings
Cover Story, by Ted Brooks, Subscriber January 1st, 2010
In our cover story, Ted Brooks shares his prodigal 2009 investing experience.
Many subscribers will recognize Ted Brooks as a gifted contributor to our Forum. Ted is an investing historian and has helped many with his thoughts and discussions. In the story that follows, Ted shares his prodigal 2009 investing experience. If you’re not a car buff, substitute your hobby or obsession … we’re in this together. Why do we whisper about investing with friends and colleagues while clamoring about hobbies, sports, etc? Pay special attention to the power of Community and support of his spouse in both areas of interest. In his words, “Don’t do what I did.” Find a way to discover and maintain balance … Indeed. Better road shows ahead. Vroom.
We often refer to successful long-term investing with metaphors that revolve around journeys. They’re often related to cars … like our fascination for dipsticks and dashboards. Everybody’s life experiences are different and hobbies can be a very important part of the trip. For many, investing is the hobby of choice.
“Investing is among the rarest of hobbies and endeavors. The potential rewards really are closely related to the amount of study and effort that we put into it.” — Larry Dix.
That said, there’s nothing wrong with a little sojourn during life’s voyage. Think discipline, patience and balance. Enjoy the ride.
Investing at the Crossroads
I had an interesting experience during late 2009 that forced me to consider the priority I place on investing. Not the priority I say it has … the priority where my actions do the speaking. It’s about what I’m willing to do (or sacrifice) to be a successful investor. Here is a little different perspective (mine) on the proper psychology of being an investor.
My name is Ted. I have an addiction problem. No, I’m not talking about alcohol or drugs. I’m talking an addiction to cast iron and sheet metal. I’m a “car guy” who’s fascinated with antique and classic cars.
The affliction began in childhood. I watched the various antics done with cars of the 1920s in the slapstick silent comedies they used to show on TV on Saturday afternoons. As time moved on, I chose to focus on 1955-57 Chevys. I bought my first one, a dilapidated ‘55 Bel Air four door sedan, in 1989.
In recent years, I’ve found myself on divergent and competing paths. The restoration of my present ‘55 Chevy languished for several years as I found myself drawn to a new fascination: investment theory. My car buddies continually asked "What’s taking so long to finish your ‘55?" My response included various other things in life capturing my attention, but for some reason generally avoided the topic of common stock investing.
A Tale of Three Chevys (Looking For Mr. Good Car?)
My wife and I embarked on a home renovation project, starting in 2008 and finishing in 2009. You know the story. It took more time and effort than we’d ever envisioned. Also in 2009, our son finished college.
The culmination of these “journeys” prompted my wife and I to reflect on our lives. After some soul-searching, we decided “you only live once.” Life simply must include some entertainment. The car hobby beckoned. Perhaps a 1957 Chevy 2-door hardtop? Or finishing the restoration of that ‘55 Bel Air?
Our son’s college graduation changed our disposable income like so many of you have experienced. The recession (for all its evils) does have a silver lining. Chevy prices fall from stratospheric to just plain overpriced. Maybe this was the time to buy that “awesome” ‘57 Chevy?
’57 Chevys are as common as dirt. But a rust-free, absolutely authentic gem that meets the requirements of a perfectionist like me isn’t. Furthermore, while there are a number of honest sellers, liars and thieves abound. Never mind the usual stuff like misrepresenting the condition of the car, we were now running into even more bizarre nonsense like tampered VIN tags (strictly illegal, but still goes on). Unswayed, I plowed into an intense four month search for the perfect fit.
Just when it seemed that my quest would end empty handed, Southwest Airlines ran one of their “super sales.” We managed to get tickets from North Carolina to California dirt cheap. A one week vacation was planned to include a classic car hunt in “old car Mecca.” I found two that appeared to meet my criteria before heading for the airport and a third on eBay after we got there. Three strong candidates. Wow!
The first one was a bust. I knew it within seconds. My standard “magnet check” to search for body filler in rust-prone areas quickly revealed the car’s hidden flaws.
The second one was much more compelling. Nice appearance. Reasonable price. No rust-out. Authentic and in a rarely-seen original color. Was our quest complete?
The test drive revealed a surprise. An engine rebuild and suspension work lay ahead. Both very doable, but more time and money … [sigh]
While standing there looking at the car, I knew I’d reached a crossroads.
I could almost hear my fellow car addicts clamoring, “Ted, where have you been? You know these cars backwards and forwards. You’re really good at cutting apart a rusted-out fender and welding it back up. Come back and join us.”
In the other ear, I could almost hear my “investing buddies” whispering, “Ted, where have you been? You know investment history backwards and forwards. Your stories are really good and your explanations helpful. Come back and join us.”
I walked away from car #2.
The final car was even more stunning. This is what we in the hobby call “a high points trailered show car.” This is the kind of car that’s so nice, you could eat off the bottom side. If I bought this car, my “car buddy” friends would just stand there and stare with their jaws hanging open. I could go to any car show anywhere, and go up against the best ‘57 Chevys in the country.
It was a beautiful car, with a price to match.
But … my wife and I decided we just weren’t willing to part with that kind of cash.
Returning to North Carolina, it was time to suspend my search. Maybe not forever, but at least for the time being…
“No one can serve two masters.” — Matthew 6:24, New International Version
Ted’s Not-So-Excellent Adventure? Many of us feel his pain. Ted is a participant in our annual Groundhog Challenge, a stock picking contest among individuals and groups that restarts every Feb 2. How many people do you know who switched to cash equivalents during late 2008 or early 2009 and missed the sudden advance in the stock market that frankly, we warned about, during that time frame? The 11% gain for Ted’s monthly Groundhog balance shown here is fairly lackluster versus the potential. Our relentless antidote to this? Community “pressure” and encouragement.
What I have experienced this year is a case of “galloping off in all directions”. Or, put another way, taking your eye off the ball.
In March 2009, as the market was trying to decide whether to continue melting down after losing confidence in Geithner to provide a miracle, I was sanding down kitchen cabinets. When the market was thinking this summer about whether to go test the lows, or just stabilize, I was writing a script to automate searching collector car “for sale” sites. As the strong market advance continued, I was reworking bathrooms and chasing down ‘57 Chevys that didn’t pan out.
“Ted, How many more months will you allow yourself to be distracted from properly managing your portfolio?”
The Bible verse’s context is different, but the principle is the same. Time to get real about what’s important and start living that way day to day.
I simply could no longer afford to expend the time and energy on such things, while letting my investments work suffer. When I get old, I can’t pay our bills with a ‘57 Chevy or a remodeled kitchen, but I can with a properly managed portfolio.
Here’s to the tough decisions in life. May we always make the right decisions. May they ultimately pay off.
Ed. — Thanks, Ted. Welcome home.