Not quite how ABBA sang it but it is something I have been reflecting on today. Regular readers will know that I read a lot and my tastes are wide-ranging. I recently bought an e-book profiling a dozen successful investors. All are private individuals. Only two are named in the book due to their profile being so high that they see little point in concealing their identity. I ignored the guys who make their money from spread betting and day trading. I have no interest in spending my life in front of a screen or six watching news flashes and decimal points move. I was however extremely interested in those who work with what I would deem to be more traditional methods.
Some delve into enormous detail and others analyse top down. All work pretty much alone. A couple are activists but most are not. The approach that fascinated me most was that of looking for companies that virtually everybody else ignores. Small cap companies often still with significant family holdings seem to be fertile territory. So do companies that have issued profit warnings to which the market over-reacts. Both require a fair amount of research and diligence to make sure that there is a reasonable foundation to the company. A couple of the guys look for neglected companies with low PEs and relatively good dividends. They can be found if you trawl long enough. I tend to look for companies with a strong liquidity profile even in adversity and I invariably check the off balance sheet obligations such as unfunded pension obligations.
However what intrigued me was that virtually none of these investors has an extravagant lifestyle. The reason they accumulate wealth is to buy freedom not material assets. One is now involved with philanthropy. Most lean towards the non-conformist side of life. They did not wear the corporate strait-jacket easily if at all. They have chosen to live the life they want not what a conventional ‘career’ path would dictate. Some have foregone family life and believe that their frugality has been helped by a single life. In some respects it seems they turned to investment to fund their way of life rather than determining up front that investment was to be their ‘career path’. Some admit to being lucky and most have suffered the occasional painful market mauling that would scare me witless.
Which brings me rather belatedly to the point of this post. The reason for reading the book was to see if I could recognise myself anywhere in there. Could I have the psychological make up to do what these guys do. In one or two cases I think the answer is maybe but in most it is a resounding no. I can see some elements of myself in a couple of these guys – and I am sorry to admit they are all men – but I think I am thirty years too late. These people have quite disparate approaches but all involve discipline. Sadly the older I get the less discipline appeals to me. Now I can see the point of punting on the stock market to fund a new camera or perhaps a new car but generally I think it inconceivable that at my age I am suddenly going to transform my lifestyle to such an extent that I am willing to make the necessary sacrifices.
In reality I am content with my lot. I worry about income and eating into savings but the calculation every early retiree makes is based on an unknown, namely life expectancy. If I shuffle of this mortal coil soon (though hopefully not before we have been to the deep South) then I will kick myself in the mortuary for not having bought a 1DX or whatever the latest must have camera might be. If however I am still shuffling around on this mortal coil in 30 years time then I do wonder how we will be coping. If the deflation followed by inflation scenario plays out as some commentators expect then at some point income has to go up or living standards go sharply down. [NB: when I refer to the Deep South, whilst I confess that it is conceivable that nothing could be finer than to be in Carolina, I was thinking of the polar region rather than Alabama and its ilk.]
Is there then a middle course? Could I perhaps devote an hour or two each day to research and ideas development? I see no reason why not. And that then is my 2013 resolution. A slightly more structured approach to my personal “all downhill from here….”. I’ve had a year of drifting and frittering away time, photographing without sufficient thought and too many unproductive days. At lunch at The China Club yesterday with some ex-colleagues (hugely enjoyable) one mentioned his intention of writing a book when he follows me into retirement next March. He will combine his passion for his particular interest with serious research and the goal of being published. I admire him for that. It is how retirement should be. Passion with a purpose. I’m not there yet. The book of investor profiles and the lunch with the gang have crystallised just a little more of my self-knowledge. I have a feeling that I shall find it a lot tougher to mine a million than the twelve investors did but hey, I have to start somewhere. I only hope that I don’t follow the old joke which runs:
How do you become a millionaire?
Start with ten and buy a soccer club.