Friday, October 2, 2009

My first trade

The story is a tad muddled because memory glosses over details. The upshot is that when I was a sophomore in college I wanted to go on a college-sponsored trip to Africa during the summer. The problem was one of economics. I could have funded the trip out of my earnings from high school jobs, but that would have depleted my savings and I needed the money to pay for college costs that weren’t covered by my scholarship and bursary job. My parents weren’t exactly sitting on excess cash, which was why I was a scholarship student in the first place. But then there was my great aunt. She, my grandfather, and my great uncle lived together, having long since buried their spouses. They were ancient, not just to a college student—all around the age of 90. Their income came from timber and mineral rights and a tiny fraction of the proceeds from a stone quarry on the property leased to Martin Marietta. Their income was modest, but their expenses were virtually nonexistent. They lived and ate sparingly--meat one night, potatoes the next, and vegetables the following. My Aunt Lizzie was a reader, not a cook. (Those who know me in real life would take this as anecdotal evidence for nature over nurture.)

Well, my mother convinced Aunt Lizzie to fund my trip in the form of a $1,000 loan. Aunt Lizzie agreed on the condition that I repay the full sum of the loan to my younger sister. My mother agreed. I changed the terms. Why should my sister get the full amount of the loan as opposed to half of the loan, a more reasonable distribution? But then how could I even repay half the loan? So I came up with a solution. At the age of eighteen I entered the offices of the local stock broker and probably asked some embarrassing question like how I could double my money in a short time. The stock broker, according to rumor also a bookie for local sports events, recommended Westinghouse. I did no research, I obviously never thought about risk, I simply accepted his recommendation. I bought $500 worth of Westinghouse stock. And then I travelled in Africa, every day buying a copy of the International Herald Tribune, absolutely fixated on the performance of my investment.

Most successful traders record their first blowup. Mine was a complete success. Westinghouse doubled in under two months. On my return I sold my Westinghouse stock, gave my sister half of what my great aunt had advanced me, and was forever hooked on trading. But I knew that my triumph was due either to dumb luck or, I suspect, to illegal inside information. It was an all too easy entry into a very difficult business.

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