Dear Survivor,
Your Survival Guy’s first job in the investment world was before I even graduated from Babson College in 1994. It was back in 1992 when I was a sophomore working at a firm called Wall Street Games, founded by Babson alum (’82) Tim DeMello.
At Wall Street Games, later renamed Replica because it also offered fantasy football, participants would call up and place their lineup to me or other employees working the phones. The Wall Street part of it was a game where participants were given a large sum of money to trade, and at the end of the quarter or so, the one with the most money won the prize.
Stock options were the tool most used to get there.
I remember studying and studying how options worked so I’d be ready to put together the trades for participants. It was a lot of reading and talking to coworkers after the shift to understand some of the intricacies of the trades being done.
Showing up for my shift, I’d grab a seat in front of one of the rows and rows of computer terminals and headsets. As soon as you logged in, the phone would beep with one caller after another and continue at a rapid-fire pace for the next several hours.
Big brokerage firms would have their new hires play the game to learn how to build options trades and not lose “real” money. As you can imagine, it was a pretty competitive and intense group of players.
This is where I cut my teeth in the world of options, an area that is today teeming with participants, many of whom wish they had never heard the word “options.”
Sure, one can write options as a side hustle, but that’s not what we were doing back then. These traders were swinging for the fences like the guys in Liar’s Poker. It’s why students at surrounding schools wanted to work there. It was the best education in town.
That was a long time ago.
Options are like living in Willie Nelson’s “You Were Always on My Mind,” because you’re always dealing with them, whether it’s taxes or the calendar. And you had to be right twice: first with the direction of prices, and second, when they would get there. To me, that’s no way to spend Your Retirement Life. I’d much rather be in Paris.
What to Do?
What to do? That’s a question that needs to be answered well before a crisis, not during it. There’s plenty of space dedicated to how to handle this market. What to do? Buy the dip? Is this the bottom? What should retirees do?
These are all scenarios Your Survival Guy thinks about well before the storm because I’ve been through enough to know they aren’t easy, and they can last longer than one can imagine.
If you’ve ever been stuck in the fog while boating, you know what I mean. Seconds feel like minutes and minutes feel like hours. Then, when the fog lifts, it can be startling to see where you are.
Do You Have a Survival Guy Portfolio?
If you were to construct a Survival Guy all-weather portfolio, your first matter of business would have to be coming to terms with “Hey, it’s going to get ugly out there.” (More on that in a minute.) If Your Survival Guy ventured out into the investment woods with my “Survival Pack,” the first item I would unpack would be a book to get me in the right frame of mind.
I’d find some focus with my spiral-bound copy of Ben Graham’s The Intelligent Investor, where terms like margin of safety and the difference between an investor and a speculator would be covered. As an aside for you, I have two copies, and everyone in my family has their own copy. I suggest you own it too. Also, I’d have my copy of J.R.R. Tolkien’s The Hobbit, because you need to enjoy life even when you’re in survival mode, and for your creative thinking. Remember, investing is mostly art, not science, and it’s certainly not about stock prices.
Which brings me to how ugly it can get out there, especially when markets are lost in the woods and the trees are chattering about AI. Look, you know I’m not the weather, and for that matter, I’m not the weatherman because I don’t like predictions. I like controlling risk, which is why risk control is at the root of my Survival Guy portfolio. That is where the Efficient Frontier comes in.
Because here’s the deal. Great stocks can look terrible at times, so bad that they can be left for dead. But often, selling is a mistake. There are plenty of dividend payers that keep on keeping on long after the newbie investors have sold. That’s ok with Your Survival Guy.
I want you to look at the histories of two companies I’m thinking about, Microsoft and Amazon. Run your finger along the line of those brutal times where their futures were in question. Sound familiar?
Owning two stocks is not what I’d recommend ever. Doubling that to four is not enough either, same with eight. 16? We’re getting there. Double that to 32 or more, and you’re probably in the sweet spot. 500? Forget about it.
My point is that when you construct a well-diversified portfolio, you don’t have to bet the ranch, or your life, on a few companies. You need to get out alive, and I don’t want to depend on two companies for my future. How do you do that? Well, you begin by investing in my #1 favorite investment in the world, Y-O-U. That’s when you immediately understand it’s up to you to get out alive. I like those odds.
Having a guide never hurts, either. Your Survival Guy’s been fortunate to have trained at the best business school in America, Babson College. I’ve learned plenty from my studies of Richard C. Young’s Intelligence Report and from having a father who believed in me. But I’ve learned the most from my conversations with you, where you tell me about you. Because it’s what you don’t say that tells me the most. Yes, we’re all different, sure, but at the end of the day, our lives have a lot in common, and we all want to enjoy our own walk in the woods. When you need a guide through the forest, email me at ejsmith@yoursurvivalguy.com.
Survive and Thrive this month.
Warm regards,
“Your Survival Guy”
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P.S. Last month, a long-time reader of Richard C. Young’s Intelligence Report got in touch with Your Survival Guy to say he and his wife would be in New England the week leading up to Easter. He said they wanted to visit Newport, see the mansions, and of course, Your Survival Guy.
When the week arrived, I asked him to text me when he had a better idea of their itinerary and arrival in Newport. He did, and I felt like I was touring New England with them. He knew all about my boat troubles a couple of years ago and, in one text, asked how the boat was doing.
When he and his wife arrived at 98 William, it felt like we already knew each other. We had a nice, relaxing visit, and we talked about their trip through New Hampshire, up the coast to Bar Harbor, ME (even calling it Baah-Haahbah like locals), and back down the coast, landing in Newport.
If you’re in town, be sure to visit Your Survival Guy. I look forward to seeing you.
P.P.S. Your Survival Guy and Gal buy real milk in New Hampshire but can’t get it in Rhode Island. Go figure. This is anecdotal, but it’s yet another reason to consider which state is best for you and your family.
Take a look at the map below from the Campaign for Real Milk, a project of the Weston A. Price Foundation. The states in red make it illegal to sell raw milk, and the states in dark blue have the most lenient rules around raw milk. The others lie somewhere in between.
In the video below, Sally Fallon, president of the Weston A. Price Foundation, explains the benefits of real milk.
P.P.P.S. You know from here, here, and here how bad stuff happens above the tree line on Mt. Washington, NH. And yet every year between now and however long the snow lasts, skiers will head to Tuckerman’s Ravine for the season’s last turns. This used to be a rite of passage after the lifts closed and summer days on the water were right around the corner.
Nowadays, with better equipment (but not necessarily better skills), skiers head up Tucks in the heart of winter. This is nothing new. Climbers did it all the time. The backcountry has always been open year-round. But more and more are heading that way to ski, who perhaps should stay in the lodge. Tuckerman’s in the winter is an entirely different beast than in the spring. And it’s why every year we hear about rescue missions.
Back in the late 80s, Your Survival Guy was caught in a sticky situation skiing the snowfields above Tuckerman’s Ravine, traversing over to and above the headwall, but we overshot it and were almost too low. With nowhere to go but over the cliff or sideways, we side-stepped inches at a time, digging in our edges, for what felt like being stuck in the fog, slowly making our way to the nearest gulley. I told myself I’d never put myself in that type of situation again.
When we got to the gulley, we skied down without much of a word. No high fives. Just an unspoken “let’s get down now.” Later that night, over beers, we were all thankful we made it down without incident. We knew it could have easily gone the other way. I can feel my palms sweating just thinking about it. I can’t say I’ve done anything like that on skis ever since.
As it relates to investing, are we safer with age? I’m afraid not. Investors tend to learn lessons the hard way, and lessons are not age-discriminatory. I know I’ve been a lot more careful on skis ever since that day in Tuckerman’s. When you’re ready to talk about your retirement life and margin of safety, email me at ejsmith@yoursurvivalguy.com. I’ll know you’re serious.
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