September 3, 2021 Lunch - PPI Steak Fajitas with penne Pasta. Dinner - PPI Chicken Enchiladas garnished with crema and avocado

September 3, 2021 Lunch - PPI Steak Fajitas with penne Pasta. Dinner - PPI Chicken Enchiladas garnished with crema and avocado

Today was not a great day of food.  In fact both meals were leftovers and I ate no breakfast.

But it was a great day for the principle that knowledgeable investing pays off.  Thirteen years to almost the day September 1, 2008 my portfolio reached $1 million and today ended within $19,000 of $3 million. It tripled.  

I do not think of myself as either a lavish spender or a miser because I have taken great trips and eaten good food and eaten good wine.  But, there are two things I am compulsive about and they are linked: one is pitting my intellect against the intellect of others economically.  I guess I have a competitive nature intellectually in that regard, perhaps because I love economics.

I have loved economics from a very very young age.  I won the award for being the best economics student in my high school, Thank you Mr Fromm, my high school Economics teacher. 

A side note.  There were Jewish twins named Zinnick in my economics class and one of them made a higher grade than I did on one test and he complained to Mr. Fromm that he deserved the Economics award more than I did.  

Mr. Fromm’s response still rings in my ears, “Mr. Zinnick, Mr. Simon knows more about economics than you will ever know.”  

I hope that did not destroy Zinnick’s budding economics career.

The other thing was taught to me by my father, who was also a lawyer and probably smarter than me, he was law review at UT Law School.  I was not.

He taught me that if you are smart enough and study, you can get the odds in your favor and that you should never bet against anyone who has the odds in their favor.  He never went into a casino except to see the show.  What he did love was to bet on the horses and used to brag that he never had a losing year.  

He taught me his technique for winning. the Racing Form was a newspaper published a day or two before each race day.  We would study the form the night before each day of racing we attended and for the big races such as the Triple Crown for each race.  We would spend summers in Ruidoso where there was a race track with racing in the summer, so we would go to the track one or two days a week. 

We would spend hours studying each of the 12 to 14 races to see if the past performances of the horses in that race revealed a likely standout horse.  We put greater emphasis on stake races than on claiming races where a horse could be claimed, because the stake races’ purses were bigger and the quality and theoretically the consistency of the horses more reliable. 

That was the key element to a dad’s method, to pick the best horse in the race that would run true to form based upon the history of its past performances.  Running true to form had lots of tricky elements to it.  Horses are like any other athlete.  They do no stay at the level of training to achieve their best result all the time.  That is why only the greatest horses win the Triple Crown, because it is hard to keep any but the greatest horse at its top performance level for the two or three months needed to complete the three races.  

So each day we intended to attend the races Dad and I would drive to the track to observe the morning workouts where the horses were ridden to give them an exercise to prep for the race.  You can see which horses are ready to run by the intensity with which they run.  This is how the handicappers pick their suggested favored horses for each race day for their “tip sheets” that are sold to the fans along with that day’s program at the track before racing begins usually between 12:00 or 1:00 in the afternoon. 

But Dad did not stop there, for the two or three horses Dad liked to win that day, we would drive over to the barns to talk to the trainers of the horses Dad liked and he would ask each trainer two questions among the other small talk, “Is your horse ready to run today?”  and, “How do you think it will do?

There were other variables that went into Dad’s handicapping, such as track conditions (some horses run better on a muddy track, called Murders) and what other tracks the horse had run at and when it last ran.

If Dad got answers that confirmed he had selected the best horse and that horse was ready to race at its full potential, he would bet the horse in the following manner; $10.00 to win, $50.00 to Place, and $350.00 to show.  Dad’s theory was that the best horse in the race, even with bad racing luck should run no worse than second (place) and if it did he would make money. Even if it ran third and if it paid only $2.20 for a show bet he would only lose $25.00.  If it won he would win 

In Pari-mutual betting the dollars bet on the winning horse get the entire pool of money bet to win after the track takes its 10%. For place, the first and second place horses split the money bet on Place in proportion to the totals bet on each.  That is why some horses pay more to place than win if a long shot runs second. Then the same formula is followed for show (third).  So if your horse finished first and you bet him to win you get his share of the win pool and so forth and so on for second and third.  A normal pay out for a favorite would be in the range of $5.00 to 20.00 to win, $3.00 to $5.00 to place, and $2.20 to $2.30 to show if another good horse finished second or third for a $2.00 bet. So on average winnings of $125.00 per race and over a year that would amount to quite a bit of money. 

Dad’s assumptions and methodologies were borne out again and again and it taught me a simple lesson that I have applied to the stock market. Pick the best company in each industry you invest in and bet it heavily.

Of course I apply different research techniques for picking companies than horses.  I either do the financial analysis or rely on those who have, to determine the best company in each industry and also rely on my intuitive sense of whether those companies in their industry are generating the most revenue momentum by watching the stock market and the economy every trading day. It is time consuming but fun for me most of the time and more rewarding than practicing law as I have reduced my law practice over time as you can see from the last thirteen years.

Coincidentally, I ended my full time career as a corporate and securities attorney in 2008 when I was terminated by SunCal development company after I helped Westland sell its 47,000 acres to SunCal for $250,000,000 in 2006. SunCal promised to employ all the Westland employees for two years, which promise they kept. Unfortunately, SunCal lost its ownership of the 47,000 acres in the economic recession of 2008, at about the same time I was terminated.

I also believe I had a strong intuition. I recall one instance in particular. The family attended a community Passover dinner at the a temple.  When it was time to the children to find the Afekoman to complete the service, I had an intuitive flash of where to look.  I ran to the head of the stairs where the basket in which tickets for the Seder had been deposited and found the Afekomen.  

Much of my success in investing is due to buying Apple, which I bought over fifteen years ago, because it has split 28 times to one since.  If I had retained my largest position (535 shares) I ever held I would have three times more Apple shares but I have no regrets.  I have sold shares of Apple over the years to live on and invest in other stocks to seek diversification.  

The reason why I have diversified is because there is often rotation among the different segments of the market, from staples, to high tech to oil and gas to biotech, for example. Diversification gives me the satisfaction that on days when high tech is out of favor, I might still have a gain.

I also employ a timing strategy.  When there is a major precipitous downturn in the market I sell and try to buy back and increase and reposition my positions as the market starts back up again. The last time this happened was in February 2020. I sold on February 28.  The market hit bottom on March 13.  I bought back in late March and netted a $52,000 gain which I used to increase my positions.

Also on February 28 I bought 1000 shares of Moderna at $32.00 per share based on the news that the NIH was funding its research to develop a vaccine to treat Covid.

I later sold 500 shares to buy Johnson and Johnson when I thought, incorrectly, that approval of J&J’s one shot vaccine was eminent. But even with only 500 shares of Moderna, I have made a handsome gain of 12.5 times on the shares I kept since Moderna is selling for almost $400 today.

So the market is a lot like the horses, there are a few outstanding companies with strong niche positions in their industries that consistently outperform and lots of other “also rans”.

The trick is to pick the winners and to diversify in such a way that when the winners falter because of market rotation, the “also rans” might have a lucky day. There are companies like mudders that do better on an off track.

Less you think I am an infallible genius, I have made terrible mistakes in my stock picks.  For example, on February 28, 2020, I also bought 1000 shares of Zoom for $108.00 per share, but sold it three hours later when it dropped to $104.00.  It is selling for $300.00 per share today and has been as high as $400.00. 

I also tried to set a stop on my 100 shares of Google and got stopped out at $1833 after which it has risen to over $2700. 

The market has been kind to almost every investor in the last two years.  I heard that there are more millionaires than ever and many are younger persons who have placed heavy bets on crypto currencies.

I did not eat breakfast, so at 12:00 I ate some leftover penne pasta from several days ago with the beef fajitas from last night.

I did not walk because we planned to go to galleries for Arts Crawl tonight and that was a mistake along with not eating breakfast, because I weakened a bit during Arts Crawl.

At 5:00 when Suzette came home she was hungry, so we decided to heat some of the leftover chicken and zucchini enchiladas for dinner.  Suzette heated a couple of 3 x 3 inch squares in the microwave and we garnished the heated enchiladas with slices of avocado and dollops of crema.

We each drank mojitos with dinner. And I ate several dill pickles to make room in the jar to replenish the jar with fresh Persian cucumbers quartered.

We then went to Ann Dunbar’s opening at a new gallery near our house and the drove to 6th and Copper downtown and went to Summer and Dine gallery and Gallery 516.  Central was closed and there was a street fair with lots of local artists and food vendors and people.

We then returned home at 6:50 and when I saw that Rachel was on vacation I lay down in bed to nibble three squares of chocolate and read Travels with Charley by John Steinbeck and fell asleep until 10:00 when I awakened and wrote this blog.

Bon Appetit