A remarkable story–one man’s answer for How Can One Become Part of the 1%? Part II

This is a story from an anonymous answerer on reddit.com.

I kept cold calling, pestering the local branch managers of various brokerage houses. Since Seattle is three hours behind NYSE opening time, it meant most brokers show up to work around 6AM. So I would camp out at the lobbies at brokers offices at 5AM in the morning, hoping to improve my odds of intercepting the decision makers. This went on day after day for more than three months. Eventually it paid off, I finally got hired at Prudential Securities by Paul Wonnacott in their Seattle branch. This is the first time I have actually encounter the 1%. Despite the fact stock brokerage was really just a sales job, I tried to learn and absorb everything I could. Finance, accounting, deal structure, annual reports, research reports, most of these were Greek to me but no matter. I read and read some more. I also got interested in technical analysis for stock trading. The early Bloomberg terminal became my best friend. I couldn’t believe how much information I was able to find on this orange tinted screen. In a few years I was making six figures, or by early 1990s standards, I was in the 1% myself. I was proud but also hated my job. I hated the conflict of selling products loaded with fees or promoting stocks that we “knew” the firm had a vested interest in. After all, it was all about selling and not actually figuring out how to make trades and investments. I wanted out and started looking for a reason.

By 1996, freshly married and sick of my job, I noticed online brokers starting to flourish. Considering the fact I was charging clients $110 a trade to trade 100 shares of Microsoft, the online brokers were charging $20 a trade, I thought my business as a broker was going to be toast. Besides, at $20 a trade, it was cheaper than the $50 a trade the firm charged employees. I finally saw the chance to leave and trade for myself.

I quit my job by late spring of 1996, but all I had was about $20,000 liquid cash to trade. The first 6 months was a disaster, I lost nearly all of my $20,000 on stocks like Ascend, Shiva and a host of other bygone tech stocks. I had to drastically scale down my lifestyle and asked myself if I was really serious. In order to trade out of my hole, I needed more capital. I maxed out all of my credit cards for cash advances. Fortunately, the market turned and I recovered my losses and some. When all said and done, I had $50,000 to trade. But I knew I needed a plan to make it. I set a goal of making at least $100,000 a year to justify what I was doing. That meant making at least 200% a year from my then $50,000 stake. It seemed almost impossible.

After some calculation and observing what I did wrong I came up with a simple plan. It would be impossible to look for stocks that can double or triple in a year without major downside, these kind of stocks are volatile. But there are plenty of stocks that moves more than a few percentage points a day, if I can capture just a chunk of those movements I didn’t need to hold stocks overnight. Since there are more than 200 trading days a year, it meant 100,000/200=500, or roughly 1% return a day on my $50,000 stake. This was entirely doable. The key would be to contain my losses. For those of you who knows trading, this is day trading in its essence. And off I went. By the end of 1996 I was up more than $100,000, I reached my goal.

A year later I made more than $500,000 and never looked back. Yes, I was back in the 1%. And this is also where things got crazy. Since day trading only occupied a few hours in the morning (Seattle is 3 hours behind NYSE time), and I was done usually by 10AM, I had plenty of time on my hands. I started shopping out of boredom. I bought multiple cars, houses, my expenses quickly got out of control. Pretty soon I was feeling like a slave to my purchases. The monthly fixed cost to my lifestyle was $50,000-100,000. For a day trader starting fresh everyday, I started to feel like I had to make certain amount just to stay afloat. I was not even thirty at the time. My mood was no longer upbeat, I was angry at myself and took out on people around me. I was this raging asshole because I was so full of myself yet I couldn’t figure out why I was so unhappy. Looking back, I suppose it was because money didn’t make me happy, despite the fact I reached my goal I had nothing but an empty feeling inside.

I had to find a way to scale my trading to pay for my now lavish lifestyle. So I went back to do what I hated, namely going after other rich people to raise funds for my hedge fund. I wasn’t particularly good at networking (hard to do when you are an obvious asshole), the fund got started with a very small pool of $10,000,000, a good chunk from myself. I struggled to trade under the nagging of limited partners, I hated it. I felt like I was being watched all the time, my trading suffered. I could no longer do the same style of trade I was used to, the returns lagged and I started to feel really depressed. I went through a couple of years of depression, spending days doing nothing but staying home and browsing online. My marriage suffered. I blamed my spouse and her extended family for being greedy and always wanting more from me. Even the arrival of my son didn’t cheer me up.

Due to my underperformance, people started to pull money out. It compounded to me starting to trade recklessly. I no longer had my old discipline of risk management, it simply went from one Hail Mary trade to another. By 2003 I was insolvent. I burned through all of my capital while still stuck to multiple homes and other obligations. I gave my wife the bad news and she spent days crying. I thought my life was over. I tried to kill myself.

Tags: dealing failures, how to be rich

A remarkable story–one man’s answer for How Can One Become Part of the 1%? Part I

September 13, 2015 by admin | No Comments | Filed in Other People's Story, Philosophy and Methodology

Part I
Part II
Part III
Part IV
Part V

This is a story from an anonymous answerer on reddit.com.

I have done it three times thus far. But there is no short cuts, so unless you are going to win the lotto, there is no get rich quick scheme here.

There are some real bitter counter to CamMi Pham’s posts, most are along the lines of how lucky she was and so on. My personal view is that I would agree with about 90% of what CamMi wrote, but people probably want specific examples.

I came to US along with my parents as a teenager from mainland China back in the mid 1980s, a time no one gave a fuck about China. Even among the Chinese here in Seattle, we were considered 3rd class citizens behind other Chinese, namely American born ones, Chinese from Taiwan and so on. We had no skills, no money, no connections, but we had our physical labor we could sell. My parents were college professors from China with no language ability and zero business sense. So, no, you can’t accuse me of having some kind of head start in business. They were utterly useless and had no concept of money in this new capitalistic society. They had to work as housekeepers and janitors, starting fresh from the bottom in their 50s. So yes, I want to say a gentle fuck you to all those whiners about how some of the 1% had all the advantages. The only advantages I had was I had my four limbs in tact, and chip on my shoulder.

My first job was at the local Safeway for the simple reason McDonalds turned me down due to my poor English skills. I was sixteen. I worked my ass off, always looking forward to weekends, holidays, and any overtime shifts if possible so I can earn more. I biked to work in the rain (Seattle rains a shit load), snow, ice, sometimes not getting home until 2am in the morning, and I still had homework to do. I finished 4 years of high school course in 2 years so I can graduate on time with my age group (my high school in US didn’t accept credits from China). I did not want to stay in high school until I was twenty. So I had extra course load too. During this time I worked as many as three jobs at a time. Moonlighting as a clerk at the neighborhood 7-Elevens, got abused at call centers, participated in focus groups, sold plasma to the local blood bank. Pretty much anything I could do to earn extra money. So for those of you who complained that you have to make ends meet to work extra hours and take on extra jobs, I understand exactly how it goes, but you will not get any sympathy from me because the entire time I kept telling myself this is all just temporary. There is no way I won’t get out of the hell hole if I worked hard.

Two years into my Safeway clerk job I moved out of the house because I met my first girlfriend, my parents didn’t approve. I was eighteen. Faced with the prospect of having to make more money to support myself, saving for college, I looked for anything that would pay more for a high schooler. The only thing that paid more than $5.25 an hour was selling.

Like a lot of men, I like gadgets. I was fascinated by cameras. Growing up poor in China meant virtually no one had a camera of any kind. It was a very expensive hobby. I would hang out at a camera stores in Bellevue so I can fondle some of these amazing machines. To my surprise a lot of the clerks knew far less than I did about the equipments they were selling. This made me realize I could probably do their jobs better. So I asked their managers for a sales job. But none would hire me because my English was still not so great, of course I didn’t have any sales experience. The classic chick or egg thing. I knew I had to get sales experience somehow.

I saw this flyer from Cutco (Kitchen knives, block sets, utensils) promising that I could make $9 an hour. As it turned out, it was all about door to door sales. Undaunted, I bought the starter knife set and started selling. I found a directory of all the Chinese engineers in Seattle that worked for Boeing and started dialing away. I would make up stories about how showing them knives was for a school marketing project, and assumed they all knew my uncle who also worked at Boeing. Most assumed a high school kid would just be harmless, and some might have vaguely remembered my uncle’s name, but few would turn me down for a house call. This taught me a lesson, if you don’t ask, you won’t receive. I even went so far to ask my uncle to drop me off at some of those “friends” houses so I can do my sales demo. Of course not everyone bought, but the few who did still reminds me to this day just how good those knives were!

Having had this sales experience in one summer, I used it on my resume and got a job selling cameras in the local camera store. But even this first sales job didn’t come easy. I had to offer to work for free for one month just so I could get in. I told the manager if I didn’t sell as much as he expected by the end of the month, I wouldn’t get the job. I went from Cameras West (now out of business) to Silos (gone too), to Video Only (Don’t Be Sorry… Shop Video Only!). I was always nearly the top sales guy everywhere I went because I spent all of my spare time learning about all the products I was selling. During my off days, I would go visit other electronic stores to learn about the product they were selling. I would linger around other salespeople to listen in on their sales pitches to learn. I hung out at magazine racks at Tower Books to read about product reviews. I simply wanted to know more about what I am doing than the next guy. I learned from early on that solution selling worked. I went from making $5.25 an hour to making $40,000 plus a year in two years. I was twenty.

My job at Video Only also gave me a small taste of entrepreneurism. Peter Edwards, the owner of Video Only instituted a margin based commission system for salespeople. We would all get a computer printout of the “costs” of all the items for sell along with the displayed price on the floor. The salespeople get to decide what the item actually gets sold at between those two data points. By the end of the month, the higher the profit margin of ones overall sales, the higher the commission payout. I loved the freedom this gave me and it taught me how to do deals on the fly. I would later on copy some of this approach with my own employees.

This was also the same time I got really interested in business and finance. I spent most of my “entertainment” money on books. I never partied, I saved whatever money I could so I can buy my first piece of real estate so I can avoid paying rent. I bought my first condo at twenty-one. Since I worked in retail sales and got pretty good at it, it quickly made me realize most the people I was working with were twice my age or older, and I was already doing better than them. The thought of spending the rest of my life on the sales floor made me looking further ahead. If I was going to be doing sales, the only way to “scale” was to move merchandize with much bigger dollar value or speed. So the idea of being a stockbroker or a real estate agent seemed appealing. I got a real estate license but found the pace too slow and boring. So stock and bonds sales it was. But being a minority with no connections (rich friends and family you can immediately bring to the firm) was not so appealing to most hiring managers, not to mention the fact I have yet to graduate from college.

Tags: how to be rich, why teaching about failure is important