Sunday, February 25, 2018

Extreme Moves In Extreme Times That I Won't Miss A Fourth Time

Among the YouTube videos I've been consuming during my slow season afternoons, I came across an interview with Tony Robbins (the name of the interviewer I never did catch). There is one particular moment around the first quarter of the interview that made me sit up and take notice: the story of how Sir John Templeton went from a $10k investment at the beginning of the Second World War to billions years later.

Here's the video; the portion I am referring to begins at the 13:57 mark:

The segment mainly focuses on maintaining an certain emotional state, which is useful but not specifically the thing that interested me.

Rather, it's the retelling of what happened in 2008-2009, a time of "maximum pessimism," the kind of time in which Templeton believed the best buying opportunities existed. In particular, Robbins mentioned one stock that plunged catastrophically a decade ago, Citigroup (ticker symbol: C), saying, "you could have bought Citibank for less than a buck."

I did a Google search for this event with the search string, "citigroup breaks a buck" and found a cluster of articles on March 5th, 2009 that mark the event.

I know where I was on that date, and I remember a key, relevant fact of my life back then: how much available credit I had, roughly $25,000 that I could have taken as 0% balance transfers from several credit cards I owned.

I got to thinking about it in terms of a "what if" extreme move I could have made, which would have been taking out that credit and buying all of the C shares I could get my hands on below $1 ($17k of that would have come from Citigroup itself, ironically), and then just working hard to pay back those loans fast while the stock recovered (if it had recovered, which it most certainly did).

If I had caught C at the low that day in 2009, I would have gotten it for .97 cents per share, totaling 25,773 shares.

Today, that would be worth nearly $2,000,000 and yield an annual dividend income of $32,990.

One extreme move about a decade ago, during a "blood in the streets" moment, and I'd easily be retired right now.

Extreme risk? Oh yeah. Something that I never could have recovered from if it failed? No, definitely not. It wouldn't have been fun if I had done this and crashed and burned, but it wouldn't have ended me. But look at what I could have gained versus what I actually gained: nothing. As they say, "no risk, no reward."

It's funny that I should have come across this little tale of what Templeton did at this point in time, when I'm starting to wonder if we're in for another dramatic plunge in the markets. Some say emphatically yes... and they're typically selling gold and/or freeze dried foods. Others say emphatically no... and they're typically selling stocks. Others look at various ratios of stocks compared to other financial products or forces (such as the interest rate set by the Federal Reserve) and opinions are similarly split.

So suffice to say, I don't know, and neither does anyone else; no one knows the future (mostly, as there were a small number that saw 2008-2009 coming, but even they could have been horribly wrong).

What I can do is be ready for such an event by having lots of "dry powder" ready to go the next time such a thing occurs (I'd call it "once in a lifetime" opportunity, but there's already been three of these during my lifetime). The next time that the markets fall like a meteor, every financial statement is dripping red ink, and everyone is running for the exits in a panicked herd, I want to be calmly walking in the other direction with a smile on my face. The next shot I get at one of these "once in a lifetime" events won't be wasted, and a few years after when the dust has settled, it could make all the difference.

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