My Worst Investment Ever Podcast

Roxana Nasoi is an advocate for community and technology with 10 years’ experience in online business data analytics and marketing. She was an Elance (then Upwork) ambassador between 2012 and 2018. She joined Aimedis as their chief communications officer (CCO) in November 2017 and is co-host at the The CryptoLaw Podcast and the Nothing at Stake podcast.    “Be true to yourself and do not be afraid to start over again.”  – Roxana Nasoi      One lesson learned    Everything you do generates a reaction that has either direct or indirect impact. It’s difficult to predict what can happen in a business or with an investment. If one doesn’t assess every single potential risk thoroughly it will return to haunt them.       “What you did today will come back to you in five years, or even sooner.” – Roxana Nasoi       Andrew’s takeaways    Breaking up is hard to do in business too, but make sure it’s a clean break. It’s important to do the work to truly separate yourself from a partnership or business partner, you want to make sure that it’s a true, clean separation. It’s even hard sometimes to identify where the connections are. But just as a lot of preparation is required to get into business or an investment, so too is it important to have an exit plan, that is well executed.     “When you separate and decide to go different ways, make sure that you invest the time and effort that’s necessary to truly separate yourself from that other business or … business partner.” – Andrew Stotz      You can also check out Andrew’s Books    How to Start Building Your Wealth Investing in the Stock Market  My Worst Investment Ever  9 Valuation Mistakes and How to Avoid Them    Connect with Roxana Nasoi  LinkedIn  Medium  Twitter    Connect with Andrew Stotz  astotz.com  LinkedIn  Facebook  Instagram  Twitter  YouTube  My Worst Investment Ever Podcast 

Tron Jordheim is a business guy, podcast writer, and speaker who spends a lot of time operating RHW Capital. Tron is one of those entrepreneurs who is always making something out of nothing. He started his first business in the sixth grade with a roll of paper towels and a can of window cleaner. He has been at it ever since. He took his boyhood interest in protection-dog training and created a whole new business model that put him through college. Tron was one of the people who helped the New York City Police Department start its K-9 Unit. He ran man-dog contract security patrols for Pan Am airlines at JFK airport and was the captain of the United States team that competed at the European championship for German shepherd dog clubs in 1982 (now called the WUSV world championship).     “What I didn’t do though is a cash flow analysis and a forward-looking pro forma … I didn’t do any of that.”  - Tron Jordheim    One lesson learned It’s very advisable to do some real risk analysis before you invest in a business so that you know that, when risk factors arise, you can recognize them. Along with that, of course, is to have a plan for dealing with the risk or avoiding it.       Andrew’s takeaway    Beware of The Entrepreneurial Seizure, which can manifest itself in the budding entrepreneur doing insufficient research on returns and risks. This happens when they have a great idea, they get so focused on it that they often lose sight of even the basic research, on revenue, on risks and they definitely ignore negative feedback. The result can be that they want to grow fast and don’t bother to test the market.   Someone in the grip of such a seizure doesn’t ask the questions:     No. 1: Do I have a product and service that’s really valuable?   No. 2: Can I execute the idea to create that product or service?     "Sometimes the best ideas are not executable. And what I’ve learned over time is that it doesn’t matter how good the idea is [it’s] how much of it can you do …and that much of it is a good idea.”– Tron Jordheim   You can also check out Andrew’s Books:  How to Start Building Your Wealth Investing in the Stock Market  My Worst Investment Ever  9 Valuation Mistakes and How to Avoid Them    Connect with Tron Jordheim:  LinkedIn  Tron Jordheim    Connect with Andrew Stotz:  astotz.

Dann Bibas is a co-founder at Fountain financial services in the United Kingdom, a digital wealth manager combining new technology was certified advisors to make personalized investing more accessible. He was formerly an equity derivatives associate at Citigroup, working closely with some of the world’s largest financial institutions on equity, cross-asset and volatility products. He is also a member of the Founders of the Future community in London, the Tech Nation Founders’ Network and is a regular speaker at start-up and fintech events.    “Stock picking, for myself at least, is really difficult”  - Dann Bibas    Die-hard passive investing fan adds key points   Dan truly believes that investment in the market for the long term is the maker of winners  He has felt this way most of his adult life since the following story of loss  Started to invest in stocks when he was a student majoring in finance at McGill University (Bachelor of Commerce)     Watching a stock closely becomes a nightmare of ups and downs   As he learned micro and macroeconomic and other financial concepts, he and his friends became interested in investing as they were learning a lot about markets and how to evaluate balance sheets.   Early forays involved using small amounts of money earned during summer jobs through a friend in his group’s TD Ameritrade account.  They bought a few hundred dollars of shares in Citigroup (a fact Dann used later on during his interview for Citigroup’s graduate program.   This was the first ever investment he actually took seriously. Perhaps too seriously, because his strong memory was that it was very anxiety driven, because he was focused on this one company, watching everything that was happening to it.  He had a clean thesis and thought he would become rich quickly. Then the stock was hit by an earnings report that was negligible below expectations.   Then some macroeconomic event happened and it fell further.   Then there was positive news and it bounced up.   But the stock can also be affected by other banks’ earnings reports, impacting the sector.   So he went from thinking he had an effective thesis but his stock was getting “hit on all sides” both up and down.   How’s the sector doing?   How’s the broader market doing?   How are its peers doing?   Is there a specific event that was not factored into the share price that is now happening?   There were too many variables.   Also stressing him out was a Forex issue. The money he was earning was in Canadian dollars, and his band of brothers was investing in US dollars.   So on top of all the above, he was having to look at how the USD/CAD was trading.     “I think it’s safe to say I was very, very overwhelmed. I think we just about sold out of our positions to break even … my first one or two gray hairs came from those couple of weeks or months of investing.”  - Dann Bibas    Definitely after this experience, he follows what Warren Buffett preaches, he converted his investor style from active to passive investments  And, he’s very happy with it.     Lessons learned  1. Stock picking is really difficult: Because:   a. Accounting for all the many variables is a lot of hard work   b. Coping emotionally with the ups and downs of a stock and all the elements that have an impact on a single stock is also very difficult   2. Full conversion and commitment “to the faith of passive investing”    a. Because of the long-term benefits   b. Investors do actually end up outperforming stock pickers  c. He much prefers reading about wider economic growth than looking into the balance sheets of individual companies  3. Such lessons drive the advice he now gives clients at Fountain    Andrew’s takeaways  Work and investing habits must suit your personality. Some people in the market just like to watch the price changes rather than beat the market “What makes you happy?”  It’s amazing how many people put money down (investing) without knowledge of the market. It’s a little bit like jumping in the car not knowing what a seat belt is or figuring out what the gas pedal is, just treading on the gas pedal.     “The end result of that is that you’re taking on risk that you don’t necessarily  know about for that person. And the world doesn’t care.” 

Guest profile     Hansi Mehrotra runs the financial literacy and investor education blog, The Money Hans. She was named in LinkedIn’s inaugural global 10 TopVoices for Money & Finance. More recently, she was included in the LinkedIn TopVoice and PowerProfile for India in 2018 and the year before, the same site’s PowerProfile for Finance in India. Her profile on that site has more than 289,000 followers. Hansi has over 20 years of financial services industry experience, mostly in online delivery of investment research and consulting for the wealth management industry across the Asia-Pacific region. She set up and led the same region’s wealth management business for Mercer’s investment consulting division in Australia and Singapore. And, Hansi has led a number of projects in India, including the design of investment options for the National Pension System. She holds a BA from the University of Delhi, a graduate diploma in applied finance and investments from the Securities Institute of Australia (now FINSIA), and is a Chartered Financial Analyst (CFA).    “Just because we didn’t have data doesn’t mean it never happened.” - Hansi Mehrotra   Prelude to tale of woe and Hansi’s motivations   She finished her degree at the University of Delhi  by correspondence because she come from a very small town.   Her desire to learn finance was due to a “lack of money”. Also, her father had lost a lot of money and she wanted to know why.   While earning her graduate diploma in Australia, she worked as a waitress part time.   Hansi’s drive and skill for self-study came partly from her father, who urged her to help her less academically inclined brother with his work     Asset allocation and sizing of position – went to Zero  Hansi and her husband started a joint-venture company to research tax-effective agriculture schemes.   They became well-known for writing the best research reports on how to receive tax benefits from planting trees, such as in orchards, vineyards, and for pulp and paper.   She joined Mercer and convinced them to employ her husband as a consulting to research agribusiness as an asset class globally.   With the knowledge they gained after reading Rich Dad Poor Dad, by Robert Kiyosaki and became interested in passive investments and income streams.  Thinking about starting a family, they discussed Hansi leaving work and needing support while raising children and managing the home.    They invested their combined life savings into the top rated agribusiness schemes that they had recommended to their clients.  Investments included pulp mills in Tasmania (specifically Gunns), orchards, grapes, stone fruit, and a big outlay in a unit trust in red-wine vineyards in the Barossa Valley, South Australia (premium wine-growing country).   The vineyard investment doubled its value in 12 months and other agribusiness stocks were doing well and achieving high returns, “so we were riding high”.  Hansi and her partner were then re-investing profits back into these schemes they were earning a return of up to 15%.   “All of it got wiped out.”   All three investment areas were hit with either environment factors (hail storms) other bad weather, foreign exchange losses and environmental impact issues and regulatory problems, bring them all to zero.   Because have were unlisted company, they could not recoup their investment in any way.   That was the end of their plans to have children.   Impact of investing and failure     “Learn from mistakes and just because we didn’t have data doesn’t mean it never happened.” - Hansi Mehrotra   Andrew asks about emotional strain on marriage  “Tell us about the emotion between you and your husband as you were going through this – how did you manage to keep the relationship strong, because a lot of times going through financial crisis can tear people apart?”      Hansi’s response   They were both trained analysts.   They forgot that what they had preached to others about investing applied to themselves.  Feels great regret for letting someone else convince her to forget all she had learned, especially about diversification and other safety factors in investing.  Such situations put a lot of stress on a couple and her marriage was no exception because they never got the finances ready to have children. “Now it’s too late.”     Lessons Hansi learned  Diversification should never be forgotten

  Thao Quynh has 15 years of experience in the financial service and investment industry. She was the investment portfolio manager for two European funds with US$280 million of assets under management. Prior to that, she worked as a financial analyst and research manager for leading brokerage houses in Vietnam. She started out with a university tuition loan to create the asset of knowledge and it is this knowledge that has given her financial security. She believes in diversifying across various asset classes and allocates about half of her wealth to investing in the stock market investments. Thao holds a Master’s Degree in International Business from SKEMA Business School in France and an MBA from the European Management Education Center in Vietnam. Today she is serving her country as an investment manager and portfolio strategy manager at Vietnam Holding Asset Management.    Vietnamese stock market booms in youthful exuberance   The year 2007 was a boom time for the relatively young Vietnamese stock market and everyone was excited about the kind of profitability in which returns of double or triple were quite normal.  The VN index chart had soared from around the 680 mark in late 2006 to its peak of around 1179 in March 2007. Several companies were trading at 70 times PE and 100 times PE and what is considered a bubble at that point of time.     [caption id="attachment_2621" align="aligncenter" width="403"] The VN index chart had soared from around the 680 mark in late 2006 to its peak of around 1179 in March 2007. The latter year was when naïve investor Thao started to invest and got caught up in the excitement and greed.[/caption]   Source: Investing.com   In the same year, Thao invested in a Vietnamese start-up brokerage house. It looked a good prospect for the following reasons:  The founders were successful entrepreneurs with rich experience in leading other big financial institutions in Vietnam, one was former director at Merrill Lynch.  The information was transparent and its financial statement was audited by a Big Four accounting firm.  So all up, it had good financing potential, network advantage, and management capability. This investment was at first a big success. Two months after investing, the stock price went up around 18%. But Thao didn’t sell because, by her own admission, she got greedy and expected it go higher. She even rejected an offer to buy her shares on the over-the-counter (OTC) market at 2.5 times her cost price.    Stock market bubble bursts  Thao doubted that the bubble would burst at that time because everyone was expecting robust growth in the economy since the country had just entered World Trade Organization and that this would be a good catalyst for corporate performance and stock prices. However, the unexpected happened when that same year the Vietnam stock market showed for the first time some correlation with the US market. The global financial crisis was showing early red flags with the collapse of Lehman Brothers. Her investment went from a profit of 2.5 times to a loss of 50% in just a year and liquidity was a big factor as nobody wanted to buy after the bubble had burst.    Opportunity loss  Regret hit Thao over this investment but she decided to ignore it. She consoled herself that the stock price would recover one day. But that only happened nine years later. Thao sold her investment in 2016 at the break-even price on her initial price. But she admits that while she in pure numbers didn’t suffer a great loss, the real damage was in opportunity loss for not selling at the right time and holding on too long despite some awareness that a bubble was happening.    “It did recover but nine years later. I sold my investment in 2016 at its break-even price so, although I sufferedonly a nominal loss, I had a big opportunity loss for not selling at the right time and for keeping it for too long with that awareness of the bubble.” – Thao Quynh   Thao’s lessons learned      1.Be aware of a bubble – Typically during such times, market sentiment is overly optimistic and people go a little crazy. We should be careful about that kind of positivity. “We may get crazy with them too”    2.Liquidity is extremely important – Especially when you want to sell your shares.     Andrew’s takeaways  The big picture matters – A lot of times investors get caught up in the small picture about a company they are investing in but even great companies can crash if there’s a shift in the industry or if there’s a bubble. This is critical to know.  Over-the-Counter (OTC) markets – If a company has issued shares but it is not listed them on the stock market, there tends to be an over the counter market where you could.    Vietnam is unique as a frontier market – There’s not much liquidity in most frontier markets. There are a small number of companies at the top of the market that have liquidity. But there are a large number of companies at the other end of the market that do not have liquidity. Liquidity really matters when you want to sell.  

Jerremy Alexander Newsome is the CEO and co-founder of www.reallifetrading.com. The trader and newly published author has one of the fastest growing audiences and websites on the Internet and attacks the markets with energy, exuberance, and humor that is truly refreshing. He has been professionally trading the stock market since he was 21 years old. Jerremy specializes in candlesticks, gaps, day trading with shares and options, swing trading and credit spreads. He graduated from the University of Florida in 2009 with a bachelor’s degree in business management, with a minor in mass communication. In his spare time, he has dabbled in the comedy world, practices Brazilian jiu-jitsu and has an informed taste in music and good beverages. Forrest Gump drives desire to not ‘have to worry about money no more’ Many people were inspired by the 1994 Tom Hanks masterwork, Forrest Gump. The box office hit inspired viewers with its mash-up history and heart-wrenching life lessons. Notably, it included an undeniable and timeless investment lesson.   Our guest Jerremy’s love affair with trading in the stock market started when he watched Forrest go to the mailbox while he’s telling his new park-bench friend how he’d had a call from “Lieutenant Dan”, who had invested their money in “some kind of fruit company” (Apple computers, Apple Inc. AAPL:US, APPL.OQ) and that they “didn’t have to worry about money no more”. For young Jerremy, the main motivation for getting into the world of investing was that his family always worried about money and he wanted to find out “How could we not do that anymore?” Jerremy begged his father to invest in Apple as well, and finally he agreed too, also saying he would match his son’s stake. He gave US$1,300 to his father, a sum raised from door-to-door sales of blackberries he had picked himself in the summer of 1994. The Apple shares they bought performed very well and around six years later, his father gave his then-12-year-old self a whopping $12,000 and he has been hooked on trading and investing ever since. Apple Inc.’s share price from beginning to present [caption id="attachment_2558" align="alignnone" width="1555"] Red line in the Apple Inc. chart above represents the approximate period Jerremy and his father traded in Apple shares, which succeeded in turning Jerremy’s initial investment of US$1,300 into $12,000. He has been hooked on investing and trading ever since.[/caption] Summary: Jerremy’s journey in investing In this episode, Jerremy shares what sparked his interest in investing and paved the way for his professional trading career.  He will reminisce about the glorious yet ill-fated days of being dazzled by the hottest trend at the time – silver. Jerremy was confident after tasting success when he had a striking 36% return from his father’s retirement funds in three months. But things didn’t go as expected when after its peak at $48.35 per share, it dropped by $10 in a week, a 20% loss in value, and unbelievably plunged to zero in the following week. Jerremy will detail more of the ins and outs of the trade and how his personal investment and loss of his father’s entire of his taught him the more important lessons: opening up his fears, on following the trend, and risk mitigation. Learn more from Andrew as well as he will give you his six-step process, fundamentals take when investing, for beginners or experts.   Every investor’s going to have losses. It doesn’t matter how much money they’ve made over time they’ve had certain situations that they’ve lost a lot of money on. So being honest, being humble, being open about it is key and integral. And it’s very important through the whole process of learning. You can learn more from your losers, than you will for your winners, without question. – Jerremy Newsome Investor, 21, bedazzled by hype and sheen of silver   On Jerremy’s 21st birthday, he asked for the contents of his father’s retirement account with which to trade. Confident about a strategy he had been using, he went on to make a stunning 36% return on the entire $100,000 in just three months. His father was as excited as he was. Then, he learned about stock options, which move faster than stocks. Jerremy went into investing in silver, which was all the rage and he was as caught up in the media, social and investing hype as everyone else. He felt he could not lose. This was the “perfect investment” and that thought was very assuring. His first foray into silver had been shares in First Majestic Silver (Corp.) ticker symbol (AG:US, AG.A) and he did very well. He holds an unofficial Guinness World Book of Records for buying silver at its highest price and even bought a lot of call options. He bought 300 call options, valued at $16,000 that time. In layman’s terms, Andrew defined call options as – “… when you think something’s going up, it’s not enough just to own the underlying stock. What if you could take a leveraged bet that says I’m going to make more money when this thing goes up? An option allows you to do that.” In 2011, the share price for the silver went up from $18 an ounce to $45.57 an ounce in a few short months, which validated his thesis and gave him comfort. When silver lost its shine After its highest share price at $48.37, it dropped to $35 after a week.  It is a $10 decrease which is over 20% rate. He bought on leverage so he was not just buying gear, but also the actual underlying position which has zero value other than pure speculation.  Jerremy was speculating at its highest degree and in just one week, the price plummeted to zero. And he lost everything in his investment. Jerremy bets wrong way with his options There are two types of insurance that options provide: insurance for the downside and insurance for the upside. Many people are unaware that one factor about trading itself is you can insure your stock positions, which right now is very beneficial for many traders. It is called a put option, which is an insurance position for your shares.  When Jerremy bought a call option, he was buying an insurance position only expecting the stock to go up. The only way to win when buying a call option is if the stock continues to go higher, and he bought a $50 call option when silver was trading at $48.37 cents. It was a position that needed to go to $50 in order to make money and it never did. He lost all of the money he put in, but it didn’t stop him because he thought it was a normal correction. He thought the stock was just pulling back and that it would rebound higher. And so, he eventually ended up buying even more options a few months later in August 2011 and that’s when silver dropped another 20% and he lost all of the money. The $100,000 that his dad gave all lost. Two fears and why he didn’t get out Jerremy only thought and considered making profits without considering the downside – how much he could lose or how bad his investments could go.  A few years later, he figured why he didn’t get out and instead of losing it all, he could’ve taken a small loss. He admits he had rational fears: (1) afraid of not being loved and (2) afraid of not feeling good enough. Since he lost all of his father’s money, he had to tell him and he feared that he would lose the love of his father as a consequence. And so, he never got out, which meant he hung on and lost more. It was a very strong psychological component, because I’m trading (with) my dad’s money, I’m 21 years old and what was happening is when I refused to take the loss, I tried, you know, years later to figure out why. Why did I not just get out, take a loss of some kind and say … ‘Hey, sorry dad, we only lost 50,000’. Rather than losing it all, why don’t I just get out, take the small loss. – Jerremy Newsome iShares Silver Trust tracks the spot price of silver + Jerremy’s trades [caption id="attachment_2559" align="alignnone" width="1545"] Chart shows the iShares Silver Trust which tracks the spot price of silver and Jerremy’s trades. Source: TradingView[/caption] Jerremy’s Takeaways    1. If everyone loves something and everyone’s talking about it, don’t get involved. Don’t invest. Bitcoin was the perfect example. Buying at $20,000. No way. Don’t do it. 2.Risk mitigation.  There are strategies you can use where you can either win big or, if you don’t know what you’re doing, you can lose everything. Risk mitigation is key in this environment because if you don’t have the money, you definitely can’t trade and you certainly can’t get it back. But if you have the money, you must protect it. Since you know that you have to protect yourself regardless of how much money you have in this world, you can lose every dime on a position that you don’t fully understand. Andrew’s Takeaways Not feeling good enough: Many of the people Andrew has interviewed are esteemed and experienced financial professionals who hid their losses in fear that they would be unworthy of their titles. He notes Your Money and Your Brain by Jason Zweig, the book he read that helped him realize that investing is a physical thing. We have emotional reactions and we mental reactions to investing. Such reactions can be measured to such an extent and that they are so tangibly physical that he calls investing a contact sport. Most people who succumb to their emotions fail to realize how easily their brains and their emotions are being manipulated. 2.Confirmation bias or The White Toyota Syndrome: When you buy a white Toyota, all of a sudden you notice there’s a lot of white Toyotas on the road. And this is the concept of confirmation bias. That bias is what we’re doing when we’re looking for things that confirm our beliefs. Serious long-term investors welcome ideas that go against their beliefs and they see the value in them. 3. Do not invest when everybody’s talking about it. 4. What should be a good process of investing for the average beginner?   Andrew outlines his six-step process: Step 1: Find an idea. Step 2: Research the return. Step 3: Asses the risks. Step 4: Create a plan. Step 5: Execute the plan. Step 6: Monitor the progress. The most important out of these six steps to which Andrew regularly refers is that you want to separate the research that you do about the return from the research you do about the risk. To arrive at this he was strongly influenced by Michael Gerber’s book The E-Myth, which discusses this extensively. The book identifies a state it calls “an entrepreneurial seizure”.   “What is important is that we separate the work that we do on researching the return, which brings all of the positive emotion and the assessment of risk and the researching of risk and risk management.” - Andrew Stotz Final words: Every trader is going to have losses. Jerremy has discovered that being honest, humble and open are the fundamental keys. Importance of risk mitigation. Measures to avoid the same fate Jerremy advises listeners to do the following: Get some charting software, such as tradingview.com, think or swim, freestockcharts.com, Yahoo finance or the like. For every guest on this show, each one of your listeners should pull up the chart concerned if it is available and look at the course of the investment on the chart. Discern why it was a bad trade (as we have done in the charts above). If you can also visually identify why something is not a good idea, it can also help when you see it. In a few weeks or months, Jerremy suggests that Andrew is going to have a guest talk about how they bought Bitcoin (COINXBT:SS) at 20,000 or Ethereum at 2,000, and if you can visually identify what a bubble looks like or “a hyperextension of price action”, you have a much greater chance to not buy at that bubble point. Go back and research with day-by-day analysis events such as the Great Depression, the crash of 1987, the tech bubble of 2000, the Bitcoin bubble, the Tulip mania of 1637, many others, actually looking visually at that information. These are things you can quantitatively do right now. Controlling your emotions and controlling your thoughts are difficult things to do. It takes time. But once you can do a quantitative act, like physically getting in front of a chart and see how these events looked, when you see another one, your brain will recognize the pattern and maybe you shouldn’t buy at that point. Andrew’s final word: If we separate the research on the return and the risk, we force ourselves to move to a separate phase of research that allows us then to say, “This is a great return. I’m going to make a ton of money. But now I have to look at how to manage the risk.” You can also check out Andrew’s Books: How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Connect with Jerremy Newsome: reallifetrading.com jerremynewsome.com LinkedIn Twitter   YouTube Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Twitter YouTube My Worst Investment Ever Podcast Further reading as mentioned in the podcast Newsome, Jerremy (2019) Money Grows on Trees: “How to reshape your thoughts, beliefs and ideals about money and become truly wealthy.” Gerber, Michael (1986) The E-Myth: Why Most Small Businesses Don't Work and What to Do About It Zweig, Jason (2005) Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich

Philipp Kristian Diekhöner is a keynote TEDx speaker, global innovation strategist and author of The Trust Economy, published in English (2017), German (2018) and Simplified Chinese (2019).  Philipp has spoken at eminent global organizations such as Facebook, P&G, Microsoft, Turner, Munich Re, Zillow, Globe Telecom, CPA Australia, Germany’s Federal Ministry for Economics and Energy, the Economist Intelligence Unit and many others. He’s written for Forbes, Esquire, e27, Marketing Mag and InVision blog plus several industry publications and featured across Springer Professional, Men’s Folio, Money FM 89.3 and Your Story. Philipp is also a founding partner of DDX, the award-winning German innovation foundry that helps companies innovate the most trusted products and services. In his free time, he’s an avid sailor and yogi.      Trust is key to change and is highly relevant to investing  After spending almost a decade working around the world in the sphere of innovation in numerous disciplines, Philipp makes two important observations: (1) that effecting change is particularly difficult, and that (2) trust is essential whenever we are trying to do something interesting or new. In fact, the world changes when trust patterns shift. This is, he says, why when old technology lingers, it is because it has managed to remain trusted. He added that by the same token, new tech that is actually not very good can still succeed also because we have somehow given it our trust. This change, whether good or bad, is very relevant to investing.    “When it comes to financial markets, our trust in the way the world works determines which things change and which things stay the same.”  – Philipp Kristian Diekhöner    Summary: Technology influence the way we trust businesses   This episode dives deep into a story about the placing (and misplacing) of trust in today’s technology. Our guest Philipp looks back at his investment in a robo-advisor fintech start-up in Singapore. He was attracted to its sophisticated digital interface and trusted them to actively manage his portfolio. At closer inspection, he discovered by himself his investment took a big hit due to a currency correction of which he had not been informed.     Phillip commands a unique perspective on trust, but was led astray based on misplaced trust in the gadgetry and slick delivery of the robo-advisor and its promoters. Despite this disappointment, he nevertheless learned a profound lesson that has paved the way to his development of new methods of research. He warns investors to beware of putting money into a company that provides no absolute “proof points” or evidence to back up their claims. And ultimately, do their own homework on what they place their trust in, an essential point to remember when assessing risk.    “With investments, there is always a difference between trustworthy players and trusted players. Some people just choose to be only trusted but not trustworthy. And at the end of the day, from losing a couple of grand worth of money, I actually realized that I gained a lot of insight   into my topic.”  – Philipp Kristian Diekhöner     Early win with a ‘trustworthy’ robo-advisor lifts that tech’s appeal   Philipp had worked a number of start-ups also in the Singapore fintech space and one was the robo-advisor, smartly. He knew the people well as he had helped them launch in the city state as a pioneer of some of the definitely more interesting fintech products. He also invested with them and earned some rewarding returns, all the while feeling that it was all more hip, modern, and relevant to him than investing in a bank or in the markets: “Because we all know that banks’ incentives are not aligned to yours”. Add to that his inside knowledge of working in finance for years, meaning he knew also what ordinary finance was like behind the scenes.   Flush from modest wins and impressed by the tech, Philipp looked at a new robo-advisor company in Singapore with a sleek interface. He had written a lot about digital interfaces and appreciated that people were increasingly putting a lot of trust in these. As did he, injecting a sizeable chunk of money into it thinking that the robo-advisors presented well and that it appeared they would do a good job, as smartly had done.     Undisclosed currency change exposure stabs in the back   Part of the outfit’s pitch was that the size of clients’ fees is because they were a “full-service” enterprise and would actively manage his portfolio. But when Philipp actually started looking into its investment framework, it turned out to be mostly a work of fiction. While digging even deeper, there was a major currency correction, which of course can have major implications on anyone’s investment. In his case, that meant a loss of around US$7,000), which definitely hurt.     Not-so-active management fails to include vital communication   While the robo-advisor was selling itself as an “actively managed product

Guest profile Corey Hoffstein is a co-founder of and chief investment officer at Newfound Research, a firm founded in August 2008, which is a quantitative asset management firm specializing in risk-managed, tactical asset allocation strategies. At Newfound, Corey is responsible for portfolio management, oversight of research and communication of the firm’s views to clients. He received his degree in BS in computer science from Cornell University and finished his MS in computational finance from Carnegie Mellon University. Early investing foray – road to the fall Corey’s tale takes place about a decade ago when he was starting out in investing. He thought he had erased the details of its telling as it was such a painful episode of this life. He believed he was playing his part with considerable research on the world of investing, starting with titles such as Benjamin Graham’s Security Analysis and The Intelligent Investor and anything available by Warren Buffett. From this he became engrossed in the analysis of individual securities and developed the idea that the “real” opportunity was in micro-cap stocks, finding that special stock no one had found and holding it until the market realizes that one is a genius.   Green investor’s vision blurred in the Internet’s salad days As an impressionable young investor in the days when the Internet was also young, he was greatly taken by all these investment boards, some prominent and large, some with a dozen or so members, all completely anonymous people sharing ideas with one another. In the sort of blind date equivalent of seeking financial advice, he got to know the people, their investment styles, their stock picks and, eventually, that they could be totally making it all up. But, he built a measure of trust in this hidden little world and on one such board a hot tip was suggested, a pink-sheets, over-the-counter (OTC) stock in a company known as Deep Down Incorporated (DPDW.PK, DPDW.US). DPDW is (still) a deep-sea oil exploration and production-services-related company that builds underwater umbilical cords and submarine drones to explore wells. It either leases or sells such technology to big companies.   ‘Underdog target for a buyout’ thesis means ‘gold’ in the offing His thesis was that there was a great R&D operation, a company that is always one big deal away from being “not just profitable, but ultra-profitable” and a sure-thing target for a buyout – The underdog team dealing with big-league industry players. For a time, his “inside scoop” delivered some joy as the stock’s price climbed in a short period, and he took the bait.   “People on these web forums are claiming they’re talking to the CEO and they’re sharing the inside scoop and so you really feel like you have your pulse on it. In retrospect, I didn’t have my pulse on anything but I thought I did and so I watched the stock climb from say 40 cents to 80 cents and I think: ‘You wanna know what? This is happening!’ One of those situations where price confirmed my narrative that probably should’ve been a sign, I probably should have dug a little deeper, didn’t even really understand the fundamentals I was getting involved in. This was pure story-driven investing and I bought. I then watched the stock go from about 80 cents to about a US$1.20.” - Corey Hoffstein   Early success on half-baked research spells peril Corey believes now that these types of early gains are among the worst things that can happen when an investor has made an ill-conceived investment because it ramps up their overconfidence gene and they become so attached to belief in their own abilities. Corey was no exception. Equating luck with genius, and ignoring his own profit target, he said to himself again:   “You wanna know what? The story’s only getting better … now I think we’re going to get to $5”. - Corey Hoffstein   His perceived future was getting rosier because the price was supporting all the myths he had built around the stock. So instead of taking some risk off the table, and banking his gains, he ploughed more funds back in. He then saw the stock price decline. Again he interpreted this as other people taking profit, some pain before the big, long-term gain. But it kept sliding. Did he stop? No. Rather, he thought:   “You wanna know what, this is a buying opportunity. So not only did I buy at the top, I then doubled down on the way down, which you know, again, in retrospect, is not such a smart move because I really didn’t at all understand what I was buying. And then it just continued to dwindle and it probably got back to around 40 cents and stayed at 40 cents.” - Corey Hoffstein   By this time, Corey was so appalled that he stopped checking the price. After three or four years, it was still at 40 cents and he finally let it go. He added that it was not actually his worst investment by dollar value but it was a case in which he made every mistake textbooks say he could have. What is a ‘penny stock trading on a pink sheet’? A pink sheet is a type of stock that is not trading on the main exchanges, such as The New York Stock Exchange or the Nasdaq and therefore it does not meet the regulatory and exchange requirements to be listed on the main courses. It is also OTC traded, which means it is very illiquid (difficult to sell and turn into cash). And if trusting in web-forum strangers’ was not bad enough, Corey invested in a penny stock. Rather than seeing this as a red flag at the start, it was instead was one of the main reasons that the stock seduced him to invest in it. His belief was that such a stock offered more opportunity for upside. But the turn of events proved otherwise.   Corey’s Takeaways 1. Invest in a manner that aligns with your personality, both the positives and the negatives. If you are someone who truly enjoys the process of understanding company fundamentals, a more discretionary value approach can be totally warranted and appropriate. For Corey personally, he had to see the negative side, which was that he was quite vulnerable to a stock’s story, which thus put him at risk of being an emotional investor. His takeaway, in essence, was what makes him more successful today in that it drove him to find a way to invest in an unemotional manner. How did he do that? 2. Adopt a fully quantitative methodology. This is one you can control from A to Z and would certainly ensure that you are not going to be drawn in and seduced by your own emotions. “Everything I do today is quant. It’s not quant because I’m a robot. I’m quant because I’m emotional and I need those rules to make sure I stay on the straight and narrow.” - Corey Hoffstein 3. Recognize that mistakes are going to happen with investing. It is impossible to avoid all mistakes, even when you are very knowledgeable and aware of them. You are working without all the information, you cannot know who is necessarily on the other side of a trade. It is very important to always consider that you are going to be wrong, and not just wrong once, but many times. Survival, ultimately, is key.   Andrew’s Takeaways The team at A.Stotz investment and Andrew have identified six core mistakes that investors make. Corey made three (although he feels his story could cover them all). 1. Failed to do their own research. We never in the world of investing would invest without doing our own research. 2. Failed to properly assess risk. Risk, as he often says, is a separate item. In this case, there were the risks to liquidity and the structures that were insufficiently put in place and then ignored for the moment that the shares started going down and the investor's response to that moment. 3. Misplaced trust. Corey placed trust in an anonymous forum where people can be releasing different stories for different reasons. They could have neither been investing themselves nor risking anything in what they were proposing and that Corey had no way of knowing it. He pointed out that there are honest people who are sharing their investment experience on the Internet and they are just unable to share it accurately. “I looked on your (Corey’s) website and I see that you’re GIPS® compliant with the CFA, the Global Investment Performance Standard. And basically what GIPS® compliance requires is that you look at your complete portfolio, of all your different asset classes. You don’t omit things that you don’t want to put in.” - Andrew Stotz Even good investors engaging with these types of web boards or groups on sites such as Facebook groups and other types of groups, even good people, find out how it is hard for them to be truthful.   “That doesn’t even consider the liars and the cheaters out there that are everywhere. And I can’t tell you the number of times that people have come to me about how they’re starting to trade in forex. We did have one story already on my worst investment ever where he lost most of his money trading in forex. But I just think of all areas, you know, forex, I just think you’re betting against the central banks of the world. And what’s your angle?” - Andrew Stotz Final words from Corey 1. Investors should really make sure they are well diversified. They should also think about all the ways that a trade can go against them and their criteria for cutting losses. 2. It’s not going to be your only bad trade. You’re going to make many throughout your career. It’s not about not making them. It’s making sure you can survive them. How to avoid having the same fate “Don’t buy penny stocks based on someone else’s recommendation.” “First and foremost acknowledge your own weaknesses. For me, that very much meant acknowledging that I could be very much drawn in by a narrative, was clearly willing to make mental shortcuts in my analysis and allow others to do the work for me at that point in my investing career. And so I wanted to make sure that could never happen again.” Final words from Andrew “There’s great people out there, men and women who can find great investment ideas and make a ton of money from them without having all the structures in place. But for me, it makes me feel better. And I think the best thing in investing is that there’s space in investing for everybody with every style. So find your style and implement your style.” - Andrew Stotz   Resources from Andrew Stotz:  How to Start Building Your Wealth Investing in the Stock Market  My Worst Investment Ever  9 Valuation Mistakes and How to Avoid Them      Connect with Corey Hoffstein: thinknewfound.com LinkedIn Twitter   Connect with Andrew Stotz: astotz.com LinkedIn Facebook Instagram Twitter YouTube My Worst Investment Ever Podcast

Danielle DiMartino Booth is CEO and director of Intelligence for Quill Intelligence LLC, a new research and analytics firm. She is known for her meticulous research in the financial markets and her unique perspective honed from years of experience in central banking and on Wall Street. Danielle is a global thought leader sought after for her insights on monetary policy in the United States and elsewhere. In a sign of her ideas’ value, European Parliamentarians invited her to Brussels in May 2018 to share her insights on global economic trends and fiscal policy.     Track record at Federal Reserve Bank of Dallas  Earlier last decade, Danielle spent nine years from 2006 at the Dallas Fed, where she served as the advisor to that district’s president, Richard W. Fisher, until his retirement in March 2015. She provided market intelligence and policy briefings and advised Fisher on policy, a unique role, which had not existed outside of the New York Fed before her appointment. Get to know Danielle in today’s feature story, her remarkable career journey from working in equity markets and then being an advisor to Fisher, to her current role as a financial consultant, author, and commentator. More importantly, discover what she regards as her most significant investment loss and the valuable lessons she learned from it.      “My biggest lesson that I’ve ever learned is that I will never again deny the simplicity and the utility of liquidity and it’s as simple as that.”  - Danielle DiMartino Booth     Financial analyst has dodged some serious bullets in her time  While these podcasts are about missteps all our guests have made, Danielle has also had a considerable share of good fortune or made decisions that saved her from calamity; none perhaps more than her rejection of employment offers from four of the most infamous or ill-fated companies in US history: Arthur Andersen, Enron, Lehman Brothers, and Bear Stearns.     So, as she told Andrew: “You never know in life that your choice might just end up being serendipitous but indeed providential at the same time.” This all happened was right before Danielle started working on Wall Street, which was before she returned to Dallas to serve at the Federal Reserve, which was also a move she had never planned to make. Danielle revisits New York every two or three weeks to contribute analysis to media outlets as one of the “Fed Whisperers,” offering explanations as she “understands how central bankers think,” which is a rare talent.     ‘Chief architect’ of liquidity rebirth failed to take her own advice  As a Fed insider, Danielle witnessed the meltdown following the financial crisis of 2007-2008. Her Dallas Fed boss at the time, Richard Fisher, was being criticized for comments against the Fed lowering interest rates to the “zero-bound.” He had pointed out that the ongoing problem was not a case of the price of credit being the impediment to the market working but rather liquidity being frozen, despite it being richly liquid in the years beforehand.     Danielle witnessed and understood her boss’ comments. She had helped to create many of the liquidity systems applied via the New York Fed. She had helped to turn on the financial “jaws of life” to force open the capital markets with liquidity facilities. What she realizes now is she had listened but not truly heard, looked but not truly seen. She had learned nothing from experience.    Despite being “one of the chief architects of these facilities”, she said was perhaps blinded by the emotion brought on by taking interest rates to zero unnecessarily. Then she saw first-hand the collapse of the global investment bank, Lehman Brothers, and the bailout of AIG at the cost of US$85 billion bailouts. In the following months, she saw quantitative easing (QE, more or less printing money) rolled out and the effect that had on financial markets. Again and again, she failed to recall the lesson she had taught others about the importance of liquidity.    Now 10 years on, Danielle notes that the European Central Bank (ECB) finally stopped its QE program (one of the measures used to stimulate liquidity and therefore the markets) early this year but flags up that it is going to be the first for being “net negative in a global liquidity position in over a decade”.      Danielle’s takeaways  1. When liquidity opened up, Danielle says she should have jumped in feet first and invested enthusiastically to follow the flow until ECB chairman Mario Draghi put a halt on the ECB’s QE, but not until then because …   2. “Liquidity is global. It is fungible, it is agnostic, it knows no borders, and it knows no asset classes. It flows to wherever the cracks are open.” Liquidity moves where it can “find a home.” Every single asset class in the world has moved up, even gold, because of the rise in liquidity, which, over the past decade, “has found many homes”:   Australian, New Zealand and Canadian real estate  Many commodities markets  Hong Kong residential real estate   Commercial real estate in London   Corporate bonds in the United States   Stocks almost anywhere   3. Investors need to understand that as long as the wave of liquidity exists, they should not fight the waves. She explains: “As long as the liquidity is abundant, then you should be invested in risky assets.”    4. BUT: Now that liquidity is being withdrawn, the markets (and investors) do not like it at all.    5. Investors worldwide should be really aware of what central bankers are doing, and that is, all central bank bosses are applying the same policies 

Vorapon Jim  Ponvanit is the founder and CEO of a PeerPower, a Fintech start-up focusing on SME marketplace lending in Thailand. He is also a partner in boutique advisory firm, Khronos, and has 18 years’ experience in M&A, investments, and restructuring. He is an educated investor in stocks, bonds, and has a solid, diversified portfolio. He and his wife are also avid food connoisseurs and shacmd+shift+vre a love of dogs.     Summary: Ups and downs on Jim’s investment path   In this episode, Jim shares the gems he has learned on his investment journey, including how research alone is not enough to guarantee your success. There are “what-if” questions all investors need to ask to substantiate your assumptions. And the exciting part is to identify the common investment mistakes that can be avoided and to “wait for the right pitch”. Since investment is a lifetime exercise, you’ll also learn more about the six-step guidelines Andrew offers to help you to better understand the investment process.     “The whole point of investing is you want to live to fight another day. And you want to make sure that you have fewer mistakes and more successes. That’s all you can hope for because nobody hits home runs every time, right?”  – Vorapon Jim Ponvanit      Skilled investor seeks to diversify gains after post-crisis boom time   Around eight years after the 2008 financial crisis, Jim started to liquidate his US portfolio. He put some money into structured bonds and equities, which made considerable gains in the following run-up of US stocks.   He then took that liquidity in mid-2015 and was looking to diversify and make use of his capital. At this time, his obsession with volatility began alongside a search for ways to trade on such conditions, and took a look at the VIX index.   He found there was no direct way to expose investors to that index, other than buying derivatives or self-building a portfolio but noticed a new product called exchange-traded notes (ETN).   Armed with research noting that the VIX was down around 40% year-to-date and brimming with confidence and cash from successes on the US bull market, he invested 50% of his liquid funds in one such ETN, the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which he thought would track the VIX index well.  He had convinced himself that volatility had reached its bottom since the crisis, the side of the research that backed his story.    Four months in and 40% down he again relies on research and invests more   A third of a year into the investment, and with his position was down 40%, does he pull out? No. He did more research and after that, remaining convinced that volatility had this time reached its lowest point, proceeded to put the other 50% of his hard-earned cash in.  Period of VXX ETN volatility product activity   Source: Yahoo Finance    After a year involved in the ETN, Jim lost 70% of his initial investment’s value   Early in 2017, he liquidated from his portfolio the position in VXX and lost close to 70% of what he put in during the course of 14 months. He recently checked the price of VXX and if he had held on to that position, he would have been down now, 87%, which he said was a minor consolation.     Importance of keeping an open mind and cutting losses   That was his worst investment ever, and not because he didn’t know what he wanted to do but because he actually went in with a plan, found research that supported that thesis, and kept on reading. He stuck to his contrarian nature and ignored what the market was saying, thinking ideas that opposed his thesis were just “people selling research”.      Jim’s Takeaways     Avoid overconfidence – Don’t be overconfident, no matter how much you know or how successful you have been with investing in the past.   Don’t practice information-selection bias – in carrying out your research, include all information in your assessment of whether to go ahead with an assessment, especially if research contradicts your initial thesis. And furthermore …  Listen to the market...