How I Escaped Wall Street
I had just left the trading floor...
I did pretty well, too. I don’t recall exactly how much money I’d made, but I do remember that it was more than my pop had made in a year working as a warehouse manager.
It was right around my 21st birthday when I’d started trading index futures on the floor of the New York Futures Exchange.
Some days, the pit was so crowded that I thought my eardrums would explode from all the shouting.
Standing shoulder to shoulder with 100 other sweaty guys and having a perpetual hoarse voice was not how I’d seen the next 40 years of my life playing out.
I figured there had to be an easier way to make a living.
A few seasoned traders told me to think about moving “upstairs.” This was trader talk for managing money for clients off the floor. They must’ve picked up that I was cool under pressure and able to think clearly.
I guess they’d never seen my knees shake when I was holding a losing position. Or the times I’d almost pissed my pants when the market opened up strongly against me.
I should’ve been the poster boy for the “fake it till you make it” club.
But before going upstairs and setting up my own money management shop, I wanted to try my hand at a “real” business.
A real business was one with customers, that provided goods or services, and had employees who needed to be managed.
I’d been trading for a little over a year, I was 22 years old, and I knew everything.
After making money trading wiggles and jiggles on a chart in the bowels of Wall Street, how hard could a “real” business be?
While looking through the Sunday New York Times classified section under “Business Opportunities,” I thought I’d found the ideal business:
Profitable Limousine Livery Business for Sale
Owner looking for minority partner with capital.
Serious inquiries only.
I knew something about the limousine business — I’d seen them while waiting for brokers, bankers, and traders each day in front of office buildings near Wall Street.
They’d always seemed busy, and there were never enough of them.
One sign of success down on Wall Street was never having to take the subway.
Even if you only had to go a few blocks — you never walked.
Instead, you’d call a car. If you had an account with a service — you’d made it. And you’d make sure everyone around you knew that you’d made it, too.
A New Road to Riches
I called the number in the ad and spoke with the owner, Jack.
After a few minutes of both of us sizing up the other, we agreed to meet. I must have impressed him by telling him that I worked on Wall Street. I didn’t tell him I was only 22 years old.
Jack said, “Let’s meet next Wednesday after you finish trading. I’ll send a car to pick you up.”
I found out that Jack was a father of two small boys and was in his mid-40s. After a few meetings, we agreed to a deal. I would own 33% of the company and have 50% of the voting rights.
I called some of my Wall Street buddies and asked them to use our company whenever they wanted to be driven around town. Soon, our business was booming.
I knew the business could do much better if we increased the size of our fleet. We currently had five cars, and I figured another three cars would boost the bottom line even more.
When I told Jack my plan, he liked it a lot. When I asked him when we could buy these cars, he said, “When we have the money.”
“But Jack,” I pleaded. “If we take out a bank loan, we’d have no trouble making the payments while growing the business.”
Jack wouldn’t hear of it — no loans on his watch.
There was no amount of logic, reason, or begging I could use to get him to change his mind. We left the subject alone...
A few weeks later, Jack invited me to his apartment for dinner.
When the taxi dropped me off in front of his building, I saw furniture and cartons stacked up on the sidewalk. The doorman was holding the door for the movers as they carried more cartons from the building.
When I got to the apartment, Jack, who’d always had a smile on his face, looked down and depressed.
“You saw all that stuff piled on the sidewalk outside the building?” he asked. “That was from my neighbor’s apartment. He was evicted today for not paying close to a year's worth of rent.”
Jack told me how the guy had lost his high paying job and couldn’t find another one at anywhere close to his old salary.
But what really sealed the coffin shut was his debt. His neighbor owed more than $50,000 in credit card bills. The interest alone each month was killing him.
After pouring himself another glass of wine, Jack looked at me very seriously.
He began telling me about his childhood. When he was a young boy, his father had died. And one day, Jack came home from school to see all of his family’s belongings on the curb of their three-story walk-up apartment.
His mother had her face buried in her hands and was crying. She couldn’t afford to pay the rent and the landlord had evicted Jack’s family from their apartment.
That day, he swore he’d get rich, but he’d do it slowly.
No debt, no margin, and no borrowing. If he didn’t have cash in his pocket, he wouldn’t buy or invest — no matter how good the deal was.
No Loan, No Problem
Six months later, I parted ways with Jack. He bought back my shares, and I made a nice profit.
I’d realized that my passion was investing in stocks and managing money — not running a business. A short time later, I opened my own money management shop. I had just turned 23 years old.
Years later, I heard Warren Buffett give a speech to MBA students. It was right after Long-Term Capital Management (LTCM) went bust.
LTCM was a hedge fund run by some of the smartest guys on the planet. The partners were MIT grads, Nobel Prize winners, and vice chairmen of major investment banks.
During the summer of 1998, the fund collapsed and almost brought down the financial system. The reason for the fund’s implosion: They were too highly leveraged.
Buffett had this to say about the partners of LTCM: “To make money they didn’t have and didn’t need, they risked what they did have and what they did need. That is just plain foolish...”
I was now able to better understand why Jack hadn’t wanted to borrow money for expanding our business.
He’d never wanted to be in a position where there was the slightest chance he would lose his money. He’d never wanted to relive finding his belongings piled up in front of his building.
Even if there were only a 1% chance that he’d lose all his money, it still hadn’t been worth the risk to him.
There’s nothing wrong with getting rich slowly. I don’t borrow money to invest, and I highly recommend that you don’t, either.
When I was in my 20s, I thought I knew everything. I’ve spent the last 30 years realizing how much I’d yet to learn...
All my best,
Charles cut his chops on the trading floor of the New York Futures Exchange before moving on to become a wildly successful money manager on Wall Street.
And with more than 35 years of recommending stocks under his belt, Charles has knocked the cover off the ball, compiling an amazing record of success and posting gain after gain for his loyal readers. He is the editor of Park Avenue Investment Club and the Insider Alert newsletters.
Charles is also the author of the highly acclaimed book, Getting Started in Value Investing.