Chapter 2: How I Fell in Love with Investing During the Great Recession

I started my investment story by only looking at publicly traded securities due to the depth of information available to the general public. By having trust that the SEC is overseeing all the publicly available information in a consistent format provided me the stability to start to compare one investment versus another. After styling my approach on a more modern version of Warren Buffet’s “Value-Investing” I naturally started with his number one rule of advice to be a good investor, READ.

Making a single investment is much more than simply doing homework on a single company. Investing is about understanding all the potential investments you could make and then finding the one that works best for you. When I was 16 and made my very first investment in Bank of America, I had to understand other potential investments I could make with the same $1000.

I started my investing journey in 2008 which was the start of the great recession. In response to a struggling housing market, the Federal Market Open Committee began lowering the fed funds rate. It dropped the rate to 3.5 percent on January 22, 2008, then to 3.0 percent a week later. Economic analysts thought lower rates would be enough to restore demand for homes. For example, the interest rate on a 30-year conventional loan was reduced to 5.76 percent from 6.22 percent in 2007. In 2008 we had IndyMac fail, we had the nationalization of Fannie and Freddie and the Federal Reserve buying AIG for $85 Billion (which took another $100 Billion to save).

Throughout all of this turmoil, my belief was one of the extremes in either direction. Either the economy would recover at some point or the headlines were right and the economy was going down the drain which to me would mean that the money I would lose would not be worth anything anyway. So I decided to start reviewing the area with the most upside potential and risk, Financial Stocks.

I started to look at the major financial institutions including Wells Fargo, JP Morgan, Bank of America, Citi, Bear Stearns (Failed in April of ’08) and Goldman Sachs among others. To make the best investment based on my macro thesis of financials outperforming it required me to understand the market as a whole for financial stocks including competitors of all shapes and sizes.

I started by reading the Annual Reports (Recommended by Warren Buffet), the quarterly conference calls and reading analysis from analysts (recommended by Jim Cramer).

These 3 items allowed me the fundamental knowledge I needed to know based on comparison and analysis of my thoughts on the most likely to outperform over the long-term. When I look back I really made my decision before I even started to read and analyze each company. I had a Bank of America debit card for several years which to this day I will not change banks. They had always provided great customer service and a wonderful mobile experience before the mobile revolution really took off. When I combined this with the information I was started to learn I realized the companies with a strong and reliable user base would certainly last. If I was attuned to what was going on and had no implication to change banks then why would others?

After all my homework of reading and analysis, I can contribute my successful investment based on three very fundamental ideas, luck, logic and buying what I know. Ever since making this investment I have made investments in start-ups, debt offerings and publicly traded stocks based on what I know and can understand.