Vantage Point - Part II

Kim replied in defence, "I am just a summer intern. You can't expect me to have a portfolio up and running yet. But I do pick stocks for my dad's investment portfolio. He is not at familiar with American market. And he added Tesla six months back upon my suggestion. He is not a frequent trader like you. He can hold on to his investment for years. So my view is long term upside for the stock." Navin said, "Well, I trade a few swing positions. But that's not even 20% of my portfolio. My positions are for the medium term. I did buy Tesla a year and a half back at $180. I sold half of my holding when it touched $300. And now I will decide whether to completely exit or not depending on the results tomorrow"

 "Smart lads both of you", said Alex in a beaming tone. "This is the beauty of trading or investing. The same figures and facts lead to so many different interpretations. And whenever someone goes long with utmost confidence in the future price movement up north, there is an equally confident person at the other end of the trade going short, with an exactly opposite view. Only time will tell who is right or wrong", said Alex with a smile. 

The full year results of Tesla for 2017 were out on the evening of February 7th, 2018. By the time the boys returned home after work, they had managed to track the exchange websites and have a quick glance at the financial numbers. It didn't look positive. Alex as usual for the first at home. He was already analysing Tesla charts on multiple time frames. The stock had gone up 6% in the last two days anticipating results. But the results turned out a bummer with even bigger losses for the electric  car maker. Kim and Navin had also reached home by then and gathered to have dinner. Alex had already ordered Thai Wok for all three. Navin was beaming, naturally as the results weren't great for Tesla as he had envisaged. "There you go fellas. You mocked me yesterday as if I had thrown nails on your Tesla highway. What's your take now?"

"Well, I have to admit the numbers are down. Investor sentiment will take a hit and I won't be surprised to see the stocstk falling tomorrow. Yet, as I said earlier, I will wait to see the price action tomorrow before deciding any position," said Alex indifferently.  Navin remarked snidely, "It's always smokes and mirrors with you big trader boy. What about you Kim?" Kim stuttered a bit, "Yes the numbers are bad. I guess I will let my dad's money work the long haul like him and myself like to do. No change in status yet. I won't suggest him to reduce or exit the holding now. As I said my dad can wait for years." Navin retorted, "Hope that turns out well for your dad Kim. I would advise you to reduce holdings. But it's your decision at the end of the day.  As for me, I have decided to sell off the remaining shares I have tomorrow, before it goes down anymore". Alex interrupted, "I would still wait to see the price movement for next couple of days before taking any panic action." Navin replied, "Well half the value of the stock can wiped in a couple of days of panic selling. I am not taking the risk"

Once the opening bells gonged in Nasdaq the next morning, Tesla opened positively up 1.3% in the first hour of trading. Then it started reversing slowly, the hourly candle alternating red and green. Once it broke the day's opening price, there was no turning back.  At day end the stock had lost 8.3% of its value and closed at $315. On that evening , when in flat 202, West 54th apartment, 10th avenue, Hell's kitchen there was one face smug with the "I told you so!" look. It was Navin's. He didn't miss any opportunity to point out to his fellow mates how right his decision was to sell the stock. Kim was quiet looking down most of the time. Alex was his usual nonchalant self, though irked by Navin's cocky remarks. Navin was so high with confidence that he even took fresh short positions in Tesla's 1-month futures contract. The next day, the stock went down to break $300 and Navin was ecstatic having made some quick money. "It's gonna reach $270 for sure, the fair value as I told you!" said Navin. Alex replied calmly, "Hold you guns bro. I have no idea about your fair value number. But I see buyers getting active again in the charts. You should exit your short futures position soon." Navin didn't let Alex complete his sentence, "No way in hell, I am not covering before I see $270. And it's gonna happen soon."

The next trading day the stock closed above $300 and it hurried up to $360, about 22%, in the next five trading days. It was Alex's turn to say, 'I told you so'. Navin was wrecked. His euphoria just a week back had now turned to despair so quickly as he burned a deep hole in his pocket. Alex had caught up with the trend early, and as always, bought low and sold high. 

Vantage Point - Part I

It was the cold and windy evening of February 6th, 2018 in New York City. Sechan Kim finished work at Silkroad Capital office in Manhattan around 8PM. It was a surprisingly early finish at work, considering how intensive work can get at the boutique private equity firm focused on East Asian technology ventures. Maybe, it was because he was only a summer intern there. Kim, as he would like to be called in America, was doing his Masters in Finance at Columbia  University. No stranger to hard work being a South Korean, Kim put in his full effort to complete his project, like a war-horse.  He reached his temporary apartment in Hell's Kitchen, where he was put up, like so many other young millennials - interns or fresh pass-outs from college starting their careers- in the Big Apple. Hell's Kitchen, though sounding sinister and more suited to a neighbourhood of gangsters and drug dealers, to the contrary, was a docile locality with affordable rents, cheap yet trendy hangouts and consequently home to many young professionals, students and budding actors, where they, quite commonly, shared a one or two bedroom apartment with two or three other mates.

Getting off the 50 Street Subway station, Kim walked along the street, amidst the flurry of snow, to his apartment. He opened the door to be greeted by the comforting warmth and Alex, who was atop the bean bag in the salon. Alex Patterson, from Albuquerque, New Mexico. Not many Americans from the wild west traditionally made it to the world of finance. Alex, coming from a family of merchants, was the ugly duckling who veered away from the family trade. Having seen his dad and relatives doing business from close quarters he was street smart and had that intuitive knack of spotting opportunities, which usually are in the blind spots of other people. Good with numbers and in poker since teenage, he inclined naturally towards speculative trading of all kinds, especially the stock markets. His entry into the financial world was not the usual way. He only did a bachelors degree in finance to learn the basics. However, he had his own trading portfolio since he was sixteen and was making his own pocket money from trades, unlike other kids who rely on their parents.  Instead of learning from best professors in ivy league schools, Alex received his education from the two best teachers of the world, Self-learning and Experience. He networked with many traders.  Many noticed his skill and one of them, a trader with JP Morgan, gave him a chance to join him. Luckily for Alex, when his benefactor looked at him, he didn't see the lack of formal degrees, but only looked at his money making potential. 

When Kim entered the flat, Alex was scanning stock and oil futures for next day's trade setup, with a cup noodle in his hand and took his gaze away from the screen to look at Kim, "Evening mate! wanna have some noodle? There are a couple more in the kitchen". Kim was in the mood for some pizza that night, "Hey Alex! Good evening. Thanks for asking, I'll get some pizza I guess. So, what's your kitty for the week ?" , he asked with a chuckle.

"Well, the flavor of the season is futuristic technology and the full year earnings of Tesla is coming out tomorrow. Since the start of February, I have been having dreams about driving electric cars in Mars with Elon Musk by my side", winked Alex. "Haha. Cool man. I am impressed by his ideas too. However, I heard there is some delay in scheduled production of Model Three cars. What's your take on it?" asked Kim. "Are these few months or years of delay really gonna matter after a couple of decades? Oil's gonna run out in a few years.  Electric cars are the future!", retorted Alex, with vigour.

Navin walked into the salon hearing voices of his flatmates in a conversation. Naturally curious and always up for a good conversation or a debate, he couldn't resist joining in the milieu."Talking about Tesla, are we now boys?" Navin, was the typical young Indian professional you would find walking along Wall Street. Like many other kids of his generation, he grew up in New Delhi, like a race horse with blinkers in the eyes, to keep focused on the finish line. His target was getting straight A's in school and excelling in a profession most probably in engineering or medicine or business. Right from beginning of teenage, the seed of the American dream had been sowed in his mind and Navin had made his parents proud by achieving it. After completing business degree at New York Stern School of Business, he had just landed a job as an equity research analyst at Jefferies.

"What the hell!? Were you in your room all this time? I thought you weren't back yet," asked a surprised Alex.  "Quite an illusionist, aren't I?", chuckled Navin with his witty sense of humor. "Let me guess, did the results day tomorrow get you two talking about Tesla?" Kim and Alex nodded in unison. "Well, our brokerage had a buy call on the stock for the last two years. But, since June last year, we went neutral with a Hold rating and it still remains", chipped in Navin. "Ah you guys are chameleons!, You just go with the trend", quipped Alex. Navin replied with frowned brows," Not really. We are only painting the picture that the numbers tell until this point in time. We come close to the bull's eye most of the times and we aren't throwing darts randomly either". Alex smiled and said, "Cool down  bro. I know what you do. I was just pulling your leg. The profit numbers could be low now, but they might turn high tomorrow and you will paint a rosy picture then. But the value of the pioneering idea shall always remain".  Kim felt relieved as he felt for a moment that the two would continue arguing seriously.

"So Elon fanboy, what's your trade setup for the earnings release? Going long all guns blazing I guess?", asked Navin. Alex paused for a moment and replied calmly, "Well, I might feel strongly about Tesla. But as a trader, I do what the charts tell me to. And rule number one, I don't trade events. News events like earnings release give you 50% hit rate. Ask any trader who knows his stuff, he or she won't take a trade with less than 70% chance of success. Just not worth the dime and time!" Navin rolled his eyes and said condescendingly, "Oh come on now! Don't give me this Wolf of Wall Street talk. You can't rely so much on charts. They aren't based on any proven method. They are just a bunch of patterns which may repeat once in a while." Alex shook his head and replied with a smile, "You are missing an important element of charting. They are not a tool to value stocks. You will realize what they are really used for soon." He asked Navin, "You have all the right tools and a mountain of data to analyse stock value. So what do you suppose is the right value of Tesla? Will you buy or sell it?"

There was a glint in Navin's eyes. Although not gregarious enough in social situations, when it came to his specialization, Navin's confidence was at its zenith. "Tesla hasn't been profitable since its inception in 2003. Although the company has been successful in winning investor's hearts with Model S and X cars, it is way behind target in the mass market Model 3. At this point in time, to meet its targets the company needs to produce 5000 cars per week, while currently the rate is just 2000. Add to that the massive cash burn over the last 3 years, which has left them a gap of 2 billion dollars to fill from debt. All this has been comfortably forgotten by the market which is valuing the company at $345 a share right now, while the fair value should be close to $250-275 a share", said Navin, completing his speech with as much seriousness as he did for his university thesis.

Alex paused for a couple of seconds and started a slow clap. Kim started laughing and joined him too. "Oh thanks for the accolades you sarcastic bastards!', screamed Navin. Alex and Kim laughed even harder. Kim quiet for a long time jumped in, "I see your point Navin. I agree with how the financial data right now will affect the valuation and bring it down. However, there is an intangible premium given to certain stocks considering their future impact and market dominance in the future. It's pretty common with technology companies and can apply to Tesla as well." Navin replied, "Not for long. People need results soon. Can't hang in on hope all the time." Alex put in a pointed question, "Ok so now both of you have got strong opinions on the stock price of Tesla. What is your plan of action? Are you guys already invested with positions or just talking without any skin in the game?"

Magnolia

The sky always appears blurred, ever since I got aboard the Magnolia. I have forgotten how long I have been on this cursed ship. Smith, who is also from my hometown, a bilge rat in this ship, used to strike black lines in coal each week, on our dishevelled basement cabins, before he ran out of space. Relentless, he started keeping a mental track of each passing day or night, before his memory failed him. It wasn’t long before it happened to me as well. Holy mackerel! I have lost track of how long I have been on this wretched ship! The constant ebb and flow of the sea, sometimes extremely tempestuous, being the only reminder of the journey still going on.

I remember walking in the market lane in Plymouth, when I heard a couple of sailors atop a fish cart, addressing a crowd of onlookers gathered around the flagpole in the middle of the market. A crooked looking sailor was accompanied by  a young man, not more than twenty five, and who, by the fear in his face while looking at the older sailor speak, must have presumably been his subordinate. The old man was brawling at the top of his voice, the words rolling out of his drunken mouth, sounding gibberish. I got wind that they were looking for young sailors for a ship sailing to the lands of spices in the Orient. Rush of blood in my veins, a feeling of exuberance in my head making the filthy market feel like the stage of an opera. Could this be it? My dream of becoming a sailor!

Coming from a family of sailors, I grew up hearing tales of exotic faraway lands from my old man and my uncles. We kids used to play imagining ourselves as the legendary Captain Jack Sparrow manning the Black Pearl. The reckless life, the rush of testing uncharted waters, the promise of endless adventure and copious casks of dark rum, wanted me to become a sailor. Hell ya'll landlubbers,  you would have still believed the earth was flat, if not for us brave explorers.

On that windy new moon day of July, the Magnolia began her journey, with Captain Haddock shouting 'Ahoy' from the starboard. I couldn't quite get the sight of him somehow. The young recruits were exuberant in the initial few months of the voyage and the sails flew whole nine yards all the time. One of them, Smith who slept in the lower decks with me, became my close pal. We talked a lot, shared many a tale. If there was one gossip which every tongue on the vessel wagged about, it was about our skipper. It seemed many of us had never got a good glimpse of the captain. We had heard his hoarse voice, sometimes uttering curses on an unlucky crew. Even with the few who claimed to have seen him, it was only a shadow or just his back against a wall, never the complete face.

We estimated we would reach our destination in a year's time.  We had rough weather a few times, yes, yet we sailed constantly every single moment. We didn't stop anytime, anywhere, not a single instant as far as my memory can serve me. Months became years. Many wanted to question the captain. The few, higher up the ranks, who had the guts to enter the lion's den were always met with failure as they couldn't get to him.  We had three square meals a day, at least for a few months. Our supplies had been planned to last us for utmost a year. As months became years, we barely had a few morsels each day. Interestingly the rum started getting more intoxicating each day, making us see spectacular islands and hear the mellifluous cry of mermaids. It made us forget hunger.

Sometimes I wondered if all of this was just a dream or the sordid reality was we had become zombie prisoners of the Magnolia? Have we entered some forbidden enchanted sea with no way out to the land? The only change in our eternal journey was the colour of the sky. Sometimes shaky blue, many a times overcast with different shades of grey and charcoal black at nights. Waves lashed high enough to cover the sails many times and I wished one of those mammoth waves would just submerge the wretched ship and put an end to my bleak empty existence. It felt like getting tantalisingly close to the dark lips of Lady Death only for the whimsical maiden to turn her head away from one last kiss. 

Kazuo Takahashi, a seasoned fisherman, started his day well before dawn to make the most of the unusually calm sea, off the coast of Iwaki, in northern Japan. Over the years Kazuo had acquired Zen like tranquillity and sense of timing in his craft. He was precise in timing the casting and the pulling of the nets. He had already made a good enough haul the four times he had cast his net this morning. The sky had gone from deep purple to reddish orange and was now already dim yellow.  Time to cast one last time for the morning. The last haul, not as copious as the previous ones, was still sufficient. As he cast aside the fish by type, preparing to leave home, he noticed a shiny object glinting the morning sun across his eyes. He picked up the glass bottle and peered through its mouth. He found an intricately carved miniature ship , with English letters engraved on its side. He had never seen such a ship in his lifetime. Perhaps it was from his great grandfather's times when pale men from the lands across the Pacific came to trade with the Japanese.

Takahashi wiped the bottle clean and put it in his bag with a rare smile on the edge of his mouth. Akihiko, his youngest son, with his curious mind, would surely like it.