Wade Slome is the author of How I Managed $20,000,000,000.00 by Age 32 which I recently reviewed. He is also the founder of Sidoxia Capital Management, LLC. The author was gracious enough to take some time to answer a few questions that I had. We did an email interview.
The following are Wade’s answers to my questions. Enjoy!
1. Wade, what inspired you to write the book?
Not everyone gets to manage a $20 billion investment fund in their lifetime, nor do they understand the commitment and skill necessary to successfully manage and navigate such large pools of money. My passion for investing was evident at an early age – as early as high school when I participated in stock market competitions. I have been extremely blessed in my professional career, and I believe it’s my duty to share my experiences and strategies so that investors of all experience levels can learn and apply the successful tools I collected over the years to their personal investment portfolios.
2. What do you hope your readers will get out of the book? What is the most important lesson or lessons that someone could learn from your life or your book?
At one level, I wanted to provide certain entertainment value to what some readers traditionally consider a dry subject…investing. In Chapter 6, “Managing Billions – Riding the Bull,” I cover a lot ground. Everything from descriptive stories about my global travels, and interactions with corporate titans like Google CEO Eric Schmidt and Wal-Mart chief Lee Scott are covered. Not to mention, unexpected FBI interviews, and jet flights with the likes of baseball Hall of Famer, George Brett.
On another level, I really wanted to demystify the world of investing in terms that a layman can understand. For example, I highlight opportunistic strategies and point out the pitfalls and dirty little secrets of the investment industry, in terms the reader can understand. There are three main areas of investing where I see the most mistakes committed: excessive trading, excessive fees charged by brokers, and an emotional ad hoc approach to investing. Most recreational investors, or aggressive brokers, read newspaper headlines and are overconfident in their ability to generate short-term profits. They feel they can do no wrong, if they are constantly buying investment ideas based on good news and selling on bad news. These tendencies may feel right or work in the short-run, but evidence shows, come the post-mortem review of trading statements, that individuals get crushed over longer periods of time. John Bogle, the very successful founder of The Vanguard Group, did an eighteen year study showing that individual investors underperformed the “do-nothing” index strategy by more than 10%…PER YEAR. I find it astonishing how much trading, fees, and emotions can impact long-run returns.
3. With such success at a young age, how have you stayed grounded. Has faith played any part in this?
I consider myself extremely fortunate in all aspects of my life. One reason I can place my success in perspective is due to the challenges and hardships I have faced during life. With two of my immediate family members having passed away at young ages, faith has definitely played a role in grounding me. I take my profession extremely seriously, but hundred point drops in the Dow no longer cloud my perspective. Having my wife constantly remind me to take out the garbage and clean the dishes has a way of grounding me as well.
4. What money moves are you making right now in this market?
I am putting more of my cash to work. With the tremendous volatility, fear, and panic in the marketplace also comes vast amounts of opportunity. And you really don’t need to listen to me, but rather you can just indulge me by paying attention to the wealthiest man in the world…Warren Buffet. He is putting his money where his mouth is and placing billions of his investment dollars to work in the U.S. financial markets. Right now, he is like a kid in a candy store doing cart wheels. And why not? Prices on many investments are on sale, by more than 50% in some instances. Therefore, the credo to “buy fear, and sell greed” makes all the sense in the world.
What many people don’t realize is that investing is NOT a black or white proposition. Many investors toggle between investing in 100% stock or investing in 100% cash. However, I’m finding tremendous value in the fixed income markets (bonds), where traditional equity-like returns may be achieved in the next three to five years. There are trillions of dollars in cash investments that investors are effectively stocking away in their bunkers because it feels safe and comfortable…for now. However with the Federal Funds Rate (interest rate target set by the Federal Reserve) basically sitting at 0%, investors who are stuffing money under the mattress are doing more financial harm to their financial futures than they are doing good.
5. With the markets being so volatile and the media talking about the end of the world (at least in terms of the stock market), what advice can you give the average investor who’s afraid to invest in the current market?
The best advice I can give people is to turn off the TV. I almost feel like hitting myself with a hammer every time I turn on the evening news. There is a difference between remaining informed versus constantly surrounding yourself in never-ending panic. Sure, global economic conditions will be tough and deteriorating for at least the next three to six months, but this is not new news. The pessimism we are constantly surrounded by is arguably largely factored into current market prices. What many investors fail to realize is that recessions are the BEST times to invest. According to Hays Advisory Services, the average bull market increase is greater than 88% from market bottoms. Even after the collapse of the market in 1932, prices rose approximately four-fold from 1932 to 1937. We may not be at bottom yet, but regardless, Boomers’ retirements are accelerating and many should be investing for the next 20+ years (not the next 20 days). Certainly some investors may have no business investing in the stock market, but I am clearly finding more opportunities now relative to a year ago.
6. And on a side note, have you entered in any Poker tournaments and won some big money?
As I write in my book, successful investing requires skillful use of both art and science. What I find so fascinating is that the same principles apply to poker playing. Like investing, poker is also a game of skill. Take for example professional poker player Patrick Harrington. In 2003 he finished 3rd at the World Series of Poker Main Event (the Super Bowl of poker) out of a pool of 839 players. In 2004, the following year, despite the pool more than tripling to 2,576 participants, Mr. Harrington managed to finish 4th and take how a cool $1.5 million in prize money. Luck? I think not. Odds, if left to chance, would be 1 in 25,000 for repeating this feat according to the Economist. I consider myself an above average player and I’ve won a few small tournaments, but it may be a while before you see me on ESPN winning the World Series of Poker (however, don’t be surprised if it happens!).
Wade W. Slome, CFA, CFP®
Sidoxia Capital Management, LLC (www.Sidoxia.com)
Plan. Invest. Prosper.
Thanks Wade for the interview and for taking the time to answer some questions for my readers at Christian Finance Blog!