BIO: Taimur Baig heads global economics and macro strategy for interest rate, credit, and currency at DBS Group Research.
STORY: Taimur invested in his friend’s hedge fund that was dealing with Iraqi stocks. He lost 50% of his investment after the country entered a war three years later.
LEARNING: Don’t get swayed by the upside and forget about the downside. Always analyze the risks, especially when the deal seems too good.
“Don’t get swayed by greed and the potential upside, and forget about the downsides.”
Taimur Baig heads global economics as well as macro strategy for interest rate, credit, and currency at DBS Group Research. He is a Director Fellow at the Asian Financial Think Tank and a council member of the Economic Society of Singapore.
Before joining DBS in 2017, Taimur was a Principal Economist at the Economic Policy Group, Monetary Authority of Singapore. Earlier, he spent nine years at Deutsche Bank, where his last position was Managing Director and Chief Economist, Asia.
During 1999-2007, Taimur was based in Washington, DC, at the headquarters of the International Monetary Fund, where his last position was Senior Economist. He is the host of the Kopi Time Podcast.
Worst investment ever
In 2012, Taimur’s friend—a Wall Street success story—who ran a hedge fund was pivoting to geopolitical bets. The idea was to invest in stocks in countries just recovering from war. Taimur was impressed by his success in the 2000s and had a lot of respect for him. So he started following the setting up of this fund.
The fund’s first investment idea was Iraq. The country had had 10 years of massive conflict. But after a decade of death and destruction, the country was coming together, and there was some peace in place. There was huge potential for the US Iraqi stock market to make an earnings growth of about 40% a year. This was the mother of all bull markets to latch on to.
Taimur had little understanding of the institutional nature of the Iraqi capital market. Still, he trusted his friend, who had made trips around Baghdad with US Marines and talked to entrepreneurs and the people who were to set up and run the new Iraqi stock exchange. It all seemed very good.
The fund launched in 2012, and Taimur invested in it. By the end of 2013, things were going really well, and the value of the investment was growing steadily. Then the insurgency began, and the following years got terrible in terms of security, as well as deep disappointment in the Iraqi government’s ability to channel oil resources to support Iraq’s economic rejuvenation.
In 2016, Taimur’s friend called him from New York and informed him that he would shut the fund down. He said he’d pay Taimur 50% of his investment in that fund.
- Don’t get swayed by greed and the potential upside, and forget about the downsides.
- Be careful when investing with friends.
- You don’t have to reach for the stars and be super greedy when investing.
- Just because something sounds cool doesn’t mean it’s gonna be cool.
- No matter how exciting an investment opportunity is, don’t get too excited and forget to analyze the risks.
Getting into an illiquid investment is a bad idea for the average investor. Investing in liquid things is far more preferable.
No.1 goal for the next 12 months
Taimur’s number one goal for the next 12 months is to be a faster runner. He also wants to solve the six sides of the Rubik’s Cube a little faster.
“Just keep listening to My Worst Investment Ever. It’s an awesome podcast.”
Andrew Stotz 00:01
Hello, fellow risk takers and welcome to My Worst Investment Ever, stories of loss to keep you winning. In our community, we know that to win in investing, you must take risks but to win big, you've got to reduce it. Ladies and gentlemen, I'm on a mission to help 1 million people reduce risk in their lives. And that mission has led me to create the Become a Better Investor Community. In the community, you get access to our global asset allocation strategies and stock portfolios, our investment research weekly live sessions and the risk reduction lessons I've learned from more than 500 guests go to my worst investment ever.com right now to claim your spot. Fellow risk takers this is your worst podcast host Andrew Stotz from a Stotz Academy, and I'm here with a featured guests timer bag timer. Are you ready to join the mission?
Taimur Baig 00:55
Let's roll Ender.
Andrew Stotz 00:58
Let me introduce you to the audience, timer heads global economics as well as macro strategy for interest rate, credit and currency at DBS group research. He is a director of fellow at the Asian financial think tank and a council member of Economic Society of Singapore. Before joining DBS in 2017 timer was a principal economist at the economic policy group Monetary Authority of Singapore. Earlier, he had spent nine years at Deutsche Bank where his last position was managing director and chief economist Asia during 1999 to 2007. Timer was based in Washington DC, at the headquarters of the International Monetary Fund where his last position was senior e columnist. Timer, take a minute and tell us about the unique value that you bring to this wonderful world.
Taimur Baig 01:53
Well, Andrew, I think I like you have been an expat around the world for a long, long time. So I think people like you and I bring a sense of belonging to everywhere. The it is the opposite of belonging to nowhere. You know, you've heard this expression in the voice of Angela Merkel when she was criticizing multiculturalism in Germany, and you hear that from others. But I think we should celebrate the opposite. People like you and I, we bring to the table and ease of living, breathing cultures that are not our own. But because we are open, because we're positive. We can be in Bangkok today or Caracas tomorrow. And we can pick up the local language and we can be at one with the local Zeitgeist. That's the value I think you and I bring.
Andrew Stotz 02:42
Yeah, it's great. It's a great point. You know, a perfect example of this, for me was my first time in China. And as a young American guy growing up, I thought communists and all of those things that were taught about China in the old days, and then I went to China, and I just saw a very different story. And it really makes you question. Now it's easy as a non Chinese person to go to China and say, well, that doesn't make sense. That's wrong. We shouldn't do it that way. It should be this way. But the real challenge is to go to a country and say, I wonder why they do it that way. That's interesting. And observe. And I think that what I learned as a equity research analyst all my career is, that's really our job really, is to question because ultimately, we're trying to predict behaviors of people markets, that type of thing. And you can't predict behaviors, if you keep putting people in your framework and the way you look at it. I'm curious, like, I know, your job. Much like my job as a strategist and a head of research over the years. You know, you're constantly looking in the future. What's something that you would tell people because a lot of times people think we're so hard to predict future, we see a lot of predictions go wrong, but yet, we still have to think about the future. Maybe you could just give a little idea about the way you look at kind of predicting or estimating what you think's going to happen in the future.
Taimur Baig 04:13
So Andrew, like you and I are, you know, in the business of looking for the crystal ball with the humility that we cannot predict the future? What we can do is think through states of the world, that looking forward, you know, what's the chance that interest rates keep rising? Or what's the chance that they flatten out? And is there a strategy that can straddle the two states under which I can be, you know, risk on my high conviction side, but not entirely risk off on my local mission side, and as a result, maybe I shave off some of the upside, but at the same time protecting the downside. So keeping bunch of states in mind and planning scenarios around that, and scaling back the risks that may embrace Is my investment position, the one that I have high conviction still stood, you know, tempering some of the risks, I think is the only way we can deal with this rather complex and rather volatile world that we're living in. I mean, we think of shocks as something that don't happen every day. Seems like sharks happen every day these days. And we go through like a once in a lifetime pandemic, to once in a lifetime drought, to things that we never thought Russia would do. So we have to sort of think of the unthinkable almost on a regular basis. So that's the overarching strategy that I sort of have to force myself to be part of these days, when I help my bank manage risk, or when I help my clients manage risk.
Andrew Stotz 05:45
It's a, it's a good point to like, you know, one of the amateur mistakes that most people make when they first start is that they, they see someone with a really large amount of conviction, and confidence in a particular story of gold, or crypto or whatever it is. And then they make the mistake of going all in. As opposed to understanding that, you know, first of all, you want to balance risk across, let's say, asset classes as an example. But second of all, you want to balance with humility, you know, you have a high conviction, something so you know, you're willing to go on that conviction, but you're not going to do it with all your money. So I think that's, you know, a real important lesson. Maybe you could just take also a moment and just kind of give a general picture of the way you see, I don't know, the next 612 months ahead, how do you look at it,
Taimur Baig 06:42
it's a tough scenario, we came into 2022. Thinking, this was going to be a year when things sort of work out, in the sense that we will finally get out of the pandemic, policies will get normalized, because they were exceptionally easy in 2020, and 2021. But at the same time, supply chains will get restored, demand will come back, but the supply chain will also sort of clean itself out, and therefore we're gonna have temporary of inflation. And then we got slapped with the war in Ukraine. And all of a sudden energy insecurity and food insecurity came, you know, to the fore. And then we also have to worry about this relentless inflation. So we sort of had a handle on COVID inflation, then came conflict inflation. And between the two, we started talking about also like de globalization driven inflation, and maybe some structural inflation. So stuff that we haven't worried about for a decade or more, everything came rushing through the window to the spring and summer of this year. So now we're at a point where my view and my team's view is that inflation has more or less peed, because central banks around the world are showing a great deal of resolve to tighten policy, and slow things down. And if need be slow things down further, by hiking rates further, in the coming months and quarters. And around that we see inflation expectations stabilizing, even if it's a bit too early to say that everything has peaked and everything is gonna work out. But as far as commodities, you know, food or fuel is concerned, I think the supply side through a great deal of work around the world by governments and the private sector is beginning to take shape. So we're not as worried about having a Russia driven, massive shortage of gas or food or oil around the world. So looking forward, it's a world where inflation is high, but doesn't keep going up. So a peak inflation that's still somewhat uncomfortable inflation around the world, which forces the Fed to keep rates high, even if they stop hiking, let's say at the end of this year, or maybe very early next year, but they keep rates high for all of 2023. And Andrew, that is something that would precipitate substantial market volatility and economic slowdown. There's just no sugarcoating that. We are not used to living with such high rates for a very long time. And if the Fed has to induce a fairly tough, tight monetary condition to slow the economy down to the extent that job growths go from massively positive to actually negative, that's gonna have a ripple effect on the US. And of course, we have lots and lots of bad stories coming out in Europe and UK, and China. So there's not much of an offset. The big positive story of the world was a US they're going to have a self inflicted basis, slow themselves down. But who's going to pick up that mantle, maybe little bit in ASEAN, where you and I live, we're seeing tourism coming back to live we're seeing events come back to life, but that's a drop in the bucket compared to the big negative global dynamic that's in place. So let's
Andrew Stotz 09:49
go back through this. So first thing is, maybe there's a lot of people that are worried that inflation could be you know, rising further, because of, you know, they just keeps seeing prices going up. And so, But your point is no, we're probably at the peak. But there's some other people that think no inflation is going to kind of come down pretty fast, because Feds tightening and all of that, and therefore, boom, we're going to be seeing inflation and therefore interest rates come down very fast. But your story is, now we're probably have seen the peak of inflation, but we're going to maintain relatively high interest rates for a while.
Taimur Baig 10:30
Right. So overall, inflation will come down, but not to the extent to make policymakers comfortable anytime soon. Now, if you slice and dice the inflation, as I said, COVID related and conflict related inflation, that sort of manifest and supply chain bottlenecks, or food and fuel related friction, I think that goes away. But we still have issues related to very strong wages and tight labor market, we still have a very tight housing markets in many parts of the world. So even as interest rates rise, and Housing, Construction, housing purchase comes to a standstill, we still have that insufficient supply of properties that keep rent high, and that feeds into inflation. So that's the problem that we have some parts of the CPI will ease, I'm pretty confident about that. I'm just not very confident that all parts of the CPI would come down to bring us down to like 2% inflation anytime soon.
Andrew Stotz 11:29
And how does the November midterm elections factor into this from your perspective?
Taimur Baig 11:36
Well, I don't think it has to be a seismic event as far as the global economy and global markets are concerned. The things that President Biden ran for in 2018, sorry, 2020, his gotten more or less all of them done. He wanted to do student loan waiver, he wanted to invest a lot and green energy and green transition done. On top of the COVID Relief packages that were put in place by his predecessor, Trump, he wanted to add more done. So from a policy initiative perspective, it's really a question of crystallizing the gains of these two years and keep the momentum going in the next few years. Now, of course, if the Republicans take both the House and the Senate, some of these issues may get, you know, maybe they face serious headwinds. For example, some of the green energy type developments in the Republicans might try to scale that back. But of course, Biden has the veto power, so maybe things just slow down, but not necessarily turn around 180 degrees. But what would happen for us domestic politics could be a tremendous amount of noise, because almost certainly, if the Republicans have the house in the Senate, they will initiate impeachment proceedings, exams, Biden, they'll do all sorts of hearings, you know, remember Benghazi hearings. So we'll get in a reprise of that for sure. And 2022 in 2024, leading up to the presidential election, so I think the midterm election will be fairly consequential for US political volatility of domestic nature, it will also probably, unfortunately, go into the cauldron, that the poisonous cauldron that we have in the US China relationship will probably make things even worse. But beyond that, for the global markets and global finance, I don't think the path of US fiscal and monetary policy will be altered by what's going to happen in the midterms.
Andrew Stotz 13:27
And what about. So if we think about this scenario that you've laid out, how does that impact the US dollar? And how do we think about that now, whether you're in Thailand, Singapore, Indonesia, you know, you're across Asia, Philippines. And all of a sudden, you're just seeing that goddess dollar just keeps rocking up? What what is your thoughts on you know, what your scenarios impact on the dollar is,
Taimur Baig 13:49
so we live in hoping, not calling but rather hoping for $1 peak for a few months, because the view was that the market had more or less understood what the Fed was up to and have priced in all the rate gains in the US. And then as the rest of the world catches up, rate different shows visa vie the US will narrow similarly as the US growth slows growth, the differential between the US and the rest of the world would narrow. The problem is Andrew, the rest of the world is slowing even faster than the US. I mean, the look at the recession, what we're seeing out of the UK, and Europe and the the you know, string of bad news as far as the real economy of China is concerned that keep popping up in the news feed. So yes, the rate hike by the Fed will slow the US economy down. And in normal circumstances that should cause the dollar to peak. But since the rest of the world is in a worse position, the relative strength of the US remains undiminished. Having said all that, we don't think that a relentless dollar upside is in the horizon. The there is further slowdown in the pipeline as far as the US is concerned. And just from $1 speculative perspective, I think there is a What we call bases, trade options that, you know, if your hedge currency exposure into other high yielding currencies, I think those opportunities are becoming attractive. And therefore, from an institutional investor perspective, we're telling our investors to start taking some of their risk off from the US dollar and looking at like, you know, Aussie dollar are some of the commodity exporting currencies, you know, could be better bets. But when we think about the likes of Thailand and Vietnam and Singapore, where we have economies that are dynamic, but also economies that are hugely energy input dependent, the weak currency, visibly the US dollar is bad news. Even as oil comes down in US dollar terms, in local currency terms, they don't come down as fast.
Andrew Stotz 15:44
Yeah, and we're seeing that currency impact even more significant in Africa, where currencies are devaluing, you know, even faster than what's happening in Asia. And yeah, and you know, that there's a tinder box going on there that concerns me like that things can really, you know, go off the rails. One last thing I would just ask, before we get into the question of the podcast is China, you know, it's been, it's been a really fascinating time to kind of observe China and what's going on. I mean, first of all, Trump kind of hit the China us relationship with a heavy punch COVID came along and severed, you know, supply chain. And China's kind of been reeling back on that, then China, all of a sudden shuts itself down, related to energy, you know, and coal and that type of thing, where, prior to COVID, people were having a hard time getting products out of China, and then you have their COVID policies that have been extremely restrictive. It's just interesting, observing what's happening in China. What is your thoughts about where China goes going forward from here,
Taimur Baig 17:04
I have been expecting a pivot in China's policy that, you know, they wanted to clean up certain practices in the property market in the tech sector, they want to scale back the power of the oligopolies or monopolies. They want to get rid of growth through speculation, the property market, all of those things are pretty good objectives for the long term structural health of the economy. But the pendulum has swung so far on that spectrum, that there has to be a correction. And I've been expecting that correction to come for the last few months. And I've been disappointed repeatedly. But I'm not giving up on that conviction, that as the China policy Congress takes place, as Xi Jinping sort of consolidates his power for years to come. That some of the the very harsh measures that have been placed that have been devastating for China's property investors and China, tech investors, and some of them will fade. China still is characterized by outstanding entrepreneurs at the cutting edge of technology. And their success, in my view is absolutely critical to China's long term success. So if shooting pay is keen to have a legacy in which China grows robustly, becomes a champion of cutting edge technology, he has to allow the tech sector to flourish, it has to allow the property sector to at least survive so that it doesn't bring the entire economy down given how large a chunk of the GDP takes up. So my view is, we are months away from substantial supportive measures, both on the property and the technology side. Some of it may not happen immediately may not get big bang, everything gets announced in October, but maybe it'll come in little drips, but it has to come. Because short of that I just can't see how China gets out of the hole right now. They're in a COVID hole. They're in a domestic economy slump. They have one shining part of the economy, which is the export sector, which has been doing very well. But that will probably also lose massive amount of momentum around slowdowns in the US, UK and Europe. So they're running out of levers to keep the economy moving forward. So they have to act in my view.
Andrew Stotz 19:23
I was a bank endless from 1993 to 2003. In Thailand, which meant that I was a bank analyst as we went through the boom time. And then I was a bank analyst through the absolute collapse, collapse and valued non performing loans in Thailand went up to 55% of total loans. And, you know, I learned a lot about how a bank has to, you know, deal with these non performing loans. But one of the lessons I learned was that every banking crisis starts with a property crisis. Because property particularly in Asia is the ultimate collateral And when collateral values collapse, then it's very difficult for the banks to deal with, you've got a dual problem. Problem number one, you're getting less cash flow from your clients because the economy is collapsing. And problem number two is that the value of collateral behind the loans is collapsing. And now you've got, you know, a huge burden of the amount of provisions or potential losses that you can have. So, I'm thinking that listening to what you're saying, you know, that the Chinese government's dealing, you know, that they've been slowly dealing with the property sector. But if it really starts to cause contagion in the banking sector, which I'm sure it already is happening, to some extent, that they're going to have to get pretty aggressive, or else things really could get worse in the bank. So let's hope that they can plug that hole before, you know, happens,
Taimur Baig 20:52
right? If China were open capital account economy, they would be in dire straits right now, because I think the global investor have much less patience than say the domestic investors do. And they would have withdrawn their capital and created a hurricane. You know, the collateral value, taking downs, equity value, and so on. Because of the largely closed capital account, I think they probably can thread the needle, as in, you know, not necessarily creating massive moral hazard by like, you know, bailing everybody out, but at the same time, not let the entire system go under and take the whole economy down with it. If anybody can, the Chinese can, but even that would be a very, very tall task. Let's see.
Andrew Stotz 21:37
Thread the needle, ladies and gentlemen, let's watch and see. Well, for all the customers of dBs, I know they get a lot of great insight from you. And we appreciate that you can spend some of that time. In fact, one of my businesses is a DBS customer. And we're a tiny little small fry. But at least we get a little bit of DVS advice right here. So that's how that's your service. Yeah, there you go. Well, now it's time to share your worst investment ever. And since no one goes into their worst investment, thinking it will be tell us a bit about the circumstances leading up to an end. Tell us your story.
Taimur Baig 22:12
I've been looking forward to hit the sharing. Andrew, thank you for the opportunity. So we'll travel back 10 years 2012. I was in Singapore and friend of mine, Wall Street success story ran a hedge fund. And he was pivoting his hedge fund toward what he called war on sort of geopolitical bets. And he said that he's filter was looking across the world in conflict countries, and making the call that the conflict was done and over with, and the country was undervalued because the conflict, and it was setting up institutions. It was about to see this unleashing of creative destruction, but at the same, so all these institutions will go away and new, interesting institutions would come and massive value will be unlocked. So I you know, was impressed by his success in the 2000s. And I certainly had a lot of respect for him. He was a smart guy, we had great conversations. So I started following the setting up of this fund. So the funds first investment idea, whereas I could give you 25 guesses and you would not get it. It was Iraq. In 2012. The view is that, you know, the country has had 10 years off, you know, massive conflict and and complete total meltdown of institutions. The US had made many, many missteps. But after a decade of death and destruction, the country was sort of coming together. And whether it was the Kurds in the north or the she has in the south, or the Sunnis in the center, there was an uneasy peace in place because money was there to be made, the oil infrastructure had been rebuilt. And then there was a massive untapped untapped potential of the Iraqis to consume Pepsi and American cars or European cars. So if you go along the US Iraqi stock market where all these consumer stocks were trading at, like 0.2 book value, or price earnings ratio of three or four, with earnings growth of like, 35 40%, a year, that this was the mother of all bull markets that we could latch on to. And it made all the sense of the world. And really, how could this not work out? I had never heard of ISIS. At that point. I didn't know that we were going to have this big civil war in Syria, and then that would, you know, spill over into Iraq and the whole country will get another tailspin. I had no idea. I also had very little understanding of the institutional nature of Iraqi capital market, but I sort of trusted my friend who had made trips, they're traveling around Baghdad and Humvees with US Marines and talking to entrepreneurs talking to the people who are going to set up and run the Iraqi stock exchanges in a new version. It all seemed very good. And so the fund launched at some point in 20. falls in, I went along the fund. And without getting into how much money I put in, let's say I put in $10, by the end of 2013, things were going really, really well that 10 had become something like 14 or 15. And, and, you know, we were, you know, following Iraq developments, but by then the insurgency had begun. And then, of course, following years were, you know, terrible in terms of security, as well as deep disappointment in the Iraqi government's ability to channel oil resources to, you know, support Iraqi economic rejuvenation, if you will, or the stock market for that matter. So within two years, that $10, which have gone to become almost 14, or 15, became nine, that became six. And then about four years down the road sometime in 2016. My friend called me up from New York, and he said, I think I'm going to shut the whole thing down, I can give you back five. So I lost 50%, in about three and a half years on that fund, and boy, boy, it was sobering. I will talk about lessons learned later. But just we have comparison, let's say that same friend who's smarter, who was looking at all the cutting edge investment ideas at that time, somehow stumbled onto Bitcoin, and convinced me to put those $10 in Bitcoin. Andrew, do you have any idea what Bitcoin costs in? 2012?
Andrew Stotz 26:26
I'm guessing 500,000? I don't know what was it at that time
Taimur Baig 26:30
by dollars? Five, not $5. So I could have taken that $10 and seen that become like, you know, millions, many millions, I think, you know, but my return would have been if I had gone long, because when of course, you know, he didn't know a Bitcoin. I didn't know a Bitcoin. But my point is, even in 2012 there other crazy ideas, I just had to stumble upon the one that truly was my horse,
Andrew Stotz 26:54
less profitable, crazy idea. Yes. So how would you summarize the lessons that you learned?
Taimur Baig 27:00
So it goes back to the earlier discussion you and I were having in terms of you know, the state contingent planning, Iraq was such a huge risk. But I just got seduced by the idea of a smart person giving me the bull case. And I suppose I got swayed by the greed and the potential upside that I was completely oblivious of the possible downsides, a country that has had not a decade of war behind it, but rather three decades, right. I mean, we had the Iraq Iran war in the 80s, we had the first Gulf War in the 90s. And then we had the Invasion of the 2000s. So it's not like, you know, it was just a temporary blip, and it was all going to be status quo ante, I ignored all that. So the first lesson would be to not just get focused on the upside potential. And I suppose any good salesperson, I give my friend full credit for being a very good salesman that he was, and selling the rosy scenario. And as tempting as it is to get sort of, you know, excited by the rosy scenario, I think one should always sort of step back and think about the states under which things would not work out and consider how big the downsides could be. And I think it would not have taken huge amount of work to realize that the downside could be substantial. So that's certainly you know, lesson number one, and attached to that lesson is that, you know, you may have a good macro story. But boy, if you are in a bad neighborhood, both in terms of who your neighbors are, but also within your own country, if there's no social cohesion, geopolitics, can security situation can overwhelm the macro, good story very, very easily. Second, is the issue of investing with friends. It's tricky. It's tricky. I have not given up investing with friends, I am invested in ESG fund as we speak with a good friend of mine, I respect his investment thesis, I like the work that he's doing. And therefore I've gone along with him. But in this particular case, it certainly, you know, was challenging when you're losing a lot of money. And you sort of start thinking, you know, is, is, does a friend have my best intentions in his mind? Or is he thinking about himself, stuff that, you know, you would second guess to a person who's not your friend, perhaps more harshly, and it becomes very, very awkward when you're having those thoughts about your friend. So so, you know, seeing through tough times with a friend who's also you know, collecting fees for my investment. It's very tricky, very unpleasant, and that sort of structure I think creates havoc in the investment slash friendship space. So so that that was certainly an unpleasant lesson. We remain Francis be very clear. But it was it was tough. And the third issue is the greed part. You know, like, it doesn't have to be Oh my god, if I had invested in Bitcoin issue in 2012, s&p 500 was 1500. A conservative $100 in s&p 500, then today, despite all the ups and downs we've had since then would have been 3.5x Return easily. So you don't have to reach for the stars and be super greedy. The problem is Andrew, that, you know, we have to survival buyers, we look at somebody who did go long Bitcoin, that here, and who now owns hundreds of millions of dollars worth of assets, we forget that there are other people who invest in Iraq and other things, who lost a lot of money as well. So not all bets will work out. In fact, most bets of that magnitude don't work out. So we should not, you know, get so influenced by those stories of that person who invested in that amazing 10x 100x return. But that's the nature of greed, you want to make a fast buck here and there. And you say, Oh, I'll put you know, 2% 4% of my portfolio, and some crazy bet. If it goes to zero, it's okay. It's not okay. Yeah, 4% of your portfolio go to zero is really bad. And it takes years to come back for the full portfolio to return to its sort of long term potential. So, so beware of these tail risks and be readied for the rather devastating impact you can have in your portfolio. If that moonshot doesn't work out. So I think it's been humbling and sobering in terms of somebody you know, who gets paid to look through the crystal ball that certainly don't have the answers, even on a personal investment basis. It's also humbling in terms of good relationships, how it can have an impact if things go wrong. And it's certainly you know, it is a big lesson on temporary Mike Reed.
Andrew Stotz 31:38
Yeah. Well, let me share a couple of quick things. I mean, first of all, that's the type of strategist I want to listen to is someone who's willing to go back and discuss the mistakes that they made and what they learned from it. Because I think that that, ultimately is what makes us valuable. There's a couple things I was writing down while you were speaking, I wrote down one thing sounds cool. You know, like, when we get in the world of investing, you know, there are people, some people that are really good at making things sound cool. Like, it just sounds like man, that that is cool. I want to just have a little part in that, you know, and so my advice to people out there is, you know, just because something sounds cool, doesn't mean, it's gonna be cool. The second thing is, it's hard, it's hard for things to change. I mean, it's nice to hear stories of turnarounds in companies and management in countries. But the reality is, is that things don't change. In fact, I did some research a long time ago about the return on invested capital of companies, and you just see that strong companies with strong return on invested capital are able to maintain that position, and dogs can't get back up to a high level of return invested, they can't even get to average. So the natural thing is to kind of assume that things can't change, or they're very change very hard. And then yeah, singing about friends, you know, that's, that's really hard with friends. giving money to a friend to manage that type of thing is just a tough thing. And I don't know how to answer it. I mean, I started a business with my best friend 28 years ago with our coffee business in Thailand. And it's gone really well. But part of the reason why it went well is because, you know, I've not really, I try not to push on some things that, you know, I just have to leave him to run it. But we've maintained our friendship. But I do, I do want to give one last piece of, of commentary, and that is I've gone through all the different interviews that I've had, and I've listened. And I've gotten a lot of written interviews, some written stories submitted to me. And I've identified six common mistakes that people make. And the first mistake is that they failed to do their research. And the second mistake is that they failed to properly assess and manage risk. And what I just would highlight in this in, I'll highlight it by telling a story, my business partner and I were considering expanding our coffee business to Vietnam. And we had a partnership opportunity that we thought would be interesting. So Dale went there, talk to them, ran the numbers, talk to a lot of people assess the market. And then we had a meeting a couple of months later at our offices where Dale and I just went into a conference room and he presented the case of the potential upside, the case of the revenue, the case of what he saw the potential was and once we finished that I asked him a lot of questions about this and that and then once we finished that we left we had dinner and then a week later, we met in the same room, and we had a meeting about the risks. So we separated our discussion or our research on return and risk. And by doing it really changes the dynamics so I highly recommend this type of situation when you're getting Something that you're looking at, you know, take some time get excited about the upside. I mean, it is an exciting story, a turnaround of countries can be amazing. Enjoy that, enjoy it, think about it, what could it mean? But then separate that from the time that you sit down and say, Okay, what could go wrong? And that's kind of my biggest takeaway of kind of what how a young person can deal with this kind of problem when it comes up to them.
Taimur Baig 35:26
This is extremely important, because I think you know, Andrew, both you and I think by nature are people with positive predisposition, we like to embrace opportunities, we like to, you know, support, things that we think will be important and purpose, have a purpose and be meaningful. But at the same time, you want to not let that positive mindset or enthusiasm get in the way of realism. So here in dBs, we have this culture where when we have strategic meetings, one person at the meeting is designated to be what be called a wreck. Cool. So his or her job is to be the grumpy one. And when everybody's saying, Alright, this is the decision, and then we turn to the raccoon and say, All right, how will this thing go wrong? Why don't you like it? And they have, they're forced to say, I don't like it for ABCD. And then we'll be like, Okay, I'm really annoyed that you're pouring cold water on my great idea. But I'm glad you did it, because we need to think through those things.
Andrew Stotz 36:20
So having a formal official process sounds like great advice, and a great thing that people can put into place. And I think you don't even have to be in a company to do that. You can just go out to some of your friends and say, tear this apart. Here's my idea and tear it apart. So based on what you learned from this story, and what you continue to learn, what what action, would you recommend our listeners to take to avoid suffering the same fate.
Taimur Baig 36:48
So I think some of the actions I think, are already embedded into what you and I just talked about. But I think there's one critical thing that we have, and I want to touch on that is the issue of investments being liquid. So these days, especially the last 1012 years, when interest rates were very low, the investment side guys had moved to the private side of the market where you invest in illiquid assets in the hope of getting long term returns. I think stuff like that should be left for private equity investors and very mature people with lots of deep pockets who can afford to do those things. I think for the average investor, getting into illiquid investment is a pretty bad idea. Life throws you all sorts of curveballs, when you need the liquidity and you will not be able to get it because you're stuck in these investments. Whether or not they make money in the long term or not, is a whole different set of question. They may not also, but even the near term, the fact that they're illiquid, can cause a lot of problem. So in my case, for example, Andrew at that time, even if I had said, Alright, the moment the money went from 10 to 15. And then he had come down to say, 10. I'm just gonna take the money, it was not possible because the fund was very, very illiquid, the act of selling that chunk would have caused the market to go down even substantially more. I think investing in liquid things is far more preferable than investing in illiquid things, holding everything else constant.
Andrew Stotz 38:09
No matter what premium people try to sell, you are gonna get a much higher return because it's illiquid now. No, thanks. Alright, so what's a resource that you'd recommend for our listeners?
Taimur Baig 38:19
Okay, Andrew, you may or may not know this, but I myself am a podcast host. And I run a podcast called Coffee time. It's on episode 84. Now, I'm not trying to advertise that people go and listen to all 84 episodes, but my next episode, which I'll record later next week, is with a dual. And this will be the first time I actually interviewed two people, and they are Singapore based financial literacy advocates. Now, financial literacy is a popular subject. Everybody wants people to learn about how to invest your job is that my job in some ways is that the way these two gentlemen do it, is through social media. Right? We have an Instagram platform. It's called the woke salaryman, so th e the woke Wk salaryman dog salaryman through Instagram cartoons, so one of them is an illustrator, the other guy writes a script, they talk about the importance of investing of pitfalls in buying property, why you should not own a car when you're in your 20s Stuff like that. So their Instagram handle has just in little Singapore 357,000 followers, and I think they have followings on telegram on Facebook. They're 20 something young gentleman with this tremendous purposeful idea of helping average people think about investment through graphic, you know, assays. So they draw, they tell a story, and they're trying to wake everybody up about the importance of investment. I think they're fantastic. I hope I have a great conversation with them when I talk to them next week. But even if you're not interested, listen to my podcast in that conversation. Do check them out. The Walk salaryman?
Andrew Stotz 40:01
Well, I think we also want to highlight your podcast too for the listeners out there and the cot the podcast is called Co Op time. See, that's K O P on Co Op time cut podcast. And I'll have a link to that in the show notes. So check it out. Ladies and gentlemen, you can get more of this great discussion. All right, so last question, what's your number one goal for the next 12 months.
Taimur Baig 40:26
This will sound like a real middle aged rant. My goal for the next four months is to be faster in a few things. So I want to be a faster runner. I also want to speed up my time that is required to solve the six sides of Rubik's Cube. Wow.
Andrew Stotz 40:42
Now that's a challenge Well, listeners. There you have it another story of loss to keep you winning. If you haven't yet joined the Become a Better Investor Community. Go to MyWorstInvestmentEver.com right now and sign up. As we conclude this episode timer. I want to thank you again, for joining our mission. And on behalf of A. Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?
Taimur Baig 41:13
I think people just keep listening to the worst investment ever. It's an awesome podcast.
Andrew Stotz 41:18
We appreciate that. And that's a wrap on another great story to help us create, grow and protect our well fellow risk takers. Let's celebrate that today. We added one more person to our mission to help 1 million people reduce risk in their lives. This is your worst podcast host Andrew Stotz saying, I'll see you on the upside.
Connect with Taimur Baig
- How to Start Building Your Wealth Investing in the Stock Market
- My Worst Investment Ever
- 9 Valuation Mistakes and How to Avoid Them
- Transform Your Business with Dr.Deming’s 14 Points
Andrew’s online programs
- Valuation Master Class
- The Become a Better Investor Community
- How to Start Building Your Wealth Investing in the Stock Market
- Finance Made Ridiculously Simple
- Best Business Book Club
- Become a Great Presenter and Increase Your Influence
- Transform Your Business with Dr. Deming’s 14 Points