Chris and Clem Meet Up #7
Young Chris, under the guidance of "old" Clem, has got himself well organised financially.
He has set up a monthly income/expenditure spreadsheet so that he can see at a glance what is coming in, and what is going out.
He was living quite a way beyond his means (but didn't realise it) until he constructed his spreadsheet. But now he is well on his way to being "cash positive."
Following Clem's advice, Chris also opened a Self Invested Personal Pension to supplement his work pension, and with a view to being able to retire early when the time comes.
Friday evening has come around again, and the pair meet up again down at the Golden Lion.
"Hi Clem, good to see you. How are you?" said Chris.
"Oh, you know, fair-to-muddling" replied Clem.
Chris couldn't get his words out quick enough: "Clem, I've been champing at the bit all week. I've been so excited."
"This is about your face-to-face interview, isn't it?" said Clem.
"Yes, it is" replied Chris. "I was down at their works Monday and Tuesday of this week and they treat me like royalty. In all, I guess I was in their company a good 8 hours.
"They showed me everything. It's a big plant that they have down there and I got to see every part of it. We also spent a lot of time with their HR people discussing details of the position they want to fill.
"I was deeply impressed. The salary is a little bit more than I am on now, but with reviews every year, and chance of promotion. The job comes with a company car, BUPA, re-location expenses (£10,000 tax-free). A good pension scheme.
"All in all, I liked what I saw and heard."
"Do you think you got the job?" asked Clem.
"Well, I gave a really good account of myself, so I think there is every chance" said Chris.
"When will you know?" asked Clem.
"They want to have someone in place by the end of the year - ready to start in the New Year. It appears as though it is between three candidates. Myself and two others. They promised to get back to me within the next two weeks.
"The next time we meet up, I will know my fate." said Chris.
"Fingers crossed, Chris. I hope it all works out for you. You are a bright young man, family oriented, hard-working. You will do well wherever you go. Good luck."
"Thanks Clem. By the way - I travelled down by train and got a taxi at the other end, but that allowed me do some reading on the way. It was a six hour journey."
"OK" said Clem, "tell me what you've learned and acted upon this past two weeks."
Chris started to look nervous. He knew that whatever research he had done, would not be enough to impress Clem.
"The book that I took with me on my interview journey was: "Buffettology" by Mary Buffett and David Clark. I assumed it was a good book because that pair had authored several books on the great man."
"I'm not a particularly fast reader but I did as you suggusted. I read the book and intend to read it a second time, but that next time I will take notes."
"It's not easy when you are an engineer, reading a book on another subject - but I tried to keep my concentration going - in between trying to grab some useful data and thinking about my interview that lay ahead of me."
Clem butted in: "What key points did you get from the book Chris?"
"A few points hit me right between the eyes" Chris replied. "I'm going to enjoy the second reading of this book."
"As I mentioned last time we met, the really big 'Aha' I got from the book was that Warren Buffett viewed that there are two types of businesses in his world:
1. Commodity type businesses
2. Consumer Monopoly type businesses
"And Warren is only interested in ONE of them!"
"The first thing that crossed my mind when I read this was that - it can't be that easy. You eliminate 'roughly' half of the companies out there because they belong to a certain group of business."
"I read on a bit further and soon realised that it was not that easy at all. Categorising companies into one of two groups proved to be a skilled job."
"Still - it was a 'foot in the door' to what everybody thinks is a tough nut to crack."
"I discovered that Warren likes Newspaper companies, TV and radio stations, fast-food companies, restaurant chains, and companies that he has dubbed 'Toll Bridge' companies (I need to study these a little bit more before commenting).
"I kept reading, and found more words of wisdom. It's not a secret that a company's earnings are what analysts look for, but the majority of analysts look at historic earnings, or present earnings, or future earnings."
"I learned that all that is good - even Benjamin Graham looked at past, present and future earnings - but where he, and most other analysts stopped short, was in how far ahead they looked for those future earnings."
"Most looked only as far as the next set of earnings. Very few of them looked any further ahead than that."
"And that's where Warren Buffett started to 'pull clear' of the competition. He looked much further into the future earnings of companies. Ten years ahead - and more."
"I know I'm giving you a very condensed view of my reading, and that I am nothing more than a layman, but you know what? It's beginning to make sense to me. A second reading of this book will ram the points home to me."
Clem butted-in at this point to calm down Chris who couldn't get his words out fast enough: "All good stuff Chris, but save a bit for the next time we meet up, what was your biggest take-away?"
"Well," said Chris, "Once Warren identifies a company as fitting 'his realm of confidence' he then waits to buy that share for the right price. To put into his own words: 'The price you pay determines your rate of return' and this is where I started to get a bit confused."
"I was always led to believe that Warren didn't favour Technical Anlaysis, and maybe he doesn't in the true sense, but yet he won't buy until the price is right."
"I'm only a layman, but in my book there's a little contradiction here. Isn't the fact that he waits to buy at the 'right' price a form of Technical Analysis? He may not be using any kind of software but he waits until 'The Price is Right' before buying. What does he mean by 'the right price?"
"I find that intriguing - don't you?"
"Wow, Chris - aren't you learning fast. That may never have occurred to me. Good thinking. Let's wrap things up for this week - I'll see you here in two weeks' time. Let's see now, that'll be Friday, 23rd. October."
"Gosh, Covid has taken a large chunk out of this year year."
Chris replied: " I should know my fate regarding jobs by then. Wish me luck!"
"You don't need luck" said Clem.
"Clem" interjected Chris, "Just one small matter. I added to my portfolio last week. I took another look at Lloyd's Banking Group and, I know, banks aren't flavour of the month right now, but I did a little background on Lloyds and satisifed myself that their finances are as good as, or better than other banks. The share price is rock bottom so I bought another 5,000 at 26p"
"Naughty, naughty!" retorted Clem. "Let's discuss your portfolio next time."
Chris was already making his exit, when ...
"Chris" shouted out Clem, "'afore ye go. There's a little something I've been meaning to say to you, but never gotten around to it.
"I got to know you through your Dad, we were good buddies at one point many years ago.
"But, I have a confession to make. My name's not Clem"
"What?" said Chris astonishingly, "but everybody calls you Clem."
"Yes, I know they do. But it isn't my real name. You see I was born in the US"
"I see" said Chris "You still have a slight twang to your voice, but I never put two and two together."
"No" Clem replied, "Why would you? My parents were real country and western fans and so am I, if I'm honest. It seems that the flavour of the day back when I was born was to give their kids real quirky names. You'll never guess what my real name is - not in a million years"
"Well now, let's see" Said Chris amusingly "country music, strange names, I'm gonna guess that you're a boy named Sue."
"Well done! You're not right, but you are on the right lines. My real name is a girls name. I won't keep you guessing - it's ... drum roll please ... Allison. All my old buddies called me Al and of course, that doesn't sound too bad. But for some reason someone started calling me Clem, and it kinda stuck."
"But the real secret I have for you is that all this Friday night chit-chat that we've been having has stemmed from a website that I started a few years ago. It really started as a bit of fun, but has grown into something a bit more serious."
"What's the name of the website" queried Chris.
"Before I tell you that, I have to tell you that part of the website has been articles on our Friday night talks." said Clem.
"That's OK, I'm comfortable with that" said Chris, "If you've only used my first name nobody will be able to know it's me, will they?"
"No" said Clem " and when I've referred to your wife, I didn't use her real name, so nobody will know it's you. I'm so glad you don't mind. There are some personal things on the website."
"I'm OK with that" said Chris, "after all, you have given me some terrific information. What's the website address and I'll check it out?"
Clem said, "thank you, I was a little conscious of what I did. I should have asked you first. I'm so glad you're OK with it all. The website address is:
"Great! I give it a coat of looking at when I get home. When can we chat again?" asked Chris. "Oh, by the way - what shall I call you from now on?"
"Clem's OK but Al is great as well."
"Now then Chris" snorted Clem, "let's meet up again in two weeks' time - that'll be the 23rd. October. Cheer up! It'll soon be Christmas."
"Very funny," Chris replied, "see you then. Take care."