Positioning Myself to Get Lucky

"Optionality is the property of asymmetric upside (preferably unlimited) with a correspondingly limited downside (preferably tiny)." 

-Nassim Taleb

I grew up on a sheep and beef farm in New Zealand, an hour from the closest city, where nothing ever happened. I had a very quiet childhood, spending most of my days outdoors helping Dad on the farm or hunting and playing rugby on the weekends.

Our Sheep and Beef farm in Mangamahu, New Zealand

I loved my childhood and wouldn't change it, but one thing always bothered me, which I couldn't put my finger on until I was at university doing a degree in agriculture. It was the negative optionality of farming- you could get screwed by the weather (drought or floods), screwed by the market (price taker) and by governments and banks. Sure, there were some good years there, but they only seemed to get you back to square one. It was a battle to ever get ahead.

At the end of my first year of university, I decided to drop agriculture (it was a big deal as I was on a rural rugby scholarship that only paid for agriculture degrees) and switched to a property degree. 

There, I had one lecturer I admired who had created a large property portfolio, drove a Maserati and did lectures as a way to give back. His insights on commercial property as a vehicle for capital gains and cash flow made a tonne of sense to me, and once I graduated, I was off to Australia to land a job in asset management.

Fast forward a few years, I had an office in a skyscraper, nice suits, a great salary and big city living- everything I thought success was about, yet no time. The work was soul-crushing (as I essentially became a well-paid debt collector), and I worked most weekends with maximum eight days of annual holiday leave (before my boss forced me to use it), making my desire to travel almost impossible. 

As the saying goes, "I was climbing the ladder but realised it was on the wrong building." 

Growing up with Dad being his own boss and having complete control over his time probably had something to do with it. I started looking for a way out of the corporate world and got very, very lucky to meet my mentor, who is a hedge fund manager.

Something clicked when he explained his investment process: he was searching the world for maximum optionality and then positioning himself there. By looking in hated corners, he ensured the market was not pricing the optionality.

People's success often comes down to the fortune of their industry. If someones first job is in a mining company before a commodity boom, it's hard to go wrong as opposed to someone who entered the fax machine industry at the same time. The idea that I could position myself in, say, a small hated industry because I'd scoured the world and that represented the most asymmetry I could find was hugely appealing. 

By my thirtieth birthday, I pulled the pin on my corporate job to see if I could make it as a full-time trader, plus I managed money for a few high net-worth clients. I started out trading options to make income to live on as I worked to grow my long-term portfolio (starting from low six figures when I quit). I say that because the FIRE (financial independent retire early) movement popularised the whole “save a million and live on 4% idea”, which I was far from!

I spent two years living in Europe before meeting my sister for a month's holiday in Bali, which is now five years and counting. I met my now wife soon after, and five months ago, we welcomed our son Hugo into the world.

I've had some massive ups and downs, from doing nothing but losing money for nearly a year and considering going back to the corporate world to getting my parents their dream beachfront apartment on the Gold Coast to retire to last year.  

So how did this whole Substack come to be?

It was the middle of 2020, and we were quarantined at home, so I started using Twitter regularly and writing a simple blog to fill in the days. The quality of people you can meet via Twitter is mind-blowing if you consistently put out value (a timeline of interesting Tweets is better than any resume). 

My style seemed to resonate with people as my Twitter account grew, and I was asked on a few podcasts/Youtube channels. 

Thanks to this little quarantine Twitter project, I was soon chatting to hedge fund managers, old hands in the industry I was interested in and other traders. This led to me having a show on Crux Investor where I fleshed out my process and investments in front of a few thousand paying subscribers for the last two and a half years. It was a huge blessing for me as I'm an introvert, yet the show forced me to get over this to continue bringing interesting guests I wanted to talk to (yet would never have otherwise). 

This brings me to today, where I want full control of my content and chosen topics, however niche, and continue to focus on interviewing people I find interesting.

I'm proud of the content I've produced as I've tried to help people "position themselves to get lucky" in sectors most investors won't touch. Not everyone has my good luck in finding a successful mentor in the markets who can help them dodge all the market pitfalls.

I'll continue hunting for the next 'Peabody Energy' or 'Diamond Offshore relisting' and get into investment trends well ahead of the crowd (like coal). Commodities are going to be where the outperformance is over the next decade. I'm sure the commodities (and associated services) I've focused on, be it uranium, coal, oil, offshore oil, and shipping, will be some of the top performers, having had a brutal last decade (they are super cyclical for a reason.)

 As described on my About page, I'm offering two paid subscription tiers:

Trader Ferg – subscribe at the basic level for access to weekly videos and writeups ($280/year or $28/month)

Trader Pro – the Pro level adds a monthly "ask me anything" session, regular chats with my mentor, and occasional write-ups. There is also a Discord for answering questions and posting opportunistic trades I'm doing/trying to get filled in the market. ($650/year)

Those who remain on my email list but choose not to subscribe will still receive the weekly Ferg's Finds and occasional long-form posts like I recently wrote on coal and oil (a new piece on offshore is dropping tomorrow).

I'll close this out with a huge thank you to my family (see this thread for my dad), friends, and mentors, as no one is ever truly "self-made"; all your support got me here.

There is a very real alternative reality where I'm dagging wet sheep, wondering what could have been!

Cheers

Ferg