This is not a let us play. This is a I play. I am doing this for my own fun, and in order to keep it fun, I don't want to worry about you:-)
Nah, J/K... kind of...
I will play for as long as I keep enjoying it, and I may or may not provide detailed updates depending on how long they take. I've started LPs before, and while updating is fun, it is also tediously annoying and boring at times. So I hope to keep this going for a while yet, but I cannot make any promises of the quality or quantity of posts.
Think of this more as am AAR than a Let's Play, I guess.
What is W$R?
Wall Street Raider. See
this post for more details.
HERE WE GO!
My dad founded and owned a specialty chemicals company that developed catalysts in a niche market. In the last few years his health has deteriorated rapidly and he sold the company to its biggest customer for 100m dollars. My father's health costs and our family's living costs add up to about $1m every year.
While we could just live off the $100m, my dad has trusted me to invest the money and grow the fortune so that our family need not worry about money for many generations to come.
January 1, 2010.
The first step is to get a feel for the current economy. I have been out of the loop the last couple years, taking care of the family and caring for my dad.
GDP: 4.3%
Prime Rate: 7.75%
6.5% long gov't bonds are selling at 102.42% of par
Short gov't bonds are selling 98.35 cents on the dollar at 5.57%
There are 1054 thousand housing starts.
Corporate income tax is at 30%,
Individual Ordinary Income and Capital Gains taxes are at 35% and 20% respectively.
Spot Crude is 89.32
and the Global 1500 is at 5,000 exact.
Last, but not least, the Fed is applying an easing monetary policy.
January 2, 2010.
After examining the economic situation and industrial forecasts very closely, I decide to enter a market with a permanent long position.
At age 35 I, Bruce Wilson, found a new company, Wiltech Systems (WILS), investing $100m. The company has 50m outstanding shares, all in my family's possession. We incorporate in Pennsylvania, United States.
I would have liked to set up an investment firm as a holding company which would in turn incorporate and own WILS, but after start up costs and fees I'd have to borrow from the bank somewhere along the line- and loans are something I detest.
WILS enters the Computer Peripherals industry with $51.2M in income producing business assets and $22.4M in free cash. Our initial factory produces high end input devices including mice and keyboards.
With an estimated quarterly earnings of -0.25 a share, WILS invests heavily in R&D with 30% of sales going to the development of new products.
Industry growth is at a satisfying 10% with returns at 8.7%, I hope to be making good money soon.
February 15, 2010.
Despite a bleak first estimated quarterly earnings of -29c a share, Wiltech Systems is already valued at $102.86M by interested parties. That comes out to $2.06 a share while the company's book value of only $1.59 a share.
Less than 2 months with my family's money and I have already increased our net worth to $102.86m.
February 28, 1020.
Wiltech Systems saw a loss in the first quarter of 2010 of -29c a share, and a net operating loss of $-14.7m. Such losses are not unexpected in a company only one quarter old. I am resigned at accepting losses while we get ourselves established in the industry.
Despite these losses, interested groups have displayed a willingness to pay $2.11 a share for the company, bringing my paper net worth to $105.35m. This is most impressive considering the company's book value is at a meager $1.58 a share.
I'll continue a heavy R&D spending budget for the next 3 to 6 months to finalize a new product line and prepare the necessary marketing materials. Such spending (30% of sales) will have a negative impact on the quarter's earnings but should pay off in the long run.
March 6, 2010.
Interest rates are dropping like crazy! The prime rate is at 5.75% with the short gov't bond at 4.89%.
March 10, 2010.
WILS buys call options expiring 5/2011 with a strike price of 120.00 per share to cover 1% of NIKKO SECURITIES (NIKO) for 30.40 per share and a total purchase price of $30.70M.
Bruce Wilson sells put options expiring 5/2011 with a strike price of 54.27 (last trade price) to cover 2% of NOMURA SECURITIES (NOMU). The sale price per share was 10.49 for a net sale of $83.08M.
March 11, 2010.
You only live once. With over $80M in the bank from selling the Put Options on NOMU, I will further invest that money (money that really never belonged to me).
Bruce Wilson buys call options expiring 5/2011 with a strike price of 25 per share covering 10% of GOLDMAN SACHS (GS) for 6.67 per share and a total price of $67.37M.
I am so leveraged in the Securities Brokers industry right now that I am anything more than a small hiccup in interest rates could destroy me if I don't react fast...
March 12, 2010.
I prematurely cut R&D funding in WILS and push the newest product line of high-end gaming keyboards to market sooner.
May 23, 2010.
The Fed has shifted to a tight monetary policy. This means interest rates are set to rise. The prime is currently at a cool 5.50%, which is working wonders for the securities brokers industry. If the rate goes up, brokers profits will likely go down.
My puts and calls are at risk.
May 26, 2010.
I don't mean to panic before the money valve is fully closed, but I also don't want to be the one standing under the faucet when the money turns to bricks.
I sell my call options covering GS for $104.54, closing out my long position in GS calls and netting a gain of $37.17M
With a hair over $120M in my bank, I am able to cover my short position in NOMU.
I buy back the short options for $57.21M, and if you remember I originally sold them for only $83.08M, netting a gain of $25.87M
I close out the deals with a total bank balance of $62.87M. My paper net worth sits a hair over $182M. That's an 82.27% increase in net worth in just under 5 months. Not bad... Well, kind of. My accrued Capital Gains total is $63.05M, which means I'll need to pay the 20% individual capital gains tax on MORE money than I have in the bank. Sadly I am going to lose out on 12.64M of my wonderful dollars because some politician thinks they can spend it better than me. It is what it is.
May 31, 2010.
Wiltech Systems announced a loss for Q2 2010. Quarterly income per share was $-0.02 and its net operating loss was $-0.89M.
We were forced to borrow $1M on our line of credit from Washington Mutual to cover some operating costs.
WILS is still sitting on a long calls of NIKO worth $33.04M. I am willing to hold out and leave WILS under the money faucet for a bit longer. NIKO's earnings are still rising god awfully fast and interest rates have not responded to the Fed's money policy. Yet.
Wiltech's appraised value comes out at 2.31 a share, with a relatively low book price of 1.60 per share. If this trend continues I will take MILS public soon to raise capital for further expansion within the industry.
June 30, 2010.
Interest rates are on the rise.
The prime rate reached 6.25% today. I am going to try to hold out 2 more months before closing my long call position in NIKO held by WILS.
July 6, 2010.
I panicked. I ordered WILS to sell off its 1% long position in NIKO call options. the net sale price was $31.27M, a mere gain of $570,000.
NIKO's quarterly projected earnings had already dropped from 44c a share to 41c a share and the stock price remained relatively stagnant just over $65 (post 2-1 split price, so ~$130 in comparison to the initial strike price).
NIKO failed to perform, and WILS suffered by tying up cash in the dud options investment for several months.
July 7, 2010
WILS pays off its accrued credit of $8.61M + fees in the amount of $170,000.
August 31, 2010.
WILS experienced the first positive quarterly income since inception with earnings per share of $0.03 and a net operating profit of $1.29M
WILS modifies growth spending, increasing it from nothing to 10% of sales and buys a European unit from SEAGATE TECHNOLOGY(SEG) for $10M to facilitate sales and distribution of its new high end keyboard in Western Europe.
October 18, 2010.
Oil crisis erupts as middle east situation deteriorates. Wire service reports out of Beirut report a major new escalation of the level of conflict in the oil-rich regions of the Middle East. As a result, oil is trading at higher prices on all major commodity exchanges, in response to the reported Syrian bombing of Saudi oil fields.
Spot crude is at 154.95
I know my next investment.
Also, the Fed ends its tight policy.
October 22, 2010.
Bruce Wilson buys call options expiring in 12/2011 with a strike price of 54.00 per share covering 3% of ASHLAND OIL (ASH) for $13 per share, costing a total of $39.39M
ASH currently trades at 53.35 and is in line to earn $1.05 a share this quarter.
I also buy call options set to expire 12/2011 with a strike price of 70.00 per share covering 1% of PETROKAZAKHSTAN (PKZ) for 12.21 each, for a total cost of $24.66M.
I was forced to draw $13.52M from my line of credit with J.P. MORGAN-CHASE BANK (CMB) to float that last deal.
Both ASH and PKZ are lower market cap Integrated Oil companies trading at NOT outrageous prices (only 302% and 587% prices to net worth, respectively ^_^).
October 29, 2010.
Diversified risks: Bruce Wilson sells put options expiring 12/2011 with a strike price of 99.85 per share covering 5% of LA. LAND & EXPLORATION (LLX) for 17.42 per share netting $86.23M.
I use $13.52M of the proceeds of the short sale to eliminate my bank debt leaving me with $72.71M cash on hand.
October 31, 2010.
Using some of the rest of the cash from the LLX short put, I buy long calls covering 10% of TRANSOCEAN INC. with a strike price of 15.07 expiring in 12/2011 for 3.56 per share and a total cost of $38.78M.
November 30, 2010.
Wiltech Systems announced quarterly earnings per share of $0.02 and a net profit of $1.17M.
Interested buyers seem to have disappeared, resulting in the 'possible' trade price mirroring the book value of the company at only 1.64 per share. I guess everyone is too busy throwing money at the integrated oil, oil services, and defense industries to be considering investing in my company...
2010 in review.
I invested my initial $100M in a computer peripherals company, WILS, which is currently worth (on paper) $90.17M. Despite the low value the company is performing well with the third highest return on assets in the industry.
I conducted several call and put trades in the securities brokers industry, yielding over $60m in pre-tax gains, which I am in the process of risking in oil puts and calls, following conflict in the middle east and increases in spot crude prices (238.41 at the turn of the year). I will need my options to turn around in performance before December of 2011 or I will be out of luck, my paper net worth is only $101.85M at the moment, and that is with $47.75M in cash.
