February 05, 2019

Tony Watson – Beware of Words Like Guarantee and Trust

14 minutes

Tony Watson is an investment professional with more than 20 years of experience in Asia (ex-Japan) credit markets. He joined Far East Investment Limited in 2016 where he is currently a Portfolio Manager and Responsible Officer. He was regularly ranked by Asiamoney, FinanceAsia and The Asset as one of Asia (ex-Japan)’s top 10 publishing credit analysts between 2001 and 2007. Tony joined the Hong Kong Society of Financial Analysts in 1996 and became Vice President in 2017 and President in 2018. He was HKSFA’s Acting Managing Director from March to September 2015. He was named CFA Institute’s 2015 Volunteer of the Year and awarded its 25-year Continuing Education Milestone in 2017. He became a CFA charter holder in 2000. He graduated with an MBA degree from Western Business School at the University of Western Ontario with an MBA in 1995 and BBA from St. Francis Xavier University in 1988.

In this episode, Tony shared his story investing in a medium sized trust company that was priced at $10 per share and how it devastatingly dropped down to zero. Learn why it is important to know the risk involved in trust investments, why it is important to understand what happens to trust companies in times of credit stress.

“If the markets are telling you something, listen, don't find good reasons to continue in your path.”

– Tony Watson

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Resources:

My Worst Investment Ever Book
myworstinvestmentever.com

Topics Covered:

01:39 – Andrew gives a summary of Tony’s educational and professional experience

03:24 – Tony narrates how his investment in a trust company ended up as a big loss

06:58 – Sharing how this experience essentially helped him in his career as a credit analyst

09:14 – Andrew tells what he learned with banks and financing specifically in Asia

13:00 – Tony gives one actionable advice to avoid the same situation he did

13:26 – Andrew summarizes the six important and common mistakes in his podcasts

14:23 – Parting words from Tony: “Listen to what the market's telling you.”

Main Takeaways:

Lesson 1: “A trust company is not a bank. A small trust company is not too big to fail.”– Tony Watson

Lesson 2: “My big takeaway there is only the biggest banks are too big to fail, and only banks get bailed out.”– Tony Watson

Lesson 3: “(The mistakes I did) Number one, do your research. Number two, things go the wrong way and continue to go the wrong way. Don't look for reasons why they can turn around and realize that you own all the loss on this and you've got to decide to stop loss and get out at some point. Other than that, ask questions from people who know. I relied on folksy mom and pop research just asking friends and family. I should have sat down with a bank analyst or done a little reading and just better understood what happened to trust companies in times of credit stress.” – Tony Watson

Lesson 4: “Thousand credit officers in the bank are likely to do a better job at allocating that capital towards the most attractive opportunities than maybe an equity investor that's trying to find a thousand different companies to invest in.”– Andrew Stotz

Lesson 5: “Six common mistakes that are made: First is a failure to do research. Second is a failure to properly assess the risk. The third is to be driven by emotion or flawed thinking a little bit about that cognitive bias. Fourth is misplaced trust. I note down that this company had two interesting words in its name, guarantee, and trust. And number five is failed to monitor their investment. Number six in a category, all by itself, is invested in a startup company, which this was not that case.”– Andrew Stotz

You can also check out Andrew’s books