The Diaries of Enea Vailatti

[luigidelta]

The Diaries of Enea Vailatti
This thread is about the story of an Italian teenager with a dream, car racing, and a precise goal to achieve: Formula 1 World Championship. Is he a crazy guy? Yes, he is. Is he really motivated, and does he have the talent? Yes, he does. What follows is his story. All the events, characters, activities, and parameters mentioned here are fictional. These events are mainly generated with my favorite car racing game, Project Cars 2. Other simulators are used in the background to generate supporting and ancillary events in Enea’s life that will be relevant to the story.

Short Prologue
When I will be the first modern-era Italian Formula 1 World Champion, some people might be interested in knowing how I got there. Formula 1 is the only sport in the world that has two GOATS: Tazio Nuvolari and Gilles Villeneuve, two very similar drivers. I will never be that kind of driver—in these modern times you don't need to—but my precise objective is to be the best driver of my time. That is the reason why I am starting this diary and in a language that is not mine, because I don’t mind having my diary revised and corrected, but I don’t want it to be translated. I want the reader to feel my emotions, to read my considerations, and to learn my thoughts from me directly and immediately after the events, without the medium of a translator.

January 2010
This will hopefully be a good year for my brand new auto parts retail business. For now it is very small, but it is all mine, including the building and all its furniture. I have put together a small inventory for the initial sales, and I keep a safe reserve of 25.000 euros for contingencies. Now I have just to see how the sales go. This business brings together both of my passions: entrepreneurship and car racing. In this respect, I am very much like the great Niki Lauda. My hopes for this business are that it will financially sustain me and my project to participate in the Italian SMS Kart Championship. If I manage to attend this championship, I... will... win it, and maybe one day somebody will notice my driving skills. I need around 20.000 euros for the 4 races season in the SMS. I have 5.000 euros in my personal account, and the store has 7.000 euros of inventory to sell and to generate profit from. My first customers are my friends, of course, the people I share my fast-lane passion with. In my crazy company of friends, I am called “The Pope" because I am the fastest guy in the bunch, even if I have the crappiest car, a little yellow Fiat Punto 1.4 Sport, which I keep in pristine condition and use as a showcase for the services that my store can provide. I often race the car, equipped with special parts from my store, on the hills around Turin against my friends and sometimes against other people. I often finish in front of much better cars than mine, especially with money on the line. I claim, for everybody who wants to listen, that these results are thanks to the parts I fit the car with. All these parts, of course, come from “Vailatti Ricambi Sportivi Corp." Needless to say, the parts just play a little role in my late-night racing performances, but the potential customers don’t need to know that. As long as I and my little Fiat perform well, it’s good advertisement for my start-up.

 

[luigidelta]

February 2010

If I want to register for the Italian SMS Kart Championship, I need to find 15.000 euros right away: 10.000 for a good racing kart and 5.000 for the first race weekend in Lonato. For now I have had some tests with a rental kart on that track, and I must have gone well because the manager of the track asked me if I race karts. Well, that, I guess, is a good sign. I need a quick way to make fast bucks in the following four months because I need 5,000 euros for each of the four races of the championship, starting like I said next month. A friend of mine, Vaglia, works in the bank, where I have both my account and the store account. So I ask him for advice. Not surprisingly, he tells me that quick bucks equal big risks on the financial markets like on any other market. If I want something fast and doable with my present personal means (5.000 euros on my personal account), there are options derivatives contracts to deal with. He invites me to his place, where he has a fully functional financial trading station with computers, monitors, and all the gadgets you need to trade online, and he explains to me how these things work. Personally He does not invest in derivatives because he says that they are too dangerous, but he says that if I want, he can open a derivative account for me through the bank with a line of credit. He also sets up a demo account for me where I can practice. We spend a couple of nights together so that he can give me some practical examples on how these options work, and then technically I am ready to go and lose all my money. My initial budget is like I said 5.000 euros.

The 5th I am ready to place my first contract. The general state of the economy is good. GDP is estimated to grow at a 1.1% rate in the first quarter and that should help companies stocks. Options are bought and sold on stocks, and they are the option to buy a stock at a certain time in the future. Like I said, you can buy option or sell options. Selling is more risky if the stock moves against you because, in that case, your losses are technically unlimited the more the stock moves against you. Buying is less risky because all you can lose is the premium that you paid to buy, but on the other hand, it’s more difficult to generate profit because not only do you have to decide a reasonable strike price, like when you sell, but you also need to nail the direction of the movement and the period of time in which the movement will occur. So, of course, it is less risky but less profitable on average. Every contract is settled the 15th of each month, but if you want, you can make contracts of length up to two years. For now, I am only interested in very short-term deals.

Another derivative opportunity are the future contracts on the stock index. This is a high-risk, high-leverage financial operation, but slightly less risky than the options, as the volatility is usually lower in the stock index than it is in the single stocks. I decide to start with the index, and I invest 2.400 euros in a future contract expiring in March. The contract costs like 49 grands, but I can put down a deposit of only 5% and borrow the rest from the bank. Of course, if the index moves against me, the losses are calculated at the leveraged amount, and I would quickly be wiped out and probably lose the store in the process, which the bank asks for as collateral to cover such leveraged financial deals. The 15th of March, my first operation with the stock index concludes positively. I doubled the 2.400 euros invested, and now my account stands at 7.050 euros. Not enough for my exigencies of this month, but it’s a start. The rest of the money that I need for this month I will take from the store account. Fortunately, I have a house, and I don’t need to pay rent. I am trying to limit my expenses to one thousand euros a month. Not easy or comfortable, but feasible. Whatever it takes to finance my racing career. After all my operations for March, including the purchase of a race gokart and the registration for the first race of the year, I remain with 2.050 euros and 3.000 euros in taxes to pay at the end of the year. Tight situation, but the beginning is always rough.