When I was a small boy growing up in the former Soviet Union, my mother gave me a little gold ring that had been hers since childhood. Later, when we were immigrating to the United States, we were allowed to take with us only one ring per person. The government was too worried that immigrants might be able to bring some of their hard-earned money with them by using it to buy extra jewelry. And so the ring my mother had given me was left behind to make room for more valuable ones.
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As part of the immigration process we lived in Italy, in a small town not far outside of Rome called Ladispoli. We waited there to receive permission to enter the United States. The aid agency, HIAS, gave us a small stipend and a place to live. That was more than enough and we were grateful. However, we didn’t have much money. To this day, I remember my mother having to go and get the old ground beef, of “second freshness”, from the grocery store when it went on sale, so that she could make us meals with it for the coming week.
Ladispoli had a street market in the main square by the fountain. There, immigrants like us would sell things to the Italians for cents on the dollar to get themselves a little extra money. There weren’t many good alternatives, as immigrants weren’t allowed to work.
Prior to leaving Soviet Union, my mother used her savings to buy some things that she could sell if the need arose. It was quite an assortment, since we could only take one of each kind of item per person with us. There were binoculars, telescopes, and cameras, to name a few of the major items. Then there were some little souvenirs, including wooden matches with nice, pretty stickers on the boxes.
Each day, my mother and I would go to the fountain market to see what we could sell. She specialized in the major items. She told me that if I sold the souvenir matches, I could keep the money and start my own savings. So there I was, not quite 10, displaying my wares and screaming at the top of my lungs in broken Italian: “Signore! Per favore! Un mila! Un mila!” This was before the Euro, and a “mila” was a thousand Lira, equivalent to about 80 U.S. cents at the time.
I did well at the fountain market during those months selling the matches. At the end, I ended up entering the United States with $35 of my own savings. But my biggest sale wasn’t the matches. It was an empty suitcase.
Once my mother sold all of the items she had brought with us, we had no use for the suitcase in which we carried our possessions with us to Italy. So I asked my mom if I could sell it, and if I did if I could keep the money. She looked at me, doubtful that I would be able to sell the suitcase, but agreed.
I had something specific in mind that I wanted the extra money for. Each day on my way to the fountain, I would pass by a jewelry store. There, in the window display, was a little gold ring. Just like the one that my mother had given me in the Soviet Union, and that I had been forced to leave behind. The best part? It was only five mila, or about $4!
Armed with our leather suitcase, I set out to find a buyer and make the money to replace my lost ring. I had only one competitive advantage – I was a kid who had no idea what things were worth, and I was willing to sell it, for, you guessed it, only five mila. That was a fraction of what a similar suitcase would cost at a store, and soon a nice Italian signore was the proud owner of our suitcase.
Excited, I rushed in to the jewelry store. There was my ring, and it was still only five mila! What made it even better is that it was surrounded by similar, yet more expensive rings. Those were 20, 25 and even 50 mila. Not only was I about to restore my little gold ring that I had been forced to leave behind, but I also found a bargain!
The owner looked at me suspiciously at first, unsure what a street kid would want in his store. When he saw the five mila I was clutching in my fist he relaxed. A few gestures later, and the transaction was complete – the owner had my five mila and I finally had the gold ring!
I proudly brought the ring home and showed my mom. She shook her head, not really pleased that I was spending money on such things when our finances were so uncertain, but since she had given me her permission she let it be.
The first few days, I really enjoyed wearing my little gold ring. I would never take it off. Then, something odd began to happen. The gold ring started to get a little silver-colored marks on some parts of it. Strange, I thought. How am I getting the ring dirty?
A few days later, I solved the mystery. The ring, which had been gold when I bought it, had turned completely silver. I finally realized why it was so cheap. It wasn’t a gold ring, it was a silver ring that was just gold plated!
That “silver ring” experience taught me three important lessons: that careful research must precede every significant purchase; that quality should be an important component of the investment decision; and that if something is conspicuously cheap there may be a reason for its low price that merits investigation. To this day I hold these lessons dear as I invest our capital at Silver Ring Value Partners. In a market with many cheap securities but few true bargains, these lessons that I learned the hard way at a young age are as important as ever.
Article by Gary Mishuris, Behavioral Value Investor
