The Secret Broker: Ch-ch-ch-ch-changes
The Secret Broker
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After 35 years of stockbroking for some of the biggest houses and investors in Australia and the UK, the Secret Broker is regaling Stockhead readers with his colourful war stories — from the trading floor to the dealer’s desk.
The line from the David Bowie song ‘Changes’: “Turn and face the strange” is something we are all starting to do, as Australia slowly begins its journey to the other side of lockdown.
When changes are forced upon you and never planned, I have always found that the long-term effect is for the better but the short-term effect can be financially stressful and mentally painful.
My biggest current (and very personal) concern is how all the pubs, clubs and airlines are going to come out of this and what changes they all need to make to gain back the public’s confidence.
As Sweden has been slightly more laid back in their restrictions, they can give us an insight as they continued to allow cafes and bars to remain open but with strict social protocols in place.
Inside bars, perspex screens divide tables and only two friends per table are allowed, with no mingling or hugging or touching between other tables. Table service only, so no lining up at the bar, and outside you are allowed three friends together, with a distance of 4m between groups.
As for how airlines are going to go, the only pointer we have to hang onto comes from the eccentric and Trump thinking tinged owner of Ryan Air, Michael O’Leary, who has stated publicly that he wants to return to flying 1,000 flights a week to European cities (down from their pre COVID-19 number of 2,500) by July.
As we have no other examples to go on, he is all we have got at the moment as a future visionary and Lord help us.
To look at his thoughts from an industry perspective, 32 people passed through Brisbane airport this April compared to 40,000 people last April, so I think he will need a bit more than a touch of Irish luck to achieve this.
One of his rules will be that you will have to put up your hand to use the toilet (thus avoiding tight mid-air queues) and as for 14-day government required self-quarantine, he says there will not be enough police around to enforce them anyway, so let the partying begin.
His main punt appears to be, that the great British traveller will want to spend 14 days self-quarantining in a Swedish bar, rather than being cooped up in a mouldy council flat.
The jury is out on this one and I am popcorn watching to see how much of what comes out of his mouth will actually become reality.
In my own career I have been forced to face up to some serious out of comfort zone changes, with the first one being forced on me by Maggie Thatcher, with her 1986 City of London forced lowering of commission rates.
When she went about privatising public assets cheaply in the 80s to gain votes, she discovered that the 150-year old boy broker network all charged the exact same fat cat fees and no matter where she turned, she could never negotiate them lower.
Brokerage fees all started at 1.65 per cent and were set by the self-governing London Stock Exchange and were thus non-negotiable.
As Thatcher was born above a grocery shop in a working class suburb of Lincolnshire, not being able to negotiate fees with the toffee nosed upper classed pinstriped set was like a red rag to a bull.
She told them that they would change the system or she would do it for them in law. This was termed ‘Big Bang’ .
Her chest beating had the effect of changing a system that had been around for over 150 years, and brokers like me had to drastically adapt and become more commercial in our thinking as we could no longer rely on a lazy fixed commission rate set for one and all.
As the City of London opened up, brokerage rates started to fall as clients became aware that they could move with their portfolio to other brokers and pay less commission, and I started to get less income.
In the short term it was bad for me and good for the public, though later it turned out better for all of us, as the fee pie grew as barriers fell and international deals became the norm.
The thought of having to get off your arse and actually do some grovelling to keep the Fat Boy lunches going was too much for some of the old boys, who sold out their private broking interests to a raft of American banks, who saw that cutting commission rates allowed them to go more for M&A market share, rather than just brokerage fees.
The next “Turn and face the strange” event for me, was when Australia moved from trading floors to trading screens and all of a sudden, another closed shop was opened up.
The old days of floor traders dealing with their mates and showing each other their orders were gone, as the screen allowed smaller brokers to trade for their clients on exactly the same level playing field.
It became a game of who could hit the buy/sell button first.
As someone said to me, you no longer had to encounter a floor traders rage, when you slam dunked his favourite share bang on the close. It was like being able to give the school bully the finger behind their back and not having to run and hide. Very liberating!
We ruthlessly used this to ours and our clients’ advantage and now in 2020, and thanks to direct trading on the internet, anyone can share around the same pain and distain anonymously, to listed companies and their directors.
If you ever need to see a sign of how COVID-19 really has changed things for ever, the chief economist at The Bank of England has just mentioned Spotify in his latest observations (which would have turned a few of the diehards in their graves).
He stated that the REM song ‘This is the end of the World as we know it’, had peaked as the most downloaded song on the Swedish-born streaming app and therefore people’s attitudes were changing for the better, so interest rates would stay on hold.
Linking songs and interest rates looks like the new technical economic management tool for the UK.
I must admit though, that depressing REM songs aren’t allowed on my Spotify lists but David Bowie definitely is. Though, to my shame, I had always thought he sang “Turn and face the strain” instead of “Turn and face the strange“. So that’s yet another forced change on me, after singing the wrong words during bath night for the last 48 years.
Ah, we live and learn!
The Secret Broker can be found on Twitter here @SecretBrokerAU or on email at email@example.com.
Feel free to contact him with your best stock tips and ideas.