The Secret Broker: There’s a pill for anything… except terrible Japanese beer
The Secret Broker
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.
There was a bit of yin yang going on, on the Thursday of this week.
Kirin, the Japanese company that owns various Australian iconic beer brands, has made an agreed bid (unless another one appears) for our vitamin giant, Blackmores.
In fact, Kirin owns the following brands, which basically makes up the entire offering at my local watering hole.
They own: XXXX Gold, James Squire, Tooheys New, Iron Jack, Furphy’s, Little Creatures, Hahn, Byron Bay, James Boag’s, Emu Bitter, Southwark, West End, Swan Draught, Kosciuszko Pale Ale, White Rabbit, Bevy Brewing Co, Malt Shovel Brewers, Eumundi Brewery, Tiny Mountain and lastly, Stone & Wood.
I got very thirsty writing out all of those names and I must admit, even I didn’t know that so many beer brands were owned by the Jap… anese.
Now those crafty chaps at Kirin want to take your health on one hand and give it back with the other hand, which for most Australians, is the circle of life (with a poker machine in the middle).
I haven’t traded Kirin shares or warrants for over 30 years, so all of this news brought back some ‘beer dulled’ memories for me.
On the Japanese exchange all companies have a four-numbered ticker, unlike over here, where we use three letters.
For example, Kirin’s ticker is 2503 and Asahi’s is 2502. The reason for this is because of the way the Japanese language is written and it’s too complicated to shorten down to just three letters.
This is why the Japanese can’t do crosswords in their own language. They had to invent things like Sudoku to fill in the gaps in their newspapers.
The language just doesn’t allow for it.
So, when I was trading Japanese shares and warrants, I had to give out orders by their numbers and not their names, when hedging my trading book.
After a liquid lunch, it was very easy to mix up the numbers and you needed to really focus on your Bloomberg terminal’s screen, so that you gave out the right order in the right stock.
When I was trading these Japanese warrants, some listed companies had multiple warrants but with different strike prices and expiry dates, and they were quoted in US$15 spreads. For example, a price could be US$30 bid and US$45 offered and in a minimum of 100 lots, each with their own four numbered ticker.
A number in the wrong order could cost you a minimum of US$1,500 to sort out. That’s a lot of premium sake needed to negotiate who should take the loss.
A 1000 lot could cost you US$15,000!
If the broker kindly took the loss for us, we would pay them back with at least five times the amount lost in commission and at this particular time of my life, I was the biggest trader of Japanese warrants, outside of Japan.
My biggest rival was a trader at Barings Bank (before Nick Leeson blew them up) called Christopher Heath and he would boast to colleagues that he personally owned an apartment in every major European capital.
In one year he was paid £3m as he rode up the Japanese equity market in the 80s and 90s before it all came crashing down.
Basically Japanese warrants were issued as ‘stapled’ to corporate issued bonds and the idea was that the ‘stapled’ warrants, when exercised, would pay for the bonds at maturity.
We basically ‘un-stapled’ the warrants from the bonds and made markets in both of them separately and as Japan was going through a real juicy bull market, what could possibly go wrong?
Well, when the arse fell out of their equity market, all those warrants became worthless and thus never got exercised and this left big holes in corporate balance sheets and just at the wrong time for some of these companies.
The lead-up to the Japanese stock market crash, (which eventually took down Barings), led to VC funds looking for the next ‘big thing’.
I remember sitting in a presentation from a fund, in which they were raising funds for one of their investee companies.
This was a brewer but unlike Kirin, they had their own technology, which allowed publicans to brew their own beer overnight.
The promoters thought this tech would globally revolutionise the whole brewing industry. I’m not joking here – their ‘revolutionary product’ was basically a giant three-foot tea bag that would be placed into a barrel full of water overnight!
We got to taste their ‘here’s one we prepared earlier’ version, but unfortunately – although not surprisingly – it tasted like s..t. When we pointed this out, they replied that they knew this fact and were working on that particular problem.
‘BIP’ (brew in progress) they said, instead of ‘WIP’. We all embarrassingly laughed, made our excuses and went for a traditional hand-pumped warm pint of real beer.
Going back to Blackmores, the son of the founder of the business, Marcus Blackmore, is about to trouser $334m, so another corporate character is about to disappear.
Who could forget him selling 150,000 shares at $47 each in March 2015 and stating in the official director’s change of holding notice that “I wish to advise that I have sold 150,000 Blackmore shares to reduce the level of my personal debt and to fund the purchase of a new yacht”.
Brilliant stuff and the sort of honesty we will now miss.
Now, I can see where you all think this is heading, what with giant tea bags, a newly purchased vitamin company and a brewer of iconic Australian beers.
Well you’d be wrong.
“Schooner of Tooheys New with a dash of a couple of those blue pills? Hang on a minute sir, I just have to go out the back and change the tea bag. I’ll be right back.”
The most amazing fact to come out of all of this is that in Japan, the tax authorities are encouraging their citizens to drink more alcohol.
All these young ones are abstaining from alcohol, which is hurting the country’s tax revenue and they are looking to reverse this trend.
In 1995, the average consumption of alcohol in Japan was 22 gallons and in 2020 it was 16 gallons. In 1980, alcohol tax stood at 5% of total taxes raised. By 2020 it stood at just 1% of taxes raised.
The Japanese government actually set up a website in the hope of converting all these green-tea-drinking youngsters into hardened alcoholics:
Now, I’m off to see if I can drink the entire Kirin beer portfolio in one sitting, which should be possible as I will drop a couple of these before I step out.
Wish me luck!
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