The Secret Broker: To be a winner you need discipline; as matron would say, cane in hand!
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.
One of my morning coffee and afternoon golfing buddies was a famous Australian jockey. He raced all around the world before retiring back to Australia.
He made most of his money riding in Hong Kong and we rib him on how we reckon he made more money coming second than he ever did coming first.
He always has some fascinating story to tell about Kerry Packer, but the best one for me was told on the start of the back nine, just this week.
It was not about where a ‘few of the bodies are buried’, but about the discipline required to be a successful jockey and to stay a successful jockey.
He told me about how he once had to get his weight down to 7.1 stone by Friday, after starting that week at 8 stone. About 50kg down to 45kg, for younger readers.
The owner of the horse had specifically requested my friend, and he had five days to make the weight.
As for me, trying to lose a percentage of body weight like that in such a short period would require me to have my left arm removed, or some other appendage.
I love my food and wine too much. I was born for the long lunch. In fact, what he was asked to lose in five days, I could have easily gained in five days.
His loss, my gain!
Anyway, he managed to do it because he was disciplined enough to do it.
It took him hours of just sitting in the sauna and drinking lots of diuretics. He had a goal to reach and he was a determined professional.
But the best bit of the story for me was how at Randwick, about 100m down the road, there was a little cafe nearby that would cook bacon and egg rolls in the morning.
As he was galloping around the track and trying to lose all of this weight, the smell of egg and bacon would waft over just as he was coming round the third bend.
He really had to dig deep not to succumb to the smell. This included getting out of his car on the Thursday (still in his jockey gear and whip in hand) and shouting abuse at open-mouthed owner manning the BBQ at the cafe and then driving off at high speed, still shouting abuse out of the window.
I think he had just summed up the meaning of the term ‘hangry’ beautifully.
My friend had the discipline to get through to the other side and (even though no one would ever try to get in the way of me and a reserved restaurant table) when it came to becoming the custodian of other people’s money, I was ruthlessly disciplined.
I would spend more time researching and then persuading clients not to invest their ‘hard earned’ into something that they were determined to invest in, no matter what.
As we always said, do the research first, before you invest. Not afterwards when it’s starting to behave not as expected.
Saving a client $1m by getting them not to invest in something may have earnt me a pat on the back a year later but no commission. It was more of a public duty for me to perform.
I have to tell you, when something is hot and reaching the top of the market, the hardest thing is not to join in and just sit on your hands.
The recent housing boom in Australia sums this up, as everyone was outbidding each other because of the fear of missing out.
So please, when you get whipped up into the frenzy of the crowd, go on a diet and throw your mental energy at that. Maybe sit in a sauna for a week.
I once got sacked by a client who wanted me to come along to a meeting, as getting in to see this certain company was very hard. Everyone wanted a piece of their action and my client was a ‘prominent investor’ with sway.
After the meeting and further research, I told him to avoid putting any money into the placement. I told him he could not t trust the company’s CEO, who had a terrible track record.
My client told me he knew about the CEO’s track record but ‘this time it’s different’. And as far as he was concerned, my services would no longer be required.
History is peppered with instances of the good old ‘this time it’s different’ phrase spurted out. Just as it is with instances where the situation doesn’t actually become ‘different’.
There is a quote by Lord Edward Thurlow that I love and it is this:
‘Did you ever expect a corporation to have a conscience, when it has no soul to be damned, and no body to be kicked.’
Now, Lord Teddy died in 1806 but this quote is still true today.
International frauds Wirecard and Theranos both had liars sitting at the top who believed that one day the company’s perceptions would spin out to everyone and actually become reality (for their company).
Part of their perception included wearing the exact same black turtlenecks as Steve Jobs did, so one might look past the spin and actually believe what they are saying. This one garment of clothing gave them investment credibility.
Good research and simple questions should always get you past spin and into reality. Look for CEOs and directors on different boards and then look at their pay, how much stock they own and how the shares have performed.
Don’t worry about their company issued options either. Look to see how much real skin they have in the game.
Have the discipline to look before you leap or find someone who you can trust to have the discipline to do the research for you.
Have a good weekend.
I’m off to clear out my turtleneck collection!
Feel free to contact him with your best stock tips and ideas.