The Secret Broker: To create a spark, you need a negative and a positive
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.
I jumped into my car to go to an important, can’t miss appointment and the battery was flat.
What with falling markets and cold windy days, my mood was already very dark. Now this.
As I sat in the car, staring out of the garage and wondering what I now need to arrange, a feeling of calmness came over me.
Maybe it was the leather in my seat or the birdseye wood in the steering wheel, but it was like the universe was telling me to slow down.
Everything will be okay.
In the garage somewhere is a portable car charging kit but after five minutes of just sitting and being, I thought, ‘No, let’s get a brand new battery’.
Out with the old, in with the new.
As I was under the bonnet and removing the battery brackets, it dawned on me that a battery needs a positive terminal and a negative terminal for it to work.
Maybe I accidentally touched them together because suddenly I had a flashback to the old broking days, when clients would appear at the reception desk, holding a print-out of their portfolio and crying after a market meltdown.
Literally, crying. You’d have to get them sat down in a hastily arranged meeting with a glass of water before they’d begin to calm down a bit.
Only then could I go through their portfolio with them and discuss how they might be able to turn things around.
I remember one particular chap had a lot of specky mining shares. Obviously, he hadn’t bought them through me!
I said why don’t you go and see this other broker about all of these sh!tty stocks, and he told me that he couldn’t get hold of him.
The other broker wasn’t answering his phone – I always did.
So I had to hold his hand and go through all of his options with him, whilst he kept apologising for using another broker.
I had to help him turn all of the negatives into positives.
In times of market meltdowns, you really got to see everyone’s true colours. It was always the rude and arrogant clients who suffered the most.
We witnessed one guy lose $1m in a day, when he couldn’t make a margin call which at that time could have easily bought him three modest sized houses.
For months, we pleaded with him to cut his exposure but oh no, he knew better. Apparently all we wanted from him was “some commission”.
On his day of reckoning, he was on the phone physically crying. All I could think was, ‘you are getting what you deserve, you rude and arrogant prick’.
‘There are many people out there,’ I’d be thinking, ‘far worse off than you are. All you have lost is some money.’
It’s not like they had lost an arm or a leg.
So, what options can you take after a market meltdown?
Well, if you have a nice, well-balanced portfolio, you are best to do nothing. Just sit and wait for things to turn around.
If, on the other hand, you have a load of specky, fallen-out-of-bed stocks, you can sell them and carry those crystallised losses forward and into future years.
It’s not like sticking $20,000 on a horse and it loses and all of that money has gone forever.
If you have managed to turn $20,000 into $2000 in the market, then you can carry the $18,000 of losses into future years and offset them against other profits.
Even if a share is suspended, like AVZ, you can do an off-market transfer to crystallise some losses. (You will need to speak to your accountant to discuss what the valuation price should be.)
I have to say things like this – check with your accountant or advisor first, before doing anything tax wise – as when I write about things like this just before 30th June tax deadline, there is always some idiot who emails us and copies in the ATO, accusing me of giving out erroneous tax advice.
If you do have some losses but would still like to hold on to the shares, you can always sell them and go back into the market and buy them back on behalf of another account.
If you understand this, you will understand why most brokers have lots of children and a mother-in-law.
There you go. Even though you can have the negativity of a mother-in-law, it can become a positive.
Maybe that’s why there are always sparks between us.
Feel free to contact him with your best stock tips and ideas.