The Secret Broker: When the elasticity in your bonds gives way, run for cover
The Secret Broker
The Secret Broker
Link copied to
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.
WARNING: The following post contains graphic content that may not be suitable for children, or anyone sitting down to a meal.
Currently all the headlines are about falling bonds, as in government issued bonds- not the ones that once retired, you only have to don for special occasions.
I for one (and some of you may wish to look away next) like to travel commando style (Ed: We never noticed) and only wear my Bonds boxers on special occasions.
Award nights, funerals (out of respect), weddings (in case I drink too much), visits to the doctor, hospital and the weekly massage table are classed as special occasions.
Being retired and living in a warmer climate allows me to adopt the Mark Zuckerberg appraoch, wearing the same coloured tee and boxer/swimming shorts most days.
I couldn’t do this if I were still living in the UK, because it’s too friggin’ cold and most days would require two or three layered pairs at least.
My only tip to you all is to visit Dan Murphy’s for your supplies pre-swim. Walking into a cool room to grab a case of beer with partly dried swimmers can literally leave you with your assets being frozen. Speaking from experience there.
Now, like many other blokes I know, we are all stuck in our commando ways and like it that way. And as you new work from home blokes now know, a Zoom meeting is not classed as a special occasion!
Armed with this ‘secret men’s business’ knowledge, I was amazed at how Step One (ASX:STP) managed to raise $80 odd million in their recent float, considering they are a one-trick pony and only sell underpants.
Their numbers are pretty impressive though, as they mail out their product to over 700,000 customers a year. Most of these customers are women.
It’s the wives and girlfriends who order them for their men folk to wear, as apparently they are comfortable and being made from bamboo, and they require 90% less water to produce than cotton ones.
Mrs. B knows she is wasting her time ordering any for me, as they will just end up in the bottom of the drawer. “Scratchy bamboo underpants surely can’t be more comfortable than natural cotton ones.”
So, with Step One stock not appearing in the portfolio or my dressing room drawers, the only things that are now actually in both are bonds.
What with rising inflation and the like, I have been skewing the fixed income investments towards products that can offer protection against inflation.
Certain infrastructure projects can lift their toll fees to match inflation and being old fashioned, gold (cotton) and not Bitcoin (bamboo) is my natural hedge.
Certain government issued bonds can have a fixed coupon that is adjusted with the rate of inflation and you may also be able to argue with the taxman, that your ‘in cost’ for Capital Gains Tax purposes, should also be indexed to inflation.
Considering that the inflation rate in America has just hit a 40-year high of 7.5%, you need to find as many ways as you can to protect your wealth from being eroded by inflation.
Ironically (and I do find this very ironic), if you have debt, then you should love higher inflation, as it will eat away at the money you owe.
Having the right asset, and the correct amount of gearing against it, was something that I observed wealthy people use to their advantage in the late ’70s.
And in those times it was called a house.
Just make sure that it is a good one and that way, when you do go to retire, you will be able to afford to buy the right bonds and not have to wear the elastic out of the old ones.
And if you don’t?
You will just end up with both bonds around your ankles.
And definitely no special occasions!
Feel free to contact him with your best stock tips and ideas.