As Soon As The Herd Turns, Sell

Let's appreciate the bull market but stay alert for the warning signs

- Marcus Padley

I was doing salary reviews at the end of last year. It was a good year for our clients, our newsletter, our members and ourselves. Everyone was happy, and we are casually assuming a similar backdrop next year, with similar growth. Normal stuff.

But this is a cyclical business, and when the stockmarket turns down things will become harder. There will be less demand for advice, less enthusiasm for investment generally, and that will translate into less trade, fewer new clients, fewer funds under management and, if it happens, some not-so-fabulous salary reviews next year.

I remember going into a morning meeting in April 2000 at Bell Securities. It was the middle of the tech boom and, as it turned out, it was the top. There were signs; there always are. Just before the GFC, for instance, the signs included three stockbrokers listing on the ASX at $2 (they all ended up below 50¢) and another putting its name on a football stadium.

In the tech boom, the sign was Andrew Bell in that morning meeting in April 2000. He announced that we had had the best day of commission ever. I had personally written $11,000 of commission the day before. One of our colleagues had employed an assistant just to process his orders – he was doing that many. Andrew told us to look around because, in the style of Top Gun, “it doesn’t get to look any better than this”.