A GREAT game for stockbrokers is to look back at the top and bottom of the market with faultless wisdom and identify events that were in hindsight flashing "Top!" or "Bottom!" but were invisible to us at the time.
In 1987 my first wife and I were working at the same broking house. We were 1980s stockbrokers earning a small fortune between us, and in December 1986 the broker we worked for announced that they were offering all their staff a subsidised mortgage rate on three times your salary.
We bought a double-thatched cottage dating from the 16th century in Henham, a quaint English village up the M1 for #230,000, 5 per cent down, with a 95 per cent mortgage at 8 per cent subsidised to 6 per cent and in doing so moved out of London, where we had grown up. It was the top.
Two years later we were paying 17 per cent, the property market had bombed and we were divorced.
On the divorce front, by the way, and a lesson to us all, one of my mate's wives explained moving out to the country by taking me into her pantry.
There was a map of London on a corkboard and a few hundred little blue pins stuck in wherever one of their friends lived.
At the point of maximum density was one yellow pin. "That's where we live," she said, "and that's why we chose to live here. You, on the other hand, did this." She took the yellow pin out of the board opened the top window and tossed it out with all her might. "No wonder you're divorced," she said.
It's a great lesson for any of you thinking of a sea-change retirement in some far-off land, because what really matters is not where you live but whether your mates are there to meet you for a drink, have a game of golf and a chat. Without that you only have each other. God forbid!
Moving on with the tops and bottoms. In the tech boom in 2000 I remember a morning meeting in which one of the partners stopped an analyst mid-flight and said to us: "I have just looked at the commission numbers for the month. Some of you have had record months. I'd just like to say that in all my years of stockbroking, it has never, ever looked any better than this."
The day before I had done $11,000 of commission in one day, and it had not gone past me that if I could keep that up I would be doing $2.75 million worth of commission a year and taking home $1.23 million myself. It was the top, the very top and the start of the tech wreck. In another sign, I used to work for and own shares in Tolhurst Noall, a listed stockbroker. In 2007, after 150 years of stockbroking, it decided to spend millions of dollars on investment banking businesses, changed its name to Tolhurst Limited and started calling itself a "leading independent investment bank".
It was the top for the market and the top for it, and by early 2009 this leading independent investment bank had fallen from 54? to under a cent, sold its best assets to another broker at a bargain price and sent the value of my shares and a lot of other employees' shares close to oblivion, converting them into a newly named company with the code "ROB".
Other signs of the top of the market included Wilson HTM (a broker) listing at 200? just before the GFC in June 2007. Bell Financial Group (a broker) listing at 200? in December 2007 and Austock (a broker) listing at 200? also in December 2007.
Just over a year after listing, Wilson HTM hit 18?, Bell Financial Group hit 37? and Austock hit 15?. Who says brokers can't time the market? And fund managers can do it too. Platinum Asset Management listed in May 2007, hit 911? and was 260? a year later.
So what about the market now? Austock has been plucked from oblivion by the broker Intersuisse and is now called Octa Phillip. Bell Financial is back to within a whisker of its record low.
When our lack of confidence at the bottom matches our overconfidence at the top, that's when you buy.
Frequently Asked Questions about this Article…
What are common signs of a market top that everyday investors should watch for?
The article highlights a few practical signs of a market top: exuberant commission numbers and record profits at brokerages, a rush of high‑profile IPOs and broker listings that later collapse, and dramatic strategic shifts by long‑established firms (for example Tolhurst Noall moving aggressively into investment banking before crashing). When sentiment feels impossibly good and everyone seems to be making easy money, that can be a warning sign.
How did the tech boom around 2000 show classic 'market top' behavior?
Anecdotes in the article show brokers earning record commissions and feeling overconfident during the tech boom — one partner said it had 'never, ever looked any better.' That kind of euphoria, followed by a swift market collapse (the tech wreck), is a classic example of how tops form when optimism becomes extreme.
What lessons does the Tolhurst Noall story offer investors about company transformations?
Tolhurst Noall, a 150‑year stockbroker, spent heavily to become an investment bank, changed its name, and then saw its value collapse, eventually becoming a newly named company with the code 'ROB.' The takeaway for investors: be cautious when long‑standing firms make sudden, large strategic pivots and spend big on unfamiliar businesses — those moves can presage trouble.
What did broker and fund manager IPOs before the GFC teach about timing and risk?
The article points out several broker IPOs (Wilson HTM, Bell Financial, Austock) and fund manager listings that debuted at high prices before the global financial crisis, only to plunge within a relatively short time. For everyday investors, that underscores IPO risk during frothy markets and the danger of buying newly listed companies at peak enthusiasm.
How did changing mortgage rates in the 1980s affect property investors in the article's example?
The author describes buying a thatched cottage with a highly leveraged mortgage when rates were relatively low, only to see interest rates spike to around 17% a couple of years later and the property market collapse. The lesson: high leverage during boom times can be devastating if interest rates and property prices move against you.
What personal or lifestyle factors does the article say investors should consider before making a 'sea‑change' move?
Beyond financial factors, the article emphasizes social support: moving away from friends and networks can make retirement or a sea‑change less enjoyable. The anecdote about a corkboard map of friends illustrates that having mates nearby to socialise with (drinks, golf, conversation) matters as much as the location itself.
When is it a good time for investors to consider buying at market bottoms, according to the article?
The article suggests a contrarian rule of thumb: consider buying when the market's prevailing confidence is low enough that it matches the overconfidence you see at the top. In short, when widespread pessimism looks excessive and prices reflect real fear rather than fundamentals, that can be an opportunity to buy.
Are there examples of troubled brokers being rescued or renamed that everyday investors should know about?
Yes. The article notes Austock was acquired by another broker (Intersuisse) and relaunched under the name Octa Phillip, while Bell Financial remained close to its record low at the time of writing. These examples show that distressed companies may be bought, restructured or rebranded, but equity holders can still face large losses.
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