Investor Points of Few – How to Buy Cows in the Moonlight…

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By Alan Steel

For those of you who don’t remember entrepreneur, investor and environmental champion Sir James Goldsmith, he drove some of the most successful corporate takeover bids of the 1980s.

But it was his investment savvy, just weeks prior to Black Monday, that has sparked today’s thoughts.

There are several opinions as to why the the mercurial businessman, who died in 1997, sold up every share he owned before the crash on 19 October 1987. 

One version of the story suggests Goldsmith, after meeting with the then richest man in Australia, financier Robert Holmes à Court, saw flaws in his approach of using borrowed money in a rising market.

The Elevator Effect

But another suggests it was a conversation with a young elevator attendant (remember those?) in one of his buildings who, at the height of the euphoria-driven 1980s, asked him: “Mr Goldsmith, do you think the market will go up or down today?”

And from the point, Goldsmith got out of the market.

(Hmmm…always be listening and always read the signs.)

When the daily movements of the stock market becomes a mainstay discussion amongst taxi drivers, in hair salons and amongst elevator operators, be concerned.

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Because generally speaking that’s when folks who often don’t have enough disposable income to speculate on the short-term movements of the markets get carried away on a river of rising optimism that quickly leads to euphoria.

And that is a like playing a financial game of snakes and ladders – rolling the dice on their next move – that almost always ends with them getting bitten, and an uncomfortable slide back to “Start.”

Confusing Bulls with Cows in the Moonlight

For those who can’t afford to play that game, or worse have borrowed in order to do so, it can be a painful or even debilitating experience.  

It reminds me of all the folks who suddenly became “expert” day traders back in the late 1990s, quitting their jobs because they were making so much money playing a rapidly rising tech-driven stock market that everyone believed could only keep going up.

Wall Street is littered with confetti-loads of stories from those who have confused bull markets with good investment strategies. 

Playing at the stock market without any real insight into how it works is, in the words of Daniel Drew, like “buying cows in the moonlight.”

You really don’t know what you’re getting.

By the way, Goldsmith made a fortune from his timely stock market exodus.

Unfortunately, Robert Holmes à Court very nearly went bust and never fully recovered; he died of a sudden heart attack in 1990.

By the way, he also died without making a Will, despite the fact he was the richest man in Australia at the time and having carried a draft Will around for the best part of a year in his briefcase!

Ironically, he was a fully qualified lawyer to trade.

If something’s worth doing, do it today.

And don’t just roll the dice.

Get some good advice and plan for the long term.

Because after all, it’s your money we’re talking about here.

Alan Steel, Chairman, Alan Steel Asset Management

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