PEACOCKINACAGE

IllustrationbyNurinaSimpson

DAHLANSIMPSON

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PEACOCKINACAGE©2012SentimentalBlokePublishing

Allrightsreserved.Nopartofthispublicationmaybereproduced,storedinaretrievalsystemortransmitted,inanyformorbyanymeans,electronic,mechanical,

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Poem/extractonpage45©TerreyHillsGolfandCountryClub

1steditionpublished2012

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PeacockInaCageisanebookbywww.sentimentalblokepublishing.com

ISBN978‐0‐9806900‐4‐8

OtherbooksbyDahlanSimpson:

JourneysofaStockbroker,anebook,CoverbyHadijahMuntingISBN978‐0‐9806900‐2‐6

StepInsideandShare–OfLifeandFriendship

PoemsbyDahlanSimpsonIllustrationsbySenaWilsonISBN978‐0‐9806900‐0‐2

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ACKNOWLEDGEMENTSWith thanks toMardiah,mywife, for the idea, andMikaela Thorogood forher encouragement. Of course, huge thanks go to all my family and toeveryone who was part of my career in whatever way, large or small. Iexpressparticular gratitude toMichaelWarren,ColinBeardsley,GregPerryandTonySmith,whoeachgavemeopportunitiestomanagefunds–forme,thatwasthebestpart.DSApril2012

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CONTENTS Page INTRODUCTION 5PROLOGUE 6Itmightnotwork 11Notoneyear’sexperiencefifteentimes 12Commodityguru 13SRIfundsmanageronsteroids 16Problemequalsopportunity 21Ilikethewayyoutalk 23Neverunderestimateyourvalue 24Aninventiontochangethevorld 28Analystatlarge 28I’llgiveyouninereasonswhyit’sstayingup 31Youbethegoodguy 34You’veknockedoverallmyobjections 35ClosethepositionbyCOB 36Bullmarketshareholders 39Sellinghalfyourbusinesscanberisky 41CanadaorBust 42Closingthedoors 43Timetowriteabook 44”GolfHappy” 45They’renotbusinessmen 46Walkinthepark 47Nineinterviews,onecompany 50Valuabledirections 52Ethicallessons 53We’regoingtobe****rich 54Thevalueproposition 55Mission:findarealSRIstrategy 57Eightyears,eightmonths,eightdays 57CCW®‐bringontherevolution 59

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INTRODUCTION

Ihavehadaprivilegedcareer.Whenonehasemployment,oneishighlypaid.Butitisarollercoasterofaprofession,withregularboutsoftakeovers,consolidationsandrecessions–andboyhowthosehurt!Ilostmyjobfivetimes!

Atschool,youlearnaboutIQandlogicalintelligence.Intheworldofinvestmentandstockbroking,youalsolearnaboutEQ,emotionalintelligence.Youhavetoreadbetweenthelines,readthetealeaves,learnthat90%ofeverythingisaboutsomethingelse.Youhavetobecomeamasterofbodylanguage,ofthethingsunsaid,of“thatwasyesterday,thisistoday.”Inotherwords,beflexible,orbedammed.Itwasmyprivilegetoencounterandbefriendsomewonderfulandfascinatingpeopleintheworldofmoney.Itisn’tallprofitandloss.It’salsofleshandblood.WhenItoldonebossthatmywifehadcancer(tenyearson,sheisstillfulloflife),hiseyesweremoist,hisvoicecrackedontheunyieldingsteelofthemoment.Thosehumanmomentswerethegems,theheart,ofmycareer‐whateverthecircumstances,happyorsad,theymadeitreal.Thereweremanysuchmoments.

Thisbookisnotabout“doasIdidandyouwillberich”.ThisisaboutsomeofthethingsIlearned,someofthemfunny,someactuallyveryunfunny.Itisabouthopingthatyoumaylearnsomethingsworthdoing,andotherstoavoid.Italsoexploresmysearchforamorecompleteapproachtoinvestmentthanwasevidentduringmycareer.

Inwritingthisbook,Ihavebeenmindfuloftheneedtorespectpeoples’privacyandtoavoidtakingpotshotsatothers’foiblesorapparentmistakes.Thatsaid,thisbookisaboutashonestasIcanmakeit.Idohopethelawsuitswillbealongtimecoming…

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PROLOGUE

(republishedfrom‘JourneysofaStockbroker’,sameauthor)

CountryofStockbrokers

The35‐footcruiserbobbedgentlyagainstthewharfasfamilyandfriendspouredonboardforasunnyMarchafternoonofcamaraderie,cuisineandthedelightsofSydneyHarbour.IthadallbeenmadepossiblebyPottsy’s*grandgenerosity:Ihadtoldhim“Brent,thisisaspecialyearformeandmydad,andourbirthdaysareclosetogether.CouldIborrowyourboatforajointcelebration?”Therewasn’tamoment’shesitation.“Sure,pal”.Therein,withthosetwosinglewords,laythequintessentialhumanconnectionthatformemadestockbrokingwortheverymoment.

•BrentPottsofPottsWestTrumbull.

ButIalreadyknewthishumandimension.Ihadbeenfundmanagerforamid‐sizedinsurancecompanyacoupleofyearsearlier.IhadidentifiedajuniorparticipantinSouthAustralia’sCooperBasinoilandgasfieldsasalikelybeneficiaryofcorporateconsolidation.Oneday,oneofmykeybrokers,whoheldourordertobuythestockonstrictpricecriteria,calledmeintearsfromtheflooroftheexchange.Itwasanuncomfortableandextraordinarymoment.Whytears?Because,hetoldme,hewasnotallowedtoactonmyorder.Itallendedwell,Iamhappytorecord,asthefundeventuallymanagedtoacquiretheamountofstockattheintendedprice,fromthesamebroker….andthetakeoverofthecompanythefollowingyearprovidedahandsomereward.So‐generosityandtears.Thefullspectrum.Stockbrokingishuman,bothatitsbestand,itmustbesaid,atitsworst.

It’ssogoodtobeback!!Ibelongrighthereinthiscountryofstockbroking,whereverImaybewhileyou’rereadingthis.It’sthebuzz,thethrill,theadrenalinrush,thepressure,thesporadicnewsflowoverthePAsystem,thedramas,thestudiedsilencesasreportsaretypedupagainsttheclock,the

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rapid‐firecallstocorporateexecutives,investorclients,in‐houseinstitutionaldealersandinterstateoffices,the“gogogo”ofitall.Yes,thelaughs;therandomdrunkenmomentsofsome;thebonuses;thedownsizings;then,onceagain,theunbridledoptimismandbigjoboffers–Welcometothisgiantferriswheelofanindustryasbadtimesfollowgood,andgoodfollowbad.Asthemansaid‐orwasitawoman‐youhadtobethere.

Continuallyandnecessarilyreinventingoneselfintheindustryformebecamesomethingofanartform:commoditiesresearch;raisingcapitalforahigh‐techstart‐up;assessingafter‐taxmeritsofgovernmentbondswitches;beinga‘rovinganalyst’,operatingoutsidetheresearchteam,foramid‐sizedbroker.MyfavouriteassignmentinthatlastinstancewascollaboratingwithShaneBannon,thenheadofresearch,tointerviewthetopdogofanoverlyadventurous‘80sentrepreneurialgroup.Theircorporatemazebadlyneededunpicking.“Youbethegoodguy”,IsuggestedtoShane,“andI’llbethebadguy”.Astheysay,“wedidgood”:thestrategyworkedandwearrivedatthecorrectconclusion:“Avoid”. Well,friend,you’vegotmegoingnow.It’sallstartingtofloodback.LikethetimeaNewZealandcompanytookmetodinnerinAuckland:“We’vegotthisproblemwiththeguyrunningoneofourAussiecompanies.”Iknewwhomtheymeant.“Simple”,Ibouncedback,“Doareversetakeoverbyhavingitacquiretheparent….theproblemwilldisappear”.Theexecutive’sresponsewasinstant.Hislargehandsweptacrossthetabletowardsme.Weshookfirmly.“Ifwedothat,we’llpayyou$50,000”.Thatneverhappened,sadly,duenodoubttoalittleearthquakecalledthe’87Crash.

I’mnotanaggressive,opinionated,ego‐drivenguy….much.Ihadanalysedanindustrialstock,abigcompanythathadfallenontoughtimes.Investorshadgrowntiredofit,thesenseofennuiwaspalpable:itwasuniversallyunloved.Asaresult,ithadbecomeagoldeninvestmentopportunity.Youcouldbuyitforjustoverthreetimesannualcashflow!SoItoldeveryoneaboutit,allthetime.Afterseveralmonthsofthistedium,colleaguestriedtoshutmeup.Firstthedealers:“theclientshaveenoughofthestock”.“Oh,right”,I

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rejoined,“soyourclientshaveenoughofastockthat’sgoingtomakethemalotofmoney!!”

Naturally,myill‐manneredsarcasmdidn’twork.Nexttoassailmeonthesubjectwasmyresearchmanager,whoreprimandedmeafterIhadexpressed,notsarcasm,buta‘smile’.“Stopsmiling!”,herightlydemanded.Mycolleague,TomWheelwright,hadmeinstitchesafterwardswhenheconfidedtome“Dahlan,Iwassoembarrassed,Icouldn’tfindenoughwindowstolookoutof!!”Gladtosay,thatstockprovedasolidperformer,astakeovermovesemergednotlongafter.

Muchismadeofinsidertradinganditsevils.Ofcourseitshouldbestampedout,notthatiteverwill,givenhumannature.Ifacompanyisinpossessionofprice‐sensitiveinformation,itshouldnotbedivulgedselectively:itshouldbetoldtotheentiremarket,ortonoone.Butwhatexactlyconstitutes‘information’?Herearetwocasesinpoint.

IwasoncemininganalystforBainandCo.,amajorbroker,andnaturallymyrolefocusedonlargecompanieslikeCRA(nowRioTinto).However,around‘81therewasanoilshaleboomandIwasaskedtolookatahopefulcalledPanD’orMining.TheyheldaleaseinQueensland,whichEssoasJVpartnerhadagreedtodrill.AtthetimeIinterviewedtheMD,accompaniedbytwocolleagues,drillingresultswereexpectedwithindays.So,ofcourse,questionsconcerningresultswererightoutofthequestion.Instead,Iaskedinnocently:“What’syourfeelingabouttheoverallprospectivityofyourlease?”Promptreply:“We’reveryexcitedaboutthelongtermpotentialofoilshaleinthiscountry.”Iglancedquicklyacrossatmycolleagues,thenturnedbacktoourhost,utteringpleasantriestoconcludethemeeting.Aswethreeapproachedtheswingdoorstoexitthebuilding,weallchimedinchorus:“One‐two‐three‐Sell!!!”

Why?Simple:theMD’sresponsetomyquestionwasacompleteavoidanceofreply.Ithadtobeunintentional,yetthereseemedjustonelogicalexplanation:Essohadalreadydrilledandtheresultswerein.Severaldayslater,theyannouncedtheirabandonmentoftheleasefollowing

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unsatisfactorydrillingresults.PanD’Or’sstockpricesuffereda‘decimalpointshift’.Wasitaonepointerortwo?Ithinkmaybetwo.

AnotherexamplecamewithBTRNylexin‘95,whichatthetimewasasubsidiaryofaUKengineeringcompany,BTR**,someofwhoseexecutivescametoSydney.“How”,Ibroachedoneofthem,“doyoumanageyourbusiness–inwhichcurrencydoyouseektomaximiseperformance?”Bodylanguageisawonderfulthing.IreturnedtomyofficeinhasteandcalledaclientwhomIbelievedwaswillingtoactonjudgementcalls.“IthinkBTRNylexcouldbetakenover”.Wegota$2morderonthestrengthofthatcall.Iknow,becauseStreets,ourinstitutionaldealer,camepoundingdownthecorridortotellme–greatfeedbackforananalyst!Butwasmyguess/insightinsiderknowledge?Absolutelynot‐itwasn’tknowledge!Itwasn’tevenahint.Itwassimplyaninvoluntaryreaction.Astheysay,bodylanguageis80%oftheequation.Orwasit90%?‐Likewhentheladyinthecosmeticscommercialsays,oh‐sosensually,totheman:“Ihaateyou”.Well,youjustknewshemeantsomethingelse!…No,inhercase,bodylanguagescored150%.

**nowpartofInvensys

Stocksarefascinatingbeasts.OnehightechcompanythatIhadtolookatimpressedmeintwoways.Ireportedtomyboss:“Thegoodnews?They’rehonestandsmart,andtheirtechnologyholdspotential.Thebadnews?They’renotbusinessmen.”Sadly,thefirmpromotedthecompanyand,Iheard,theclients’moneywentupinsmokeayearorsolater.Unfortunatelyforme,Ihadbeenaskedtoleavethefirm24hoursafterexpressingreservationsinamorningmeetingaboutpromotingthatcompany.Why?‐becauseitwasn’t“workingout.”Severalpeopleinthebrokeragetoldmetheyhadaprettygoodideawhyithadn’t‘workedout’:Iwasn’ta‘yes’man.

Onoccasion,askingacompany’sCEOevenathousandquestionswouldn’tprovideaclearpicture.Aparticularhightechcompanyprovidedacaseinpoint.Attheconclusionofthemeeting,indesperation‐feelingIhadachievednothing‐IrequestedthesinglepieceofpaperonwhichtheCEOhadwrittenassortedhieroglyphics.Ipromptlyhaditanalysedbya

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handwritingexpert–togetherwithsomeofmyownhandwriting(asaqualitytest).Theresultswereextraordinary.ItwasonlythenthatIrealisedIoughttohaveobtainedtheCEO’spermission,forone’shandwriting,itturnsout,revealsone’spersonal‘signature’.InSPADES.Anexampleofthehandwritingexpert’sprowess:sheknewthathehailedfromeasternEuropeandalsothathehadaheartcondition(whichIalsoknew).TheendresultofthisresearchwasthatIadvisedclientstoavoidthestock,butwithoutgivingsolidreasons.Idohoweverrecallmentioningextravaganceintheinvestorrelationsdepartment,giventhecompany’searlystageofdevelopment.Thisstocktooperformedthedecimalpointshift,aboutayearlater.

Oh,yes…..andImadeamentalnotenevertomarryahandwritingexpert…

OnetimemyfaxtoclientswasinterceptedandIwasbannedfrompublishingviewsonastock,duetothebroker’scorporaterelationship.Yes,ohdear…..thedreadedconflictofinterest.Iwasasaresultreducedtomakingsurreptitiousphonecallstoclients,saying“betterletsomego…they’redoingsomefunnydeals”.Sadly,thatcompanyfailed,andtheirCEOendedup‘inside’.Ileftthebrokeragesoonafterwards…Ifyouremployercannotresolveconflictsofinterest,timetosay‘goodbye’….Icouldrelatemorestoriesaboutmystockbrokingdays.PerhapsIwilloneday….Letsseenow,findalawyer..andbuymorelifeinsurance…………………………………………………………………………………………………………………….......……Asyoucansee,Ihavewrittenmore…Golly,Iforgotthelifeinsurance…

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ITMIGHTNOTWORK

Inthemid‐1970’s,MLC’sInvestmentdepartmentwasasleepyplace.Hardtoimaginenow.ThemostinterestingpersononthefloorperhapswasBernie–notsurewhathisjobwas‐buthe’dlookatyouwithaworriedexpressiononhisfaceasyougotyourcoatonattheendoftheday,andsaysomethinglike“Ihopeyougethomeallright”.Acool,andmightyrelaxedguy,wasBernie.Howthingshavechanged.Now,theprofessionisbuzzingwithnews,activity,riskon,riskoff…gettinghomeallrightnowistheeasypart.Eventogainadmittancetoit,youneedfinancediplomasandevenPHDs.Forusthen,itwasalllearningonthejob.True,Iandotherswerestudyingactuarial,whichgiftedmeawonderfulinsightintotheconceptof‘exposuretorisk’(whereweretheactuariespretheGFC?–no‐oneseemstoknow).Butinvestmentperseinthosedays–thatwasallsupposedtobeabsorbedbyosmosis.Oneday,MLC’spervadinglethargyreallygottome.So–ok,confessiontime–IdeliberatelywrotesomethinginacompanyreportthatIcouldn’tpossiblyjustify.Itdidthetrick.Outcamethesenioranalyst,allboiling,andtoreintome,tellingmeallsortsofhometruthsaboutcompaniesandhowresearchshouldbeconducted.Wellthanksverymuch!–exactlywhatIneeded!Transferofinformationaccomplished.Inthefuture,ofcourse,itwillallbedonebyinsertingaknowledgepodintoyourbrain.

Ionlyeverpulledthatstuntonce.Callmechicken.Oneday,anotherseniorcolleagueinvitedmetojoinhimforabrokerpresentationonconstructioncompanies.Whatalifethey’veled.Leightonaroundthattimeneededacashinfusionfromshareholders–understandable,giventhecreditcrisisofthemid‐70’s–buttheconversationIrecallwasaboutMainline:“Well,ofcourse,”thebrokerwassaying,“asyouwouldknow,theyarehavingsimilarproblemstoLeighton”….mycolleagueandIglancedateachother…Afterthemeeting,Itookahardlookattheir‘offbalancesheet’situation.Sureenough,itseemedthatMainlinehadserious

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‘issues’.Inhaste,Iwroteaone‐pagerformanagement,whichatthetimewasconsideringincreasingitsinvestmentinthecompanyinordertosupportthelatter’spurchaseofRalimProperties.Iadvisedcaution.Backcamemyreportfromthedeputyinvestmentmanager,withalinediagonallyacrossit,withthewordsatthetop,“buyXsharesat$2.00”.ItisamatterofrecordthatMainlinewentbustayearortwolater.Aunionrepresentativewasquotedassaying“itcouldn’thavehappenedtoanicerpackofbastards.”Asagraduate,IassumedIwasemployedtothinkonmyfeet.Onetime,Icameacrosssomethingveryinteresting.Today,HailCreekisanestablishedcokingcoalmineinQueensland’sBowenBasin.Backthen,itwasjustadeposit.ThemainshareholderswereCSR,CRA(nowRioTinto)andacompanycalledAAR.Moveswereafoottothinkaboutminedevelopment.Ibecamefascinated,forIrecognisedthatCSRandCRAhaddifferentapproachestopartialownership:CRAwashappywiththat,butCSRlikedcontrol.Howcouldtheprojectmoveforward?ThenIlookedatAAR.Thiswasacompanysellingonthemarketataboutitscashbackingof$2/share,withtheimpliedcostofitsHailCreekstakebeingnil.Surely,Ireasoned,AARwouldhavetobe‘takenout’,sothatpublicshareholders(withtheirtypicallyshortterminvestmenthorizons)wouldnotbeinvolved.IproposedtoMLCmanagementthatittakeastakeinAARandawaitaneventualbidfromoneoftheproject’smajorowners.However,Iwasimmediatelyrebuffedwiththesememorablewords(memorableforallthewrongreasons):“Itmightnotwork”.Well,Ithought,ifthatisn’ttheantithesisofinvestment!Asapostscript,AARwastakenoverafewyearslateratover$5pershare.NOTONEYEAR’SEXPERIENCEFIFTEENTIMES

IbegantowonderwhatIwasdoinginthisjob.WasIjustdoingtime?SoIdecidedtoseekadvice.Iwenttoarecruitmentagency,put$100onthe

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table,andsaid“whatshouldIdo?”Well,Iwastold,thatwasanunusualrequest….buttheupshotwasincontrovertible:“Tellmanagementthatyouenjoyworkingthere,butforthenext15years,youarelookingfor15yearsexperience,notoneyear’sexperiencefifteentimes”.Brilliantadvice!Ofcourse,Iwentstraighttomanagementtoenquireaboutmyprospects.Itwaslookingawfullyliketheoneyear’sexperienceoption….”well,infiveyearsyoucouldbeaprojectmanager”…..Plansformynextcareermoverapidlytookcentrestage.Iwasn’tsurewhereIwasheadedlongterm(onewagdiddescribethelongtermasaseriesofshortterms,whichisprobablyafairdescriptionofhowmuchoftheinvestmentworldworks).ButonethingIknewforsure.Ibadlyneededaswiftkickupthepants,metaphoricallyspeaking.Ineededtolearn,Ineededrealworldexpectationtoperform,andIneededtoprogress.IdoveheadfirstintotheworldofstockbrokingatBainandCo.There,IhadtheprivilegeofworkingforthebestbossIeverhad–andIhadsomegoodones–MauriceLoomes.Whataguy.(afavouriteexpressionofmine,fromtheclassiccomedyTheIn‐laws,starringPeterFalkandAlanArkin).COMMODITYGURU

MystartatBainandCowasnotpropitious.Itactuallycameasquiteashock.Iwasassignedanindustrialcompany,andmaderatheramealofit.IwasalsoremindedthatIwasnolongerworkingforaninstitution,andreportsweretobecompletedbyFriday(fortheweeklyresearchnotestoclients,mostofwhich,ittranspired,wereusuallywrittenbythevoluminousMWL–MauriceLoomes).

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Oneday,MauricecameintomyofficewavingsomereportsbyCRU,whichIsoondiscoveredwerecommodityassessments.“Shouldweprovidethisinformationtoclients?”,hewantedtoknow.Irequestedtimetothinkitover,thenadvisedhimweshouldonlyprovideitifwealsointerpretit.Igottheguernsey.WithinafewmonthsIbecameestablishedasBainandCo’sCommodityAnalyst.Somehow,Iseemedabletopriseopenthenatureofindividualmarkets,andtoshedlightonthem.IwastoldthattheAMPfoundmyworkuseful.Butatfirst,justaswiththeindustrialresearch,Istruggled.Iwouldstartwriting(inthedaysthatonestillusedapen!),thenscrewpageafterpageintoaballandhurlitattheWPB.Overandover.Eventually,Iwrotemyfirstreportonthecoppermarketandhandeditin.Ididn’thavelongtowait.Mauricewasatthedooragain,declaringwithaworriedlookthathecouldn’tunderstandit.IwastomeethimandPeterHannah(laterofShawStockbroking),thenMiningAnalyst,inMaurice’soffice.Thinkingabouttheissues,IrealisedthatPeterandMauriceknewfarmoreaboutcopperthanme.Iwasjustjugglingnumbersandwords,Ihadnofeelingforthesubjectatall.AsIenteredMaurice’soffice,Istated:“MyattitudetothismeetingisthatIamgoingtolearnsomething.”Theytoremetoshreds–well,notme,ofcourse,myreport.Butafterwards,itstartedtomakesense.Forgetaboutthewords.Forgetaboutthenumbers.Firstunderstandtheissues,thedrivers,findoutwhat’simportant.Thenandonlythen,writethereport.AsaSirErnestGowers’bookhadtoldmeyearsearlier:“Havesomethingtosay,andsayit.”Sothatbecamemywatchword:findsomethingoriginal,authentic,tosay.Don’t‘wordsmith’.Evennow,Irecalltheopeningwordsofoneofmyupdatesonthecoppermarket,afterreturningfromvacationtodiscoverthatthedealershadturned

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bullish.Ijustcouldn’tseeit.Iwrote:“Thecurrentmoodofuncertaintyininternationalcoppermarketsisnothingnew.Itistheresultofavolatiletrackrecord,retrospectivelysynthesisedintolongtermtrends,andthisnowprojectsastrongdemandmomentumintoatestingperiodofreducedGDPgrowth….”Ithinkthat’showitwent.PeterHannahmovedtothedealingdeskafterIhadbeencoveringcommoditiesforayearorso,andIbecameMiningandCommoditiesAnalyst.Oneday,IearnedanothervisitfromMaurice.Withaknockonthedoor,heenteredbearingalargerecordcard,whichturnedouttobemypersonalsharetradingrecord.Well.Ihadbeenbusy.Toobusy.Mauriceaskedmetoeaseoff.Ithoughtaboutit.Isoldeverything,flukingthetopofthemarket.Myactivetradingpromptedmetoreconsidermycareer.PerhapsIwasbettersuitedtomanagingmoneythantobeingabroker;andafterall,Ihadonlygoneintobrokingoriginallyforthatmuch‐neededkickinthepants–propellingmewithindecenthasteintotherealworld(asrealasthefinancialworldevergetslol).ImentionedthatMauricewasthebestbossIeverhad.Ihaven’tsaidwhy.Inmid‐1979,Isufferedapersonaltrauma.Itresultedfromoneofthemoststupidmistakesofmylife:IblamedGodforsomething(askmeoveralongcupofcoffeeandI’llsharethestory).Suddenly,mypersonalselfcontrol–whatwenormallytakeforgranted–fadedtoashadow.Everythingsuddenlybecameanenormouseffort.Thiswholeepisode,thatIthinkofasmycrisis,lastedtwoweeks,mostofwhichwasspentatmyfather’shome,whereIwaslookedafterbyfamilyandfriends.Formetohavestayedathomewithmyownfamilyfelttoomuchtoask.Iwasquiteahandful.ButbacktoMaurice:afteraboutadayinmyweakcondition,hecamequietlyintomyofficeandshutthedoor.IsaidIwasfineandmyworkwasuptodate,somethinglikethat.Hetoldme:“Dahlan,Idon’tknowwhatyou’regoingthrough,butitisn’toveryet.Takesomeleave,andcomebackwhen

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you’reready.”Hisgenerosityandsensitivitytouchedme,nottomentionhisperspicacity.Ileftimmediately,andreturnedsomesixweekslater,afterarecuperativeholidayinEnglandwithmumandinHollandwithfriends.IntheprologueI’vesharedanotherstoryofmytimeatBainandCo.Itwasadefiningperiod,andpreparedmeformynextassignment:InvestmentsManager(StockExchange)atFriendsProvidentLifeinMilsonsPoint.LittlethendidI,orthey,knowwhatwascoming!SRIFUNDSMANAGERONSTEROIDS

ThefirstthingInoticedonceinstalledintheFPfundmanagerhotseatwasthelackofinvestmentactivity.Thingshadbeenoccurringwithglacialspeed.Itwasacaseofbuyandhold.Agoodstrategyifyouheldtherightstocks,butnototherwise.Theportfoliowasabouttoundergomajorsurgery.Istartedontheengineeringstocks,whichhaddonewellbutnowseemedtometorepresenttoobigaproportionofthefundgiventhegatheringrecessionaryclouds.PrettysoonIwasbeingchallenged,particularlybytheboardandbytheactuary,PeterVinson(whohadanamusingposteronhiswallthaturgedyoutoturnonyourbrainbeforeopeningyourmouth).WasIawareofthetaximplications?WhywerewebuyingGraceBrothersandnotDJ’s?WhoisMagnumResources?Easy:yes;becausemyjobwastomakemoney,notnecessarilytobuythebestretailer;andMagnumResourcesownedacoaldepositcalledVickery,whichCRAhadsignedanagreementonandwhichIexpectedthemtobuy–AARalloveragain!Topmanagementunreservedlybackedmeinmyfeverishactivity.MichaelWarren,theunderstatedEnglishman–whatagentleman,andshrewdwithit,wastheinvestmentschief.Hemainlyfocussedonpropertyandwas,forme,areadysourceofwisecounsel.PhilipBurns,deputyGM,washighly

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supportive,rightthroughtheearly80’srecession–whenCRAfellbelow$2.00(atthetimeofwriting,RioTinto,itsnamenow,isabout$70).JackLamb,theGM,awiseoldScot,waslessinvolved,buthemadehismarkformeforeverwhenheadvised“therearenoproblems,onlypeople.”Thatwisdomhasstayedwithmefromthatdaytothis.There’sanamusinganecdoteaboutJack.Hisstylewasverywarmandpersonalandhedidtherounds,catchingupwithstaffalloverthebuilding.Oneday,anemployee,presumablyquitenew,saidtohimashepassedbyherdesk,“Youseemaniceman.Wheredoyouwork?”“Well”,Jackreplied,“youknowthe13thfloor?‐rightdowntheendthere’sabigoffice.Iworkthere.”Apparently,thecolourofbeetrootwasn’teveninit.Asanewfundsmanager,onethingthatamazedandsurprisedmewashowunderwhelmingthebrokingcommunitywasatthetime.Inhindsight,perhapscommissionsweresohightheydidn’thavetotry.ThewayIsawit,manycouldn’thavetoldthedifferencebetweenriskandrewardifthymettheminbroaddaylight.Thequalityofbrokerresearchthenversusnowisworldsapart.Iadmit,forinstance,thatthetomeIwroteonCRAatBainandCo–describedbyoneinstitutionastheirCRAbible–wasinkindergartencomparedtotoday’sin‐depthanalysis.Well,therewasonegoodreason:bytoday’sstandards,therewerenocomputersbackthen.Asifthatwereagoodexcuse….Themarketof1982and1983wasavaluemanager’sparadise(askSirRonBrierley).TherewasGraceBros,DavisConsolidated,MagnumResources,ReefOil,LNCIndustries,CRA,evenMLC,tonameafew.TheMagnumResourcesopportunitytookmuchofmyattention.IstudiedcloselythejointventureagreementtheyhadwithCRA.Iassessedtherisk/rewardpersonally.Idecideditrepresentedafirstclassinvestmentopportunity,andaccumulatedsharesateveryopportunity,FriendsultimatelybecomingoneofMagnum’slargestshareholders.IrememberonedayreturningfromlunchtoamessagethatNationalMutual(precursortoAXAAustralia)wassellingitsholding.Instantly,Ipickedupthephoneandbought

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theirholding.Thosewerethedays.Friends’mademillionsfromthatinvestmentwhenCRAacquiredit,andPhilipBurnsyearslaterwasmostappreciative.AsimilarstoryplayedoutinthecaseofReefOil,inwhichFriends’becamethethirdlargestshareholder,ifIamnotmistaken.ThelargeCooperbasinoilandgasfields,situatedsome900kmsNWofSydneyandstraddlingSouthAustraliaandQueenslandborders,werecontrolledbySantos(SouthAustraliaandNorthernTerritoryOilSearch).Therewereseveralminoritypartners,ReefOilandBasinOilbeingtwo.IfiguredthatconsolidationofownershipwasinprospectandthatReefOilwouldgettakenoverbySantos,whichhoweverwasalreadyabout90%ownedbyBTandNationalMutual.WhyshouldSantosbother?–becausetheJVagreementsseemedmessyandcouldholdupinvestment.Santoshadanobviousproblem:howtowinReef?Solution:launchbidsforReefandBasin,gainfootholdsinboth,thenoffertoselltheirBasinholdinginexchangeforcontrolofReef.Andthusitwas.ThebattleforReefwascharged.SomeevensuggestedthatBTandNationalMutualhadsolddowntojustbelow90%inordertopositionthemselvestobidandenforcecompulsoryacquisitionof100%.Ihavenoknowledgeofthat.Butintheheatoftheselldown,forwhateverreasonitoccurred,Friends’gainedanicefootholdofitsown.ThereweretwodifferencesbetweentheReefandMagnumprojectsfrommyperspective:firstlythedrama!!,andsecondly,inReef’scaseIprocuredthreebrokervaluationsinordertogainconfidenceaboutvalue,whereasIvaluedMagnumpersonally.IfIrecallcorrectly,mybuypricewasnotmorethan$1.55;andthetakeoverbySantos,whenconcludedthefollowingyear,wasat$2.30.Anicelittleearner.HowdidImanagetoachievethesecoupsforFriendsProvident?OnekeyfactorwasFP’sinvestmenttimehorizon:long.Asinvestmentsmanager,Ididn’thavetoworryeachdayaboutfundinflowsandoutflows….theassetswerebackinglong‐term‘withprofit’insurancepolicies.Mymissionwastomaximiselongtermaswellas,wherepossible,shorttermreturns.

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Onoccasion,Iwaspreparedtobeanactivistinvestor.IrecallacompanycalledOCA(OilCompanyofAustralia).Memoryisbitdustyonthisone,butthegististhatBoral,anOCAshareholder,wantedtoincreaseitsholdingwithaplacementataroundthethensharepriceofsub40c/share.Iwasn’thappywiththeproposal–valuationswerecirca90c/share‐andsoIattendedOCA’sEGMtovoteagainstit.Atonepoint,SirEricNeal,thenMDofBoral,stateditwasn’ttheirpresentintentiontoincreasetheirholdinginOCA.Iretorted(asInowshuddertorecall)somethingalongthelinesthat“Idon’tpresentlyintendtogotothetoilet…butthatdoesn’tmeanthatIwon’t”…..Ohdear,afundiewithattitude….ButIwasright:BoraldidbuymoreOCAbeforelong,andultimatelygained100%.WhenBoralspunofftheirenergybusinessaround2000intowhatbecameOriginEnergy,OCAremainedanimportantasset.ShareswerenottheonlyassetclassImanagedforFriends.Ialsolookedafterholdingsincorporatedebentures,convertiblenotesandgovernmentbonds.Youmightthinkthatgovernmentbondswereoh‐so‐boring.Farfromit.Firstly,aboutthe‘landscape’.Statutorylifefundswereobligedtoholdbondsundertheso‐called30/20rule:aminimumof30%ofliabilitiesweretobebackedbystateorcommonwealthgovernmentbonds,atleast20%beingincommonwealthbonds.Thereweretwointerestingwaystoimprovereturnsfrombonds.Thefirstwasso‐calledswitches,whereyouexchangedonebondontheopenmarketforanother,togiveyouahigheraftertaxreturntomaturity(leavingasidepotentialshorteningorlengtheningthetermtomaturity,giventhatlongtermratesaregenerallyhigher).ThisinvolvedmuchuseoftheHPcalculatorandthetelephone.Sometimes,itcamedowntominutesontheclockbecause,havingexecutedonehalfofaswitch,youneededtocompletetheotherhalfasap,incaseinterestratesmovedagainstyou:onetime,IgaveRobertSkinnerofBainandCotillacertaintimetooffermealineofstockwithparticularmetrics.Hewas5minuteslate.Heremindedmeofthatincidentlater…

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Bondtendersweretherealspiceofmanagingthebondportfolios.Itwasaclassiccaseofrisk/reward.Theeasysolutionwassimplytoavoidtendersandtomeetyour30/20requirementsontheopenmarket.Butthatwouldbetodenyyousomeseriousupside.Thewayitworked,asIrecall,wasthis:youlodgedbidsattheRBAinMartinPlace,Sydney,fortheCommonwealthbondsintermsof$amountandtheinterestrateyouwanted.TheGovernmentwouldmeetitsrequirementsbyacceptingthelowestinterestratebidsoffered.TheissueforFriends’andotherbidderswastheinterestrateriskifyoubidformorebondsthanyouneeded.Bylodgingseveralbidsatonce,atdifferentinterestrates,youcouldbalancetheneedforbondswiththepotentialopportunitytobuymore,atabove‐marketrates.Importantly,bondswereaveryliquidmarket.Friends’achievedgoodoutcomesfrombondtenders,andthekeytothatwasthatrisk/rewardcouldbeassessedquiteprecisely.Myactuarial,operationsresearchandstatisticstrainingcameinveryhandy,foreachhelpedmethinkaboutthecoreissues.ThetitleofthissectionreferstoSRI,orsustainableresponsibleinvesting.Friends’wasstartedbytheQuakersintheUK,andthisimposedafewlimitationsonhowpolicyholders’fundscouldbeinvested.Nowadayswerefertothe‘sin’stocks,e.g.gambling,alcoholandtobacco.Iwas,atthattime,notagainstinvestinginalcoholortobacco,believingnaivelythatsimplyowningshareswasn’tmakinganydifferencetoconsumers….butatleastIstartedoutonthejourneyofconsideringtheissues.ThepointhereisthatFriends’relaxedtheirrulesduringmytermasportfoliomanager.SoIboughtsomeCUB(breweryshares,forthoseunfamiliar).ThereasonIrememberthisisthat,oneday,MikeToltz,oneofmyfavouritebrokers,ofPottsWestTrumbull,calledtosayhecouldbuymyCUB.Ilistenedonthephone….andlistened….buttherewasjustsilence.Thiswasbodylanguage,withoutthebody!Mikealwaysgaveyouapitch…”youshouldhavesomeofthese”,“youshouldletsomego”….Once,Ievenranghiminannoyanceandsaid“Ididn’tbuythose,yousoldthemtome!”(hekindlycancelledthattrade,butIshouldhaveretainedthem:Vamgasbecameyetanothertakeoverstock).

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Butonthisoccasion,allhesaidwas“IcanbuyyourCUB”.So,you’veguessed,Ididn’tsell,andmayhaveboughtmore.ThebuyerturnedoutlatertobeSirRonBrierley,oneofthesmartestinvestorsever.MyrealSRIjourney,whichdidstartatFriends’,beganwhenwewereofferedsharesinanewfloator‘IPO’(initialpublicoffering)inacompanyplanningtorentvideos–excepttheyweren’tallfamilycontent….Ipolitelydeclined,sayingwedidn’tneedtomakemoneythatway.inlate1983,afterabout2andahalfyearsintheFPsaddle,IdecidedtoemigratetoVancouver,Canada.Igaveplentyofnotice,andeventuallymanagementmadetwoappointments,havingdecidedtosplitmyroleintotwo,sharesandfixedinterest:EugenieWhite(shares)andNickBasile(fixedinterest).My1981‐1983timewithFriends’remainsdeartomyheart.Itwasawonderfulandenrichingexperienceallround.Iformedgoodfriendships,includingthemega‐reliableandcharmingsecretaryBelinda,bothwithinthefirmandwithout,anditfeltlikeapeakofmyachievements.PROBLEMEQUALSOPPORTUNITY

Itwasin1982,ayearandahalfbeforeIactuallyleftAustralia‘forgood’,andforreasonsbeyondthescopeofthisbook,thatIfirstconsideredthepossibilityofemigratingtoVancouver,Canada.Itwasasthoughmylifeneededanewdirection,newvistas;thatIneededtobreaknewground,inwardlyandoutwardly.Also,mythenwifewasacountrygirlatheart,andIenvisagedushavingaplaceintheFraserValley,fromwhichIcouldfeasiblycommute.ItookanexploratorytriparoundOctober1982.Notwithstandingthesensationof“standingintheshowerandwalkingonawatersandwich”–

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wordsthatgreetedmeatlunchshortlyafterbeingmetattheairport‐Iimmediatelyfellinlovewiththeplace.Ifeltathome.Thefirstpartofmyinvestigationhadprovenpositive,bythemereactoftouchingterrafirma.TomisquotecomedianVictorBorge,ifyouknowwhatImean,noexplanationisnecessary;butifyoudon’tknow,whatdifferencewoulditmake?Onapersonallevel,Iwaslookedafterbyfriendsextremelywell.Mychallengethenwastoassessthejobmarket.Sadly,mytimingwasnotgood.Therecessionwasbiting.UsingmyfriendBardolfPaul’sofficeonWaterStreetasabase,InetworkedlikecrazytillIlinedupfiveinterviews.AtoneofthoseIwasgreetedwiththebalefulwords“Therearen’tmanyjobsinCanadarightnow”.“That’sok”,Ireplied,“Ionlyneedone.”There’sanexpressionforsomeonewhomakesacracklikethat,butwhatwasIsupposedtosay?Oneofthefiveinterviewsdidlandmeajob:YorktonSecuritiesofferedmea$10,000salaryasamininganalyst….butitnevermaterialised…..andonthatlowsalary,Imighthavedematerialised….Ihadaninterestingencounterwitharecruitmentexecutive,WaltSandford.Heposedthefamiliarquestionalongthelinesof“whydoyouthinkyoucangetajobinthismarket?”.Myanswerwassimple:myattitudeis“problemequalsopportunity.”“MrSimpson”,cametheresponse,“Oneday,Idon’tknowwhenorhow,butyou’regoingtomakeit.”Comforting,invigoratingandchallengingwords!IreturnedtoSydneywithaweek’shecticexplorationsringinginmyears,toppedoffwithWaltSandford’sencouragingprognostication.

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ILIKETHEWAYYOUTALK

Iwasn’tgoingtogetajob,notsittinginSydneytheothersideofthePacific.Imean,Ibelievedinpossibilities–hell,in1980IgotajobatHoareGovett,atasalaryabout50%abovetheadvertisedlevel,afterpickinguptheEconomistandcallingGovettsfromaLondontrainstationonaFridaynight,saying“IhavetoleaveonTuesdayforSydney,butthat’smyproblem.ButifIcouldmeetbriefly”,Itoldthem,“Iwouldappreciateit.Myattitudeisthateverythingispossibleuntilprovenotherwise.”Veryunfortunatelyhowever–andherecomesanotherconfession–Icouldn’tcopewiththejob,andafterjusttwoweeksIflewbacktoAustralia,tailbetweenmylegs,backtothewelcomingarmsofBainandCo.MyproblemwiththeGovettpositionwasthis:theydescribeditasmininganalyst,butitseemedtomethattheactualjobwastoprécisotherGovettanalysts’reportsfromaroundtheworld.Ananalystissupposedtoquestionthings.WhatwasIallowedtoquestion?Rudely,Ididn’twaitaroundmuchtofindout.Thatwasanultralowpointinmylifeandcareer.Whatevertheprofessionalmeritsofmyposition,walkingoutwasunforgivable.Iapologisedprofuselylater,butmorethanthat,Ineededtolearnandgrowfromtheexperience,painfulandself‐inflictedasitwas.Butbackto1983andmymountingfrustrationintryingtomovetoCanada.IcametotheconclusionthatifIcouldn’tfindajobthere,Iwouldtrytocreateone.So,aroundEaster,Iheadedoffonceagain.Iappearedtolandonmyfeet,securinganexcellentformativerelationshipwithJohnRussell,abusinessconsultant,latertobecomeagreatfriend.Weeventuallyworkedonseveralprojectstogether,butusuallybytheirverynaturetheytooktimetoprogress.Meanwhile,Johnwasthinkingofotherwaystohelpmeemigrate.Oneday,around5pmonaFriday,JohnrememberedacontactofhisatCominco,alargemininghouse.Hecalled;hiscontactnolongerworked

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there;Johnwastransferred.Afterabriefconversation,JohnhungupandtoldmeIwastocallsomeoneonthatnumber.IaskedJohnwhathispositionwas,anditturnedouthewasthePresident.Woah!I’dbettergetmylinessortedout!IcalledthePresidentofComincocold,assuggested,andwasmetwiththewords“ItriedtotellMrRussellthereisreallynopoint….”..butIjusthadtosaymypiece:“Sir,Iwouldbeamazedif,atthisparticularpointintime,thereisamatchbetweenyourneedsandwhatIhavetooffer….However,Ibelievethattheremaybesomethinginthefuture……”.ThePresidentspokeagain:“MrSimpson,IwantyoutocallMrGriffiths.Hewillexpectyourcall.”Allofasuddenthereseemedtobe,infishingparlance,atugontheline.Nextday,bothofusincasuals,ImetMrGriffiths.HeinvitedmetoexpresswhatIhadtooffer,andafterawhilehesuddenlysaid:“Ilikethewayyoutalk”.“There’snonewhiringgoingonathemomentinourcompany,buttherehappenstobeapossibilityofatransferviaourAustralianaffiliate,Aberfoyle(atinminer).Whenyou’rebackinAustralia,IwantyoutoapplyforajobinCominco’splanningdepartment,andIwantyoutodosoinyourownhandwriting.”Well,thatwaspromising.Butwhysucharequest?Ifyoureadtheprologuetothisstory,you’dalreadyknow…Iwasbeingintroducedtothemysteriousworldofhandwritinganalysis.NEVERUNDERESTIMATEYOURVALUE

TheComincoprospectdidnotdevelop.WhenIarrivedinVancouverinearly1984,soonafterleavingFriends’,DonGriffithstoldmethattheimmigrationchallengehadbeentoohard.Hewasverysupportive,offeringmecontactsandsuggestions.SoIthankedhimsincerely,atwhichherespondedbysayingsomethingnice,butstrange:“OnedayImaytellyouwhy,butItrustyou.”Unlessitwasthegleaminmyeye,Ilaterhopedthatitmustbethehandwriting…

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My‘emigration’toCanadain1984wasnotunprepared.IhadservicecontractswithtwoAustralianbrokers,oneforideas(“butIamgoingtobeinNorthAmerica”,Itoldthem.“That’sok,itmakesnodifference.”).TheotherwaswithPring,Dean&Coforcommodityresearch.ThedealwithPringswasthattheywouldpaymeamonthlyfeefortheAustralianmarket,andIwasfreetomarkettheworkinNorthAmerica.Twohandsomearrangements.LukePenseney,aminingconsultantwhobecameagreatfriend,undertookmarketresearchandproducedsomeexcellentinformation.Buthowaboutthebusinessitself?Forthisstory,IhavetobacktracktotheOctober1982tripandawonderfulencounter.OneofBardolf’sfriendswasPeterSurrao,wholivedintheRockyMountainswithhislovelywifeYollande.PeterandIwereintroducedinVancouver.Hemadeadistinctimpressiononme.Peterwaseitherretired,orclosetoretirement,fromBCCoal,whereoneofhisresponsibilitieswasnegotiatingexportpriceswithJapanesecustomers.WhenIreturnedinEasterthefollowingyear,IcalledhimathisRockyMountainshome.“Peter”,Itoldhim,“Ihaveafeelingthatoneday,wemayworktogether.”“Iwouldlikethat”,hereplied.IlaterflewouttotheRockiestomeetPeterandYollande,andourconnectiongrewstronger.OnmyreturninJanuary1984,withmycommodityresearchventureburningmybrainhotterthanfivepotatoes,ImetwithPeterinVancouveratBardolf’soffice.Wehadalsoagreedtoincludeinourstart‐upPeter’sformer–andmuchyounger–colleague,GerryGlynn,ahighlyaccomplishedindividual,bristlingwithdegrees.SomethinghadevidentlyattractedGerrytothisformativeventure.Iwasdelighted.IwillneverforgetthemomentImetGerry.IhadbeenbuzzedbyReceptionofhisandPeter’sarrivalandsothereIwas,approachingthem,theywiththeirbackstomeatthecounter.Gerryturned.Iwasgobsmacked.Iknewthisguy.ButIcouldn’t!ButIdid.Forthehoursthatwethreeheldourdiscussions,Itriednottoburstoutlaughing,becauseGerry’severy

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movementandmannerismfeltcompletelyfamiliartome.ThereisonlyoneotherpersonintheworldwithwhomIhavehadthatdéjàvuexperience.Forthatname,we’llhavetoshareanothercoffee.Peter,GerryandIwereshapingupasagoodteam,veryintune.Atonepoint,Peteraskedusalltostatewhatwethoughtweshouldearnintheventure.IthinkIsaid$30,000.Petertoldmehedidn’twritethatnumberdown:“Neverunderestimateyourself”,hestressed,notquitehittingthetable,becausehewasaquiet,unassumingguy.(IbetthatpainedhisJapanesecoalbuyers–Icouldjustvisualisethemsaysomethinglike“youmustbemissingyourwife”‐codeforletssettlethepricenow‐andhimsaying,“whatever”….butverypolitely.)Unfortunately,afterthebigbuild‐upandhighexpectations,ourputativebusinessventuredidnoteventuate.Yes,IproducedacoupleofcommodityreportsinVancouver,typedupbymywonderfulsecretaryPattiMcCormick.Ialsohadsomecorporateideas,onebeingthatOakbridge(coalminer)wouldbecomeatarget(itdid).However,itwasinearlyMarch1984whenIlearnedthat,forfamilyreasons,IwouldhavetoabortmymovetoCanada.Thatwasahugedisappointment,but,astheysay,thefactsarethefacts.IreturnedtoSydneywithoutdelay.BackinSydney,Icontinuedwiththecommodityreports.Meanwhile,the‘ideas’arrangementhadlapsed,duetoachangeofpersonnelatthebrokeragehouse.Myreportontheinternationaltinmarketmadesomethingofanimpression:TheTinCounciltoldmeIhadgiventhemsomeinsights!(aparallelIsawbetweentheOPECcarteloftheoilmarketandwhatallegedlywasatincartelrunbytheMalaysians).ButIwasstrugglingfinancially.Somehow,mygoodfriendHughWallace,whomImetwhilstIwasatFriends’whenhewasanexecutiveatBT,tunedintomysituation.“Youcan’tbuyyourgroceriesonBankcard”,Irecallhimsaying,“Ithinkyouneedajob.CallPottsWestTrumbull(PWT).Iheartheywantaresearchanalyst.”

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PWTmademeapersuasiveoffer,eventhoughIknewIdidn’twanttobeananalystagain.Andyet,asafundsmanagerforFriends’,Ihadbeguntorunintothelimitationsofsucharole:onceyouhavetheportfoliowhereyouwantit,there’sadangerofovertrading,ofgivingintoimpatience.Also,Ifoundithard,fromavailablebrokerresearch,tounderstandtherealqualityofmanycompanies.Sometimes,evenwithmajors,youwereflyingblind.[Thisthoughtdidnotgoaway,butremainedasapassion.Ultimately,itledtomystartingmyowninvestmentadvisorybusiness,CashHarvest].Theneednottoover‐trademeantthatfundsmanagementofteninvolvedspinningyourwheels.ItremindsmeofhowWarrenBuffetoncedescribedhisworkethic,somethinglike“relaxed,borderingonsloth”–butofcourse,inhiscase,hewasalso‘handson’,notjustapassiveinvestor,sono‐onebuyshiscommentunlessasadescriptionofaduckwhosefuriouspaddlingyoucan’tsee.Forme,theidealjobwasprobablyrunningaventurecapitalfundoraninvestmentcompany,inwhichyoucouldreallygetyourteethintodirectinvestment(Icameclose,someyearslater).Failingthat,theattractionformeofbeingananalystwasthatyoucouldgetupcloseandpersonalwithcompaniesandmakeaconfidentassessment.And,Ihavetosay,themoneywasgood.Fromaround$40,000salaryandbenefitsatFriends’thepreviousyear,Iwassoonearning$70,000plusbonuses…withhigherrisk,ofcourse….So,recallingPeterSurrao’sadvice,Isaidyestothebigdollarsevenifmyheartwasn’ttrulyinit.ButtalkingaboutPWT,I’vegotaheadofmystory.Ihaven’trelatedhowsomethingbigwassettochangethevorld.

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ANINVENTIONTOCHANGETHEVORLD

InthemonthspostmyreturnfromCanada,myinterestinassistingnewventureswashighandIsoadvertisedmyservicesintheAFR.Atthattime,WaynePeters,andthenNigelStewart‐bothofwhomIfirstmetatBainandCo‐verygenerouslyofferedfreeofficespacewhilstIwasgettingre‐established.Istillgetachucklethinkingofthe‘Prof’(LaurieBaragwanath,aseniorcolleagueatBains,andeverthewag),callingupNigelat“NigelStewartandAssociates”andwantingtospeaktotheassociates.Oneday,myphonerang.AthickEuropeanaccentspokeintomyear:“Vehavesomethingvichvillchangethevorld.”Well,Ithought,ofcourseyouhave,andyou’vecalledme.Whatdowehavehere,Iwondered,someprizenutters,orsomethingabitinteresting??…Well,Isilentlycountedtoten,butIhadtoseethem‐lifecouldn’talreadybethatexciting.Twomencame,onewithascarfewrappedaroundhisneck,andintroducedmetoBrown’sgas.I’vejustfoundthefollowingWikipediadescription:“Brown'sgasisamythical2:1mixtureofoxyhydrogenthatcouldbeusedascarfuel.”Butin1984,Iwasbeingtolditcouldbeusedasanindustrialgas,withwaterastheclean‘waste’product,andIarrangedanapproachtoamajorsupplier.Nothingcameofit(surprise,surprise),thefeedbackhoweverbeingthattheproponentsweretoogreedyintheirequityrequirements.Well,itdidn’tchangethevorldafterall.Backtothedrawingboard.ANALYSTATLARGE

IntheprologueIhavealreadyrelatedsomeoccurrencesatPWT.Atfirst,Ireceivedamixedreception.Iwasknownasafundmanager,notasananalyst.Itoftenamazesmehoweasyitisforpeopletopidgeon‐holeyou.NooffencetothefolksofPWT,it’sacommonoccurrence.ThatprobablyexplainswhyIkeptlow‐keythefact,inlateryears,thatIwasapoet(Ihavewrittenover100poems–checkoutepoems.com.au)andaradiopresenter(I

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hadthatenjoyablegigfor2SSR99.7FMforabout2years).Somefolksseemtostruggleiftheycan’tputyouintoabox.ChrisTrumbullwasPWT’sHeadofResearchandheimpressedmeasahighlycommercialanalyst.HisrecordedinterviewwithCRA’sMD,forexample,showntoclientsontheboardroomTV,seemedaheadofitstime.Christoldmehewantedmetomakeasplashandtoresearchanentiresector.WesettledonBuildingMaterials,whichIwassoontodiscoverwasasectorbrimmingwithundervaluedstocks,e.g.Humes,Monier,ACI,Rocla,allsubsequentlytakenover.Havingcompletedthat,IpickedACIasonetoresearchinmoredetail,asreaderswouldhavegatheredfrommyhyperactiveprologue.OneofmychallengesinbrokingwasthatIhateddoingupdates.Updatesonthecoppermarket,updatesonACI,ABC,XYZ,younameit.Thelearning,thenewmaterial,wasusuallyverylimited.Itcouldfeellikeaproductionline.AtPWT,Iwasfreetoexploreotherstocksandopportunities.Thisgavethejobzest.IraisedfundsforanunlistedcompanycalledEquatorialSatellite–sadlyaheadofitstimeandnomatchforTelstra,thenthe‘900lbgorilla’–andinvestigatedotherhigh‐techstocks.Onetime,Igotintoseriouslyhotwater,throughnofaultofmyown.Iwasawarethatafriendhadstartedatechnologycompany.Oneday,inameetingwithDavidMacSmithofBT,Igatheredthathewaslookingatthesame‘space’,tousethecurrentlingo.Imanagedtogainaninsight–nothingtoosecretive,mind–whichIthensharedwithmyfriend.Shewentballistic,assumingthatIhaddiscussedherbusinesswithsomeonewithoutherknowledgeoragreement.Actually,Ihaddonenosuchthing….IhadbeenMrDiscrete…SoIdidwhatanyonewould,recognisinganhonestmisunderstanding–I‘suckeditup’.Stockbrokingisafascinatinggame.AtPWT,Iwasoftenunsurewhatthedealersweretellingtheirclients.Weretheyrecommendingmy‘buys’?Onceortwice,Iwentintothedealingroom,pretendingtoreadthe‘RedBooks’–theASXsummariesofeverylistedstock,AtoZ.Onthoseoccasions,Iwasn’t

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readingtheRedBooks,Iwaslisteningtothedealers’conversations.IhadtowaitforStreetsatHSBCJamesCapelin1995beforeIreallygotfeedbackfromdealersonmyrecommendations.ThereisanamusingstorythatI’vejustrecalled.MarkScott,oneofPWT’sdealers,respondedtomyannouncementonedayinthedealingroomthat“I’mgoingtoseeJennings(amajorhomebuilderinMelbourne)–anyonegotanyquestions?”MarkScottswiftlyhandedmeasheetwithalonglist.Iknewexactlywherehewascomingfrom.HehadcorporateclientswithNZconnections.ThismademymeetingwithJim,thenMD,inMelbourne,alongwithhiscolleague,whomIwillcallBen,ratherawkward.Justputtingitmildly.ItallstartedwithJimstridingintotheroom,handoutstretched,andhelookingmesquareintheeyesandaskingifI’dcometotakehiscompanyover.Well,afterwhatseemedliketenminutesofmyramblingdenial,Jimsaid“that’sthelongestexplanationI’veeverheard!”Withpropertycompaniesespecially,sometimesitishardtonailthefacts:thevalues,therisks,theexposuresandcommitments.Imanagedtogleanavaluation,Ithink,of$3/share.However,attheliftonthewayout,Benconfidedtome“ignorethe$3,that’sjustaJimnumber”.DespitethePWTjob’smanyattractions,itwasthecorporateaspectthatledmetodepartinearly1986.AsmuchasIrespectedthemindividually,IcouldnotworkinasystemwhereadviceIwaspermittedtogiveinstitutionalclientswasinfluencedbythefirm’scorporatebusiness.Forinstance,PWTactedforBrierley/IELandEquiticorpTasman.Icouldn’tfathomhowtheymanagedtolookafterbothsetsofclients.Ininvestment,animportantaxiomis:ifyoudon’tunderstandit,avoidit.Idecidedthesameappliedtojobsandconcludeditwastimetomoveon.

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I’LLGIVEYOUNINEREASONSWHYIT’SSTAYINGUP

Inthemid‐eighties,mydearfather,thelateRamdhanSimpson,hadavisionforSydney’sDarlingHarbour,atthattimeadilapidatedassortmentofwoolshedsanddisusedrailwaytracksituatedalongsidetheCBD.Hisvisionwastoreturntheareatothepeople.Atthetime,hewasahumblesocialworker,drivinghisVWCombivanaroundSydneyhelpingdownandouts,especiallyimmigrantswithpoorEnglish.Hisvanwasstockedwithofficialinformation,suchasbyCentrelink,inseverallanguages.Ramdhanwasoneofthemostwonderful,andoneofthemostunderrated,peopleIhaveeverknown.Ifhehadonebusinessfailing,itseemedtobethathetrustedpeopletoomuch.Buthehadabrilliantmind,awideviewoftheworld,wasaloverofallpeoples,andcarriedhugebeliefinlife’spossibilities.Onhisbrilliance,onceinEnglandhewastoldbyamilitarypersonofaproblemwithejectingpilotssafelyfromfighterplanes.Instantlyhemadeasuggestion,towhichcametheresponse:“We’reworkingonthatalready.You’reundertheOfficialSecretsAct.”RamdhanwasaSubud*member,asIam,andformanymonthshehadbeensearchingforasiteintheSydneyregionthatcouldaccommodateameetinghallfor2,000people.Ramdhanwasnotonlyavisionary,hewasaninfluencer,andeventuallyhemanagedtoassembleinSydney,formonthsatatime,ateamofexpertsfromallovertheworld.OnesuchexpertwasLuqmanMcKingley(thenknownasLuqmanKeele)whocreateddesignconcepts–themainoneofwhichIrecallwastheOrbisphere….allveryhightechandpeople‐friendly.*Subudisaninternationalorganisationthatespouseshumanvaluesanddevotionofone’sinnerlifetoGod.Manymembersundertakesocialandotherworthwhileprojectsallovertheworld.

Oneday,RamdhancalledmewhileIwasatPWT.Hesaidthatthepeoplebehindso‐calledProjectSunrisewerenotknowninbusinessorgovernmentcirclesandcouldIhelptoobtaina‘letterofcomfort’forNevilleWran’sNSWGovernment?IsaidI’dtry.

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Myapproachwassimplicity.Igotoutallmybusinesscardsandspreadthemonthedesk.Imadetwopiles:thosewhocouldhelpandthosewhocouldnot.Then,Iseparatedthosewhocouldintotwopiles:thosewhowould,andthosewhowouldnot.Thefirstpilewasverylonely:itwasjustRobertSkinner’scard,ofBainandCo.IcalledRobert.Hewastheman.HecameroundtotheSunburstPub,whichRamdhanhadpurchasedforProjectSunrisefromToothandCo,asProjectSunrise’sHQ.[Itookataxithereonce,and–recallingthatitwasoncetheMontgomeryArmswith,aslegendhasit,acertainreputation–Iwasacknowledgedwithaknowingsmile).Sothenextmorning,therewasRobert,brightasabuttonasheemergedfromhissportscarrightoutsidethepub.Isaid,“Robert,thanksforcomingsoquickly.”Herepliedwithageneroussmile:“Dahlan,whenyousayit’surgent,it’surgent!”(recallingthatbonddealthatgotawaywhenIwasatFP).Wegottheletterofcomfort.BainandCocamegood,withtheexecutive(JohnHarston)expressinghisviewthattheprojectanalysiswasthorough.PriceWaterhousebecameinvolvedtoo(JohnChegwyn),andtheprojectprogressivelybecamemoreandmoresolidandcredible.Thereweremanycrucialstepsalongtheway.OnewashowtokeepPyrmontBridgefrombeingdemolished(howveryclosetheycame!),whichwascouncil’splanatthetime.Ramdhanrelatedtomehowhedressedupinhissuit(aswimsuitorawetsuitwerehispreferredattire)andenteredaroomfulofcouncilfolk.Oneofthemturnedtohimandsaid:“MrSimpson,Idon’tknowwhyyou’rehere,thebridgeiscomingdown.”Myfatherrepliedwith,tome,thesefamouswords:“I’llgiveyouninereasonswhyit’sstayingup.”Well,ofcourse,itdid.TheonlyreasonoftheninethatIrecallisthatthepeoplewantedit.Absolutely.

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Thisbookisforhighlights(andlowlights)ofmycareer,andIwithotherscouldwriteawholebookaboutProjectSunrise,whichinmyeyeswasawonderful,courageousachievement–eveniftheproponentsdidnotachievealltheysetouttodo.WhatdidundoubtedlyoccurwastheredevelopmentofDarlingHarbourforthepeopleofSydneyandforitsmanyvisitors.Ihadtwofurtherinputsofnoteintotheproject,bothpostPWT.OneTuesday,Ithinkitwas,IreceivedacallfromLuqmanaskingwhetherIcouldraise$250,000forCDT*(ProjectSunrise’ssuccessor)byFriday.Yes.Itwasoneofthosetimeswhenyoucould.*CDT,CreativeDesign&Technologies.Itisinthenatureofsuchprojectsthattheyneverhaveenoughmoney,becausevisionariesrarelyhavelargebankaccounts.Theirmissionwassimplydoingtheimpossible.Anotherthingtheprojectrequiredwasaprojectsponsor.Thiswasmysecondinput.Iwasattendingalunchforfundmanagersandsuch,andatmytablewasGrantSmith,thefundmanagerforalargefirm.Ienquiredaboutthesortofprojectstheyinvestedin.Answer:fullydevelopedones.Itoldhimthathemightwanttoconsideranexception:DiscoveryVillageinDarlingHarbour.So,tocuttothechase,OceanicFundsManagementbecameleadproponentfortheproject,havingsatisfieditselfthatDiscoveryVillagecouldbecometheirflagship.Thatrepresentedabreakthroughatthetime,because–notwithstandingthatOceanicultimatelyfounditselfunabletoconsummateatransaction–itgavetheprojecthighcredibility,supportingthegrantofpermissiontoproceed–bytheDarlingHarbourAuthority,ifIhavethisright.CDTengagedseveralotherpotentialinvestmentpartnersintheproject,butalastheydidnotbearfruiteither‐withtheeventualresultthatCDT’srightsintheDiscoveryVillageleaseweresoldtoincomingdevelopers.WhatRamdhan,Luqmanandmanyothersachievedtogetherduringtheearly‐tomid80’sindemonstratingandpromotingthepotentialofDarling

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Harbourwasremarkable,astotheirvision,courageandbelief.IknowIcannotbealoneinthatview.YOUBETHEGOODGUY

AfterPWT,Ijoinedwithanewventuresfriend,GeorgePappas,toformPappasSimpson.Ourofficeswereonlevel65oftheMLCCentre.HowwemanagedthatfeatIdon’trecall.Unfortunately,ourexperimentwasunsuccessful,perhapsbecauseweweresosimilar–strongonresearch,butnotsoonbreakingdowndoorstowinbusiness.Reluctantlyandtoosoon,Iwasbackinthejobmarket.IjoinedValderElmslieJardineFlemingasa‘roving’analyston$100,000paplusbonuses.Myjobwastoscoutforopportunities,outsidetheframeworkoftheresearchdepartment,whichwasheadedbyShaneBannon.Thatsuitedmewell,givenmydislikeofroutine.ThefolksatValderElmsliewereapleasuretoworkwith.ApitythenthatIwasonlythereforafewmonths,forreasonsthatIwillmention.OnecompanythatIresearchedwasHeraldandWeeklyTimes.IwenttotheirMelbourneHQandmetoneoftheirexecutives.Enteringthebuilding,andthebusiness,waslikebeingairliftedbackintothe1800’s.Itwasunbelievable!And,aswediscussedthecompanyanditsdirections,itcametomeloudandclearthatthiswasacompanycryingouttobe‐wantingtobe‐takenover.Unfortunately,Ididn’treturntotheofficewithharddataandsolidarguments.IsupposeIwasjustimmersedinthesenseofwhatIhadjustexperienced.DealersrecommendedclientstobuyHWT,butnot,perhaps,aggressively.Onreflection,thatwasreasonable,andmyinternalreactionofdismay,wheninBrisbaneandseeingnewspaperheadlinesonthepathway

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thatMurdochwasbiddingforHWT,wasprobablyunwarranted.Whocouldhaveknownabidwasjustroundthecorner?AnotherstockthatIlookedatwasoneIalludedtointheprologue:UnityCorp.Thiswasthemid80’s,andanotherboomwaswellintoitsstride.Forsomereason,ShaneandIdecidedtotakeacloserlook,toseehowtheyworkedtheirparticularmagic.WeagreedthatIwouldplaythebadguy,andhethegoodguy.Idon’trecallmuchofthedetailnow,exceptthatUnity’scorporatestructureseemedinordinatelycomplex.Ourconclusionwasthatthestockshouldbeavoided.Goodcall.IfonHWTIwaslackingintermsofhardnumbers,myworkonBellResourceswastheopposite.Ilookedintoitverycloselyand,backedbysome20pages,itcameupasastrongbuy.Severalreasons:therewasgoodvalue,thebrilliantHolmesàCourtwasamajorshareholder,andthemarketwasstrong.Thedownsideseemedtobeprotected.Itwastimetohittheroadandmarketmyreport.YOU’VEKNOCKEDOVERALLMYOBJECTIONS

Oneparticularclientleftmewithastrongimpression,andValderElmsliewithanorder.Themeetingbeganwiththeclientexpressingseveralreservations.Idon’trecallwhattheywere.However,afteraboutanhour,heannouncedthatI’dknockedoverallhisobjections.Forsomeonewhowasneverquitesureofhisabilitytopersuade,thatwasmostencouraging.TherewasacrucialdenouementtotheBellResourcesstory,anditremindsmeofonesage’scommentthat“whenthefactschange,Ichangemymind.”Butthatformspartofthenextstory.

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Byearly1987,Iwasstrugglingtofindfreshinvestmentopportunitiestorecommendtoclients.Indesperation,IwenttoWellington,NZ,insearchofadifferentperspective…andtomeetPaulCollins,thenMDofBrierleyInvestments.Ireturnedwithoutmuchinvestmentconviction.Increasingly,Iviewedthestockmarketas‘exanalyst’,anexpressionforwhensharepricesescapethe‘gravitationalpull’ofunderlyingvalue….whichmaybeapoeticwayofdescribingit.Forsomereason,IputRenoufAustraliaunderthemicroscope.“Whatistheiredge?”,Iwondered.Onlyonewaytofindout:askthem.SoIwentovertothehighriseonKingandGeorgetoputthequestiontoMDColinBeardsley.RenoufAustraliaoutoftheblueofferedmeapositionasportfoliomanager,coveringsmallstocks,alongsideGregPerry(ofsubsequentColonialFirstStatefame),whocoveredthebigstocks.Thecompanywaspackedwithhighcalibreexpertsontheeconomy,oninterestrates,evenonpsychology.Itwasbristling.Ihadtojointhem.Itwasmychancetomanagemoneyagainand,onceagain,withouttheshort‐termimperativethatusuallyhandcuffsfundmanagers.Soitwasa“sorry,butgoodbye”toValderElmslie.CLOSETHEPOSITIONBYCOB

AtthetimeIjoinedRenouf,asIjustmentioned,themarkethadgone‘exanalyst’.Soanelementofdangerwaspresent.Thatwasmyoverridingperspective.Thatsaid,therewasstillvalueonofferinthemarket.WaughandJosephson(W&J),forinstance.ThiswasalittlegemIhadunearthedatValderElmslie‐withLaurieSaville’shelp,asIrecall‐somyfirstmovewastocontactthemtocheckwhetheritwouldbeinorderforRenouftotakeaposition.Itwould.

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IhadmetthechiefofW&J.Thiscompanywasfruitripeforthepicking.ItsmarketcapitalisationwasaboutthesameasitsinventoryofdozersandotherCaterpillarequipment.Thebusinesswasvaluedbythemarketatpracticallynil.Someonewasgoingtoseethat.Renoufboughtsharesandsoon,sureenough,notonebuttwobiddersemergedforthecompany.Gregimpressedmewithhisstronggraspofindustryandcorporatestrategy,butweworkedquiteseparately,unlessoneofuswasonvacationandneededtheothertolookafterpositions.Itsohappenedthat,whenthe’87Crashhit,Gregwasoverseas.SoallofasuddenIfoundmyselfkneedeepintryingtoprotectGreg’sholdingsaswellasmyown.ThismaybeanopportunemomenttoreturntotheBellResourcesstory.SincemyValderElmsliereport,thiscashrichcompanyhadbeenastrongperformer,supportedbyanexplosivemarketandchasedbycorporateraiders.However,aroundthetimeofthe1987Crash,HolmesàCourtsoldhisBellResourcesholdingtoBondCorporation.Suddenly,horrorofhorrors,BellResourceswascontrolledbyAlanBond.Well,onhisrecord,I’dhavebackedhimtowinbacktheAmerica’sCup–butIdidnotwanttobeinvestedinoneofhiscompanies.I’dseenhisWaltonsdisaster,andthatwasenough.IclosedoutRenouf’spositionaggressively.BellResourceshadbeenastrongbuy,butthefactshadchanged:thepricewasmuchhigher,andsowastherisk.WheneverGregorIwishedtoincreaseourportfolio,wehadtorequestpermissionfromColinBeardsley.Invariablyitwasgiven.Forinstance,whenIhadidentifiedPineValeInvestmentsasacheapstock,Iwantedtobuysomethinglike10%ofthecompany.Theshares,eveninthatstrongmarket,werelanguishingataround60cents,buttheirapparentworthwasaboutadollar.Theinvestmentcaseseemedgoodandwetookaposition.However,JohnKelly‐Jones,thenacolleague,kickedthePineValetyresformeinQueenslandandhisfindingsledustobelievethat$1.00orsocouldbeoptimisticgiventheapparentconditionoftheassets.Wesoldtocorporate

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raiderIEL,Ibelieve,realisingatidyprofitjustamonthorsobeforetheCrash.Well,sometimesyouhavetogetlucky.The’87CrashwashoweverthedeathknellforRenoufAustralia.I’mgenerallynotthatsortofperson,butitmademeangryforanentireweek,evenatnightifIawoke.I’lltellyouwhy.AsIexplained,ifwewantedtoincreaseourmarketexposure,weneededapproval.WehadassumedthatthefundingwasprovidedbytheRenoufgroup,anetworkofcompaniesspanningAsia‐Pacific.Soitmaywellhavebeen.However,thefundingprovedtobeshortterm.Asin‘24hours’shortterm.So,letsplaythatback,.....wewereborrowingfromthe24hourmoneymarketinordertofundequitypositionsinamarketthathadalreadyrisen60%incalendar1987alone…..Yes,Iwasangry.Thecompanyhad‐inmynarrowviewofthereality,atleast–needlesslybeendestroyed.Colinkepttheteamonforaslongashecould,butitwastheTitanic.IleftaroundFebruary1988,afterclosingoutremainingpositions.Gregdidn’treturn,asthereprobablywasn’tmuchpoint.IwasquiteproudofthefactthatImanagedtosellmytwounlistedholdingsataprofit.Onechallengingsituationstandsoutinmymemory.Itwasalifelessonformeintermsofthedifferencebetweenfriendshipandlegitimatecompetition.Renoufstillhadasub‐underwritingcommitmenttoPineValeInvestments.ColinapproachedmeonedayandinformedmethatithadtobeclosedoutbyCOB(closeofbusiness).ColinwasawarethatIhadanofferfromIanGreenyer,aclosestockbrokerfriend,at,Ithink,50c/share.Ianwasactingforacorporateclient,Ieitherbelievedorhadbeentold,Icannotrecall.WithmyCOBinstructionwellunderstood,InegotiatedwithIantoofferhimthestockatabout55cbyCOB,providedhewouldgivemetill12pmthefollowingdayanoptiontoacceptthe50c.Thatway,Igainedpreciousextrahourstofindabuyerat55c.Atonepointinthejourney,Ian’sclienttriedtocancelthecommitment,butI

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prevailed,sayingIdon’tthinkyoucandothat.Hardtodowithagoodfriend,butwemutuallyrespectedourpositions.Bythe12pmdeadlinethenextday,Imanagedtofindanotherbuyer,therebysavingmyemployer–ormorelikelyitscreditors‐$200,000,equivalenttotwoyears’salary.Thatstandsasoneofmyproudestachievements,becauseIcouldeasilyhavecompliedasrequestedandno‐onewouldhaveknown.Itwassuchashametoseeaonce‐successfulcompanycollapseinaheap.Iwitnessedthatoncemoreafewyearslater,butthatcasewasnosurprise.Iwasthereona12monthcontracttohelpfundmylastditchattempttoemigratetoCanada….thefirmlastedjust6moremonths….butIamaheadofmyselfagain.BULLMARKETSHAREHOLDERS

Earlyin1988,themarketwasthewalkingwounded.Itdidn’treallystarttorecoveruntillate1992,welloverfouryearslater(soundfamiliar?).HughWallaceandIhadre‐establishedcontactwhilstIwasatRenouf,andheinvitedmetojoinDartCorporation,ofwhichhewasMD,alistedinvestmentcompany.Hughwasnotshortofbackers,givenhiscorporatesuccesseswhilstatBT.Hewasknowntobeathorough,persistentandshrewdplayer.AsaDartshareholder,youfeltyourmoneywasingoodhands.Soitwasadelighttobeinvitedtojoinhisteam.Myrolewasas‘creative’analyst.“Idon’tmindifyouspendallweeklookingoutthewindow(hey,thatwindowsanalogyagain).Iknowyouwillcomeupwithideas.”Actually,Idid.Icameupwitharaftofideasthat,accordingtomycalculationsatthetime‐andincludingoneideathatwouldhavelostmoney‐offeredatheoreticalreturnofover100%pa.However,Hugh’sneedsformyservicesevolved,morphedeven,intoarolethatwasnotnaturalforme.Heneededin‐depthcorporatereports,thekind

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thatprovidesestimatesof,say,howmanyBentleysthecompanyhas(anon‐trivialquestion,markyou),orthecapacityutilisationforspecificfactories.Inotherwords,details.Fiftypagereports.Sorry,wrongguy.Iwasn’tgoingtolastlonginthatrole.Ididn’t.Ilastedjustfivemonths,andHughandIpartedways.Ireceivedagenerousterminationbenefit.However,thatwasn’tquitetheendofour‘Dartrelationship.”Fastforwardafewyears.WarwickFairfaxhadlongmadehisill‐fatedbidforFairfax,justpriortotheCrash,andthereby,onepresumed,decimatinghisfamilyfortune.Oneday,theSydneyMorningHerald,aFairfaxpapernoless,publishedwhatstruckmeasanextraordinarilyobtusearticleonDartCorporation,headed“René,whereareyou?”ThiswasashallowreferencetothelateRenéRivkin,thenoneofDart’sshareholders,whomHughwasallegedlytryingtocontact.ThearticlewentontodescribeDartasabullmarketcompany.Inotherwords,thebullmarketwasover,sowhatwasthepointofDart’scontinuedexistence?IwrotetotheSMH,copytoHugh,explaininghowtheyhaditcompletelywrong.Dartwasactuallyabearmarketcompany,buyingcheapstocks.Tome,itseemedDart’sproblemwasitsbullmarketshareholders,whowantedout.Iendedmyletteronanironicnote,saying“Warwick,whereareyou?”Hughwasthrilledandmostappreciativeofmyletter,andgraciousindeed,givenhowIhaddisappointedhimsomethreeorfouryearsearlier.HetookmetoasumptuouslunchatBennelongPoint(OperaHousecomplex–and,forthoseinterested,BennelongwasanaboriginewhobefriendedtheBritishbackin1788).Thenhetoldmehehadconsideredrehiringme,butdecidedagainstit.“Itwouldbelikekeepingapeacockinacage.”Ha!–thatwasworthabellylaughortwo.

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Hughisoneofthosespecialfriendsfrommycareer,likeGregPerry,MichaelWarren,IanGreenyer,MauriceLoomes,Pottsyandseveralothers.OnefriendIhaven’tmentionedwasRichardGordon,abrokerwhileIwasatFriends’.Hewassuchadecentperson,andsoprofessional.Sadly,hecontractedararecancerinvolvingthelossofoneeye,anditclaimedhislife.Meetinghisfamilyatthefuneralwasatouchingoccasion.Butback,foramoment,toDart.WhatIcalledthebullmarketshareholderseventuallyprevailed,andthecompanywasvoluntarilywoundup.AsfarasIrecall,shareholdersreceivedtheoriginalassetbackinginfull.Hughsailedoffintothesunsetwithaterminationpaymentof$500,000.SELLINGHALFYOURBUSINESSCANBERISKY

Newventuresarerisky,ofcourse,butsellinghalfyourbusinesscanbeevenriskier.IfoundthatoutwithCoralSeaAquaculture,inwhichIwasasignificantshareholderintheearly90’s,ifmemoryserves.WehadpurchasedlandintheTownsville,Queenslandregionanddecidedthat,tomanagetherisk,wewouldcommencewithatrialprojectinSingapore.Sofar,sogood.Therecameapointhowever,asisusualforsuchprojects,whenweneededanotherroundoffunding.OneofBT’smanagedfundscametotheparty,whichsoundedexcellentnews,giventheirpedigree.However,oureuphoriawasshortlived.Atacrucialstageoftheproject’sdevelopment,theshareholdersfailedtoagreeonhowtoproceed.Everythingstalled.Meanwhile,BThadsoldmanagementrightstothefundandwewerenowinbedwithadifferentgroup.Fromthatpointon,itwasdownhillalltheway.Frommyperspective,no‐onewasatfaultandtherewereseveralfactorscontributingtotheproject’sdemise,buttheneedforcompatibleco‐shareholdershadinmyviewbeenseriouslyoverlooked.

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CANADAORBUST

AfterDartCorp,theemploymentenvironmentfeltquiteuncertain.Fortuitously,acallfromIanGreenyeralertedmetoFriends’needforaportfoliomanagertohelpoutwhileoneoftheirswasonanextendedperiodoverseas.Thissuitedmefortworeasons.Firstly,Iwouldbeworkingforoldfriends,nopunintended.Secondly,Iwasinthefinalthroesofre‐attemptingtoemigratetoCanada–thistime,assistedbyanimmigrationlawyer–whichmeantthatmytakingapermanentroleinSydneydidnotfeelappropriate.However,thesalarywasmodest,unlessonetookasubsidisedhousingloanandacar,neitherofwhichIwanted.Meanwhile,the‘message’comingfromCanadianimmigrationwasthatIneededto‘makemoremoney.’So,asTonySmith,Friends’InvestmentManageratthetime,wrotewrylyonmyGoodbyecardafewmonthslaterwhenIjoinedstockbrokersBNZNorthona12‐monthcontract,itwasacaseof‘Canadaorbust’.BNZNorthpaid$$upfront,plusamonthlycontractsum,withthreemonthspaymentontermination.Oftheupfront$,AlanCashmanlaterremarkedwittily,“thatwasprobablysomethingImightnothavedone.”MejoiningBNZNorth‐thatwasdefinitelysomethingIoughtnottohavedone.BNZNwasawalkingdisaster,collapsingjustsixmonthsafterIjoined.Withover100yearsofhistory,itbecamehistoryfasterthanthatfamousship.Finally,CanadianImmigrationsaidno.Theythrewthebookatme.Accordingtothem,Ihadchangedjobs,myname,myreligionandmywife.Idon’tknowwhatkindofprejudiceallthatimplied,orwhatbrandofignorance.Asitwas,Iwasonlyapplyingforaprovisionalvisa,renewableintwoyearssubjecttomeetingdefinablebusinessmilestones.JohnRussell,myventurepartner,plusoneofourmutualbusinesscontactsinVancouver,stronglyassertedmycredibilityandtheskillsIhadtooffer.Itwastonoavail.Itwasdefinitelythe‘orbust’option.

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Ihavenoregrets.Canadaisawonderfulcountry,withwonderfulpeopleandhugepotential.ThewishtoliveonthatpartofGod’searthwaseasytounderstand–butinmycaseitwasawinforthebureaucrats.CLOSINGTHEDOORS

Reflectingonmycareer,IrealisedonedayhowmanyfirmsIhadworkedfortwice–includingoneIhaven’tyetmentioned.IworkedatMLCtwice(theintermissionbeingforastintatZurichasanactuarialanalyst);BainandCo(HoareGovett);FriendsProvident(PWT,PappasSimpson,ValderElmslie,RenoufAustralia,DartCorp);TyndallInvestmentManagement(AustralianEthicalInvestment).Whysomanyjobs?RobFerguson,thenMDatBT,hitaholeinonewhenhedeclinedtohiremein1984(despiteHugh’ssuggestion),tellingmefranklythathebelievedIwastooindependent.Hewasright.Ajobiswhereyou’retoldwhattodo,right?Ajobdescription.Aboxwithsixsides.Whereyouturnupat9am,tickalltheboxes,thentickthemagainifit’snotyet5pm.Insomecases,whereyouaresupposedtolovethejobmorethanyourspouse.I’mpullingyourleg.Especiallyifwe’retalkingaboutBNZNorth.AtBNZNorth,afterIhadbeentherescarcelyamonth,weweren’tevenpermittedtoissuereports.Managementdecidedtheyneededtosaveonpaper.Conversationsatthewatercoolerescalated.Oddballpoemsstartedtobereadoutatmorningmeetings.Youweren’teventhere,butyouknowthatwasn’tfun.

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Afterafewmoremonths,thecurtaincamedown.Theoldgirlofafirmhadtoclose,aftermorethan100years.Asemployeesgatheredtogetherforthenews,tearsflowed.EvenIwassad,andIhadbeenwellrewarded.Withnoparticularjustification,thisIdecidedwastheendoftheroadformyrelationshipwiththefinancialservicesindustry.Wherearethemorals,Iwantedtoknow.Whereisthecompetentmanagement?Wherearetheinvestorswithatimeframelongerthannextweek?Whereistheconstancy?Allrhetorical,ofcourse.Moralsarewhereyoufindthem.Soareconstancyandothervirtues.Youjusthavetokeeplooking….especiallyinthemirror.In1990,IestablishedSentimentalBlokePublishing,creatingtworangesof‘SpecialFeelings’greetingcards(whichwereinover50storesattheirzenith)andwritingabook.Eventhoughtheventureconsumedlargeamountsofmoney,itwasaqualifiedsuccess:itcreatedpotentialforafutureventure,basedonpopularityofthelogo,someoftheJapaneseartist’sillustrations,andsomeofthepoemsandstories(visitwww.epoems.com.au).Oneamusinghappeningfromthistimeisworthrelating.HideoTsubono,theartist,wasshowingmyconsultantMarcusandmehissecondbatchofillustrations,scatteredalloverhisloungeroomfloor.Heinvitedapproval.IfIdidn’tlikesome,hewoulddothemagain.Onthisoccasion,oneofthedesignshadastrangelook,resonantofaphallicsymbol.ItriedtobediscreteinsayinghowIfeltabouttheillustration,butIwasembarrassed.Myexplanationbecameclumsierbytheminute.“Dahan”,saidHideoatlast(hecouldn’tpronouncethe‘l’),“yourEnglishisgettingworse.”Weallcrackedupinunison.TIMETOWRITEABOOK

Ioncehadthecrazyideaofwritinganautobiography.Whatalaugh.Mydadhadmenailedwhenhepined“ortadonethis,ortadonethat.”Well,Iwrote

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oneanyway,about100pages.Soonafterwards,IflewtoAmerica.Uponmyreturn,Ire‐readit.Itwasawful,andallbutonepageendedupinthebin.Sotherewentmywritingcareer….Untiltwochancehappeningsoccurredincloseproximity.FirstwasthelettertotheSMHaboutDartanditsbullmarketshareholders.ThesecondwastoacorrespondentfortheWeekendAustralian,thelateMaxHarris.Inhisreply,hegenerouslyadvisedmeto“enjoythewonderfulworldinsideyourhead.”“OutofCharacter”(‘OUCH’),republishedin2012as“JourneysofaStockbroker”,wastheresult.OUCHwasn’tahit,butmyfavouritereviewsofarisJohnRussell’s“goodbook,nicepoems,weirdsenseofhumour.Sendtenmorecopies.”GOLFHAPPY

Thepublishingventurewasneverabletosupportafamily.Unabletoobtainajobinthe‘recessionwehadtohave’oftheearly90’s,Ibecameafreelancecopywriter,withassignmentsfortheQantasIPO,LendLeaseInvestmentAdvisors,PeterBakerOpticaland,lastbutnotleast,TerreyHillsGolfandCountryClub.Idon’tplaygolf–thoughtheguysatTyndallreckonedmyputtingwasawesome(relativetomydriving,itwas!)–andsoitwasquiteachallengewhentheJapaneseclientaskedmetowriteaparticularpageoftheirmarketingbookwiththetheme‘GolfHappy’.Iremainproudthatmyeffortblewthemarketingmanageraway.Thepagebeganwithsome‘golfhappy’scene‐setting,thencomesapoem,plussupportingprose:

“Forgolfisbeyondasimplegame,It’sadailysummaryoflife;It’stheconstantchallenge,Andtheundeniabledelight….

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WhenIseethosetrophies,Iseethosefaceswiththeirexpressionsofjoyandslightdisbelief;Ihearthebustleofcontestsnowover,andhowitwasorcouldhavebeen.Istillseethosesmiles;andtheynevergetold…that’sthethingaboutsmiles.”

Iwrotealmostallofthemarketingbook,andmostoftheadvertisingcopy.Itoyedwiththeideaofworkingasafulltimecopywriterbut,asbyRobFerguson,IwasfoundoutbyCoswayCommunicationswho,Iunderstand,believedIwouldnotremaincommittedtosucharole.Theywereright.Wantingtoworkforothers,ornot,Ihadnooption.Ineededtoreturntothefinancialservicesgame,oritwouldsoonbetimeformyfamilyto‘blowbubbles’.Well…maybeitsethicswerebetterthanIhadgivenitcreditfor.Unfortunately,withmynextrolethematterremainedinthebalance.THEY’RENOTBUSINESSMEN

AphonecallfromoneofmypalsfromValderElmsliedays,LaurieSaville–whobecameandremainsaclosefriend‐informedmethatananalystwasrequiredatBurrowsLtd.Itwasmid‐92andthemarketwasclosetoits‘predawn’nadir:youknow,likethenightisdarkestjustbeforethedawn.Themarketwasonthevergeoftakingoff,buttherewerestillafewmonthsofpaintoendure.ThatwastheenvironmentwhenIsteppedintoBurrows’officeson,strangely,threemonthsprobation.Welltherewasahumilitypill.Allproceedednormallyforawhile.Ipublished‘buy’reportsonAGLandonLangCorp,bothofwhichperformedwellinduecourse.ButthenalongcameLaserHoldings.Itriedtoavoidmanagement’snudges,butfinallyIwasrequiredtotakealook.

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Ireturnedwithgoodnewsandbadnews.Thegoodnewswastheirpeoplewere–inmyopinion‐honestandsmart,andtheirtechnologyhadinterestingpotential.Thebadnews:theywerenotbusinessmen.Treadingonpeoples’egosisgenerallyabadidea.IknewthatfromwhenIhadbeentold–suchasbyMauriceLoomes‐thatmyworkwasbelowpar;itwasnotagoodfeeling.SothenitisquiteeasytoseewhyIdidnot‘passGoandcollect$200’whenmythreemonthswasup.Thedisaster–frommyviewpoint‐struckonemorningmeetingwhenitwasannouncedthatclientswouldbecominginforapresentationonLaserHoldings.CouldIkeepmymouthshut?Icouldnot.“Idon’tthinkweshouldpromotethiscompanytoclientsuntilwearehappyaboutitfromaresearchpointofview.”–Ithinkthat’showmysuicidenoteread.Sadtosay,LaserHoldingswentbustabout18monthslater…aroundthetimethatIandmy(second)youngfamilyalsonearlywentbust,owingtomyinabilitytofindwork.WALKINTHEPARK

AroundEaster1994,IwasgrantedaninterviewbyLouisNiederer,thenResearchHeadatHSBCJamesCapel.LouisandIhadcrossedpathsatBains,some14yearsearlier.JamesCapelwasinatoughspot.Severalsenioranalystshadjustbeenpoachedbyarivalfirm.(Atonepointaboutthreeyearslater,AdamSpiers,anotherJamesCapelite,toldmethat,whilsthewasthere,therehadbeennolessthansevenmajorcrises.Oh,thejoysofstockbroking).Sotherewasanopeningforanindustrialsanalyst.Iwastoldithadmynameonit‐IfIcouldpersuadeLouisandtheMD,AlecBurt,thatIwouldstay,given

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my‘who’swho’listofpastemployersandmyevidentlychronicallyitchyfeet.Talkaboutbeingrumbled.Iwaspalpablytransparent.Iundertooktostayforthreeyears,providedJamesCapelwouldreciprocate–acheekyrequest,butitreflectedmypersonalobservationthatbanksmakepoorownersofstockbrokers–differentcultures.IjoinedinAugust1994afterawaitofaboutthreemonths.IrecalloneconversationwithAlec:Hesaidhiringmewasfinewithhim,buthehadtocheckwithLouis,whowasinLondonatthetime.IamprettysureIhadasimilarconversationwithLouis.However,beforetheyeventuallymadeuptheirminds,I’dlostinterestintheoutcome:myfatherpassedaway,aheartattackinbedabout5or6am.He’dbeenglowingtheeveningbefore,andIcanstillseehisfacealllitupaboutsixinchesfrommineashewaxedlyricalabouthisprojectideasforVietnam.(Incidentally,RamdhanbecamearepresentativeoftheInternationalRedCrossforVietnam‐where,duringthehigh‐riskyears,heposedasatouristinanattempttoassistpeopletoescapebeforethecommuniststookover).SoatlastIjoinedJamesCapel,whichprovedafountofnewfriendships–amongthemMikeWebb,NeilDoyle,JamesTsiolis,PatrickBennett,MarcusTuckandMichaelChun.Louiswasanexcellentboss,veryhappytoletyoujustgetonwithit.Fairlysoon,asperusual,Ihadtoundertakeamajorreportinordertore‐establishmyselfinthemarketplace.Wasthisdéjàvu,orjustadream….Theopportunitysoonbecamecrystalclear:JamesHardieIndustries‐atthetime,aragtagofdisparatebusinessesinthewakeofhavingterminatedtheirpreviousmainstay,asbestosproductsmanufacture.Notsurewhattodo,theyhadtriedtocovertheirbetsbysprayingmoneyindifferentdirections,suchaswindowsmanufactureandFowlerbathroomware.Meanwhile,theyhadperseveredwiththeirnewfibrecementbusiness,heraldedasareplacementforasbestos,thoughtheywerestillunsureofitsprospects.

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Investigativeresearchhastobeconductedwithalacrityandno‐holds‐barred.Otherwise,it’sjustthesameoldtiredbrokeryadayada.ThefirstthingwastolookattheHardieboard:whatsentinelsofcorporateAustraliawerepresidingoverthisseemingjumbleofacompany?Wellguesswhat:JamesCapel’sChairmanwasontheJamesHardieboard.How,IposedtoLouis,shouldIplaythatone,givenIwaslikelytobecriticalinmyreport?“Goforit”,hereplied,givingmeafriendlyslapontheshoulder.“Don’tworryaboutit!”GoforitIdid.KeithBartonimpressedmeasHardie’srecently‐installedMD.Heturnedouttobewellontopofthesituation,havingunearthedtheoldbusinessplan,thenrewritingitfromthegroundup.Innotime,Ifoundmyselfseriouslyinterestedinwherethiscompanywasnowheading.Onewordcametomind:transformation.Someyearsearlier,Hardie’shademployedconsultantstoassessthepotentialoftheirfibrecementtechnologyintheUSmarket.Theirconclusionwasinthenegative.ButBartonwashavingnoneofit.Hewasgoingin,bootsandall.Aswenowknow,Bartonwasright:itsfuturelayintheUS.Myin‐depthreportonJamesHardiewasasuccess,ifnotinitially.Ofthe20‐oddinstitutionsIpresentedto,‘X’(PaulXiradis,currentlyofAusbilDexia)wasoneofthefewwhoboughtthestory.Oneresponsetomyspiel(afterthetenthtimeorso,that’swhatitfeelslike)was“Isitawalkinthepark?”Itwasn’t,ofcourse.Andthereweretheasbestosliabilities–butno‐onecouldhaveforeseenthepicklethatafuturemanagementandboardcouldhavebecomemiredinyearshence,andrequiringawholenew,andhighlycomplex,agreementtoensurecompensationforuntoldyearstocome.Atthetime,theinvestmentcaseseemedcompelling.Aftertenyearsofflatlining,thestockwascheap.Overthenextten,thestockmorethanquadrupled,albeitthereweresubstantialupsanddownsalongtheway.

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Anothermajorreportofminethatseemedground‐breakingatthetimewasonBoral,whichIpreparedjointlywithNeilDoyle(energyanalyst)andJamesTsiolis(report/datacompilation).Itwassubtitled“Re‐energised”,apunononeofthereport’smainthemes,i.e.thatweexpectedBoraltoacceleratethegrowthofitsenergybusiness.Someyearslater,ofcourse,BoralspunthatofftobecomethehighlysuccessfulOriginEnergy,underGrantKing.LifeatJamesCapelmaintainedtheethosofitsfraternity,withcontinualdramas.Oneday,LouisandMDAlechadadisagreement.JustasinthesayingthataSmithandWessonbeatsfouraces,Louislost,andleftthecompany.Seeminglyoutofleftfield,MartinEarptookLouis’position.ShortlyafterMartin’sappointment,itwasperformancereviewtime.Myofficehappenedtobeadjacenttohis(andLouis’beforehim).“Idon’tknowwhatyoudointhere”,Martinwavedinmyoffice’sgeneraldirection,“butwethinkyouaredoingagoodjob.”Sensationalwords….maybesomedaytheymightbeengravedonmytombstone(carefulwhatyouwishfor).Sadly,however,mylove/haterelationshipwiththebrokingindustrywassoontobetestedyetagain.Afterjust14monthsinthejob,IandnineothercolleaguesweresummonedbytheMDtotheboardroom.Weweretold,withcoldbrutality:“Thisisnotadiscussion,youareallterminated.”So,Iwasbackonthejobmarketin1995,justpriortoChristmas.Fortunately,myterminationpaymentcoveredmeintotheNewYear.NINEINTERVIEWS,ONECOMPANY

Ittooktimeformetolocateanotherpermanentpositionbut,justpriortoleavingCapel’s,Irangclientstothankthemfortheirsupportand,insomecases,toaskiftheywouldkeepmepostedonanyopportunitiestheyheardof.

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ThatishowIcametojoinTyndall,whoalwaysseemedinterestedinthefinedetailofmyresearchfindings.Withthem,itwasn’tsomuchaboutwalksintheparkas“whatdoyouhaveforthatlineinyourmodel?”.Therein,forme,laytheirinherentcredibilityasavaluemanager.Asusual,Iamaheadofmyself.HowcouldIforgetShawStockbroking?MeetingHaroldShapiro,theirMD,inearly1996wasanabsolutepleasure.HecommissionedmetowriteareportonKeycorp,awannabetechcompanyinthebanktellerequipmentmarket(cardreadersandsoon).IfIrecallcorrectly,weagreedonaflatfee.Induecourse,IwrotewhatKeycorp’sthenMD,JohnWood,generouslyhailedas‘extraordinarilygood’.Iinterviewednineexecutives–forme,thatwastheextraordinarypart–whichIfeltwasneededduetothecomplexityofthebusinessandthenewnessoftheexecutiveteam.WorkingforShawwasoneofthehighlights,briefthoughitwas,ofmystockbrokingdays.There,too,IcaughtupwithpalsPeterHannahandHaroldMilnerfrommy‘glorydays’asabrokerandfundmanager.Notthattheyearstofollowwerelesschallengingorevenlessinspiring.Inhindsight,thefollowingtenyearsorsoofmycareerto2008heldthreethemes:stability(notinthestockbrokerlexicon);education/exploration‐especiallyaboutsustainableinvestment;andthirdly,strivingforindependence,bydevelopingabusinessmodelforsustainableresponsibleinvestment.ResonantofmyattemptedemigrationtoCanadaandthe‘needtomakesomemoney’,IknewmythirdambitionwouldbeunreachableunlessIcouldachieveliftofffromthegravitationalpullofmonthlypersonalexpenditure.Ultimately,Tyndallobliged,but,asIwillrelate,Ihadtosailfaroutofmycomfortzonetopursuethatgoal.Self‐imposedpaindeservesnosympathy,butmypersonalmissionforindependenceeventuallypaidoff.

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VALUABLEDIRECTIONS

Idon’tknowhowI‘scored’thejobatTyndallinearly1996.DougLittlewasInvestmentsDirector,andatonepointinmyinterviewIcouldn’trememberwhatIhadjustsaid!Iwassoembarrassed.Whoknowshow,butsuddenlyIwasoneoftheTyndallteam.Valueinvestingtechnology–ifIcancallitthat–sharedaqualitywithothertechnologies:itworkedfromDay1,butboywasthereroomforimprovement!Iwas,inmyfirstTyndallincarnation,hiredtolookaftertheirresourcestockvaluations.Thisinvolvedbuildingmodelsfromthegroundup,reflectingthefactthatTyndallwasthenfarmorefamiliarwithindustrialstocks.ResourcestocksweretheCinderellaofTyndall’suniverseatthattime–aformativetimeforTyndall(inmyopinion)whichhadalreadyrecededtothevaluationdarkagesbythetimeIleftthefirmforthesecondtime,inApril2008.Notably,in2005TyndallachievedwidespreadrecognitionwhenitwonS&P’sawardasFundManageroftheYear.IwoulddescribeTyndall’svaluationmethodologycirca1996asGeneration1.By2008,IbelievedtheyhadprogressedtoGeneration3andwereontheirwaytoGeneration4–incorporatingESGfactors(environmental,socialandgovernance).Idon’tbelievethatthatprocessofrefinementcaneverstop,becausenewinsightscontinuetoemerge.Alllifeisdevelopmentordecay,andinvestingisnoexception.Notsurprisingly,itwasn’tlongbeforemywheelswerespinningagain.Ihadbuilttheresourcestockmodels,andalltoosoonroutinewasclaimingascendancy.TherewasnocareerprogressionformeatTyndall.Thejobwasthejob.IthadbeenasuccessfulformulaforTyndallformanyyears,butalas

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itwasnotasuccessfuloneforme.Meanwhile,mysearch–andmylonging‐forawaytoengageinsustainableinvestinghadcontinued.EnterAustralianEthicalInvestment(AEI),basedinCanberra,whichhadadvertisedthepositionoftheirinauguralGM.ETHICALLESSONS

WhenItoldmywifethatIhadwontheAEIGMguernseyinCanberra,sheliterallyrandownthecorridortoembraceme.Sheknewjusthowimportantitwastome.Eventhoughitactuallymeantustakinga35%haircut–takingusfromcomfortabletojustOK–itmeantIcouldatlonglastdosomething,withothers,thatIactuallybelievedin:ethicalandsustainableinvestment.IwaswithAEIjustoneyear.ItwasayearthatsurelyIwillnotforget.Ilearnedsomuchaboutethicalandsustainableinvestmentanditwaswonderfultoworkinanenvironmentofpeers,superiorsandclientswhowerenotjustdrivenbythebottomline.Theirsinceritywasgenuine.TheywereseriousandprofessionalaboutmanyofwhatIconsideredtobetherightissues.And,formyself,Iwasfullyimmersedinseveralkeyfacetsofthebusiness.WorkingwithinvestmentsdirectorAlistairClarkwasadelight.Givenallthis,leavingAEIsosoonwasanotherlowpointforme,andittookthewindoutofmysailsforquitesomeyears.Forsomereason,directorshadnotbeenreadytodelegatemorestaffmanagementdutiestome,preferringtoretainthatpower.Meanwhile,IfeltthatsustainableinvestmentmeantmorethingsthanespousedbyAEI,whosefundsseemedtobemoreabout‘Green’investmentatthetimethanaboutthebroaderconceptsIhad.Somaybetherewasadivergenceinthinking,Iamnotsure.Intheend,weagreedtodisagreeandIreturned,somewhatdownhearted,tothejungleofSydney,uncertainaboutthefuture.Iwouldprobablysoonbeearningmoremoneyagain,butwouldthatbeapyrrhicachievement?No,Ihavelongbeentoomuchtheoptimistforthat.

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WE’REGOINGTOBE****RICHForthisstory,IneedtobacktracktoJamesCapeldays.JamesTsioliswasonepersonwhoparticularlyintriguedme.Herewasananalysttowhomthereseemedtobemuchmorethanmettheeye.Perhapsitwasmy‘inner’eyethatsawabiggerpicture.Whoknows.FastforwardtopostJamesCapel,andacatch‐uplunchamongoldJCfriends.Icameprepared.Afterlunch,ItookanenvelopewithafoldedA4sheetfrommypocketandhandedittoJames:“Pleasetellmewhatyouthink.”Therebybeganalongstandingrelationshipofideassharingandattemptstoworktogether.Oneofthosetimeswasthen,andanotherisoccurringatthetimeofwriting.Sometimesthereisunfinishedbusinessbetweenfolksanditmustjustsomehowbedone.Jameswasprobablytoopolitetodecrymyidea–anideathathassincedeveloped,almostunrecognisably,intomynewventureCashHarvest(www.cashharvest.com.au).Butatthetime,hehadabetteridea.Icannottellyouwhatitwas,becausewedidn’tmanagetolaunchitonthemarketthen,andwemayyettryagain!Butaround1999,wecamemightyclosewithamajorAustralianinstitution.Thusoneday,ItookacallfromJames,whotoldmethatthe‘insto’wasgoingahead.“Sowhat’sthenextstep?”,Iwantedtoknow.“Thenextstep”,respondedJames,“iswearegoingtobe****rich!”Well,howcouldheknowthatthechiefactuarywouldputthekyboshontheproposedbreakthroughproduct?Thisdeservesanactuaryjoke(asanassociateone,Iamprivileged):howdoyoutellthedifferencebetweenanintrovertedactuaryandanextrovertedactuary?Whenanextrovertedactuaryistalkingtoyou,heislookingatyour

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shoes.Iimaginethatthatinsto’sactuarymusthavebeenlookingathisshoes,notattheopportunity.THEVALUEPROPOSITION

AllegoricallyonmylasttriphomefromAEIaroundmy50thbirthday,IdecidedtowritetoMikeWilkins,thenMDofTyndall;explainwhyIleft;andexpressinterestinrejoining.IfIamgoingtobehonest,myheartwasn’tinit,butmysenseoffamilyresponsibilityloomedlargeanditwasincumbentonmetosolvethefinancialchallengesbeforeus.Inmyfirstfewmonthsbackinthe‘jungle’,IworkedforIanGreenyerandIvorFindlay,anotherfriendI’dmadeintheindustry.Theywereengagingexperiences.TheboardsurveyonecommissionedbyIanwasespeciallyfascinating.Thequestionatthetimewasthedegreetowhichinvestorsandbrokersconsideredboardqualityintheirinvestmentwork.Ononeendofthescale,byaneminentbrokeranalyst:“Wedon’t.”Ontheotherendofthescale,byLaurenceGrech,anotherhighly‐respectedanalyst:“Wedo,butwearenotpreparedtodiscussit.Weconsiderittobeacompetitiveadvantage.”Onedaymymobilerang,anditwasTimPhillips,along‐timefriendandthenstillinvestmentsguruatTyndall.Hetoldmethatseveralanalystshadleft,twoofwhomhadbeenpoachedbyLazard(RobOsborneandPhilHofflin,theheavyhittersoftheteam).WouldIbeabletohelpout?IgatheredthatmylettertoMikeWilkinshadfounditswaytoTim,forwhichIamindebtedtoMike.(HereseemsasgoodaplaceasanytorecordmyindebtednesstoTim,andtoHowardPenderofAustralianEthical,forprovidingtheformalreferencesneededforCashHarvest’slicenceapplicationin2010).Well,readersmustknowIdidnotwanttojoinTyndallasaproductionlineanalyst.Butsomehow,mydreamofindependence,managinglong‐term

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capitalanddevelopingnewproducts–andmaybethatwastherealproblem,itwasstillonlyadream–seemedasremoteasever.SoIjoined,onasixmonthscontract.Afewmonthsintomygig,BobvanMunsterarrivedasHeadofResearch.Afteraperiodofreview,hechosetooffermeapermanentposition,whichIaccepted.Thatwasin2000.IremainedasasenioranalystforTyndalluntilApril2008,intheprocessdefyingthepropositionthatIcouldnotworkanywhereformorethanacoupleofyears.ButIhavetosay,Iamnotparticularlyproudofthatfact.Imorphedintomoreofa‘yes’manthanIcouldeverbecomfortablewith.Ihadbecomewaryoftreadingtoohardonsomeone’sego….maybeitwasshadesof1992andLaserHoldings…Minewas,ofcourse,aridiculousconcern,asinvestmentmeetingswerequicktosquashanyegosthatmightbepreeningthemselves.Everyonereceivedtheirfairshareofcreampiesinthefaceiftheirinvestmentargumentswereeverfoundouttobemissingawheelorevenanaxle.Itwasridiculousforanotherreason,too.Ifyoulookedabitpeaky,thenbigman,BradPotter,wouldroundthetableandgiveyouafriendlyhug.Outsidehisoffice,too,Bradsportedacabinetbedeckedwithamodelcar,acanofSPAM(meatvariety),andatricklighter.Howwereegosevergoingtosurviveinthatworld?ItwouldbelikeabattlebetweenthosepumpingoutoxygenandthosepumpingoutCO2‐Awful!TheTyndallvaluepropositionwasanimpressiveandsuccessfuldiscipline.Everystockhasavalueinawillingbuyer,willingsellerscenario.Ifyoutakeawaythehypeandignorethemyopia,whatyouhaveleftisthevalue.Ifyoufocusontheunderlyingparameters,betheyretailmarginsorreturnsoncapital,thereisthereality.Except,Ihumblythoughpassionatelybelieve,fortwovitalconsiderations:

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MISSION:FINDAREALSRISTRATEGY.

Corporatequality,and,morespecifically,sustainability:thesetomearetheelephantsintheroom‐orthatshouldbeintheroom‐ifvaluationsaregoingtopossesstrueintegrity.Thekeypointisthatvaluationsaredynamic,notstatic.Corporatevalueiscontinuallycreatedanddestroyed.Itisamovingtarget.Yetinordertodevelopmy‘qualitytechnology’,anSRIstrategywasindispensable.Mysearchforapracticalapproachtosustainabilityspannedmanyyears.MyfirsttasteofSRI,asIrelatedearlier,occurredin1981atFriends’.Butmyconceptsalwaysseemedfuzzy.Thiswasoncebroughthometomeintheearly2000’swhenaVietnamesefriend,MinhSu,enquiredwhatIwasupto.IspenttenminutesexplainingtohimmySRIapproach.Helistenedattentively,thencalledmeaphilosopher.Thatwasgreatfeedback:itmeantmyideaslackedfocus.WhenIdescribedmyideastoMarcusTuckoverlunch,seekinghisadvice,hetoosaidmuchthesame:“Dahlan,youneedtofocus.”Eventually,theSRIpuzzlesolveditself:SRIisabout3steps:applyanethicalscreen(“wouldIinvestatanyprice?”);includesustainabilityaspartofthequalityassessment;andengageconstructively,notjudgmentally,withcompanies.However,IwasstillatTyndall,amillionmilesfromseeingmyideasachieverealisation.UnlesstheyofferedmeanSRI‘mandate’tomanage–whichsadlytheywereunableto.EIGHTYEARS,EIGHTMONTHS,EIGHTDAYS.

Iwasrelaxinginourswimmingpoolafewdaysbeforemyfinal,andverywarm,‘sendoff’fromTyndall,whenitsomehowoccurredtomethatmysecondstintwiththemwouldhavelasted8years,8monthsand8days.

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“Well”,Iimaginedmyselfsayinginmypreparedspeech,“IrealisedthatifI’dstayedanother8hours,8minutesand8seconds,thingscouldturnugly.”Inearlychokedwithlaughter.Butthatwouldhavesoundedcute,asifIhad‘issues’.(Ihadplans,notissues).Whenthetimecame,insteadIrelatedhow,“asGrouchoMarxmighthavesaid”,whiledrawingonanimaginarycigar,“Mymodellingdays….areover.”Oneseniorexecutivepresentdidn’tgetit.Insteadofthinkingspreadsheets,hewasthinkingcatwalks.“Ididn’tknowyoudidmodelling”,hetoldme.Idon’tknowforsureifhewasjoking.ButlaughterformewasthegreatrelieveratTyndall.Itwaspartoftheculture.Thankheavens.Inatoughbusinesslikevaluingstocks,itneededtobe.ButwhereIwasconcerned,Godhadthelastlaugh.Ihadlongyearnedforindependence.ButIhavebeen,inallhonesty,toocomfortableovertheyearstopushhardenoughforthat.Iwaswelloverduefora‘shovefromabove’.BythetimeIsaidgoodbyetoTyndall,Ihadnotoneboss(alreadyonetoomany,thewayIalwaysfelt),butthree:headofresearch,deputyheadofequities,andheadofequities.Ifinallygotthemessage.IleftTyndallon10April2008.Shortlythereafter,Isoldmysharesinthebusiness,nicelyaheadofthemarketCrashof’08.Icouldn’twaittoputmyinvestmentideasandexperiencefullyintopractice.SomeassumedIwasretiring,butthatthoughtcouldn’thavebeenfurtherfrommymind.ItwasallgoingtobeaboutCashHarvestandcommercialisingwhatturnedouttobetwelvekeyinvestmentfactorsthatdescribeacompany’squality(www.cashharvest.com.au).Thepeacockwasfinallyoutofthecage.

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CCW®‐BRINGONTHEREVOLUTION

Theoriginsoftheinvestment‘technology’thatIdevelopedforCashHarvest,withmybrotherMursalinontheinfo‐managementside,couldbetracedbacktomyexperiencesinthemid80’s.IfIhadtopinpointthebeginnings,Iwouldsaytheybeganwithatwo‐daycourseIattendedonventurecapital.Iwasspellbound:ultimately,thekeydriverofasuccessfulbusinessistheingredients:notjustthemoney,butthebusinessmodel,theenergy,thecompetitiveedge,thestrategy–andmore.Thisisnotlikebakingacake.Inventurecapital,thetypicaljourneytofindingandnurturinghighlysuccessfulcompaniesistoconsider100,narrowitdownto10actualinvestments,andexpect1or2tohitseriouspaydirt.Typicallythatmodestsuccessrateisenoughtoyielda20to30%pareturnovera7‐10yeartimeframe,eventhoughperhaps5ofthe10businessesgobellyup.Butwhataboutestablishedcompanies?Dosuchprinciplesapplytothem?Absolutely!‐companiesthatarenotcontinuallyreinventingandreinvigoratingthemselveswill,soonerratherthanlater,gobackwards. Withsuchcompaniesinyourportfolio,cheapnessisunlikelytoprotectreturns,unlesssavedbytakeoversbeforetoomuchdamagehasbeendone.Toshareinvestors,corporatequalityisneverunimportant.IknewthatwhenIwasatFriendsinthe80’s,butinthosedaysbrokersdidnotsupplycomprehensivequalityassessments.Youwerereliantthenonmakingbroadjudgmentsbasedoninadequateinformation.Manyinvestorsstillaretoday.IseeCashHarvestasmyopportunity,atlonglast,toputmyinvestmentexperience‘outthere’,andtoputittofulluse.CCW®standsforacompany’sCapacitytoCreateWealth‐responsibly.It’sthestartingpointforlookingateverycompany’sinvestmentmerits.

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CCW®istheDNAofCashHarvest.Bringiton. …………………………………………………. Footnote:wasWaltSandfordright,inpredictingthateventuallyIwould‘makeit’?Tooearlytotell.CashHarvest,ormyhobbyventureSentimentalBlokePublishing,mayeventuallyprovidetheanswer.Inmyeyes,mykeycareerhighlightshavebeensuccessesasInvestmentsManager(StockExchange)atFriendsProvidentLifeOfficeintheearly80’s,andjointcreationofStepInsideandShare,acolour‐illustratedbookof42poems.Thefruitsoftheseexperiencesareexpressed,asbestIcanmuster,atwww.cashharvest.com.auandatwww.sentimentalblokepublishing.com.au.Thanksforsharingmyjourney.Mybestwishesforyours.DS