Sit at the back of the investment rollercoaster

You know times are tough when your favourite TV dollar guru is sitting on a roller coaster explaining that this is how markets work. If you were sitting in the front seat, you’d have an even greater appreciation of the term ‘greenback’.

No doubt, most of you have shrugged off the recent market turmoil, putting it down to a mere market glitch, one which we will all ride out.

By applying the law of historical returns and an inverse correlation with the Malaysian red bean crop futures market, one can quite easily see the S&P 500, optimised with a mandlebrot weighted eurobond portfolio (with maturity dates linked to GDP estimates of South East Asia) perform well over the next few months. Any fund managers out there looking for a copywriter?

You can tell the flavour of a quarterly report by whose picture is on the front cover. In more buoyant times, smooth, slick, over-dressed young professional types with goofy smiles adorned the cover. The caption read: “Tom Smith at 15 is our youngest portfolio manager with more than $15 billion under management.”

In times like this, they wheel out some crusty old bugger, with just the hint of a “Yes…. I survived the great crash of 1929”, smile on his face.

The opening paragraph invariably reads that 2001 was a tough year and the remainder of the report tells us they have no idea what will happen next year.

In spite of the carefully written annual reports, there’s just the odd person out there who’s a little worried. Bank managers for one. Nothing quite brings things home like a margin call.

These are not nice things. It’s a bit like discovering Warwick Capper’s your dad. You know, your eyes suddenly look like a shafted Chihuahua’s.

It must be a tough job making the phone call.

“Hello, is Mr Adams there please?”

“That bastard! No he’s nothere, he’s taken off with theblond bimbo from the office tolive in Cuba, whaddya want?”

“Ah well, Mrs Adams, it’s Meryl here from ABG Margin Lending. I’m just calling about your facility. I’m afraid it’s exceeded its LVR and we’ll need to have additional security.”

“Listen ... Beryl, Ferral, waddever your name is. I dunnowhat you’re on about. Wedon’t have a Felicity here, she’sthe one that’s taken off with myBert and I don’t want an f’ingburglar alarm.”

“No, I’m calling about your margin lending facility. Your managed funds have dropped below the 20 per cent buffer we allow and we need you to stick in extra security under the terms of the application you signed in 1994.”

“Don’t talk to me about fun,managed or otherwise, I reckon the blonde’s managed fun,if you know what I mean, andI’m sure he was buffering herwell before 1994 and I told youbefore, we don’t want an f’ingburglar alarm.”

“Look, I don’t know how to explain this any differently. You jointly signed a loan agreement with your husband in 1994. The loan was used to buy $100,000 in the You Beaut fund and now the fund’s worth 83c. You need to stick in $80,000 to bring it up to the required level.”

“Hello? ... Hello Mrs Adams?”

In a positive contribution to practice management, here are some of the ways you can manage the phone calls you are likely to receive from your clients.

Firstly, get up early one morning and pour hydrochloric acid (available from all good pool shops) down the Telstra access well in front of your office. The damage should destroy your phone system for at least a week.

Secondly, get burgled. Make sure you have the computer with the client data stolen and explain that your off-site backups don’t seem to work — they never do anyway, so this is a legitimate reason.

If the client still insists they want to talk to you, preparation is the key. Make sure you know what you’re going to say to them. The conversation will hopefully go something like this. Your responses are in italics.

“I’m a bit concerned about my returns last year.”Yes, statistics show that one in everythree years will be negative.

“They were negative the year before that”.Yes, occasionally we see an aberrationin the statistics yet the chancesof this occurring successivelyis one in 70.

“You have no idea, do you? I want to pull it all out and put my money in cash down the bank, they’re paying five per cent, much better than negative four.”That would beunwise, you would crystalliseyour losses. You would be aloser if you did that.

“Not as big a loser as you are. Why didn’t you tell me to get out of the market back in February? What am I paying you for?”Our fees are for theoverall strategy weprovide you with andlisten mate, I’m not abloody fortune telleralright, you expect meto predict the future? IfI could do that, Iwouldn’t be dealingwith turkeys like you.(Swallow, three deep breaths.)

“Jeez, I hope you blokes have got good insurance, I’m gonna sue your bums off, you take out two grand a year to lose me 20.”Yes, statistics show that one inevery three years will be negative and we also have photosof you with your next doorneighbour from last year’sNew Year’s Eve party. You doremember that one don’t you?

“I see. Well, let’s just see how it goes over the next few months, shall we?”