After 35 years of stockbroking for some of the biggest houses and investors in Australia and the UK, the Secret Broker is regaling Stockhead readers with his colourful war stories — from the trading floor to the dealer’s desk.
What a great week to discover things.
Firstly, we find out that ASIC are looking into the ASX for breaching their own listing rules.
Only in the land of four banks, 2.3 supermarkets and only one stock exchange can this happen. If they hadn’t been pinged then they would have just kept going along, as if nothing had happened.
What should have happened is that the ASX compliance team should have written a letter to their own board of directors demanding to know why they didn’t disclose certain information to the market.
Imagine having to write that letter to your own bosses. Well that’s all we can do, as it never happened.
Secondly, I came across a new word in the world of inflation.
“Greedflation.”
Being dyslexic, I first thought it was greenflation and my mind immediately rushed to thinking ‘what on earth are all these greenies doing to inflation?’
Maybe mung bean futures are up or there is a shortage of tofu. Something like that.
But no. Delving a bit deeper, I realised that greedflation is a term now being used to describe companies that are putting up prices, when they have absolutely no pricing pressure to do so.
Up go their prices to the public, as everyone has now been trained to expect this to happen, everywhere their wallets go.
So, now we have another term in our inflation related vocabulary, to add to all the others.
We already have Stagflation – a combination of high inflation and economic stagnation. Inflation drives prices up but purchasing power down.
Shrinkflation: This is what actually happens to me during a cold winter morning swim (or so I tell Mrs B) but, in the world of economists it means a manufacturer has kept the same size packaging but shrunk the product inside without telling anyone.
Then we have inflation: Where price hikes reduce people’s buying power.
And of course we then have hyper-inflation: When inflation starts to rise at rates of 100%, 1,000% or 10,000%, people rush to spend money before it becomes worthless. In 1932, inflation in Germany got to the stage where prices were doubling every four days and to keep up with all of this the German government produced a 100,000,000,000,000 Mark note!
As I got older, I believed that my hands had really gotten bigger, as when I recently held an old favourite treat of mine in my hand (settle down), a CurlyWurly bar made by Cadbury, it seemed tiny compared to when I was 10.
The older lady serving me in the sweet shop assured me that my hands hadn’t become hormonaly pumped up and out of proportion with the rest of my body.
In 2019, Cadbury’s shrank the CurlyWurly bar from 26g to 22g and kept the price the same. Their excuse was that they were required to get the calorie count to 100 per bar, from 118. Today they are 21.5g and cost $1.20.
When we were kids in England, they would cost 3p or 5c and would take about 10 minutes to chew through. Today’s version would take about two minutes, looking at the one in my hand.
Helps you work, rest and pay
When we were trainee brokers, they put us into the research department for three months or so and one day the head of research wanted some background on the buying power of various international currencies.
I thought about it and managed to find and manipulate an international index using the humble Mars Bar. Mars had at this time not changed the size and ingredients of each bar produced since 1940.
We were able to calculate how many Mars Bars you could buy in England with £1 versus how many a Franc would get you in France. We then expanded it over more currencies and turned it into an index.
The Mars Bar index became our way of measuring wages and expenses in various countries and of course our own wealth. In 1940 you would have needed the equivalent of 204,000 Mars Bars to buy a Roller. In 2006, you would need 347,000.
Later, after Mars decided to change ingredients and size, the Big Mac index came to the forefront, as the Economist magazine would publish it in the back inside cover.
You could compare the buying power of living in Tokyo versus New York City as Macca’s used the same ingredients and weights in about 52 different countries.
Adjust your job, not your lifestyle
Of course these days we could have created a crypto coin based on a Mars Bar or Big Mac, so it could be traded in different countries, like Zimbabwe where the inflation rate for consumer prices has moved between -2.4% and 24,411% over the last 41 years.
So, my advice to all you parents who are struggling with the pocket money index, is to go back in time and work out how many CurlyWurlys you could buy when you were their age.
Then readjust the weight to today’s weight and bingo, problem solved.
Not sure how you would go with the boss at work when trying to negotiate a pay rise, but the Tooheys New or Lipstick Index could be good places to start. If they tell you to drink less beer or use a cheaper brand of lippie, then change jobs.
Find an employer who really knows inflation and how to really gouge their consumers.
By the way, the CurlyWurly I bought for $1.20 was made in Poland, who appeared at number 12 in the Big Mac table of buying power, as their price had moved from US$1.63 to US$3.44 (or 111%) from 2004 till 2022.
I predict they will soon be made in Turkey, as they are number 34 on the Big Mac index because their currency has been a disaster recently.
Over the same period, their equivalent price of a Big Mac has gone from US$2.58 in 2004 to US$1.56 in 2022.
Now that’s a backpacker hostel-living, fruit picker’s diet problem solved!
The Secret Broker can be found on Twitter here @SecretBrokerAU or on email at [email protected].
Feel free to contact him with your best stock tips and ideas.
