This weekend I sat down for a roundtable discusssion with Geoffrey Wilson of WAM Capital, Mark Carnegie chief executive of Lazard’s Australian private equity business and Marcus Padley, a stockbroker. We sat down at my dinning table, or at least I did while the others joined me via Malcolm Maiden’s Business Day article.

Clearly all three are smart guys, sorry Malcolm all four, though Carnegie shone as the brightest. Admittedly that opinion may reflect confirmation bias as Carnegie often spoke from my play book. Someone said you can’t judge a book by its cover, but I’ve always thought that was a load of crap and I liked Carnegie’s cover.

By the second year of my to be uncompleted psychology degree I’d decided my thesis was going to be analysing people by their walks. Wilson looks and was both self depreciating and intelligent. His comments displayed an open mind and importantly for his business, he oozes trustworthiness. Padley was amusing, anecdotal and provided good balance for newbie investors. Carnegie looks sharp of mind and focused. A measured pace, followed by a strut and fast walk is my prediction for their respective walking styles.

The number one point newbie investors should takeaway is, “embedded fees of the products they buy” makes them the biggest suckers of all. As I keep saying, structured products are structured to make your money someone else’s. Newbie investors should either average in to index funds when the index is under the trend line. Average into a specific fund manager with a proven record or if they are determined to buy stocks then only buy what they know really well and buy it with a margin of safety. Those three options are ordered by degree of difficulty and most people should stick to the first two options.

Carnegie started the ball rolling by observing the insanity of markets pretending that trillions haven’t be eviscerated in black holes formally known as banks.“Yep, off to the party” – it’s nuts.

Wilson then highlighted the poor timing by the geniuses. Is it a bear or bull market? My view remains the same, we’re in a cyclical bull market within a secular bear market.

Padley’s then chips in his best line explaining that home equity if spent is not equity, it’s debt, no matter what a bank’s marketing department tells you.

Wilson somehow channeled me. “I didn’t understand how quickly everything could implode.” Oh in case you’re keeping score that’s exhibit one for Wilson for self deprecating. If I have a regret from 2008 it is that I had a box seat for the GFC and never profited from it. In fact I had two complete write offs and a couple disasters which I thought were on high enough ground to avoid the debt tsunami. I saw it coming, I told others it was coming, I simply did not understand the magnitude.

Later in the article Wilson gives a nod to a technical analyst, Andrew McCauley, who was close to calling the bottom based on historical trends. He predicted six negative quarters and then a rally. What did happen? It seems so long ago already.

Padley then tries take a flyer on capital is more important than income. Of course it Marcus…to a stockbroker! Capital gains means yet another two commissions, one for the sale and another for the new purchase, whereas income means diddly squat for Marcus. I often find Padley’s advice tainted by his years of being a salesman. Oops, I was trying to be nice, but my bias is now plain for all to see. Perhaps I can blame the radio lab podcast on choice. Free choice is an illusion, we need both analytical and emotive responses to make decisions, the bombardment of choice is not good. Distracted? Let’s move on and pretend that didn’t happen.

I’m now looking back at my notes on my printed copy of The Age and see I gave Padley’s comments a few good scores. 10/10 for his opening comment on the biggest suckers.

Maiden gets his finest moment in next with his observation about our superannuation system that’s 60% invested in shares. As he says “That’s completely out of whack with every other super system in the world“. Shiller would shake in exasperation. I hit 96% invested the other day in our SMSF. Though I more than offset the Australian purchases with US sales. Plus the Biota capital return, other dividends and the monthly contributions make for a steady source of new funds.

Later on Carnegie gives Jeremy Grantham a well deserved gong for calling the bottom. Here is what I said about a Grantham letter back in May.

The Last Hurrah and Seven Lean Years Jeremy Grantham’s quarterly letter. [Free registration required]

• … brilliantly written and chock full of good advice. ” …have a simple battle plan of determining levels at which to reinvest and to stick to it absolutely” That advice was presented as an anecdote to investors too terrified by the recent declines to deploy cash. I think that advice can be used more widely. A key takeaway for me from George Soros is, investors should always have a battle plan for each position and their overall allocation. They should then monitor the positions against the plan and imperatively always react and continue to update the plan. The letter is a must read for all investors.

If you only read one person then it should be Grantham.

Carnegie suggested the timber field due to reduced numbers. Interesting? I’ve been watching one company in that area, but I have trust issues.

Wilson’s recommendation of Telstra made Padley apoplectic, though he managed to blurt out “mid -size resource stocks“, i.e. volatile, heavily traded issues which generate a lot of commissions. Marcus speaks as a Stock Broker. ‘As he would’.

The article is definitely worth a read.

In Other News

Here’s an incredibly intelligent article on Telstra. Adjectives courtesy of confirmation bias, yet again.

I remember that interview so have known of Keen longer than I thought.

Related posts:

1. Marcus Padley Shines Again
2. Zacks Roundtable Articulates my Thinking
3. Thomas Nogales Report