What was it like to invest in the 90's?

[Tyler Durden]

I first stepped into the share market in around 2007 by purchasing JB Hifi shares. If I had more patience, I would've made a bit of money, but as soon as it went down a bit I sold out hehe.

Anyway, I didn't take a real keen interest in the market again until maybe around 2010, and since then I've been following it to varying degrees. One thing I have heard in the last year or two, both here and in the media, is that investing now has a lot of uncertainties. It seems to me that this implies that investing before this 'era' there were less uncertainties?

I always get the image of fat cat stock brokers in the 90's wearing their wide lapel suits and ties smoking a cigar, making money easily from the market, and that maybe there was more certainty back then? Maybe almost everything went up?

So I would like to ask the more experienced here, what was it like investing in the 90 to early 2000's? Was there still the same degree of uncertainty as there is today?

 

[pixel]

I first stepped into the share market in around 2007 by purchasing JB Hifi shares. If I had more patience, I would've made a bit of money, but as soon as it went down a bit I sold out hehe.

Anyway, I didn't take a real keen interest in the market again until maybe around 2010, and since then I've been following it to varying degrees. One thing I have heard in the last year or two, both here and in the media, is that investing now has a lot of uncertainties. It seems to me that this implies that investing before this 'era' there were less uncertainties?

I always get the image of fat cat stock brokers in the 90's wearing their wide lapel suits and ties smoking a cigar, making money easily from the market, and that maybe there was more certainty back then? Maybe almost everything went up?

So I would like to ask the more experienced here, what was it like investing in the 90 to early 2000's? Was there still the same degree of uncertainty as there is today?

Thanks for the question, TD.
Now that brings back some memories

The shock of 1987 seems to have lingered a little, making many a tad wary and causing them to miss out on a lot of first mover opportunities. Those who ignored those jitters - be it through blissful ignorance or an innate gung-ho attitude - and bought early, were certainly able to make rarely-repeated profits.
In the mid-90's that changed gradually, when the cautious crowd returned and decided they wanted back in. Initially, the prices went up thanks to increased demand; but in 1995, the early movers took profit.
And then, a new government came into power, and Howard & Co decided to sell the crown jewels, from Qantas to Telstra and Which Bank. Shortly after, the Y2K scare drove every company into buying new IT equipment and replacing software, no matter how firmly the people "in the know" insisted that planes would continue to fly and lifts couldn't possibly plunge 50 storeys down. Board members had been scared (by none other than IT manufacturers and providers) into believing that they personally would be held legally responsible if anything happened at the stroke of midnight 31/12/1999. They wrote the cheques and most IT Managers didn't have any scruples and increased their already generous budgets by x00%.
Some observers recognised the implications and bought/ sold stocks in the appropriate sectors at the appropriate time. Others believed spruikers and their analysts. They were the ones that bought Telstra above $9 and joined the Packers into OneTel...

http://www.ataa.com.au/file/PR_Vagg_A_Long_Term_Model_for_Aust_Stock_Market_Dec10.pdf shows a long-term model of the All Ordinaries. Page 12 has this very telling chart:

 

[McLovin]

I always get the image of fat cat stock brokers in the 90's wearing their wide lapel suits and ties smoking a cigar, making money easily from the market, and that maybe there was more certainty back then? Maybe almost everything went up?

In 1995, I used to ring the family broker at JB Were every afternoon after school and ask what the price of Oil Search and Caltex was. Eventually I bought some OSH shares. The brokerage was 0.75%, and that was a discounted rate.

 

[Tyler Durden]

Thanks Pixel, very informative. It did bring back a few memories for me as well, as some of those things (sale of Telstra, One Tel) happened when I was a kid and didn't understand the meaning of it all.

 

[Bill M]

One thing I have heard in the last year or two, both here and in the media, is that investing now has a lot of uncertainties. It seems to me that this implies that investing before this 'era' there were less uncertainties?

Nah, that's not quite right, things were as uncertain then as it is today. My first investment into the stockmarket was in early 1987, an insurance agent selling financial products convinced me to buy into 2 managed investment plans. Then the crash of October 87 came and wiped out half of my money, that made me sit back and re-think my approach.

I always get the image of fat cat stock brokers in the 90's wearing their wide lapel suits and ties smoking a cigar, making money easily from the market, and that maybe there was more certainty back then? Maybe almost everything went up?

There was no internet or mobile phones back then and you needed a proper physical broker to place your trades with. Nobody would take on an unknown person like me, then a friend told me to contact Joseph Palmer and Sons. I called them and placed a trade for 500 shares to buy Coles Myer, that trade cost me about $80 to place and that firm was a bit worried whether I would pay up or not. Anyhow I used them for my trades until the internet came along, that changed everything, best invention ever.

Then came along the "recession we had to have" in the early 90's.

It was always a risky business, WBC nearly went bust, others did, others just got bought out. Things were changing all the time. I remember a company having $1.92 worth of NTA per share and then overnight they threw out an announcement saying that their new NTA is only $.01c and next day 90% was wiped off the share price.......... not much has changed, it still happens now.

So I would like to ask the more experienced here, what was it like investing in the 90 to early 2000's? Was there still the same degree of uncertainty as there is today?

Yes there was, nothings changed concerning uncertainty. I still can't get over this internet thing, I can buy and sell shares anywhere in world with the click of a mouse. In the old days we had to read those share quote pages out the hard copy Sydney Morning Herald newspaper. I'm glad those days are over. The information we have available to us now is better than ever.

 

[Bill M]

^^^Oh, PS: I forgot one part. Do you older players remember teletext on Channel 7? That was as close as live as we could get to monitoring our stocks prior to the internet. We paid extra for a teletext enabled TV. Ahhhh I remember those days coming home from work and whacking on the teletext to see how my stocks went for the day, I still remember the pages, 210,211 and 212 were my regulars

 

[Julia]

Nah, that's not quite right, things were as uncertain then as it is today. My first investment into the stockmarket was in early 1987, an insurance agent selling financial products convinced me to buy into 2 managed investment plans. Then the crash of October 87 came and wiped out half of my money, that made me sit back and re-think my approach.

I'd been persuaded into a similar investment 1986. I knew next to nothing about shares. Escaped the losses of 1987 for no other reason than being fed up with the shoddy administration of the managed investment and pulled it all out about a week before the crash. Pure good luck.

Yes there was, nothings changed concerning uncertainty. I still can't get over this internet thing, I can buy and sell shares anywhere in world with the click of a mouse. In the old days we had to read those share quote pages out the hard copy Sydney Morning Herald newspaper. I'm glad those days are over. The information we have available to us now is better than ever.

Yep, so true. It doesn't seem all that long ago that I was keeping a handwritten record of share prices from the Saturday paper, and paying up to $300 per trade via full service broker!

 

[VSntchr]

^^^Oh, PS: I forgot one part. Do you older players remember teletext on Channel 7? That was as close as live as we could get to monitoring our stocks prior to the internet. We paid extra for a teletext enabled TV. Ahhhh I remember those days coming home from work and whacking on the teletext to see how my stocks went for the day, I still remember the pages, 210,211 and 212 were my regulars

Yep, my dad set up teletext for me so I could check TLS after school

 

[burglar]

Twice daily, lunchtime and close, the teletext!
Each page of the teletext flipped, before you could read it all.
Sometimes we would sit through more than one viewing.

And the graphs:- you did your own! Rolled them up, put them away for a week, unrolled and updated them.

That's right, ... 43 companies, 43 graphs.


No Google, so magazines and newspapers stored in date order and archived manually and annually!

 

[Smurf1976]

Availability of information is a key thing that has changed. Consider how you'd get information without the internet? You'd be looking at company reports (on paper of course), listening to what your broker said, and then there's the media.

So whilst it was possible to get info on one particular company, there's no chance you were going to do any sort of comparison of every stock on the ASX. Even just comparing the top 20 would be a monumental task when you've got to get all the information from various sources and put it into some form that enables comparison. That leaves you at the mercy of broker recommendations and the media.

End result = stick to large cap "household name" stocks unless you're really, really keen on spending a lot of time on research and/or have a lot of trust in what your broker is recommending.

But that said, if you wanted to make money in the second half of the 1990's then it was pretty easy. Just put your money in an "all stocks" managed fund and watch it grow. That's it. If managed funds are routinely returning 20% per annum then it's hard not to make money.

It all worked so well until quite a few people found out the hard way that a certain well known, high performing fund manager of that era popular with the masses had put pretty much everything into dot.com stocks. It worked fine until suddenly it didn't.....

 

[pixel]

Availability of information is a key thing that has changed. Consider how you'd get information without the internet? You'd be looking at company reports (on paper of course), listening to what your broker said, and then there's the media.

So whilst it was possible to get info on one particular company, there's no chance you were going to do any sort of comparison of every stock on the ASX. Even just comparing the top 20 would be a monumental task when you've got to get all the information from various sources and put it into some form that enables comparison. That leaves you at the mercy of broker recommendations and the media.

End result = stick to large cap "household name" stocks unless you're really, really keen on spending a lot of time on research and/or have a lot of trust in what your broker is recommending.

But that said, if you wanted to make money in the second half of the 1990's then it was pretty easy. Just put your money in an "all stocks" managed fund and watch it grow. That's it. If managed funds are routinely returning 20% per annum then it's hard not to make money.

It all worked so well until quite a few people found out the hard way that a certain well known, high performing fund manager of that era popular with the masses had put pretty much everything into dot.com stocks. It worked fine until suddenly it didn't.....

I must say the Internet had well and truly arrived well before the time of dot.bomb. In the latter half of the nineties, providers like Bourse Data and Market Data Services burst on the scene and changed the nature of the game completely.

True, in the early years, the best route to take was to buy on "inside knowledge"; that did not have to involve anything insidious like the term conjures up today. You simply chose stocks that you knew and trusted.
For example, in late October 1987, I took a big option position in Rio Tinto (called CRA at the time) because I worked there and could lock in an exercise price of $5.85. The price was sheer dumb luck, as it was determined from vwap a week after the Crash. But I probably would have taken the shares even at pre-crash levels.
A few years later, I had accepted an offer of the position as IT Manager at the West Australian Newspapers. For $1 a share, WAN was re-floated out of the collapsed Bond Empire. And again, it was a no-brainer to buy into that float, all guns blazing.

But several years before I turned full-time trader, We had already set up a computer desk with a trusty 28kB dial-up modem on a dedicated Internet phone line. That delivered live data and very basic charts to trade off. I would set support and resistance for a number of stocks even before I left for work, then get Mrs Pixel to check the situation every so often and ring a pre-arranged order through to our Broker. Yes, that had still to be done by phone, and the brokerage was quite substantial. Quite often, the broker would still try to talk you out of a trade, which, as we discovered quite early in the piece, usually meant we were on the right track. I remember phoning a sell order through for Telstra at $9.15. "Don't do that! Telstra will soon be a $10-plus stock!" came the reply. So I ordered to sell as soon as it hit $9.15, and if it hadn't by Close of Trade, sell at any price at Close. I got $9.15, and TLS reversed from $9.20. Never ever touched $10.

Soon after, I severed ties with the last FSB and chose Westpac as my first online broker. No lip from them :

 

[SuperGlue]

With every opportunity I'll go to the the public/university libraries and flipped through all the local,

interstate newspapers and business magazines for IPO listing articles.

Contact the underwriting brokers for propectus so I can subscribe to the IPO.

IPO was all I know back then, nothing about T/A or F/A.