MARCUS TODAY – 25 YEARS

Another year. Our 25^th. Indulge me as I take you back to the beginning.

On my first day of broking in February 1982 at Buckmaster & Moore in the London Stock Exchange building, I was asked to write up the morning meeting notes for the equity and bond dealing desks. It gave me purpose as I found my way in an industry I had no experience of.

After the first week of typing text only, I created a bit of a stir by adding some pictures cut from the newspapers (no computers) as I photocopied, stapled and distributed them. And it went from there. If I hadn’t ended up in the stock market I’m sure I would still be writing about something else, a motorbike journalist maybe.

After sixteen years in institutional broking dealing with mostly Scottish fund managers, I moved to Australia (followed Emma’s lucky shorts) and after a few years at ABN Amro, after we floated the first tranche of Telstra, ABN institutional desk was bought by BZW and they offered me a job or $70,000. I took the $70,000 and crossed the corridor at the invitation of Andrew Bell, to join Bell Securities, a retail broker.

Andrew took me downstairs on my first day for a cup of coffee at Rosati’s at the back of 101 Collins Street and taught me how to do retail broking. He said all you need is a client and a stock. “Have you got a client?” He asked me. I had my brother-in-law Andrew. “He has $10,000,” I told him. “Good,” he said. “Let’s make him some money, he'll tell others, and your client base will grow from there”.

“Now all you need is a stock" he said "and I’m going to give it to you”. He told me about Challenger and a change in legislation that allowed annuities to be backed by property instead of bonds and that Challenger were on their own in the property-backed annuities space, the big banks were not making enough money in annuities to bother to compete, and Challenger would clean up. I went back to the office and bought $10,000 worth of Challenger shares for Andrew at just under a dollar. They eventually went up ten times. Andrew made money, he told his friends. One was an accountant who turned out to be my best client and still a close friend, and very quickly, my retail client base grew. Everyone bought Challenger. Everyone made money.

The Challenger experience taught me a couple of things – “Make clients money, and the money looks after itself” and “One good idea a year makes for a good year”. That thought eventually spawned the one-stock portfolio idea.

When I started Marcus Today from my dealing desk at Bell Securities in 1998, it was an email for my clients designed to communicate stock ideas and make them money. We were all just getting our heads around the Internet, but I had discovered the BCC box on Microsoft Outlook (it was about eight clicks away). I could send stock ideas to all my clients without them seeing each other’s addresses.

The other dealers at Bells twigged what I was doing, communicating ideas to all my clients at once without having to call them. Brilliant. Some of them wanted me to send it to them so they could send it to their clients, but I didn’t trust them to get their client’s email addresses right. Email was new, so I insisted they sent their client's email addresses to me instead, so I could check if they bounced or not. It was a Masterstroke of blind luck. The BCC box filled up. Who knew that an electronic database would become an asset?

The subject line on the very first email was originally “Marcus’ ideas Today” - but I got fed up typing the apostrophe, and it just ended up as MARCUS TODAY in capitals. I knew it would brand.  I had over a thousand names in the BCC box in the end, and only a few of them were dealing with me, so I simply wrote one day, without planning, “If you want to continue to receive my email you need to send me a cheque for $200”. I remember carrying the very first cheque down Collins Street to the Commonwealth Bank at lunchtime the next week, thinking, “If I don’t get another one of these, I’ll be writing all year for just $200”.

The next week there were two cheques. The next week five. And the rest is history.

I was one of the first. Pre-Rivkin. Rivkin made newsletters famous in Australia. You might remember his tagline -“Know what I know, trade what I trade”. His marketing was all about displaying wealth and success. He had the most paying subscribers of any newsletter in the industry, 28,000 by all accounts, and he was charging a flat $500. If you want to know why he was in the back of a Rolls-Royce on the Sydney Harbour Bridge and living on a superyacht on the harbour, it might have been his trading, but $14 million a year in subscriptions probably explains it better.

I admired Rivkin because he was colourful. On the stock market floor in London, the jobbers had a motto - “Do anything but bore me”. The world needs colour and colourful people. Rivkin was that. His story has a tragic end of course. Rest in Peace, Sir.

I met with Rivkin’s marketing people in the early 2000’s. They had been to the US to visit all the established US newsletters to see if they could pick up a few tips and tricks. They told me one abiding piece of wisdom that I have lived by ever since - “Anyone can sell a subscription once, but it's the re-subscriptions that matter”.

You have probably experienced the selling tactics of some newsletters in our space. Sales people that ring bells when they get a subscription and discount endlessly until you bite. Anyone can sell a subscription once. We’ve never done that and never will. We just have Lorraine on Customer Service. A fabulous addition to the Team this year.  And we have a re-subscription rate that is consistently over 85%. No bells.

We will live or die by the value Marcus Today delivers to you, our Members and rather than sell hard, the message just spreads. I know a tipping point is coming one day, when we tip over from a few thousand Members to 28,000, but we haven’t got there yet. It's coming, and the best we can do is to just keep doing the job until it does.    

LAST YEAR

If you look at the numbers this year it looks like a standard stock market year. Up 7% on the All Ordinaries Index. 6.6% on the ASX 200. If there was one Post-It Note you needed on your trading screen this day a year ago it was "Big Tech will recover" - the NASDAQ had fallen 33% in 2022. Another might have been "Sell in February and don't bother with Australian equities until November". "Avoid Lithium stocks" would have surprised. Buy Gold and Uranium would have worked.

The top 20 in Australia this year.

Add in dividends and franking to the Australian market return, and you get to a number around 12%, which is an appropriate return for the risk involved in equities relative to bonds and cash.

But this year was not easy. This is the weekly chart of the ASX 200 this year.

If you missed the January rally, which was based on a misplaced expectation that the Fed was going to return from the holidays and cut interest rates, then from the high at the end of January to the low at the end of October, the market fell 10.8% with no clear (easy) uptrend to take advantage of. Inflation was sticky, central banks were prudently hawkish, and interest rates would not lie down. All year we endlessly, boringly speculated about “peak rates” and were disappointed until the Fed meeting just two months ago, which flagged the top in interest rates and the bottom in bonds and equities. In the 40 trading days since the whole year has been rescued by an 11.8% rally leaving the year-end tally at the “average” of 7%. But it wasn’t average at all. There was no general uptrend to sleep at night with, and you had to time stocks, sectors and the market to make a dollar.

A FEW WINS

Against that backdrop, we have managed to pull off a few wins.

The Strategy Portfolio is up 32.64% since December 31 last year. That involved three important decisions this year.

• Buying FANG and NDQ in April to take advantage of the recovery in big Tech led by the AI boom.
• Cashing out in July and staying there for 120 days whilst the market fell 7%.
• Buying back into the market the day after the November Fed meeting signalled rates had peaked.

It is a revelation that such a simple portfolio based on ETFs (low risk) has been able to achieve an outstanding annual return by making three simple decisions. It sets us up for a fascinating 2024. What are going to be the crucial decisions next year? Good game. If we can repeat 32.64% for a couple more years, I’ll have to bin the newsletter idea and open a hedge fund.

The Macquarie One Stock Portfolio managed a 15.5% return between March 14 (inception) and yesterday. Not bad, considering MQG itself is only up 1.4% over that time.

The BHP One Stock Portfolio is up 7.6% since inception on May 3. Respectable but not quite as impressive. BHP would have been up 14% if we'd just bought it and held it.

The Trading Ideas Portfolio did 42 trades this year. 14 fell. Two absolute howlers. 28 went up. This section is a lot of work, and the older I get, the less interested I am in frenzied opportunism in individual stocks. I wonder sometimes whether we should bother offering short term trading ideas in individual stocks. The risk-reward ratio is so much higher. We'll persevere because there's a demand for it, and I think there is an education in it. But it is time-consuming, and the returns are a bit random. But as many Members have emailed, those LNAS trades alone make the rest of it worthwhile. But even those were based not on researching LNAS but on market timing, which we are proving to be quite good at (I can hear the swish of a baseball bat behind my head) also captured in the Strategy Portfolio. Maybe I should replace this section with a one-stock portfolio that is just in LNAS (long NASDAQ 2.0x to 2.7x geared) or SNAS (short NASDAQ) and forget trading stocks. It would certainly be interesting if stressful. Maybe just LNAS then.

The trades.

This year we also sharpened up the MT Long Term Growth Portfolio - fewer stocks, bigger weightings, more focus on growth than benchmark hugging (growth in share price rather than earnings necessarily). It was up 13.79% this year (blue line). Over 15%, including franking. Better than the "impossible benchmark", the ASX 300 Accumulation index.

We are going to have a bit of a revamp of the MT Long-Term Income Portfolio early next year. Up the weightings in banks, and reduce the number of stocks and lift the "Achievable Yield". It's done OK this year, up 9.05%, and up 10.76%, including franking. Not dazzling, but income never does excite, that's one of the qualities of investing for income, boredom, and the only time it outperforms is when the market falls over.

MERRY CHRISTMAS

Another year down, another 312 newsletters, 756 podcasts, 1000 Member emails, weekly TV appearances and daily radio slots. Not to mention a plethora of articles, conferences, Member events and business interactions. Henry and I have been busy, as always. It's lucky we love what we do. The workload would crush someone who didn’t. Respect to all those in our industry that weren’t crushed. Some have been.

It has been a privilege and a pleasure, once again, for us to “paint with words” and hopefully serve you in the process. We’ve had a good year against a market that only shone for three months and drifted lower for the rest. I feel like I should go on a global roadshow entitled “You can time the market” but we probably need to get a few more years under the belt defining and implementing the "Marcus Today formula" before we can boast about it. Or a dose of hubris is doubtless coming our way.

After this year, I am now looking forward to next year. Trends start fast, and there is just a chance that this recent two-month rally has started a bull market. That’s a hope, not a prediction. This year we were swimming against the tide for 75% of the time. We won’t know ourselves if that reverses.

The other bit that is fascinating to me is how the strategy portfolio performed this year. Three decisions and a 32% return. Is investment that simple? And we did it with low volatility, low-cost, low risk and low activity ETFs, perfect for timing the market and sector themes. We may have found a formula that works.

• Watch the herd don’t join the herd.
• React don’t predict.
• Make decisions based on facts, not guesswork.
• Wake up every morning and make decisions. Daily vigilance works. Maybe that's the key.

Let’s see if we can keep it going.

So that’s it for 2023 from me. We are on MARCUS LITE now until January 8^th. Then we go mid-strength and I’ll be back proper on the 15^th. Henry and I will as always, we can’t help it, watch the market on a daily basis and jump in to help Oliver and Matt if decisions have to be made before that.

Let me finish by thanking the Marcus Today Team for all their work and passion this year. Henry, Oliver, Matt, Cam, Lorraine, Emma, Archie and Jemima, thank you for looking after Marcus Today and caring for the Marcus Today Members this year. We work in a great industry, ever-changing, ever-interesting, and ever-challenging. Never boring. We also work with a Member base that is, thank goodness, eternally polite, bright, civilised and engaged. It makes our lives a lot easier. It makes it easy to fulfil our promise to be vigilant on your behalf every day and do the best any of us can do.

Henry and I and the Team wish you and your families a Merry Christmas and a Happy New Year.