The wisdom of selling ahead of the crowd

Dominic Prince says that some of the world’s canniest investors have consolidated their fortunes by moving into cash as soon as economic storm clouds started to gather

Six weeks before the stock market crash of 1987 Sir James Goldsmith met the Australian financier Robert Holmes à Court. Then at the height of his financial prowess, Holmes à Court was reckoned at the time to be the richest man in Australia, wealthier than either Rupert Murdoch or Kerry Packer.

Intrigued, Goldsmith was convinced Holmes à Court must be a genius. After the meeting he began to gather as much information as he could on his business methods. But once he’d assembled the intelligence, something dawned on him that would dramatically reverse his opinion. Holmes à Court had minority stakes in a raft of companies ranging from airlines to theatres, insurance, mining, media and agriculture, and although he had made vast sums along the way, it had all been done on borrowed money in a rising market.