- A Ho-hum day with pretty good volume. If GE hadn’t advanced almost 14% the Dow would have been down more.
- Everyone waiting for particulars of bank bail out. Tonight’s must see TV with the President’s press conference had best be convincing or the overnight trade will be all red.
- Here is a site for the unemployed to adapt: www.recessionwire.com.
- My bet that Treasuries will continue down is getting long of tooth. TBT, the inverse Treasury ETF, has done great but am playing chicken with Bernanke. He may begin buying bonds on a massive scale any day and that would put TBT in red very quickly.
- Here is a somewhat lengthy memory of my interplay with Peter Lynch and Wilbur Ross:
Wilbur Ross and Peter Lynch
When, after five years, I left Sanford Bernstein & Co., I went to Rothschild Inc. This was a great name with a middling operation; I was supposed to bring institutional sales and research to its banking, real estate and money management businesses. I moved from one of the most famous buildings of the world into another. Bernstein occupied the 21st floor of the General Motors building. We had previously been at 717 Fifth Avenue, which was the Eastern home of Coca-Cola. 717 was an older building but its location, at 54th Street, was terrific. The GM location was even better. Across from the beautiful Plaza Hotel and Central Park, this was the best address in the city. I loved walking around Fifth Avenue during lunch. Sometimes I would walk through the lobby of the Plaza remembering how it felt to check in the day of our wedding. Pam was twenty-three and I a year older. It was intimidating to walk up to that huge marble check-in counter. We were still in our getaway clothes and the whole lobby knew we were newlyweds. Pam and I had a large suite, which we put to good use for about six hours. We had an early plane to Bermuda. Other times my walks would take me into FAO Schwartz, which was in the lobby of the GM building. This was toy-central and during Christmas the place was an amazing display.
So, I moved from Bernstein to the offices of Rothschild Inc. This was located on the 16th and 17th floors of One Rockefeller Plaza. We had a sweeping staircase going from one floor to the next. My small office was on the 16th floor. It was heady stuff to work in the office next to Baron Guy de Rothschild. He had been thrown out of France when his Paris bank was nationalized. Baron Guy would walk past my office while walking his dogs, two small white things, probably poodles or King Charles. He would smile broadly and say the appropriate thing in his fractured English. His suits were the best I have ever seen. When the Baron wasn’t around, which was often, I would peek in to his office and see cases of incredible wines in wooden crates. Upstairs was corporate finance, asset management and executive offices. There were also two dining rooms. One, a four-person room, was intimate. It was decorated in old fashion French wallpaper and had hand-colored etchings of Paris scenes. The other dining room was capable of seating a dozen at one grand table. Every famous industrialist, lawyer, and entrepreneur from around the world had lunch here. Several times I would pass Joe Flom, the legendary head partner of Skadden-Arps, on his way to have lunch with Bob Perry, our president. Flom was Skadden’s first associate, hired in 1948. Very few major mergers and/or acquisitions were completed without Flom’s critical eye. These were the people that really decided what was going to happen.
Our chef, who had had a heart attack and quit La Grenouille to join our company made amazing meals to go along with the Rothschild wine. We didn’t drink the Chateau wines, usually the second or third labels. Still, these were delicious. The aromas from the kitchen would begin around 11am and would become insufferable if one wasn’t invited that day. After lunch the waiters would roll around wheels of Stilton cheese to go along with the Port.
I conducted something called the Rothschild Forum from the large dining room. Twice a month I’d invite presidents of companies with whom our company had venture money. Our most famous was probably Amgen. Portfolio managers would come and listen to the officers of these companies and they would, hopefully, send us some commissions as their thanks.
Directly across from the dining room entrance was Wilbur’s office. He had an office out of the old world, as did most of us. Oriental rugs on top of carpet. Big mahogany desk, green eyeshade lamps on the desk, books all over in the shelves, world globe in a corner. It was perfect. Wilbur Ross and I had a curious relationship. Of course he was smarter than me but I had the Rolodex. He made a specialty of hostile takeovers. He used the press to help make his case. He would leak awful things about the targets and it would be reported in the morning press. He also used the Delaware courts to his advantage. His weakness, if there was one, is that he didn’t know anyone on the Street. But I did.
After advancing his malice towards his target Wilbur would then call me, asking who owned the stock. I’d let him know and then would call the portfolio managers, whom I probably would have known or know of. Or at least would have the balls to call for the first time. After all, I was with the house of Rothschild. They always took my call. At least once.
Once, the PM for Fidelity’s Contra Fund (Dan something, cannot recall his last name; and this was when Will Dannoff was a defense analyst in the Select funds) owned a lot of one of Wilbur’s targeted companies. I made an appointment with Dan and Wilbur and I took the shuttle up to Boston. We met in one of their small conference rooms on the ninth floor of their downtown 82 Devonshire Street office.
This reminded me of another fateful trip to Fidelity. The ninth floor of 82 Devonshire was hallowed ground for institutional salespeople. Other than CapRe in Los Angeles, Fidelity was probably the largest commission producer in the country at the time. This was before the ramp-up of hedge funds. Once I took Sy Syms to see Peter Lynch. Peter’s best performance days were behind him but he was still very, very important. Sy ran the retail operation, SYMS and Peter owned the stock. SYMS was probably one of 1000 stocks Peter had in Magellan Fund. And because the market cap was so small I was astonished when I called Peter’s office and they said they wanted to see us. We were waiting in the same small reception area and Peter himself came out to greet us. At the time he had a cast on his left arm. His shirtsleeve was unbuttoned to accommodate the cast on his right wrist and his shirttail was flying from behind. He had on a pair of the most god-awful pants I have ever seen. A green plaid. Ghastly. Here I was with Sy Syms who was dressed to the nines and Peter comes out looking like he slept in his clothes. Anyway, Peter led us to the large conference room, which surprised me because SYMS was a smallish position for him and the stock had done nothing for years. I figured we would get an associate and a small room. Not so. There must have been thirty people waiting for us. Sy and I looked at each other. We sat down and I prepared to provide an introduction and give our earnings estimates, etc. Before that Peter, who occupied the head of the monster conference room pipes up: “Sy, I buy your stock everyday.” Aha, so you’re the one, I think to myself. Sy immediately spun to the offensive and told the group all the good news at the time. Yellow pads were everywhere and everyone was furiously writing notes. Especially Peter. It then occurred to me that this was probably Peter’s way to train the junior analysts on how to get information. Questions were asked specific to SYMS but also about fashion trends, the return of the suit, wholesale prices, competitors, freight costs, new store openings, etc. It was an exhaustive session but everyone seemed to be getting something out of it. Afterward I was further astonished when Peter walked us to the elevator and warmly said goodbye. When we got to the street our driver told us that the tunnel to Logan was backed up but we’d make it OK. I wasn’t convinced so I prevailed upon Sy to take the T then hop a bus. Sy was a boy of the streets and never balked. We arrived at the airport T station and got on a waiting bus to take us to the terminal. He seemed to really enjoy it but I made a joke that he was the only CEO to take the T on that day.
A couple of years later: Dan kept Wilbur and me cooling our heels in the tiny waiting room. Once settled I outlined the actions we anticipated and that we would like Dan to hear us out. Wilbur made his case that Dan should throw the shares controlled by FMR into the proper slot. Dan was sympathetic but not convinced. As I recall, Wilbur was a bit upset and we made a somewhat abrupt exit. In the taxi back to Logan we kind of strategized about how I was to call Dan in the morning and put the screws to him. We got on the shuttle and into the bulkhead seats, Wilbur on the aisle, me by the window. He wanted to go over my list of other holders of the stock. I got that out and he asked about my relationship with each PM. As others began to board several asked to sit in the empty seat. Wilbur looked each in the eye and said that it was occupied. Evidently he wanted to talk to me and didn’t want anyone in between. We got back to LaGuardia and got into a limo. We returned to One Rock about 6pm and worked another two hours. He was still pushing the pencil when I left after 8pm.
After his disappointment with Dan’s response Wilbur would call me less and less. But he still referred to me as the man with the Rolodex.
All of my banking friends at Rothschild were impressed with Wilbur. He was not above pushing the pencil to figure things out. He prided himself at being able to compute the cash flows and P/E’s necessary for a takeover. The guy was good. Still is. That’s how you get a billion.
