Margot and Bill Winspear Opera House – Dallas, TX
By Cheryl Hall, The Dallas Morning News – October 12, 2008
It took courage and a touch of insanity to stand on the stage of the Meyerson Symphony Center and offer money advice to hundreds of battle-worn investors — especially since they’d paid $1,000 apiece to hear market clairvoyance.
That was the scene at the second annual Great Investors’ Best Ideas Foundation Investment Symposium last week when T. Boone Pickens and Rusty Rose faced the audience with seven other high-level speakers.
They tried not to sound like singers in a tragic opera.
The speakers, mostly heads of large investment funds, stressed that this too shall pass. Sometimes they seemed to be speaking as much to themselves as the audience.
Mr. Pickens, who has taken it on the chin in recent weeks as oil prices nosedived, was low-key. Not his usual “ebullient self,” as a fellow speaker put it.
“I know why I was selected to go first. I’m the oldest one, and I’ve had more losses than anybody else in the room,” Mr. Pickens said.
“You’ve all heard me say, ‘Learn the doors that mash your fingers, and don’t go [near] those doors.’ But I did. I stayed too long. You could say it was greed, whatever, but I saw [oil prices] at $147.80 and thought there was still room to go, and there wasn’t.
“There are great opportunities now if you have any money left.”
Mr. Pickens set the tone of the afternoon — subdued but not down for the count.
“We have the financial crisis of the generation on our hands, and we’re going to have the opportunities of the generation coming out of this,” said Clint Carlson, president of Carlson Capital LP. “The difficulty is the timing. John Maynard Keynes said: ‘Markets will stay irrational longer than you can stay solvent.’ If I’m given any more opportunity, I’m likely to go broke.”
Mr. Carlson, who’s known for sophisticated arbitrage trades, suggested – of all things – buying municipal bonds. “I never in a million years thought I’d be pitching municipal bonds to anybody, but the risk/rewards are really very compelling,” he said.
Many attendees seemed rather chipper, given all that has come to pass.
Many told me that they’d gotten liquid in the past year by going bold into gold and slimming down their stock and real estate portfolios.
Those who admitted missing the disaster signals said they hope to get back on track with new ideas or, at the very least, find solace by hanging out with others in the same boat.
The event was organized by Shad Rowe, president of Rowe & Co., and John Neill, a partner with Dallas-based Telesis Co., who split the $200,000 tab for putting on the symposium. The speakers donated their time.
The more than $1 million that was raised will be split between the Michael J. Fox Foundation for Parkinson’s Research and the Vickery Meadow Youth Development Fund, which helps at-risk kids in a neighborhood east of Central Expressway.
More to go
Mr. Rose, president and owner of Cardinal Investment Co., nailed the housing downturn in his talk last year. He rarely speaks publicly but participates in the Great Investors symposium because he’s pals with Mr. Rowe, who has Parkinson’s.
“Unfortunately, my new prediction/guess is that house prices will decline another 20 percent probably over the next 12 months,” he said. “I know that’s not very pleasant, but that’s what I think.
“If house prices only fall to replacement costs, house prices have to go down another 19 percent. For those of you who think house prices can’t sell below replacement costs, if you lived in Dallas in 1987, most office buildings within a mile of where we are sold as a general rule at 25 percent of replacement cost.”
But Mr. Rose’s most convincing reason is the old issue of supply vs. demand.
“It doesn’t make any difference what new house production does. It doesn’t make any difference what the foreclosure rate is on subprime houses,” he said. “Total supply in 2009 is going to swamp total demand.”
You could almost feel the air being sucked out of the room.
But Mark Hart III, founder of Fort Worth-based Corriente Advisors LLC, said the U.S. is in better shape than most of Europe.
“What we’ve seen over there has been much more reckless lending,” he said.
“If a Western European country were to default on its sovereign debt or if the European monetary system were to break up, financial mayhem would likely ensue. My best idea is to a way to hedge against the economic consequences of a European meltdown.”
How does he suggest we do that?
Buy insurance on European sovereign debt. (And yes, he was talking about credit default swaps – those infamous financial instruments that decapitated American International Group Inc.)
But in this strategy, you buy the insurance, not sell it like AIG did. “The most you can lose on a CDS is the finite amount that you pay for the insurance,” Mr. Hart said. “The potential upside is enormous.”
The hit of the afternoon was Karen Finerman, president of Metropolitan Capital Advisors.
“In times such as this, the one thing we can do is drink,” she said as she suggested buying stock in Diageo PLC.
“You may not be familiar with the name, but you’re surely familiar with their brands: Johnnie Walker scotch, Guinness Stout, Jose Cuervo, Tanqueray, Baileys and Smirnoff,” Ms. Finerman said. “They have a rock-solid balance sheet, and they are now on sale. It’s trading at a near all-time low multiple of just over 12, with a dividend yield of just over 5 percent.”
Michael Price of MFP Investors LLC expressed a common theme.
“I’ve got 10 buy orders in every day. Nibbles. I tell my traders to buy a little and duck, buy a little and duck,” he said.
“The clouds will start to lift. Banks, once they refinance their balance sheets, will start lending again. America, our economy and our employment base will thrive because we’re going to clear through all this junk and we’ll be just fine.”
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