Monday, February 24, 2020

Back in banking days, a trip gone awry, 1990...

As referenced in two prior posts, my job at Manufacturers Hanover Trust had become Director of Investor Relations in 1988.  Even at the beginning of the role, there was wide latitude in places to call on investors and who to call on.  Then in 1989, based on their polling data, I was named "best Investor Relations Director at money center banks" by Institutional Investor magazine.  As MHT was generally viewed as a beleagured institution, it was a stunning surprise to all, including the CEO.  After that, it was basically carte blanche for me, conferences, cities, countries, institutions, all visited at my discretion with the approval of my boss, the CFO.

When I was arranging a trip to Zurich, Geneva, Frankfurt, and Amsterdam, the continental European countries where some institutions were buying U.S. equities as investments(Germany not at all, but our office there was large and wanted us to visit), I asked the CFO if he wanted to join me.  He was always welcome, but he surprised by expressing interest.  As usual my secretary and I worked with the travel department to arrange the trip.

Everything was set.  Two days before our departure the Travel Department sent the agenda to the CFO's office.  On the Sunday evening of our departure, we met at Kennedy airport for our 9pm overnight flight to Zurich.  As he looked at the travel documents that were my responsibility, he was aghast.  "Business class?  I travel First Class." As it happens my secretary had handled the arrangements with the Travel Department and the person she dealt with in the travel department had not flagged the fact that members of the Executive Committee, of which the CFO was one, always traveled First.  Hmm, I would have been there too.  He called the Travel Department and found out that there were now no First Class seats were available.

Nice guy, the CFO, he accepted the situation and said no problem but with the admonition that next time Executive Travel should be used.  Oh, even a separate department for top brass, news to me.  Could this get worse?  Of course. When we boarded the Swiss Air plane, we had aisle seats and were seated directly across from each other as requested.  Seated on the CFO's right was a medium sized dog, looking perfectly at home.  To the dog's right was an obviously wealthy older Swiss woman.  Apparently dogs were not allowed in First.

We arrived in Zurich.  Now to a nice hotel, what else could go wrong?  While a famous old hotel, in a prestigious location, "old hotel" was what could be seen at first glance.  As we approached and stood at the reception desk, a slim tall black woman in a slinky dress walked up next to us and said "hi boys".  As we walked toward the stairs to head to our rooms, she whispered, "any company?".  Remember the Kinks song Lola?  I will never be sure if the CFO caught that whole sequence or took it in, but when we checked into our rooms they were messy, beds barely made up.  "We're out of here", he yelled through my door.

At this point it was late afternoon, no hotel, no dinner reservations, no 6pm vodka and tonic for my boss, and I could at least use a cold one.  He roused the Executive Travel Department in New York, late night there, and told them to find another hotel, one with a decent restaurant.  They used their clout to find a room in the Hotel Baur en Ville, a grand hotel of the old aristocracy.  It was old, but exceptional.  The hotel restaurant had just closed,  but they discreetly opened the door when we arrived, saying the chef had stayed for our arrival as we slipped in.  He came out, telling us that ordering from the menu was no longer possible but he would prepare our dinner, and hoped that we would like it.

Vodka tonics were quickly served, an amazing bottle of white wine hit the table, and after that my memory fails.  I do clearly remember us agreeing that it was one of the best meals we had ever had.  My job was secure!

There may be a follow up to this post, as so much more followed on this investor calling trip.  We will see, but not today.

Thursday, February 20, 2020

February 19th Democratic debate, short takes...

Last night the two hour debate among six Democrats seeking the nomination for President was watched.  At the conclusion, there was purposely no follow up watched here, meaning no interviews and no newscaster commentary.  Picked up a book and read before dozing off.  This morning only the scrolling stock futures were watched on CNBC, volume off, so no political commentary would be heard.  Why?  What follows will be brief thoughts untainted by the opinions of others taking claim to the narrative.  Was that a good idea?  Let's see.  At 6:30am, caffeine hopefully beginning to kick in, here are brief comments on each candidate.

Mike Bloomberg --- as fully anticipated by all, the newcomer was the prime target of the others who have already been grinding away for months.  At times he was not as articulate as had been expected but overall he stated his points clearly and focused on defeating Trump.  When challenged on his party loyalty, stop and frisk, attitudes toward women, he gave a response and did not elaborate in any long winded way.  When attacked by Warren and Sanders for being a billionaire, he was not defensive, except in one instance under attack by Warren over confidentiality agreements.  Most importantly, for the most part he let the others five fight among themselves.

Bernie Sanders --- came out firing, he attacks "corrupt" large corporations and his opponents on the stage.  His many aspirations are laudable but that word keeps coming up.  He does not see any issue with having 100% federal government control of the health care system, and is absolutely certain that is the most efficient and "fair" way to proceed.  How to accomplish that is unclear, but his belief is absolute.

Elizabeth Warren --- her life story and personal anecdotes were part of the show again.  When she started one with "I met a man in Reno", my mind flashed to Johnny Cash.  Her capacity for exaggeration and at times plainly distorting views of other candidates was on display again as was her "just two cents" comment on the "greedy billionaires", again she obfuscates on two percent for a sound bite.  She is intense and wants to win, that's clear.  Her positive goals at times get lost in her personal presentation style.

Joe Biden --- he seems a bit desperate as he speaks, eager to talk about his past experience, knowledge of foreign policy, where he has been(Johnny Cash flash again --- "I been everywhere man...).   As always he has an uncanny ability to misspeak, in minor ways on the stage last night.  And he does that Hillary Clinton act of pointing into the crowd to acknowledge someone, as a way of showing his close personal contacts.  Doing so at end, kneeling and pointing he just looked old.  His virtues as a centrist were made clear, but boasting about his popularity in black and latino communities was not news, and not effectively done.

Pete Buttigieg --- his persona as the smartest student in the classroom is well known, and as he interacts with other candidates his style aggravates them.  His temperament is more distant than personal.  When he challenges others, he is direct and articulate, not collegial at all.  His more centrist view on health care is not full throttle, as he emphasizes that change is incremental.  This is his version of telling the truth, not common in an aspirational politician.  In this debate he was more confrontational, especially with fellow centrists Biden and Klobuchar.  This was not his best performance, his approach showing some signs of  fraying.

Amy Klobuchar --- her approach was measured and rational once again, but basking a bit about now being in the spotlight.  The homespun woman from Minnesota approach continues.  She does not take criticism lightly and that comes across as a bit thin skinned.  Her policy commentary is not revelatory in any way.  Her steadiness may be an asset. Those voters looking for a compromise candidate could  find this as attractive.  It is possible that she would frustrate Trump more than the he always wants a fight.

That's it.  One observation overall is that every candidate went out of their way to talk about the black and latino middle class.  Why not just middle class once and a while, no further clarification.  Trump knows how to capitalize on this in his ugly way, as we have certainly seen.

After the show, I went back to my book, "Bubble in the Sun", a light, entertaining, and informative history about the boom of Florida during the 1920's and what led to that.  Learned last night that the Ormond Beach Florida golf course that my father and I played on during summer vacations when the textile company closed, was not built by the Rockefellars, as he told me, but by the Flaglers, Henry Flagler being John D. Rockefellar's more private partner.  So my father was basically right. It was a beautiful public course built in 1892, rare at that time in this country, no big clubhouse as mansions as homes were the style of the rich at that time.  The book has been recently published and is by Christopher Knowlton, an author previously unknown to me.

Footnote:  To a large extent, the opinions about the candidates above are straightforward.  I do acknowledge that I am not a fan of Elizabeth Warren.

Thursday, February 13, 2020

College basketball professionals?

College basketball is different from other college sports.  That's an opinion, viewed as a fact here.  The attention it attracts is phenomenal and the television advertising must be commensurate.  Unlike football, where the eventual goal of turning pro and going to the NFL can be a large opportunity with so many players needed by each team, the NBA, with max 12 active players on a team, means the great majority of talented college basketball players have limited possibilities to cash in, to be blunt.  Playing in Europe or China is available for only a talented few.

On televised games, the announcers are programmed to point out the true scholar athletes(he has a 3.8 GPA, or has already graduated and is attending pre-med classes, or plans to attend law school next year, he is a volunteer at a school for handicapped children, so many positives...).  Do they ever say that he did well in his remedial reading program this year, and his tutor says that his grades are above 2.0, can still play next month. 

Watching games this year, it is fascinating to hear the announcers describe the number of students who are transfers.  "He played at  Western in his freshman year, then after a year at community college, he played for State, and then transferred this year to Eastern, and became eligible to play last month."  If this is anything like the old time role as a college student, please correct me.  Louisville seems have built its current team primarily on savvy choices of college transfers, but do have one player from a Louisville high school.  In the 1970's, players from Louisville high schools would have been half of the roster.

A college experience at an academically adequate university can be a positive life long experience.  For the exceptionally talented player, even a year at a school like Duke can set them up for future academic advancement, Louisville not so much.

There is no answer forthcoming in this rambling comment.  This issue is a current one, not new here.  When watching a game and seeing a player sustain a significant injury, knee or ankle or a concussion, wondering what their future is worth a thought.  An advertiser funded insurance pool, guaranteed payments based on need for five years after graduation, thoughts...

Sunday, February 09, 2020

Another yarn of early banking years

In 1988, when the position of head of Investor Relations at Manufacturers Hanover fell my way because no one else wanted it, I decided to call on the securities analysts covering the company at their offices.  At the time, that was not protocol, basically unheard of, but waiting around for analysts to visit me at my beleagured firm seemed silly.  Calling them directly, setting up appointments without the aid of a secretary, was also odd.  It put me on the map quickly and got me out of the building.  My previous job in the so-called Strategic Planning Department had been excruciatingly boring.

One of the first calls was on the bank analyst at Goldman Sachs(called Bob here).  Like almost everyone he was negative on the stock, but like most firms he had a neutral rating in print, as the investment bankers may have a deal in the works.  When he spoke to investors, he was not positive about the company.  It was clear that he was somewhat offended that I was calling on him at his office.  The long maned and somewhat flamboyant analyst had a PhD. in electrical engineering, but math whizzes gravitated to the money that could be made on Wall Street.  Ushered into his office by a secretary, we shook hands and he immediately went into a rant about a prior investor relation's head at MHT who had been removed from that position, replaced on a interim basis by a bond analyst, and then there I was.  When meeting with analysts part of my pitch was that I would arrange meetings with members of management that they wanted to see.  This was unprecedented at MHT, and at most firms.

My "successful" predecessor that Bob liked was a New York blue blood type, a Vietnam officer and helicopter pilot, and a big spender on food and drink for analysts that he entertained, (for ease of writing he will be called Clay). Clay's expense budget was huge and he was viewed by management as an excellent contact to the "arrogant" analyst community.  His view that was he was irreplaceable as no one in management understood what drove the stock price.  The Chairman named a new head of the Strategic Planning Department, a stubborn New York Irishman(called Kevin here) but also a Vietnam veteran who had been on the ground during the Tet offensive, a Captain in the quartermaster corps at a dangerous time for everyone there.

Still following this.  Not sure.  I will continue.

Kevin, as head of Strategic Planning, had Investor Relations reporting to him.  In his first meeting with my predecessor he was asked to explain what he did and how he approached Investor Relations.  Kevin asked about the expense budget as well, with fine restaurants almost nightly on the bank's tab.  Clay said to him, "people of your ilk would not understand this".  Kevin promptly went to the Chairman and said he would not do the job if Clay was in Investor Relations.  Done, so much more to this but that is the backdrop to what follows.  It was my job, Clay was put in another position where work was required. That was not for peoply of his "ilk", so he retired to his family home in the Westhampton on Long Island, saying that he was managing money.

The Goldman analyst followed up by asking to meet with the head of the International Division of the bank(Doug), who was a year or two younger than me but whose father had been President of Bankers Trust Company.  He was highly regarded as a possible CEO someday, and intimidated other bankers senior to me. A Brit who was much more experienced than me, and senior to me, could hardly speak without his voice quivering when asked a challenging question by Doug.  He stumbled and I explained as a follow up.  That was not a bright move by me, to correct one my managers in front of someone senior, just an honest but rather stupid mistake.  It made an impression on the younger Doug, as he became a bit intimidated by me, even as he was making a zillion dollars more and headed for the stars, his expectation, not to be fulfilled.

So Bob the Goldman analyst asked for a meeting with Doug, the Executive VP head of international banking.  That was arranged and the meeting was held, Doug and Bob acting like they barely knew each other.  It all seemed fine to me, with Bob asking mostly softball questions and Doug explaining the opportunities for business that were attractive in his sphere of influence.  Usual fatuous talk about how MHT was better positioned than its competitors in many areas of the world.

The next day I received a call, picked up by my secretary, and after some chit chat which she did with anyone who called, she told me that it was Doug on the line, "important call" she said.  Doug then began to ask me about the meeting with Bob and what I thought about it.  "Wasn't he a bit arrogant?" and "Did he understand anything I said?" and "Where did he come from?" and "What did you think about him?".  I gave straight answers but did faintly hear some other voices in the background, not relating to that at all.  In answering Doug's questions I explained that, yeah, Bob comes across as a bit arrogant but he really understands banking and is a capable analyst.  At the same time I realized that there was a speakerphone on, and others were there.

They were all together, Doug, Bob, and Tony, and were baiting me, to try show how uninformed this new Investor Relations head was.  I asked, are there others with you?  Laughter followed, and Doug said he was with a few friends.  He quickly finished the call, saying "thanks".  Only later did I learn who was on the call, and Bob eventually became a regular on the phone with me, treating me as if I was human.

Those creeps.  Doug was fired from MHT the next year(for general incompetence and lack of loyalty, my guess), Tony stayed a Hampton's playboy of sorts, and Bob was named the 2nd best analyst for large banks in Institutional Investor magazine. He became a huge supporter of my efforts, but not of my company, until much later.

We eventually became friends when serendipity put Bob and his wife at the same hotel on a vacation trip to Lisbon in 1998.  Kathy and I were invited later that year to a gathering at his house in the Hamptons, you guessed it, usual suspects.

This must end.

Thursday, February 06, 2020

Investor's dilemma

One of the more competent regular panelists on the CNBC program that airs on weekdays from noon to 1pm, said today that "you can only invest in so many stocks".  He was trying to explain why he had chosen to sell a stock even though he believed that it had great potential.  One could wonder, "when we get to this point, is there a correction ahead?".

In a January 19th  market commentary here, the closing comment was "Could this possibly be a bubble?  Of course it is and I don't want to miss it".  The saga continues.  Of stocks mentioned at that time, HAPP, FTCH, SAGE, and YNDX have been sold, three with modest gains and one with a slight loss.  BIID has gained over 10% since that time due to a satisfactory settlement of a drug patent dispute that was news to me.  A medium sized position in TWLO was sold yesterday with a slight gain as I realized that it was a mystery to me, missing today's 7% decline. Yes, it seems that for part of my portfolio, I have become a trader.  Keeps me busy!

Paycom(PAYC) is a significant longer term holding with solid gains in place, but it declined 9% today on what looked like a stellar earnings report that beat expectations. Not all expectations it seems.  Smile Direct Club continues its rise after several purchases in January, up in the aggregate 12%.

The Stock of the Day here, if there is such a thing, is QTT, that's Qutoutiao.  It's a mobile app company based in Shanghai that is possibly comparable to SNAP, but in China.  It also seems to encompass comic books and cliff notes, as well as an application like Medium.  Dived in two days ago and now up 15%.  Maybe it's reaction to the Corona virus and the thought that people will need to stay at home more, and need entertainment.  The stock must be watched, just like the virus.  Two days after the purchase, it is a mystery to me how QTT hit my radar.  That's a bit of a concern.

This does not seem completely normal, talking about me or the market?  Proceed with caution.


Sunday, February 02, 2020

Short comments of the day...

---After Ginni Romitty announced her retirement from IBM, the stock rose over 5% on a day when the overall U.S. averages were down 1.75%.  The only market consensus now is that the new CEO and President, both insiders, could not possibly be worse.  New shareholder here based on the news after many years of shunning the stock.  IBM was my banking client for international business in the early 1980's and the arrogance of my contacts there was in the range of rude to ugly.  The firm moderated that attitude over many years, until Romitty upped the ante again.  The Board was reticent to deal her even as she failed to invest in cloud projects.  It's been a long time coming...

---The February 3rd New Yorker magazine has a profile of James Corden, titled "Mr. Happiness".  The 41 year old polymath of the present, whose late night program airs mostly when I do not, is an interesting person with a varied career, having had his ups and downs. The profile is fascinating.  There were a few times when my eyes were open during "Carpool Karaoke" in the past, but I had no idea that it had become such a phenomenom.  Now "You Tube" will get more action to catch up.

---In the same issue, there is an essay by Jill Lepore, "In Every Dark Hour", under the smaller font header "The Future of Democracy".  In five dense magazine pages, she reviews the state of democracy in the world since 1917, with even a few backtracks to more distant times.  The name "Donald J. Trump" is mentioned only once, in a paragraph that includes the names Putin, Erdogan, Orban, and Bolsonaro, but his time in power is the real subject.

---Sports update:  An American woman not named Serena has won a major title for the first time in over ten years.  Sofia Kenin was born in Russia but came to the U.S. with her family when she was three years old.  She defeated Garbine Magurza, a two time major winner, who was born in Venezeula but moved with her family to Spain when she was five years old.  Novak Djokovik defeated Dominic Thiem in five sets, keeping the dominance of the top three intact.  There was a hope here that Thiem could break through and it looked possible after three sets. Great match, remarks by both about Kobe after.

---Super Bowl next:  San Francisco will win the first half, Kansas City will win the second half, half time will be the winner.

Saturday, February 01, 2020

Ancient history participant in the banking world...

In 1991, there was significant consolidation expected among the large banks in the U.S., particularly in New York and California.  Residual credit issues from the 1980's and the need for cost cutting were the primary reasons, and higher capital levels were required.  The big speculation at the time in New York was whether Manufacturers Hanover, my employer, would be combined with Bank of New York or Chemical Bank, or whether those two would merge with each other.  It was not just speculation, the negotiations were underway.  Another thought was whether any of the three banks would be acquired by Citibank or Chase Manhattan, all considered more viable at that time, yet their difficult days would come as well, and soon.

The President of Manufacturers Hanover had been recruited from Chemical Bank the year before, where he had been one of three Presidents there, under a Chairman and two Vice Chairman.  To say this was a unique arrangement, not just in banking but in corporate America, was an understatement.  Top heavy?  The Chairman of Manufacturers Hanover was still firmly in charge of the troubled company, and realized that going it alone was not possible.  The intrigue inside and outside of the banks was a source of speculation in the markets, the media, and among the employees of those institutions, rife with rumors.

My hours worked during that time were daunting.  Having secret locations for negotiations and planning around Manhattan to avoid scrutiny was commonplace.  At  8pm one evening in early June, I went out to dinner at a small and discreet French restaurant on East 48th Street with the CFO,  who was my boss, the Controller, and the head of strategic planning.  The CFO was filling us in on the status of the negotiations, the challenges faced, and the fact a choice was being made between merging with Chemical Bank or Bank of New York.  Bank of New York was less stressed and smaller, but with limited international operations where big cost cuts would be possible.  Chemical was generally viewed to be the stronger bank with its blue blood culture, but its capital levels were no better than MHT at the time.  Unfortunately for Chemical, as well, they had entered into a huge interest rate swap in 1990, actually a big bet to supposedly hedge their balance sheet, and the swap was massively underwater.  That was not public at the time.  The brainchild of that swap was the new President of MHT.

Anybody still reading?  Is this possibly boring?  Oh well, this will continue.  Keeps me busy!

At dinner that night on 48th Street, I was quizzed by the others about what our largest shareholders were thinking, as they were my contacts.  Clearly they thought mergers were necessary for the industry.  MHT's largest shareholder by far was Fidelity Management, and various portfolio managers there bent my ear daily with rational thoughts and opinions.  My job required that there be no disclosure of confidential information and they did not expect that, or want it(illegal for them and me), but they could opine.  A few days before in Boston, the new President and I had a meeting at Fidelity HQ,  and at the dinner that night the CFO asked me to describe their thoughts.  Basically, I related their position. What they wanted was the most beneficial deal possible, certainly, which depended on the exchange ratio, cost reduction possibilities, and management leadership choices.  They expressed no preference about which merger partner, but liked the merger of equals concept.

Hearing that, the detail oriented, knowledgeable and usually soft spoken CFO yelled "Damn it", which was added to in a lower tone of voice as "that motherfucker".  At the quiet tables around us, heads turned.  As it happens,  the President, in a meeting with the CEO and the Management Committee earlier that day, had told them that Fidelity much preferred Bank of New York as the merger partner.  The President, reviled at Chemical after his departure to a rival, was talking his book and lying, no other word for it.  His cover was blown.

Manufacturers Hanover and Chemical Bank announced their tentative merger agreement the next month and completed the merger in January 1992.  The President had sealed his fate and found a job later at Toronto Dominion's U.S bank HQ in Chicago for a short time, aggravating everyone there, and eventually became Chairman of Greenpoint Savings Bank in Queens, where he promptly moved the executive offices to Manhattan.

That's my story and I'm sticking to it.  Eventually the new Chemical Bank merged with Chase Manhattan, actually bought the massively mismanaged Rockefeller bank if truth be told, but the name Chemical Bank was justifiably retired, and subsequently the new Chase merged with(bought) JP Morgan in 2000.  In 2003, they parted ways with me.  It was an exhausting run, but the travel required in my investor relations role kept me on the road part of the time, limiting internal politics for the most part, until it didn't.

Enough of this.  Avoided names above to protect the...