Tuesday, October 29, 2013

By Cheryl Hall, The Dallas Morning News – October 17, 2010

Shad Rowe and John Neill know how to turn a $200,000 investment into more than a million bucks in just three hours and not have to pay taxes on the profit. They’ve pulled it off three times and expect to do it again next month.

How?

They’re the masterminds behind the Great Investors’ Best Ideas Investment Symposium (a.k.a. GIBI and pronounced gibby) being held at the Winspear Opera House on Nov. 1. Attendees pay $1,000 a ticket to hear investment tips from financial celebrities who have just 15 minutes apiece to speak their minds.

Rowe, a well-known Dallas investment fund manager, and Neill, who owns and operates senior living properties in North Texas, each pay $100,000 to cover expenses. The speakers donate their time. All ticket revenue and donations go to two charities: the Michael J. Fox Foundation for Parkinson’s Research and the Vickery Meadow Youth Development Fund. The donation has been $1 million-plus each year.

These are pet causes of Rowe, who has been living with Parkinson’s for 12 years, and Neill, who has a soft spot for underprivileged kids in one of Dallas’ most impoverished neighborhoods across Central Expressway from NorthPark.

“These are young people who have a chance if we give them hope, encouragement and a little bit of support,” says Neill, a partner in Dallas-based Telesis Co. “We want kids to move from underperforming to overperforming. And we have a chance to help inner-city kids do that.”

Michael J. Fox will be at this year’s event.

The investment world has been on a roller coaster ride since GIBI began in 2007, when people were still fairly euphoric.

Rusty Rose, president and owner of Cardinal Investment Co., drew an audible gasp that year by predicting that housing prices on the two coasts would plunge much deeper. He suggested shorting big residential builders.

In 2008, the bottom dropped out of the markets the week of the event. My favorite tip from the conference was to buy liquor stocks.

‘Surviving, probably’

“This year, the world is surviving, probably,” says Rowe, who’s general partner at Greenbrier Partners Ltd. “Whether there’s another shoe to drop, who knows?

“But we’ve got the bases covered. We’ve got macro-players, stock pickers, gloomy people, optimistic people.”

I’ll bet a few folks from J.C. Penney Co. headquarters will be there. One scheduled speaker is William Ackman, president of Pershing Square Capital Management LP, who just reported that his New York hedge fund has teamed up with Vornado Realty to acquire a 26 percent stake in the Plano-based retailer.

The aggressive, high-profile investor is known for playing hardball with retailers that he feels aren’t making the most of shareholder value and is a regular presenter at GIBI.

Kyle Bass, managing partner of Hayman Advisors LP, is apt to make your stomach sink. The Dallas fund manager intends to give a primer on how international currencies could fall like dominoes.

“Japan is the big one,” Bass says. “But then you have Ireland , Portugal, Italy, Spain and, of course, Greece. Then you have Hungary , Iceland, Latvia, Lithuania. There are so many countries that are past the point of return that they will end up restructuring [their debt]. And restructuring simply means wiping out bondholders. I don’t think that the world’s come to that conclusion yet.”

The idea that the International Monetary Fund offers a safety net is an illusion, Bass says. The two largest contributors to the IMF are the U.S. and Japan, which are also the world’s two largest debtor nations.

“Do you know of any creditor nations in Europe? Because I don’t,” he says.

Bass will focus on Japan because, he says, its debt restructuring is a matter of when, not if.

“I feel terrible for the Japanese,” he says. “A quarter of their population is over age 65 – the oldest population of any country in the world. These people have put their faith in their government to get it right over the last 20 years. But the government lied to them and got it wrong.”

Glum and glummer

Bass predicts that the Japanese government will ultimately wipe out 70 percent to 80 percent of its sovereign bond values when it restructures. “People are going to end up with 20 or 30 cents on the dollar.”

On the surface, Japan still appears to be thriving, he says. “But so did Germany just before World War II. But in reality, everybody was broke, and only the elite had access to capital.”

While a Japanese default on its debt wouldn’t be the end of the Earth, it should be cataclysmic enough to unnerve our government, Bass says. And therein lies the silver lining.

This country has fallen into the zero-interest rate Catch-22, Bass contends. The U.S. must pay an additional $120 billion in interest on its debt with each percentage point increase in its capital costs. “We can’t allow our [interest] rates to move up is what I’m telling you,” Bass says. “Zero-rate policy is a trap. Once you get there, you can’t leave until you restructure.”

That’s not exactly what politicians on either side of the aisle or in the White House are apt to embrace, he says. “So it’s going to take something so much larger than 2008 to change the way we spend and borrow. When the dominoes start falling in Central and Eastern Europe and Japan, I hope that will give [the government] the impetus to change.”

Now that’s a cheery thought.

So what investment advice does Bass have?

“You have to defensively position yourself,” he says. But to learn how to do that, you’ll have to come hear his spiel.