Margot and Bill Winspear Opera House – Dallas, TX
By Cheryl Hall, The Dallas Morning News – November 2, 2010
Organizers of the Great Investors’ Best Ideas Investment Symposium promised diverse, thought-provoking advice from some of the biggest names in the investment world.
But they probably didn’t expect two of the headliners to lock horns.
A panel discussion got testy Monday afternoon when hedge fund magnate William Ackman and Dallas banker Andy Beal disagreed about the economy and investment timing.
Ackman, the founder of Pershing Square Capital Management LP who’s been in the news recently for his nearly $1 billion investment in J.C. Penney Co., said the stars are aligning for a continued market rally.
As Ackman sees it, the low cost of money is bound to push corporate America into spending for expansion. Corporate balance sheets are in better shape than in years. Corporate profitability is near an all-time peak.
The stock market recovery “should have some wealth effect” on consumer confidence. The weak dollar makes U.S. companies more competitive.
“This is an incredible time to buy a home,” said Ackman, who didn’t mention his activist investment in the Plano-based retailer. “The only thing missing to have a real run here is a little more confidence.”
That’s a huge but, countered Beal, the 58-year-old chief executive of Beal Financial Corp., who was making his first public speech.
The pessimist’s view
Beal emphatically asserted that the real U.S. economy is in a depression masked by a scheming, manipulative government intent on luring people to invest when they otherwise wouldn’t.
“The best opportunity is to recognize that we are living in a fantasy world of price-fixing and manipulating markets and hugely significant unknowables domestically and worldwide,” Beal said. “Sometimes the best idea is to just do nothing.
“Don’t get sucked into this idea that because you have cash to invest, you must buy something. I made most of my money on the deals that I did not do.”
Before Beal finished his remarks, Ackman piped in. “I don’t want to overspeak my welcome on this dynamic panel, but I’d love to take this man on if I can. Is that allowed in Texas?”
“Go ahead,” Beal responded, rocking back slightly in his chair.
“If I were thinking about investing in a bank,” Ackman said, “this is the guy I’d want making my loans. But when it comes to investing in the world, that kind of pessimism will cause us to be in a depression. … This is the humble guy on the panel, but he’s not going to turn the economy.”
Beal responded, not missing a beat: “Is the question ‘How do we turn the economy?’ Or is it ‘How do we make great investments?’”
A third panelist, David Einhorn , president of Greenlight Capital, said the Federal Reserve has become a money-printing junkie intent on keeping interest rates at near zero rather than facing the wrath of the stock market.
The Fed is expected to loosen money policy even further today at the Federal Open Markets Committee meeting. He hopes that doesn’t happen.
“This is the last best chance to cut that off before monetization becomes the standard policy because the capital markets expect it,” Einhorn said.
“The entire monetary policy that this man [Fed Chairman Ben Bernanke] is leading us on is determined by which way he thinks the S&P 500 will go up the most over the shortest period possible.”
The symposium, which benefits the Michael J. Fox Foundation for Parkinson’s Research and the Vickery Meadow Youth Development Fund, drew more than 1,000 people and is expected to raise $1.3 million.
Actor Fox, who has Parkinson’s, was on hand at the Winspear Opera House to say thank you.
What to do with idle money was on the mind of everyone I spoke with.
“Two years ago when we were at this meeting, the market crashed that day,” said Jere Thompson Jr., chief executive of Dallas-based Ambit Energy. “Today it’s much more stable. People are trying to look into the crystal ball and see what’s out there. Not many people seem to know.”
“We can’t make any money at the bank,” said high-end jeweler Richard Eiseman, “so we’re trying to find things with normal return levels that don’t have a lot of risk. You have to ratchet down your expectations on what returns are.”
Real estate developer Craig Hall came away thinking that Beal had spoken the brave truth.
“It’s a strange time and dangerous time,” Hall said. “The saying is ‘cash is trash’ when interest rates are too low. That means you go out and invest. ‘Cash is king’ when cash is scarce.
“Right now both are true. Cash is king because people are rightfully nervous. You’re better off being liquid than not. But cash is trash because you can’t earn anything on it.
“Andy Beal was brilliant in saying you don’t have to invest. It’s a hard thing for people to realize.”
Zac Hirzel, portfolio manager of Hirzel Capital Management, a Dallas hedge fund, was delighted with the spirited banter. “If you are in the investment business, this is as good as it gets.”
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