I know. Buffett’s a year older, still buying oils and sitting with his monstrous position in Apple. When I told my 3-year-old standard white poodle, Sasha, she needed to qualify as a service dog, she threw me a fishy stare and scooted under the refrigerator. Not exactly upwardly mobile craving the service dog’s sash!
Way back, I had ventured down to the “Street” still in my twenties. Excepting Merrill Lynch, the large Irish house, the Street was a collective of boutiques run by traders and sharply analytical entrepreneurs. A couple of million bought you a seat at the table with such survivors from the ‘29 Crash.
Analysts then were called statisticians by partners. They plied their “slip sticks”, foot long slide rules and cribbed Moody’s and Standard & Poor’s manuals for their turgid research reports that nobody read. I was hired from my copy editor’s seat, to spruce-up research reports. The going wage was 100 bucks, weekly, and I needed to get an MBA at NYU while soldiering on. And so I did as the firm banked me if my grades were good.
Later on, I whipped up a Morning Research Report that went out on the teletype machine. Brokers read it with their coffee and donuts. Research then was still primitive. I digested 50 to 100 trade publications, weekly and summarized relevant contents.
Thank God the game then changed in 1961 when Bell laboratories discovered the transistor and licensed it to all callers. The technology sector then was born before my eyes. No longer just Polaroid, Xerox and IBM’S Selectric typewriter. Tech soared from a 5% market weighting, bulging to 20% of the S&P 500.
Actually, for over 60 years, tech never surged much higher than a 20% weighting. Overvaluation and recessions stalled the ride.
I’d promise my clients 2% a month largesse in Fairchild Camera and Motorola. This worked for years and then stopped working, specifically when recessions hit. I remember when Motorola management told me they were building a 500,000 square-foot semiconductor plant in Scottsdale. Arizona. They expected to make back their investment in three years. So I took notice. But excesses in growth stocks do get stamped out periodically. In NASDAQ, most of the top 10 are growth stocks, mainly tech.
As a Street operator you look for upcoming industries with an open ended feel to the revenue base. Early on, I was intrigued by cellular telephony, where the Street and the industry grossly underestimated that industry saturation would top out at 15% of civilized world population. Today, we’re over 100% saturated. I thank my son, Scott for such insight. He was working in sales for Nextel which soared from 3 bucks to $30 in a year or so.
Decades earlier, I got the word on the Syntex pill from Herbert Allen, Charlie Allen’s brother, who was backing “Pill”research on pregnancy protection. I bought 6-month options and went to the moon. Having smart friends is a must. You do this by sharing insights. Half a dozen or so great insights over a lifetime is enough to carve your place in the world.
I’ll give myself some credit for appraising the gaming industry back in the seventies. Howard Hughes explained then why he was buying up every available parcel on the Vegas Strip. Casino operators labeled him “Crazy Howard” on his buyout binge. They called their own properties “grind joints.” Hughes anticipated scarcity value for strip real estate.
Later on, Steve Wynn perceived Las Vegas as a destination point for families, not just joints for cranky players. Hughes rented a penthouse in a flashy joint. He flaunted waist-long hair, and uncut fingernails.
The going rate for a casino, downtown in the 60s was no more than $20 million. The Las Vegas Hospital sold for more. Trump bought Mar-a-Lago in 1985, a much better property than his casino experiences. I sold my Golden Nugget position to Steve Wynn, still in his twenties but restive.
“Perception” is forever the magic word for investing. Same goes in the art world. I was a confirmed New Yorker, early fifties, when the city became the contemporary art capital of the world, particularly for Abstract Expressionism. Jackson Pollock and Mark Rothko sold for $1,200, apiece with few takers then. I couldn’t come up with such funds.
So, I bought $300 pieces from artists without galleries and paid for them $25, monthly. Years later my dealer, Sam Kootz, would sell me Pierre Soulage canvases for $33,000, apiece. Sam would say “pay me when you can, kid,” and so I did years later.
Recently, I sat next to a fortyish Chinese collector at a dinner party who related how he built his “collection.” Bidding $50 million or more for a canvas bought at auction. When I asked why not use dealers, too, he responded that absent a knowledge base he would only participate when he saw friends bidding up at auction. He felt, then, in good company, that no dealer could exploit his ignorance. I took a deep breath and wished him luck.
No free lunches for investors. You work tirelessly to understand all kinds of businesses. If I had spent as much time studying the world art market, I’d be fabulously wealthy, not just comfortable. I coulda done in art what Buffett accomplished, buying stocks and holding on forever and a day.
But, I didn’t do it, did I?