According to Dallas Morning News business columnist Cheryl Hall, Monday afternoon's Great Investors' Best Ideas Investment Symposium in Dallas presented a rare opportunity for some of Wall Street's masters of the universe to get a taste of what many Texans have already come to appreciate: banker Andy Beal taking your conventional wisdom and sticking it in your ear.
Readers of this blog have already read (most recently here) about Mr. Beal's talent for moving in the opposite direction of the herd and making scads of money as a consequence. Since he generally does not give interviews to the press or speak publicly about his ideas (Ms. Hall alleges that Monday afternoon's talk was his "first public speech"), when you get to hear what he has to say, it might make sense to listen. Certainly, hedge fund "guru" William Ackman got a mouthful of a Beal Meal he's not likely to swallow anytime soon.
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.
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?' "
I wonder if Ackman offered Beal a Penney's gift card as a peace offering? I doubt it.
I'm neither denigrating or defending either Beal or Ackman because I'm simply a pedestrian bank lawyer from Texas without either man's track record for making money from his investments. That said, I thought Ackman's interruption of and condescension toward Beal, personally, and Texas, generally, typifies a mindset steeped in a provincialism that deludes itself into the conviction of its own superiority simply because its located east of the Hudson River. Not only do those of us who fled New "Yawk" City as a means of preserving our sanity find such attitudes tiresome, but In some circumstances, that kind of superciliousness might make it hard for the speaker to reach the door with a full set of uncracked dentures, guest or no guest. After all, we're all still half-wild down here just south and east of the Llano Estacado where the phrase "One Riot, One Ranger" means something to a few people.
As it was, the audience members seemed to separate the wheat from the chaff all by themselves, without the aid of either an Armani suit or a 28 year-old Wharton MBA.
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."
I agree with Mr. Hirzel, and I wish I'd been present to witness the exchange, except for the fact that hearing Beal speak Monday might have depressed me even more than reading his words does today. As Craig Hall (a former bank owner himself) put it so well, this is "a strange and dangerous time."