Investment Outlook

April 2000 --- Sachs merges with Saks

In the real world, Wall Street is separated from Seventh Avenue by about six subway stops or about a $20 cab ride. In the financial world, the two parts of New York are much closer. If one observes what is happening today, one will find that the investment business has evolved from a world of dour number crunching accountant types to a glamourous world where being fashionable becomes an issue. When one turns on CNBC, widely regarded as the MTV of the baby boom generation, you are struck by how attractive the hosts and guest panelists are. Certainly, someone would not be presented if attractiveness was the only attribute…but it sure helps. If that seems too far-fetched, consider the talk at cocktail parties surrounding the stock market. You need only mention that you are trading some of the current hot names in the high flying technology sector such as Ariba, or Commerce One in order to be considered in the know. You probably don’t even know what these firms do, something about B2B, but at least you’d be current. If you mention that your holdings consist of Coke, Philip Morris or United Technologies, people would look at you as if you bought your bell bottoms at Wal-Mart. Heck, if you mention that you actually owned stocks as opposed to just trading them, you would be considered déclassé.

The huddled masses await the pronouncement of the hot stock gurus to see where their money should be directed. This is akin to the mavens of the fashion world dictating what will or will not be in vogue for the coming season. Can anyone dispute that Abby Cohen of Goldman Sachs is more powerful than Karl Lagerfeld of Chanel? The rapid ascent of anointed stocks is matched only by the sudden decline of hot stocks as ardour cools and the fashionable crowd moves on to the next hot thing. As we have pointed out before, it is rather ironic that in this new information age, the ease of access to all manner of information, research, facts, factoids and opinions has not made investing easier for the general public. Easier to trade to be sure, but not necessarily easier in terms of making money. After all is said and done, having access to the most current financial information and earnings numbers is not that relevant when you see new firms with little history and very slim chances of an operating future trade at hysterical multiples of earnings.

Recently, one of the icons of the investment business, Julian Robertson decided to shutter his $6 billion hedge fund, Tiger asset management. At its peak only a short time ago, the fund ran $22 billion of client assets. His comment was that he just did not understand the market anymore and at 67 years of age, "who needs it." He was right: something had changed. The stock market hadn’t changed, the market for stocks had changed.

Now, instead of only professional managers running the markets, the public is now in on the game. The promise of a wired community has really come to reality in the financial world. Everyone wants to be in on the action, now. We hear much these days about New Economy stocks versus Old Economy stocks. If you substitute the word fashion for economy, then the whole thing makes sense. At one of the numerous and meaningless American awards shows this year, Jennifer Lopez appeared in what can only be charitably called a dress, a rather provocative dress, what there was of it. Suffice to say, every red blooded male in America would want to be associated with that dress, but it’s highly doubtful that they would buy it for their wives or girlfriends. Sounds a lot like any of the blah blah dot coms trading on stock markets today. As we all know, the fashion world is notoriously fickle when it comes to trends. Anyone old enough to have gone through a couple of fashion cycles has some vestige of bygone fashion hidden away in the back of closets, banished from use once their trendiness value expired. Platform shoes, bell bottomed pants and hopefully soon, three button men’s jackets. If you think about it, none of these items looked particularly appealing. They were items you were obliged to buy to appear current. Someone somewhere decided that these items were important and the mass of the population followed. Even today, some of the more anointed designers place their names right on their garments, in big bold letters, in effect sartorial billboards and people will still gladly pay big bucks for the privilege of wearing them. Years from now, people will be embarrassed to dig out old shirts with "BOSS" or "DKNY" stenciled with 72 point font.

No doubt, using this analogy, years from now, people will wonder why they would be so eager to have paid 500 times sales for an internet stock which debuted in it’s IPO at 20 but which they had to own at 190. Well, we think we have it figured out and the reason that most analysts can’t, is because they think the markets are all about numbers and reason. We know it’s about fashion and if you can’t stand riding the fashion bucking bronco, stick to blue jeans.