You can’t teach an old dog new tricks, the saying goes, and in the last month, three of Wall Street’s oldest dogs have decided, in various ways, to give up trying.
The first was Julian Robertson, the founder of Tiger Fund, one of the most successful hedge funds in history. Hedge funds are private investment pools that specialize in placing rich people’s money in situations that have high rewards, but high risks. Robertson, over the last two decades, took the big risks and made the big money, betting on stocks, interest rates, currencies, and any other proposition that offered a high payout. But over the past year, he opted to stay with gritty but seemingly undervalued companies instead of high-flying technology stocks, and his investors began to pull their money out. The $22 billion he managed in 1998 dwindled down to five, and he decided to limit himself to managing his own money, still a full-time job.
The second investor giant to have a change of heart in recent weeks was George Soros, who in 1992 bet that the British pound would fall precipitously and earned a billion dollars when he was right. Like Robertson, Soros didn’t really believe in the tech stock bubble, but he decided to climb aboard: his funds began to pile tech stocks on last year, just in time for the current market retreat. Soros isn’t quitting, but he now says his fund will take less risk and accept lower earnings in a more limited future.
The third old dog is Warren Buffet, whose investment company, Berkshire Hathaway, unlike higher-risk hedge funds, is famous for buying and holding plain vanilla companies in such old-line industries as newspapers, soft drinks, and insurance. But at his annual shareholders meeting last week, Buffet proclaimed that the stock market in general was played out and he would concentrate instead on buying companies outright.
All of these Old Dogs are frightened by the same perception – that, particularly for technology stocks, the stock market has become a casino, that the way to make money is not to invest, but to bet, and that sooner or later the dice will come up craps. Robertson folded his business rather than sign up to what he called “a Ponzi scheme headed to collapse.” Soros, burned by his last minute leap into the pits, warned that “the music has stopped but most people are still dancing.” And Buffet called internet investments “a chain letter.” None of them can find a roadmap to guide them through the market’s manic moodswings.
A new generation of stock pickers, day-traders, and dot.com enthusiasts will argue that these old dogs just don’t get it. Maybe. But consider the case of the Foxhound Fund, which made a 532 percent return in the past year by betting on tech stocks, and lost almost all of it in March and April. Perhaps the most important new trick these old dogs have ever learned is when to walk away.
Old Dogs
You can’t teach an old dog new tricks, the saying goes, and in the last month, three of Wall Street’s oldest dogs have decided, in various ways, to give up trying.
The first was Julian Robertson, the founder of Tiger Fund, one of the most successful hedge funds in history. Hedge funds are private investment pools that specialize in placing rich people’s money in situations that have high rewards, but high risks. Robertson, over the last two decades, took the big risks and made the big money, betting on stocks, interest rates, currencies, and any other proposition that offered a high payout. But over the past year, he opted to stay with gritty but seemingly undervalued companies instead of high-flying technology stocks, and his investors began to pull their money out. The $22 billion he managed in 1998 dwindled down to five, and he decided to limit himself to managing his own money, still a full-time job.
The second investor giant to have a change of heart in recent weeks was George Soros, who in 1992 bet that the British pound would fall precipitously and earned a billion dollars when he was right. Like Robertson, Soros didn’t really believe in the tech stock bubble, but he decided to climb aboard: his funds began to pile tech stocks on last year, just in time for the current market retreat. Soros isn’t quitting, but he now says his fund will take less risk and accept lower earnings in a more limited future.
The third old dog is Warren Buffet, whose investment company, Berkshire Hathaway, unlike higher-risk hedge funds, is famous for buying and holding plain vanilla companies in such old-line industries as newspapers, soft drinks, and insurance. But at his annual shareholders meeting last week, Buffet proclaimed that the stock market in general was played out and he would concentrate instead on buying companies outright.
All of these Old Dogs are frightened by the same perception – that, particularly for technology stocks, the stock market has become a casino, that the way to make money is not to invest, but to bet, and that sooner or later the dice will come up craps. Robertson folded his business rather than sign up to what he called “a Ponzi scheme headed to collapse.” Soros, burned by his last minute leap into the pits, warned that “the music has stopped but most people are still dancing.” And Buffet called internet investments “a chain letter.” None of them can find a roadmap to guide them through the market’s manic moodswings.
A new generation of stock pickers, day-traders, and dot.com enthusiasts will argue that these old dogs just don’t get it. Maybe. But consider the case of the Foxhound Fund, which made a 532 percent return in the past year by betting on tech stocks, and lost almost all of it in March and April. Perhaps the most important new trick these old dogs have ever learned is when to walk away.