New York – Yesterday was the Investorside Conference, called “Independents’ Day 2010”. The organization supports truly independent alternative research. The agenda was full of interesting speakers, panels and breakout presentations. One interesting conversation was a sort of fireside chat discussion with Morris Offit and Todd Petzel, from Offit Capital.
Morris Offit, as some of us recall, was the person that started the equity research department at
Salomon Brothers in 1967. Needless to say, he had a great deal of historic insight into the markets. Initially, he was asked what the differences in the equity markets were today, versus when started. Rather than opine about the differences, Mr. Offit said things were pretty much exactly the same. Then he qualified this comment by saying the psychology was the same, but back in 1967, commissions were in the 15 cent range. Later he added that the ability of the market to take short positions had also been a game changer. He finally added that there had been a convergence of equity research and credit research and that he could not see any analysis being valuable that did not consider both of these analyses.
On the issue of prospective hedge fund regulation he suggested that there does need to be greater transparency. Mr. Petzel, Chief Investment Advisor at Offit Capital, recalled a recent trip to Brazil. He recalled that the hedge funds in Brazil are compelled to report their positions to regulators every 2 weeks. After a period of 45 days, these position reports are made available to the general public. The experience left Mr. Petzel wondering how the U.S. market could be so far behind in transparency.
Mr. Pretzel is a well know expert on derivatives and discussed the credit default swaps market and what occurred in the recent years. Mr. Offit, as it turns out joined the board of AIG post-Greenberg, to help sort out the CDS mess. While he could not comment directly on the situation, he did indicate that AIG had some hard-working well-intentioned people and he hoped that the company would eventually survive and thrive.
In his summary comments, Mr. Offit reflected on the shift of power between the board and the management of firms and added that this was a positive development. He said that his heavily fundamental process of investment analysis also relies on a behavioral assessment of the people that run the company.