Summit Notebook

Ritholtz: I zig when everybody zags

The U.S. economy is experiencing an ongoing but slow recovery, says Barry Ritholtz, director of equity research at Fusion IQ. But that’s not stopping him from enjoying discounted prices in a low-inflation environment, at least when it comes to his personal spending habits. The world is on sale if you’ve got the money to spend, he told the Reuters Investment Outlook summit in New York when asked, for example, if he might spend less while on a vacation or forego a purchase or two.

“I am an enormous counter-cyclical spender. At the top of the bull market I don’t want to buy anything. I am a seller into a bull market. We have been buying a ton of stuff over the past year. We got two new cars long before the May…. so we picked up two new cars. We’re doing work on the house. We’re adding a kitchen. I got my wife a very lovely birthday gift. She got me a very lovely birthday gift. We’ve been buying artwork. We’ve buying jewelry. I love to buy stuff when it is on sale. I hate to buy top dollar for it.

“So, we just were in the Cayman Islands on vacation some time ago. We were in Aruba back in December. I’m heading to Vancouver in July and probably take a week or two in the Hamptons. I’m thrilled to spend money in this environment.

“I got an e-mail from a client in the heart of ’08 saying the advise and commentaries have been great but you’re just so relentlessly negative in ’08, you’ve got to say something that makes me not want to commit suicide.

“I said stuff is on sale, go buy stuff. Go buy collectible automobiles, artwork, jewelry. If you want to buy real estate, you are probably early, but if you find a unique property, and as we have seen with some of these so-called trophy properties they’ve come down in price but they don’t plummet the way some condo in Miami is going to plummet. If you find something you really want to get, buy it now. Don’t be afraid to make low-ball bids on artwork. If it is $15 million up from $8 million, bid six and you might get surprised by what happens.

“In this environment I’m happy to tell people, if you can afford it, don’t go out and borrow against the house, don’t leverage yourself, but if you have the ability to go out and spend money and there are things you want and they are significantly discounted from where they were three, four, or five years ago, why the hell not? I would much rather spend when things are cheap than pay up when things are expensive.

from DealZone:

Markdown poster child: I’d do it again

With the luxury of hindsight, Saks Chief Executive Stephen Sadove said he wouldn't hesitate to repeat the big markdowns of the 2008 holiday season if faced with the same tough environment that made the retailer the poster child of recessionary sales.

"It was the right thing to do to generate the cash," Sadove said at the Reuters Global Luxury Summit in New York.

The sale slashed prices on high-fashion, designer merchandise by as much as 70 percent, prompting a flood of media coverage and a slew of shoppers.

"It took some months to clear out the inventory. All the  questions of vendor relationships --- every one understood very quickly it was the right thing for the business. I would have done it again," Sadove said.

"It was a function of supply and demand when you have an excess of supply over demand you have to clear out the product. It allowed us more quickly to get back to a normalized state -- healthy margins," he said.

Sadove declined to take credit for the decision, saying it was made by a large management at Saks.

"My career has been about building teams and teamwork  -- that was an example where all the right players had a seat at the table," he said.

Private Bank finds synergy in public bar

It is a little known fact that private bank Wegelin, Switzerland’s oldest bank is also active in the bars and restaurants business.

In its ‘Nonolet’ bars – a play on the Latin saying pecunia non olet (money doesn’t stink) – in St. Gallen and in Geneva, hedge fund managers and other financial professionals rub shoulders with other locals in the early evening over sparkling wine or champagne and snacks.

It may sound an odd sort of diversification, but Wegelin says there were forced to try a new line of business to ensure an upmarket crowd mingled on the ground floor of the Wegelin building.

“You cannot have a strange business there like a kebab shop,” said Wegelin partner Christian Raubach.

Wegelin was forced to launch a hostile takeover on a local bar which had attracted a lot of unruly drinkers near its St. Gallen branch office.

“We bought the bar, we fired the owners, and we put a nice Café in so we get a different crowd. The crowd that sits during the day drinking coffee and not vomiting drinking beer at night,” Raubach said.

The operation proved to be a success but is unlikely to develop in to a brand new business area.

Swiss brand key to banks’ cache

Private banking: you may be worth it

Those who tend to avoid posh restaurants in Geneva’s expensive Rue du Rhone district and famed private banks because they believe they are not rich enough may be given a second chance at century-old wealth manager Julius Baer.

The Swiss private bank, which has made its name thanks to the services it offers to the ultra-rich, believe its powerful high-end brand may be keeping potential clients away.

“It’s a bit like the nice chic restaurant on Rue du Rhone you walk by 10 times and think: “I am not so sure I can go in there, it might be a bit sophisticated,” Boris Collardi, Chief Executive of Bank Julius Baer, told the Reuters Wealth Management Summit in Geneva.

“And then you end up going in there and you have a wonderful meal.”

Private banking services at Julius Baer start at around 1 million Swiss francs.

Worth trying?

Geneva is for wealth management

Even for an American who’s not wealthy, Geneva has a reputation as a global centre for wealth management – the place the world’s rich come to stash their money and (they hope) make it grow.

    But you don’t necessarily expect it to be so aggressive — after all, the rich tend to be demure when it comes to their banking.

    Imagine one reporter’s surprise, then, on arriving in the airport in Geneva and seeing bank ads everywhere. Think of the casino adds in Las Vegas’s McCarron Airport or the technology ads in San Jose’s Mineta Airport: it’s the exactly the same in Geneva, only with wealth managers.

    Look left – there’s UBS. Look right – there’s Julius Baer. Look up in the baggage queue – there’s a Swiss bank that emphasises a focus on the Arab world. A complete unscientific guesstimate suggests the display ads in the terminal run about 75 percent wealth management and 25 percent fine watches. (No surprise that every other storefront in the Ville Centre area of Geneva has watches on offer.)

    There is one plus to all of the bank ads in the airport for the less wealthy though. Tell your cab driver to head toward their addresses and you’re likely to find the city’s best cafes.

Retail in recession: bottoms, bananas and breeding

So, what did we learn from executives in the hard-hit luxury and main street retail sectors this week at the Reuters summits?

The idea of a “new normal” age of lower consumerism was in vogue, with many executives expecting consumers to continue to be thrifty for some time. Conspicuous consumption may be dead, they say.

Heck, even Tiffany’s is attracting hagglers.

Even the Saks CEO is “Staycationing” in the downturn. Of course, not everyone is cutting back, so Hermes still needs supplies of crocodile hides to make $35,000 handbags. The company’s solution? Breed its own.

The word “bottom” was also bandied about. Executives were hesitant to say the economy had definitely hit bottom. But many did see some leveling off. EBay CEO John Donahoe, for example, said he has seen some stabilization in demand, as did VF Corp CEO Eric Wiseman.

Taittinger chief Pierre-Emmanuel Taittinger isn’t even concerned about the bottom line. Just bottoms up.

And about those young American women with the word “Juicy” on their sweatpants bottom? We may not be seeing that as much, said Juicy Couture President Edgar Huber.

Kuwait banks on luxury with third airline launch

As airlines around the world cut capacity and ground planes, the tiny Gulf state of Kuwait is stepping boldly into the global aviation crisis with the launch of a third carrier. Kuwait National Airways hasn’t even taken delivery of its first plane yet, but when it does, it will be fitted with Recaro luxury leather seats. Kuwaiti executives will be offered the lowest seat density Airbus A320 in the world, enjoy in-seat entertainment, and be able to use their mobiles phones and Blackberrys on board – at least for data — the airline’s CEO George Cooper told a Reuters summit. Cooper is betting that the world’s seventh-largest oil exporter will remain an island of prosperity in the midst of a global financial crisis. “Creating this airline is something that will work in Kuwait,” he said. “I can’t think of many other places in the world where it would.” With only a business plan, the airline raised nearly $200 million in a 2006 initial public offering. Cooper, a former pilot who worked for many years at British Airways, said it will focus on ferrying businessmen around the region, with the first flight expected sometime in January. The carrier, which will operate under the brand name Wataniya, is benefiting from the plight of airlines around the world as fears of a global recession loom. It can now snap up pilots from around the world and capitalise on a glut of fuel as planes are grounded in the United States and Europe, Cooper said. And high fuel costs that have plagued the industry are finally coming down – but that may not be entirely good news for Wataniya. “Kuwait is a petrodollar economy, so there is a minimal oil price we want to see,” Cooper said. But as the fate of recently-rescued Kuwaiti lender Gulf Bank shows, the country of 3.2 million isn’t entirely immune from the global crisis. But even as its economy slows next year and prices for its main export drop, flying around the Gulf in plush leather seats may be too much for some Kuwaitis to resist.