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HedgeFundLIVE.com — Last night I was privileged to attend an excellent event at the Bloomberg headquarters hosted by the Yeshiva University Wall Street Group.  The event was titled “After the Financial Crisis: New Strategies for Investing and Managing Risk”.  The panel was a smorgasbord of Wall Street elite:  Dr. Henry Kressel, Chairman of Yeshiva University and Senior Partner at Warburg Pincus, Isaac Corre, Senior Managing Director at Eton Park, and Seth Masters, Partner and CIO of Defined Contribution at Alliance Bernstein would have sufficed, but the headliner was Alan “Ace” Greenberg, former CEO and Chairman of Bear Stearns and current Vice Chairman Emeritus of J.P. Morgan.  From thumbing through Mr. Greenberg’s management handbook, Memos from the Chairman, I knew he was philanthropic (he instituted a policy at Bear that Managing Directors donate 4% of their income to charity), parsimonious as a manager, a great investor, magician, dog trainer, and bridge player.  I also knew he was funny, but I guess great comedians are always funnier in person than they are in print, and Ace is no exception.  (The following is by no means a transcript, but the spirit of Ace’s retorts is intact.)

Q: Please tell us a little about yourself

A: I work at J.P. Morgan.  Our primary business is “lending money to people and hoping they pay us back”.  But I’m not involved with that, I work in asset management.

Q: How have your investing practices changed since 2008?

A: My approach to investing really hasn’t changed much.  I still invest in large U.S.-based companies with good management.  I have never invested outside of the United States, “I won’t even invest south of Houston”.  I remain opposed to leverage.  Leverage can work two ways and “one way is down”.  In our business people make projections and eventually they’re right – “my advice to those people is to quit”.  These people make one correct call and then go start a firm named after themselves and continue to try to make calls.  There was a woman (Elaine Garzarelli) who predicted the crash in 1987 and I don’t think she’s gotten another thing right since then.  There was a guy named Grandall (??) who used to make stock market predictions and people would pay top dollar to fill the room at his seminars.  Eventually he got like 20 predictions in a row wrong, so he switched to predicting earthquakes and tornadoes instead – that was a smart move.  Recently there was a woman who predicted that Citi would cut its dividend (Meredith Whitney), and since then she’s been wrong.  She’s predicting that there will be several hundred billion dollars worth of municipal bond defaults by June; we’re in March, so she’d better hurry up.

Q: How has your firm changed since 2008?  (This question was asked to all panelists and was not specific to Bear Stearns)

A: Well, “our firm has changed considerably” (crowd goes wild).  Investment banks are gone and will not come back, that includes Goldman Sachs.  Broker-dealers will do well and boutique investment banks will do fine.  Everyone involved in a deal these days wants representation.  There are 8 investment banks involved in every deal so boutiques will have what to do.  (The Alliance Bernstein CIO made an interesting point here – he said that their clients are more risk-averse than ever before and they want bond exposure, but if it were up to him he would be more heavily exposed to equities.)

Q: How do you feel about high frequency trading?

A: It doesn’t bother me.  If someone wants to flash 22 and then really sell for 22.02 I don’t care.  Making 2 cents is a non-event for me.  If I’m trying to buy Wells Fargo and I buy it for 2 cents higher than I thought it doesn’t make a difference.  Overall these guys add liquidity which is good.  Sometimes the liquidity can disappear, but liquidity can always disappear.