When the good drive out the bad
Money manager won't give terrorists satisfaction by selling
Derek DeCloet
Financial Post
In the middle of an extraordinary week, John Zemanovich sat down with his wife for an ordinary conversation.
They have three young children, including a baby girl born in June. They also have much of their personal wealth in insurance stocks, namely Fairfax Financial Holdings Ltd. and Berkshire Hathaway Inc. (Mr. Zemanovich, who runs a small money-management firm in Oakville, Ont., is a Warren Buffett disciple).
They considered selling. But there are times when your money should be used for a greater purpose, said Mr. Zemanovich, and this is one of them. "The people who died paid a hell of a higher price than whatever's going to happen to us," he said. So they held. When the Toronto Stock Exchange opened yesterday, Fairfax was hit hard (down 7.6%). But he took satisfaction that the overall market did not slide into freefall: "It's nice to see those SOBs aren't causing us too much more trouble."
During a crisis, good people do what they can to help. And many of those who make their living on the stock market took the same approach as Mr. Zemanovich. That meant ignoring their instinct to panic and, in their own way, telling the terrorists to go straight to the hell they deserve.
We'll see if this holds when the U.S. market reopens on Monday. But others already forsee patriotism-induced calm. One U.S. market strategist, speaking on condition on anonymity, believes stocks will open higher. "In a sense, it would be giving a 'F--- you' to the people who did this," he said.
Said Derek Webb, chief executive of Webb Capital Management in San Francisco: "I think there really is a psychological change here. People are thinking it's almost their duty not to sell. That's the intangible element that's going on."
But it's not merely anger, or a sense of obligation, at work. Many people are simply too numb to care.
Ellen Kratzer, an investment advisor who worked near the top of the World Trade Center's south tower, returned to work yesterday morning, at her firm's "business resumption centre" in New Jersey.
More than 100 people are missing from her firm, Fiduciary Trust Co. International, yet she and her colleagues were phoning clients to let them know business is continuing. These are wealthy investors with a lot at stake -- Fiduciary's average client family has more than US$10-million in assets. And what was their reaction? It's wasn't to ask whether they should be short-selling the Nasdaq on Monday. "A lot of them just break down, sobbing, when they hear our voices," she said yesterday.
Not everyone held off, of course. Air Canada was hit by a sell-off that knocked $85-million off its market value. (This prompted Mr. Zemanovich to say the unthinkable for a Buffett-style manager: "It just makes me want to go out and buy Air Canada.")
But for the most part, rational thinking prevailed. Dominion Bond Rating Service announced it would not touch any company's credit ratings -- not even insurers, not even to put them "under review" -- until things have calmed down. One Wall Street firm instructed its traders not to short vulnerable stocks, such as airlines, when U.S. trading resumes. The Ontario Teachers' Pension Plan Board, one of Canada's biggest equity players, decided it would make no major changes to its multi-billion-dollar stock portfolio. "This is a terrible human tragedy," said Brian Gibson, a senior vice-president at the pension plan. "But in economic terms, it's not a huge impact."
That last point will eventually get through to whoever masterminded this disaster. New York's financial district will rebuild, and the world's most powerful economy will, in the end, remain so. The terrorists struck at the very heart of capitalism. But they couldn't make the people who manage capital flinch. |
