More thoughts on BS--------Closing the Barn Door on Bessie
By James J. Cramer
10/15/2001 09:46 AM EDT
Bessie's gone! I can't believe it. Bethlehem Steel (BS:NYSE - news - commentary - research - analysis), that once-great company, the one that had 19 of the top-20 highest paid executives in the nation in the early 1960s, the one that really irritated Jack Kennedy with its arrogance, the one that had not one, but two, executive golf courses that were both capable of holding the U.S. Open, has filed for bankruptcy.
Amazing.
We all have our Bessie stories. This one was such a great trader that you could take down a hundo (hundred thousand) any time you wanted to play a cyclical rally. It was a monster good vehicle for playing economic expansions. Bessie defined cyclical. It could make or lose $10 a share depending on the economy.
And then it all fell apart. It fell apart for three reasons: horrid management, terrible industry fundamentals and health care costs for retired people. Bessie simply had too many people working for the company at one time and could not support the pension plan once the company decided to shrink to meet reduced demand for steel.
Anyone who has ever visited the hulking two-mile long now-abandoned foundry in Bethlehem knows that this company had taken decisive action in the last years to downsize. Bessie made giant pieces of steel for skyscrapers and bridges, the latter being the principal use of the product. But there hasn't been a big bridge built in years in this country, and the skyscraper business isn't so hot either. Bessie could never outrun the industry's disgusting fundamentals.
For me, I will miss Bessie. In 1985, Goldman Sachs brought a piece of preferred paper for Bessie Steel that we were asked to sell. I remember meeting with their management then and thinking they were the most inane, unprepared, ossified, geriatric troglodyte managers I had ever seen. I bought a huge number of puts on the company for all my large clients. We proceeded to make a fortune as the stock got cut in half.
Then the SEC got involved. I got the informal inquiry that you get sometimes when you have been so right. My clients were called in and asked what they knew, whether they were related to Bessie in any way. Finally the investigation went away after it was made clear to the government that I didn't know anything except what a bunch of morons they were.
The upshot? We kept the profits. And we named one of our many cats Bessie. She didn't outlive the company, but she did have a grand old time in the interim. |
