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February 19, 2007

Breakfast is late, so business is good: Via Quadronno

I have to confess that I once belonged to the social tribe that hangs out at places like Via Quadronno and St. Ambroeus. For most of that period, I had a BMW motorcycle that I could easily park. Now that I have a wife, children and no motorcycle, it's a little harder for me to get there and spend the time. Even Bottega del Vino in mid-town is becoming a stretch. And I have to say that I have not raised any money there, but I can say that I've met some very nice people at ViaQ.


By JULIA CHAPLIN

SHARON COPLAN HUROWITZ was on her second cappuccino and fifth air kiss by 10:30 a.m. She was standing, as she often does Friday mornings, at the long marble coffee counter at Sant Ambroeus on Madison Avenue near 77th Street, a traditional Milanese restaurant done up with pink shimmery mosaics and crystal chandeliers.

Within an hour, Ms. Hurowitz, a private art consultant dressed to the nines in an ivory Miu Miu jacket and Chanel ankle boots (''because you never know who you are going to run into,'' she said) had cemented dinner plans with a neighbor, set up an appointment to view an edition of Roy Lichtenstein prints, and swapped business cards with a Chelsea gallery owner.

On alternate mornings, Ms. Hurowitz, who lives in the neighborhood with her husband and two children, has breakfast five blocks away at Via Quadronno, another Italian restaurant specializing in thick cappuccinos, flaky croissants and a well-heeled clientele.

''We always joke that Via Quadronno got my husband hired,'' Ms. Hurowitz said.

When her husband, who runs a hedge fund, was negotiating for seed money with an investor, they realized both their wives frequented Via Quadronno and knew each other from mornings at the coffee counter. ''It was as if it solidified the deal,'' Ms. Hurowitz said. ''It was like they can trust us. They know where I'm going to be every morning.''

Such are the benefits of belonging to a Manhattan social tribe (or several tribes) whose members regularly languish for an hour or two on weekday mornings at European-style cafes. Drawn from the self-employed ranks of late-rising professions like fashion, art, publicity and Web publishing, these affluent breakfast clubbers avoid Starbucks as too common, preferring locales where it is not unusual to see black S.U.V.'s and chauffeured BMW's idling outside.

Favorite restaurants include Via Quadronno and Sant Ambroeus on the Upper East Side, Pastis and Soho House in the meatpacking district, Cafe Cluny and a downtown branch of Sant Ambroeus in the West Village, and Balthazar in SoHo.

Unlike the ''power breakfast,'' that well-documented institution that plays out among corporate executives at the Regency and Four Seasons hotels, members of the late-morning breakfast tribe, who gather from 9 to 11, don't have to put in an early appearance at an office.

But don't be fooled by the casual vibe and the late hour. These breakfast clubbers are not slackers. The scene at the European-style bistros and ristorantes is all about business and social networking, just as much as it is at lunch at a restaurant like Michael's (popular with the publishing crowd), or at dinner at Phillipe (hip-hop moguls, fashion designers).

Habitués say table-hopping and small talk are easier in the morning, in a sunny corner of a clubby cafe. ''I talk to people at breakfast that I might never otherwise talk to,'' said Steven Shailor, an interior designer seated at the communal table at Cafe Cluny on a Tuesday last month at 11 a.m. ''It's like an unspoken camaraderie. It's about making the choice of not having to be in an office by 9 a.m. and you're going to meet other like-minded people -- idea people.''

Mr. Shailor wore blue corduroys and a sweatshirt covered in dog hair from his yellow Lab, Buck, who was tied to a bench out front on West 4th Street. Rotating his breakfast routine between Sant Ambroeus downtown, Pastis and Cafe Cluny, he said he has struck up conversations over cappuccino with Mario Batali, Malcolm Gladwell and Jan Hashey, a power real estate agent.

An ideal breakfast-club hangout includes free newspapers, including a few French and Italian publications, and some authentic well-dressed Europeans to read them. Cappuccinos, delivered silently by waiters in ties, should cost upward of $4, with the bill for a full breakfast including tip costing $20 to $25, enough to discourage out-and-out idlers.

On a typical morning at the downtown Sant Ambroeus, you may spot Calvin Klein reading the newspaper, Isaac Mizrahi visiting with friends or Lapo Elkann, a freckled Fiat heir, conversing in Italian with the waiters about soccer matches.

This fall, during the three and a half months that the producer Brian Grazer was in New York filming ''American Gangster,'' he held meetings in jeans and sneakers most mornings at Sant Ambroeus, or at the Mercer Hotel in SoHo.

''I was at Sant Ambroeus at my usual table one morning and I noticed seven or eight of these super fashionable Italian kids sitting there,'' Mr. Grazer said. ''I was so curious that I blindly went over and introduced myself. We ended up talking for an hour.''

One of the young men was Mr. Elkann, 28, who is known for the embroidered Italian flags on his custom shirt cuffs. (He inherited his grandfather Gianni Agnelli's fashion sense, as well as his Caraceni suits.) ''He was so cool that I decided to do a Fiat tie-in for the sequel to 'The Da Vinci Code,' '' Mr. Grazer said. ''I'm flying to Italy to meet with him about it.''

Olaf Breuning, a Swiss-born artist who shows at Metro Pictures, was drawing in a dog-eared sketchbook at Balthazar one morning last month. ''People know I'm here and if they need to find me they stop by,'' he said. ''It's like my office.''

Mr. Breuning, who lives and works in an apartment in Battery Park City, arrives at Balthazar by 8:30 four mornings a week. If all goes well, the maître d'hôtel seats him at his favorite round red leather banquette in the back corner, where Mr. Breuning orders breakfast and sketches, and then by 9:30 receives friends, gallerists and curators.

''I work at home and it's very nice to get out of the house,'' Mr. Breuning said. ''I like the warm yellow light. And it's so big and airy here.''

Balthazar, the nine-year-old French brasserie that seems lifted from belle epoque Paris, may be the most clubby of all Manhattan breakfast spots for movers in the fashion, dot-com and design worlds. At 10 a.m. on a Thursday before the holidays, Sarah Brown, the beauty director of Vogue, who schedules meetings there three mornings a week, was having scrambled eggs. She was with Peter Lichtenthal, an executive at MAC cosmetics, when she spotted another regular, Vanessa Weiner von Bismarck, the fashion publicist. Ms. Brown waved. ''I'm forever grateful to Vanessa,'' Ms. Brown said. ''That morning when Vincent Longo stood me up, she came over and kept me company so I wouldn't have to sit there and drink my cappuccino alone.''

Ms. Brown recalled another morning when she was commiserating with a friend who had been fired from a job over a bowl of latte: ''And then Jude Law came over and sat next to us. It cheered us both up.''

By a window sat Rufus Griscom, the chief executive of Nerve.com, and in the ''don't talk to me zone'' by the bar sat Nick Denton, the founder of Gawker Media, who was hiding behind a newspaper. Irene Chung, a design director at Marc Jacobs, was seated with her friend Mandie Erickson, a fashion publicist. ''The fashion people are very obvious,'' Ms. Chung said, scanning the room. ''Always with the designer 'It' bag, the boot of the season, their piece of Marc Jacobs whatever.''

Balthazar, a late-night celebrity hangout with an unlisted phone number during its first years, has weathered the inevitable transition to a tourist restaurant at night and weekends, popular with suburbanites traipsing around SoHo.

But breakfast remains a relative secret, the restaurant unhurried and filled with people who live or work in the neighborhood, many of them Internet publishers. Keith McNally, the owner of Balthazar and its younger cousin, Pastis, said the breakfast crowds at both bistros have doubled in the last three years. ''Breakfast has become popular because, in the right circumstance, it can be a wonderful refuge,'' he said.

Lockhart Steele, the managing editor of Gawker Media, is a regular, who on a different morning was in his usual banquette with Ben Leventhal, the editor of Eater, a food blog that Mr. Steele is an investor in. ''We lead strangely deconstructed lives,'' Mr. Steele said. ''Ben works at home most of the time. My full-time job is at the Gawker offices. It would be very easy for us to go weeks without getting together.''

Taking inventory of the room, with its big glass windows on Spring Street, he said, ''There's a little Internet hive around here so we'll see people from Nerve.com or Media Bistro or Daily Candy.''

''Who's that over there making out?'' he asked, peering at a couple across the room. ''Definitely not a good place for an affair.''

It goes without saying that the breakfast crowd wouldn't be caught dead in Balthazar at dinner.

''In the morning you can walk in and actually get a table,'' Mr. Steele said, ''whereas almost any other time of day you're fighting a war here to get in.''

Eventually the caffeine takes effect, and the late-morning breakfast clubbers must move on to start the day. They head to the home office, or the film set, or the design studio.

''Once 11:30 hits, the energy shifts in the city,'' Ms. Erickson said.

February 18, 2007

Financial Times: Long only is the new black

Maybe if enough people read this article, I will stop getting grief for not shorting enough...

Two quotes that I really like:

"99 per cent of shortsellers are incapable of doing it"

And the following:

And who are the long-only, or mostly long-only, managers worth looking at? It’s a hard call because most hedge fund managers, even if they are mostly long, like to brand themselves as long-short because, well, what’s a hedge fund if it doesn’t hedge?

Long-only is the new black in quest for ‘alpha’

By James Altucher

In the past three weeks I had two funds of hedge funds and one $10bn family office based in Geneva call me and essentially say the exact same thing: We’re starting to look at long-only hedge funds.

“We’re tired of paying management fees to people who are guaranteed to lose money over time,” one of them told me, referring to investing in shortselling funds, or even long-short funds that have primarily lost money on the short side.

Another good friend of mine who has been an arbitrageur his whole career is looking at setting up a hedge fund focused on long-only in the energy space. “Long-only” is the new black. What’s the basic idea and is it a bearish sign on the markets if suddenly everyone cares about only going long?

First off, it’s not bearish at all. It’s smart. It’s very difficult to create alpha from shorting. In other words, when someone invests in a skilled shortseller they are hoping for two things: 1) when the markets are down the shortseller is up, and 2) when the markets are up, the shortseller is not down as much as the markets are up. This last condition is the “alpha”.

But here’s the problem: 99 per cent of shortsellers are incapable of doing it. As an example, the Dedicated Short Bias Index of the CSFB/Tremont hedge fund index was negative in 2001. What this tells us is that in a year with terrorist attacks, a dotcom bust, a recession and negative returns in nearly every market index, the shortsellers still couldn’t make money.


So does this mean that funds of hedge funds are just going to go long the market? Not at all. The managers at FoFs are probably even more skilled at hedging than a typical hedge fund because they have to monitor their risk across many diverse strategies.

If they have a manager who is primarily long, say, small cap energy stocks, they’ll figure out the right ETFs, futures, and options to hedge and if the manager they invest in has alpha, then the FoF will have positive returns. This is the way the game is changing. The focus will be on alpha generation through stockpicking.

And who are the long-only, or mostly long-only, managers worth looking at? It’s a hard call because most hedge fund managers, even if they are mostly long, like to brand themselves as long-short because, well, what’s a hedge fund if it doesn’t hedge?

I like many of the activist funds that are out there. David Nierenberg, who runs the D3 Family of Funds, has a focused portfolio where he takes an active role in almost all of his investments.

This is worth paying management fees for: someone who is going to get his hands dirty and have the type of portfolio that can generate outsize returns. He just increased his positions in Electro Scientific Industries (ESIO) so that he now owns 10.8 per cent of the company, up from 9.5 per cent, and RadiSys (RSYS), disclosing an 11.1 per cent stake in the company.

I also like Barington Capital run by Jim Mitarotonda. Its biggest positions include Pep Boys (PBY), an 8.1 per cent stake in the company, and Stride Right (SRR), where it owns 4.3 per cent of the company. Barington has been up every year since its inception in 2001. The other possibility, although perhaps difficult from a marketing point of view, is. . . to forget about hedge funds. There are some great value-oriented mutual funds that are far better than the average hedge fund.

For instance, I like the Heartland Value Fund. William Nasgovitz has managed the fund since 1984, which is a lot more consistent than any hedge fund manager I know except for George Soros. It has returned more than 17.3 per cent annualised over the past five years and was up more than
25 per cent in 2006.

Then there’s Royce Microcap Fund, probably my favourite mutual fund to follow. Run by long-time Royce manager Whitney George, who runs several of the Royce value-oriented funds, the five-year return is 16.61 per cent annualised, and this
year so far they are up 20 per cent.

I’ve been following the exploits of the Al Frank Fund ever since it was the biggest investor in Invision in early 2001 when it was trading in the low single digits (the bomb detection company sold to GE for $50). I subscribe to the Prudent Speculator, a newsletter from John Buckingham, the fund’s manager. He tends to focus on stocks trading at or near cash with high cash flows.

I also like the Fairholme Fund. What impresses me about Fairholme is not that it was up 16.7 per cent in 2006 or that its five-year return is 16.25 per cent a year, but that in 2002 it was only down 1.6 per cent.

For a long-only product that tends to focus on midcap stocks (which was down 25 per cent in 2002), that strikes me as incredible. Fairholme is run by noted value investor Bruce Berkowitz.

And finally Dreman Smallcap Value, run by David Dreman, super-investor and Forbes columnist. The fund is up 30 per cent year-to-date and has a three-year record of 22.5 per cent annualised return.

While the rest of the hedge fund industry continues to dart around for a valid business model, you can be safely ensconced inside the funds of solid stockpickers, generating consistent returns and the long sought after, elusive “alpha”.

James@formulacapital.com

Copyright The Financial Times Limited 2007

February 02, 2007

The Art of Banking

Robert Kennedy College - January 29 - February 2, 2007

Guy Spier was a speaker at The Art of Banking course in Davos run by Professor David Costa, Dean of Robert Kennedy College. The following is an excerpt from the course description:

The banking industry faces an era of change. New technologies, new regulations, new customer expectations, and the decreased importance of geography in competition all affect the fortunes of each institution. This program is designed to meet the continuing education needs of banking executives to keep pace with that change, both its risks and its possibilities.

The Art of Banking is designed around six strategic principles, derived from Sun Tzu's Art of War, that winning strategists have used to succeed in business.
Learn more about course