Julian Robertson on … Germany
September 24, 2015 Leave a comment
From More Money Than God:
In early November 1989, when Griffin was on leave at business school at Stanford, the fax machine that he had installed in his room sputtered out a message from the chief: “Big guy, the Berlin Wall is coming down soon. This is gonna be a VERY big deal.” A few days later, the wall duly fell, and two days after that Tiger began to load up on German securities. Robertson knew next to nothing about Germany; but Griffin had studied the German market during a summer stint in London, and Robertson was not going to let an absence of experience get in the way of a historic opportunity. Tiger bought Deutsche Bank, which stood to profit from a unification boom. It bought Veba, a large utility that owned power plants along the West German–East German border and could be expected to capture the emerging eastern market. It bought Felten & Guilleaume, the firm that made the power cables that would carry the electricity into the new territories. Sure enough, Germany’s stock market went on a euphoric tear, and Tiger’s stake in Felten & Guilleaume soon doubled.
The following summer, Robertson and Griffin rode into Germany. They went to East Berlin, where they discovered that nobody had heard of hedge funds or Julian Robertson. They also discovered that Germany was not quite what Robertson had thought. Sitting in the waiting room on his first company visit, Robertson touched the table and held up a dust-blackened finger. “These people have a long way to go,” he said a bit suspiciously. The meetings continued, with Robertson asking Wall Street questions and the Germans doing their best to be genial, and all the while Robertson was grappling with the gap between what he could see in the numbers and what came out of the mouths of these people. By American standards, and relative to the factories and other assets that they owned, German stocks were ludicrously cheap. If the Germans could manage these assets as American managers would, they would generate huge returns for shareholders; and if the incumbent managers were too sluggish to do that, surely a wave of Wall Street–style takeovers would quickly solve the problem?
But the more Robertson toured Germany, the less enthusiastic he became. He would sit in a manager’s office and ask about his company’s return on equity, but the managers cared more about their sales than their profits; they were running the company for the sake of the employees rather than for the shareholders. At the chemical company Bayer for example, Robertson was treated to a lavish lunch by the company’s top management.“It must be great to be the chief executive if you can eat like this,” Robertson said, not mentioning that he would have preferred that the company save money. “Oh no,” his hosts replied. “We serve this meal to all employees.”
“My! The planes here fly so close,” Robertson said, looking out the window. “Yes, that is the company flying club,” came back the answer. “Anyone who wants can train for their pilot’s license.” After the lunch ended, Robertson delivered his verdict to Griffin: “These people just don’t get it.” German managers could not care less about return on equity. By 1994, Robertson had come full circle on his view of the Germans. The nation’s industry was nothing more, he wrote, than a “giant flab bag of inefficiency.”
Then this happened ‘Model’ Germany that has recently rendered Greece a colony/vassal state
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