"Bearish" investor has been on the job 8 decades
Albert Gordon took over Kidder, Peabody & Co. in 1931, turned it into an underwriting leader on Wall Street and saw opportunities overseas...
Albert Gordon took over Kidder, Peabody & Co. in 1931, turned it into an underwriting leader on Wall Street and saw opportunities overseas before many rivals.
He's still looking abroad at the age of 105.
After working as an executive and investor for eight decades that spanned from the roaring 1920s to the age of terrorism, Gordon says he's "bearish" on U.S. stocks, partly because of the $8.41 trillion national debt. He prefers shares of companies such as Canada's EnCana, Wal-Mart de Mexico and Petroleo Brasileiro.
"At least three-quarters of whatever I own is foreign stocks," he says from his Manhattan apartment overlooking the East River.
Gordon, who has outlasted Kidder as well as Wall Street staples like ticker tape, is a role model even to octogenarian elder statesmen such as former Goldman Sachs Group Co-Chairman John Whitehead and former President George H.W. Bush. This year, Gordon stopped going to the office at Deltec Asset Management, where his son, John, is a senior managing director.
A marathon runner into his 80s, Gordon now walks with a cane and assistance from a nurse. His opinions are still sought because he's one of the few living Wall Street investors who worked in the years leading up to the stock-market crash of 1929.
While his three current favorite stocks each climbed at least 13 percent this year through August, almost triple the gain in the Standard & Poor's 500 Index, Gordon built his reputation as a salesman rather than as an investor, says Whitehead, 84.
Presidential role model
"He was a famous business-getter," says Whitehead, a former rival. "Work hard and never give up — those were very valuable lessons I learned from trying to compete with him."
Whitehead, who joined Goldman Sachs in 1947, remembers vying for clients against the more experienced Gordon at Minneapolis-based 3M, where Gordon's relationship was so close with then-Chief Executive William McKnight that Whitehead says he focused instead on cultivating the next generation of executives. It didn't work right away, he says.
When McKnight died, Whitehead says, his will stipulated that Gordon and Kidder should handle any sales of McKnight's stake in 3M.
Gordon's influence extended to the highest levels of the U.S. government. He befriended Prescott Bush, a U.S. senator from Connecticut from 1952 to 1963 and grandfather of President Bush, and served as a role model to George H.W. Bush, 82, the 41st U.S. president.
"He taught me a lot about ethics and values," the elder Bush says. "He's a very energetic man of great character."
Gordon, the son of a successful leather merchant in Boston, graduated from Harvard University in 1923 and from Harvard Business School two years later.
Today, one of the main roads into the business school bears a plaque calling it "Albert H. Gordon Road" in recognition of his advice and donations over the years.
"Al Gordon was a master salesman," says Samuel Hayes, 71, an investment-banking professor emeritus at Harvard Business School who met Gordon in 1961. "He was an effective rainmaker long after he ceased to manage the firm on a daily basis."
As a bond salesman at Goldman Sachs in the 1920s, Gordon says he considered stock values excessive and steered clear of the market before it crashed.
That helped him a year later in 1930 to capitalize when a Harvard classmate, Edward Webster, approached Gordon to help rescue Kidder, a brokerage based at the time in Gordon's hometown of Boston.
Planes and trains
They moved the firm to New York, and Gordon, who would go on to become the firm's senior partner and biggest shareholder, built up its sales and underwriting divisions. Gordon expanded across the U.S. and overseas, taking airplanes to see clients when his competitors were more comfortable on trains like the 20th Century Limited to Chicago, he says.
"People wouldn't fly," he says. "So there was virtually no competition."
With the advent of jet travel, he flew to Japan with his wife "to see if the people were friendly," paving the way for an expansion in Tokyo.
"We did a tremendous amount of business in Japan," he says. That followed expansions in Asia and Europe in the 1950s, he says: "We were the first people to have an office in Hong Kong, the first people to have an office in England."
Gordon began turning over chief executive duties at Kidder to Ralph DeNunzio in the 1970s, staying on as chairman. In 1986, Gordon helped engineer the firm's sale to General Electric and remained at the firm until 1994, when GE sold the company to PaineWebber Group, now part of Zurich-based UBS.
Kidder's final years included criminal inquiries. Martin Siegel, who had been the firm's top merger banker, pleaded guilty in 1987 to one count of conspiracy to violate the securities laws and one count of tax evasion for failing to report payments he received from arbitrager Ivan Boesky.
The firm fired bond trader Joseph Jett in 1994, accusing him of manufacturing $350 million of false profits. On March 5, 2004, the U.S. Securities and Exchange Commission ordered Jett to pay $8.4 million and barred him from the securities industry after concluding he committed fraud and created phantom profits. Jett maintained his innocence after the order.
Kidder should have spotted the activities sooner, and the inquiries hurt the firm's reputation, Gordon says. Until that time, he says, "it really was a gold mine."
When it comes to investing, Gordon looks for companies that will grow for years, says Arthur Byrnes, who is co-head of Deltec Asset Management with Gordon's son, John.
"Despite the fact that he's an old man, he buys things not for a quick trade," Byrnes says. "Al is a long-term investor, if you can believe that someone who's 105 years old can be a long-term investor."
Gordon favors countries with economies that will support growth, and he says the U.S. has too much debt. He says he liked Petroleo Brasileiro partly because South America had been successful for Kidder. Wal-Mart de Mexico and EnCana, Canada's largest natural-gas producer, may grow, he says.
"I read that Wal-Mart was stationary but Wal-Mart's Mexican subsidiary was on the move so that was enough for me, so I bought quite a bit of Wal-Mart Mexico," he says.
"EnCana was owned by the Canadian Pacific Railroad and so you knew that its background was business, not government."
Sleep and run
A nonsmoker who says he used to pay people to give up cigarettes, Gordon ran in the London marathons for the two years after his wife died in 1980. He credits his long life to exercise and at least nine hours of sleep a night.
He would often walk or run between city centers and airports in New York and Los Angeles.
He has three sons and two daughters, all between the ages of 55 and 70.
When it comes to investing, at least one of Gordon's contemporaries agrees that overseas stocks can provide more robust returns than U.S. shares.
"Al Gordon is right," says Irving Kahn, 100, chairman of New York-based investment firm Kahn Brothers & Co.
He says global wealth imbalances and the rise of extremists should give investors pause: "You don't have to be too alert to see how much terrorism is spreading."