Earlier this month, I interviewed famed investor Felix Zulauf on his professional background and investment outlook (Audio here). As per popular request, here is the interview transcript.
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BARRY RITHOLTZ: Tell us about your background…
FELIX ZULAUF: I grew up in Switzerland, in a small town, I went to all the school. After college, I decided to go [with] a banking career. I regretted it after a year or two because it was so boring — commercial banking, then I finally hit the investment department. It became more attractive. I asked my bosses why stock prices moved up and down, and from their end — I could very soon tell that they had no clue. So I tried to figure out if there were some other people who knew why the markets were moving. And I found some leading opinion people like Bob Farrell. They were all in the US, there were no opinion leaders in Europe. And I decided that I wanted to learn that business and foresee market moves in big ways.
And then I went step-by-step. I started in the equity stock market department in a Swiss Bank in Zurich. And then I transferred to Paris to a stockbroker for a year. There, I really developed my speculative activity. As a young chap, the owner of the shop gave me a credit of half a million dollars. Which was a dramatic amount for a 23-year-old guy, and I started speculating. Went short on the market in the fall of 1973 and you know what happened thereafter into the end of ’74. So that year I made the first big money.
What was your actual first employer?
The Swiss Bank Corp. I was there for 2 years. And then I was sent off to Paris and to acquainted more with the French language and see another country and another culture and I didn’t want to go to a bank because I wanted to learn more about the investment business. So I went there, came back after a year, moved then to portfolio management (or what they thought was portfolio management), and then went to the US. So in 1976, or 1977, I stayed in New York, put together a trainee program for myself using all of the concept of Swiss Bank Corp. and I trained with Charlie Maxwell in energy and Bob Farrell in Market Analysis and Ed Hyman in Economics and trading in a shop called Salomon Brothers at that time. So I went through Wall Street and all of those firms and it was like paradise.
I’m still friends with many of those people.
It was fantastic. And then the bank called me back to Switzerland in ’77. And then I changed horses and joined UBS because I wanted to learn money in a more aggressive way, and Swiss Bank didn’t offer me that job. That was ’77 — I joined UBS and the mutual funds management department and research. And I ran the US equity funds and global equity funds and a raw materials fund and became a global strategist for the whole UBS group. And later I ran the institutional portfolio management department at UBS and then came 1987. I was very instrumental to push UBS equity allocations to the highest in all of Europe. At that time, 65% equity in balanced accounts was extremely aggressive in European standards. And in ’87, during the summer, I tried to reduce that because I was also part of the investment committee, and I convinced the committee but general management then vetoed it and that upset me so much that I stopped there and liquidated all equities ahead of what thereafter became the crash of ’87.
And it didn’t make many friends. By hindsight, I think it was the most difficult thing I ever did because I never got the credit for it. I got the blame because all of my friends and colleagues looked terrible next to me. You know, from a political point of view, it was not a good move. But from a trustee point of view, it was the right move and also from a professional point of view, it was the right view.
Then I decided I needed to join a smaller money management operation where I had more freedom and I joined a subsidiary of Credit Suisse at that time as an executive vice president in charge of the whole investment policy. And then came ’89. The leading portfolio managers were very successful with Japanese equities and I turned very bearish on Japan and they took it as a personal insult that I turned very bearish on Japan.
At 39,000 and something, and I think it was January of 1990…I turned very bearish and pulled… And it then happened and it made it clear to me that I had to go on my own to manage money the way I thought was right.
Before you launched your firm, you had essentially rotated at some of the biggest banks in Europe and you had come to New York and worked at some of the biggest banks in the city. And the takeaway from all of this is that there are institutional impediments for a money manager and a trustee to operate on behalf of the clients.
So I became an entrepreneur and started a new financial management firm. I was 40 with two small kids and no client so the first six months were very tough because I could not attract any clients…which was very nerve-wracking. But after that, the ball got rolling and I managed individual accounts. i just wanted a limited number of individual accounts that I could manage in my own fashion so I could go long and short but not leverage. Which was basically the ways I ran my own money in earlier times. But later on, I moved away from leverage because too much leverage is where you make the most mistakes.
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I found the Washington Post chart (mentioned here) somewhat more informative than the chart above in terms of comparing the GOP and Democratic plans side by side in terms of brackets — but just as lacking terms of distribution of taxes across the entire taxpaying public . . .
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