James Tisch

James Tisch: When Trash Becomes Treasure
by Chris Mayer
The Rude Awakening
Wall Street, New York
Friday, February 10, 2006

Chris Mayer explores James Tisch's advice that the best investments can come from where others are afraid to invest.

-------------------------

-------------------------

Joel Bowman, reporting from between 72nd and Fulton
street...

The subway system in New York City is absolutely
astounding. I am constantly amazed at the fact that a city
this size seems to be resting on a hollow underground
labyrinth of tunnels and passageways. Trains fire along
their tracks beneath fifty, sixty and seventy story
buildings and barely a vibration is felt above.

Last night I found myself making my way back downtown after
dinner with a friend on the Upper West Side. It was late at
night and, as I am too tight to pony up for a cab ride, I
decided to delve into the cavernous underworld of the late
night subway. Aside from saving a few dollars, I also
expose myself to all manner of interesting characters.

Understandably, the trains run far less regularly than they
do when populated by the busy commuters of the day. There
are but a few tired, inebriated souls left in the stations,
exhausted from the day and no doubt looking forward to
getting back home.

This unusual absence of activity in a place that is
normally humming with busy New Yorkers gives me an
opportunity to marvel at the structural accomplishment of
the city's transport system.

To the untrained eye, the engineering of the subway system
is simply too complex to comprehend. The trick, it seems,
lays in carefully planned and positioned support beams.

When choosing companies for his readers, Chris Mayer looks
at, among other factors, exactly what is "holding the
company up." A carefully planned foundation is fundamental
to his selections. While attending the Columbia Investment
Management conference just last week, he was able to add a
few more tricks to his bag, as he explains below...

--- Advertisement ---

Earn 4.5 Times as Much Money as Wall Street's Wizards...in
Just 10 MINUTES a Day!

I'm talking about extended accuracy rates of up to 92%,
with gains of up to 4.5 times as much as the world's best
stock-pickers are making - in just days, or even hours....

This 100% automatic, no-judgment-calls system for profiting
from the stock market is truely a Guaranteed Money
Multiplier...The secret lies in three indicators that
accurately measure a stock's Momentum, Strength and Trend

Learn how you can get in on this simple profiting system
today...

http://www.agora-inc.com/reports/MST/EMSTG206 
 
-------------------------

When Trash Becomes Treasure
By Chris Mayer

Investment opportunity dwells among the dispossessed. It
resides among the orphaned and scorned investment sectors
of Wall Street...I learned this lesson anew at last week's
9th Annual Columbia Investment Management at New York's
Columbia University.

The conference featured an impressive line-up of superstar
investors like Bill Miller, manager of the Legg Mason Value
Trust, James Chanos, founder of the short-selling Kynikos
Associates, Marty Whitman, long-time manager of the Third
Avenue Value Fund and James Tisch, CEO of Loews
Corporation.

Because most of these professional investors ply some sort
of value-investing strategy, I felt like the proverbial kid
in a candy store throughout the event...especially during
James Tisch's presentation. He reminded us all that
investment opportunity resides where others fear to
tread...

Back in the 1980's, Tisch recalled, things were very
different in the oil business than they are today. As many
Rude readers certainly recall, the oil bust of the mid-
1980s brought the economy of Houston, Texas to its
knees...and caused many "oil men" to endure some very tough
times. Eventually, boom followed bust, just like it always
has in the oil patch. The fortunes of this industry tend to
go up and down like a fiddler's elbow.

James Tisch: Oil Tankers, 90% Off

Therefore, the oil bust did not only impose hardships on
many, it also provided opportunities for a few...like James
Tisch. In the mid-1980s, it would have cost around $50
million to build a new oil tanker. Yet, you were able to
buy a perfectly good used one for a 90% discount – or $5
million. Why? Because only 30% of the industry's ships were
in use. The rest of them sat around collecting barnacles.

Obviously, empty ships, you may have gathered, don't bring
in any money. And all those empty ships caused shipping
rates to plummet to unprofitably low levels. It was a grim
time. As a result, oil tankers began trading for their
scrap value. In other words, you could literally buy scrap
metal for the same price per tonnage as you could a fully
assembled and working tanker.

So who would want to own an oil tanker amidst these dire
conditions? James Tisch, for one. Tisch calculated that an
oil tanker selling for scrap value presented very little
downside risk. It couldn't sell for less than scrap value
could it? Therefore, he reasoned, any improvement in the
oil-shipping business would dramatically boost the value of
oil tankers.
 
Eventually, of course, the business did improve and Tisch
made several multiples of his original investment. Today,
tanker companies are gushing money. Rates are good, ships
are full and ship owners are awash in cash. Business is
strong. But Tisch is not complacent.

In fact, he's rather bearish on crude oil – the commodity
that drives the profitability of the tanker business. He
expects demand for crude oil to fall over time, as people
move to alternative sources like nuclear power and coal. He
notes, too, that current inventory levels of oil and gas
are "comfortable." Because price changes occur at the
margins, he says, today's comfortable supplies might
produce falling oil and gas prices. Indeed, natural gas
prices have been tumbling already.

Longer term, he suspects that today's enormous drilling and
exploration boom could lead to a surge in supply. Tisch
admits, however, that geopolitical wildcards could lead to
oil price spikes. This is always a risk, given that so much
oil comes from such troubled parts of the world (i.e.,
Venezuela, Nigeria, the Middle East, among other places).

Though Tisch sees oil prices coming down, he cautioned
attendees that his predictions have often missed the
target. "I'm not in the business of making predictions," he
says. "No investor should be."

James Tisch: Four Basic Rules

Funny, isn't it...that a craft like investing, which seems
to be all about the future, should have so few successful
practitioners who actually think powers of prediction are
important?

Instead of making predictions, Tisch's follows four basic
rules for investing: First, keep it simple. The tanker
example illustrates the idea that you don't need a complex
investment thesis to underpin a great opportunities. With
the tankers, Tisch was buying well below cost. It's hard to
go wrong in such circumstances. Theses simple ideas are
often your best ideas.

Second, the consensus is often wrong. Not always, Tisch
pointed out, but often. Therefore, you cannot be afraid to
back an idea that runs counter to what most experts think.
The third precept Tisch preached was patience. He said it
"was one of the most important virtues" because great
investments "take time to develop and mature."

But above all, Tisch believes it is most important to focus
on your downside risks. If you have adequately insulated
yourself from downside risks, you can confidently and
patiently await the upside potential.

In other words, look for investment opportunity in the
scrap heap of Wall Street...not on the showroom floor.

[Joel's Note: Shortly after Chris left the conference in
New York last Friday, he called to see if I would like to
catch up for a bite before he left for Maryland. He was
full of excitement and I could sense he was bursting at the
seems with ideas for his readers. To say he was a 'kid in a
candy store' is a drastic understatement. Chris loves this
stuff and he has some incredibly bright ideas and
investment insight that can put you in a position to make
some very wise investments. Don't let the opportunity pass
you by. Learn all about it all here:

Capital & Crisis
http://www.agora-inc.com/reports/FST/EFSTFB06 

--- Advertisement ---

The impending "Petrocalypse" that's already beginning...

But you have a chance to post incredible financial gains of
up to 3,000% or more!

Six months ago, an analyst group made up of former top-
level U.S. government officials calculated a global oil
scenario beginning RIGHT NOW, December of 2005...
In this extremely likely scenario, just 3 minor disruptions
in the already-strained world oil supply chain cause:

*$150-a-barrel crude prices 
*A $5.32 pump price for gas
*More than 2 million jobs lost
*A 28% drop in the S&P 500.

But this is just the tip of the iceberg...Learn more here:
http://www.agora-inc.com/reports/OST/EOSTG219

-------------------------

And the Markets...

	Thursday	Wednesday	This week	Year-to-Date
DOW	10,883	10,859	90	1.5%
S&P	1,264	1,266	0	1.2%
NASDAQ	2,256	2,267	-7	2.3%
10-year Treasury	4.54	4.59	1.00	14.00
30-year Treasury	4.64	4.68	1.00	10.00
Russell 2000	718	721	-6	6.7%
Gold	$564.10	$551.10	-$4.79	9.1%
Silver	$9.63	$9.43	-$0.10	9.2%
CRB	336.96	336.07	-8.94	1.5%
WTI NYMEX CRUDE	$62.72	$62.66	-$2.65	2.8%
Yen (YEN/USD)	JPY 118.78	JPY 118.52	0.08	-0.7%
Dollar (USD/EUR)	$1.1983	$1.1954	39	-1.2%
Dollar (USD/GBP)	$1.7413	$1.7415	208	-1.2%