Wall Street legend Mario J. Gabelli (CBA ’65) looked on the bright side of the present economic downturn on Nov. 11, telling future College of Business Administration graduates that it’s better to enter the job market when it’s down.
Gabelli, a first-generation Italian-American who grew up on 174th Street and Bathgate Avenue in the Bronx, is chairman of GAMCO Investors, Inc., an investment firm with $25 billion in assets. He started his own investment firm in the 1970s, he noted, when the economy was also in a recession.
“Whether you are going to be a CFO or you are going to run a school, or whether you are going to do anything, you always want to come into business when things are going bad,” said Gabelli, speaking to more than 200 students on the Rose Hill campus at an event sponsored by the Fordham Finance Society.
“Some of you will create the next Facebook . . . or come up with the next Google, so the foundations you are getting here are exciting, and this is the most exciting time to be graduating,” he said. “We are going through a whole change of business models, and you are on the cutting edge.”
Armed with an entrepreneurial spirit and an entertaining PowerPoint presentation, Gabelli shared his expertise on how business cycles work and how to invest innovatively and responsibly in future growth. In the last century, Gabelli said, the United States has worked its way through a depression in the 1930s and recessions in the 1940s, 1950s, 1970s and again in the early 1990s.
Due to too much deregulation by the Federal Reserve and reckless lending in recent years, the housing market has lost $3 billion in the last few months, and the stock market has lost $19 billion, he said. This recession cycle will lead to permanent changes in lending and investment policies.
“The United States did damage with the financial derivatives that it created and some of the names they took on—collateralized debt, collateralized loan, and so on; we mislabeled risk and mismarked it,” he said. “Now we have to get rid of this, and go back to plain vanilla. For now, the business models are changing, and we have to restore confidence. We just have to get back and have leadership.”
Ideas on how to allocate capital, Gabelli added, are being challenged due to the collapse of Wall Street financial houses, and even the free market self-interest philosophy of Adam Smith, the father of modern economics, may be revisited.
“We are going to have a transition,” he said. “What policies will we have? How do we get back Brand USA? What does America stand for? Meritocracy. The rule of law. The free market, but yet, in the free market we need to have a new round of sheriffs working again.”
Gabelli talked about his practice of value investing as a means of maintaining healthy and profitable funds. Value investors statistically analyze a stock to measure whether it is underpriced or overpriced and buy when a stock is down. Gabelli also said he looks for catalysts that affect business cycles, such as regulatory changes, or world events like the fall of the Berlin Wall.
Today, he said, two global events that are affecting industry are climate change and an aging world population—new energy technology and health care are areas ripe for innovation and investment.