Since 2002, I have eagerly anticipated reading Byron Wien’s Market Commentary. Every month, Wien shares thoughts and predictions regarding the economy, as well as the occasional investment ideas of a laudable-yet-mysterious character referred to as the “Smartest Man in Europe.”
The 15-Year Mystery
Wien is the Vice Chairman of Blackstone Advisory Partners L.P., and he has a wide and deep readership – from institutional to retail investors, from Wall Street to Main Street. And his reputation continues to serve him well.
Before assuming his current role at Blackstone, Wien served as the Managing Director and Chief Investment Strategist at Pequot Capital Management Inc., the Chief U.S. Investment Strategist and later Senior Investment Strategist at Morgan Stanley, and spent 20 years as a Portfolio Manager at Weiss, Peck & Greer.
Additionally, in 1995, he co-authored Soros on Soros – Staying Ahead of the Curve.
His long list of awards includes being named by New York Magazine in 2006 as one of the 16 most influential people in Wall Street. In 2004, he was named to the Smart Money Power 30 list of Wall Street’s most influential investors, thinkers, enforcers, policy makers, players, and market movers.
Further, he was ranked the No. 1 Strategist by SmartMoney.com in 2000, and in 1998 he was named by First Call as the Most Widely Read Analyst on Wall Street.
So if Wien, a revered and honored voice on Wall Street, truly believed in a man he deemed the “Smartest Man in Europe,” then his opinion held weight. If there was someone out there deserving of such accolade and reverence, and with such a lofty title to boot, than this mystery man must be someone worth paying attention to.
But Wien has kept this individual’s identity a secret.
In fact, even people who knew and worked alongside Wien weren’t privy to his identity.
Many of Wien’s readers suspected various economic figures in finance or academia, but no one, it seems, felt absolutely certain.
In fact, a friend and mentor of mine, who worked closely with Wien, once wrote to me, “I knew Byron was talking about one of two people in Europe, but was never sure.”
Losing a Legend
Lo and Behold, Wien opened his June 2016 monthly Market Commentary, Mentorship and The Smartest Man, with this statement: “There will be no essay on The Smartest Man in Europe this year.”
He continued to inform his captive readership that his “good friend and mentor Edgar de Picciotto, Chairman of Union Bancaire Privée in Geneva, has passed away; he was 86.”
This story was of particular interest to me, having been an employee of the New York arm of the Swiss private bank for the years leading up to the 2008 financial crisis and a year thereafter.
I was one of a number of portfolio managers running strategy-specific fund of funds, which at the time became the largest portfolio of hedge funds, globally by assets under management, to reach $58 billion.
As a privately held bank, we didn’t have to address the interest of shareholders. Our interest was purely to serve our investors. And we did that well, focusing on risk and beating our benchmarks even through the crisis.
Reflecting on Greatness
Wien met de Picciotto during the 1980s while at Morgan Stanley, as de Picciotto was a regular attendee at the bank’s global client conference in the Bahamas.
They were both Supervisory Directors of Soros Fund Management, and met for several days twice a year in Europe.
Wien chose not to reveal de Picciotto’s name to protect his privacy.
Jokingly he shared the fact that he had a shirt made with the legendary title – “Smartest Man in Europe” – and gave it to de Picciotto, who “only wore it around his swimming pool.”
Wien stressed that de Picciotto “didn’t think like other investors,” attributing it partly to his formative years.
Edgar de Picciotto descended from a family of mercantiles whose roots stretch back centuries, having operated canteens along the Silk Road route from China and India.
Lebanese by birth and educated in Europe, de Picciotto came to the U.S. to train in finance. Afterwards, he settled in Geneva, seeing opportunity in its recovery from World War II.
During his time in Geneva, he managed money, both that of others as well as his own, and was an early investor in hedge funds.
“His reputation as a person who could identify secular change, talent, and undervalued assets ahead of others grew over the years,” wrote Wien. And “he lived well.”
Wien details de Picciotto’s vast art collection in his homes around Geneva and the south of France, with works ranging from Canaletto to Kandinsky to Jeff Koons, as well as his love of cigars, his 1982 Bordeaux collection, and his inner circle of influential people.
But what really interested de Picciotto was “discussing and reading about ideas that really aroused his enthusiasm.” As a visionary, he could identify opportunity and invest early.
Investing in Brilliance
Wien writes that, in the 1980s, de Picciotto was one of the first to identify the investment potential of Japan. He did the same with Germany before the Berlin Wall came down, and with Russia when it began to dismantle its command economy.
As a macro-thinker, de Picciotto always considered the economic, social, and political context in which the stocks were picked, and stressed the importance of networking – testing ideas on those he respected while never lacking conviction about his ideas. “Nobody owns the truth,” de Picciotto would say.
Reflecting back on the titles of his essays over the last 15 years, Wien came to realize that, “They provide a chronicle of the market’s glory days and pitfalls.”
After the fall of the twin towers in New York, de Picciotto emphasized the importance of global interdependence. He bought gold on leverage, sold the U.S. dollar short, put money in European hedge funds, invested heavily in Russia – and made a killing.
De Picciotto saw opportunities in China in 2003 as a “manufacturer of everything the world wants” and its forthcoming desire to seek political influence.
In 2004, he was bullish on Asia and its expanding middle class, as well as on the U.S., convinced that with an accommodative Fed, inflation would stay low.
De Picciotto became bullish on bonds in 2005 with the build-up of global liquidity, yet he expected government paper to decline and U.S. stocks to follow suit. He was “worried about the debt accumulation taking place at the government, corporate and individual levels.”
Then, in 2006, Edgar de Picciotto sensed a movement to the left in America.
Wien jokes that, “he should have lived to see Bernie Sanders… but he didn’t think it would undermine the capitalist spirit of the country.”
He was positive on India and concerned about the rise of Islam.
When de Picciotto became cautious, Wien titled his 2007 report “The Smartest Man is Wearing Rain Gear.”
This metaphor only continued into the following year when, in 2008, as de Picciotto expressed nervousness about the debt incurred by marginal borrowers buying overvalued assets, Wien’s title was “Overcoat Time for The Smartest Man.
De Picciotto pulled out of all hedge funds where he was locked up over a year.
During that time, he foresaw U.S. bankruptcies and a devaluation of the dollar, which would revive manufacturing. Yet, cooling on globalization, he expected the standard of living to remain flat in the West and rise in Asia.
In 2009, he once again became bullish after the sharp sell-off in world markets, cautioning correctly for 2% growth and foreseeing growth in the BRICs.
Cautious again in 2011, his only investments were in Swiss francs and gold.
“Dancing Around the Fire of Hell”
Again, Wien was able to report ahead of the curve thanks to the wisdom and foresight of his mentor.
This is the dark title that de Picciotto suggested for Wien’s 2012 essay revealing how governments had figured out how to postpone their debt consequences.
De Picciotto felt that Greece’s problems “were indicative of flawed financial planning everywhere.”
By 2014 and throughout 2015, he was totally committed to innovation stocks, particularly technology and biotechnology, which represented a new industrial revolution. Thus his investments were sector specific, as he felt “governments around the world had proven ineffective at problem solving.”
Throughout the years, de Picciotto’s insights proved not only accurate, but financially beneficial to those with the wherewithal to heed his advice.
The Meaning of Mentorship
In his farewell essay, Wien explains that his purpose over the last 15 years in analyzing de Picciotto’s thinking was “to show how [his mentor] consistently tried to integrate his world view into the investment environment.”
De Picciotto “was always questioning himself and he remained flexible,” Wien continues, “When he lost money, it tended to cause minimal pain in relation to his overall assets, and when one of his maverick ideas worked, he made what he called ‘serious money.’”
Wien paints a picture of de Picciotto as a valuable mentor to him – the type of mentor, whom, even in his absence, always provided guidance as it was character and nature to do so.
A Lasting Impression
“He was fond of breaking rules. Suspicious of diversification as the hiding ground for those without conviction,” Wien reflects.
As a seeker of high rewards, de Picciotto was willing to tolerate high risk, once buying an office building in Iraq and selling it a short time later at double his purchase price. One of his favorite lessons was, “It can be dangerous to overstay a position.”
Wien admits he still hasn’t learned this lesson, but he has learned a second, important lesson, which is to sell mistakes quickly.
Finally, states Wien, “He taught me the value of trust and the joy of friendship and the futility of envy.”
As his own toughest critic, de Picciotto emphasized that even if you are an intelligent risk taker, you’ll make many mistakes. “Recognize them early, but never stop taking risks, because that is where the real opportunities are and your life will be more stimulating as a result,” Wien reflects.
De Picciotto worked at the bank until the end – as that was what he enjoyed doing.
“My life is better as a result of having known him and I will always be grateful for that,” writes Wien. “He was modest and generous to the end. Every mentor should follow his lead.”
The Smartest Man in Europe, indeed.