Wilbur Ross to run the Commerce Department? The 79-year-old distressed investment guy? At first it makes no sense. Bottom fishing old industrial companies is not the magic elixir to fix our economy. The Ross nomination reminds me of a Kidder Peabody executive’s line in 1987, when General Electric announced a new CEO for its investment banking subsidiary: “I was thinking just the other day that what we need around here is a good tool-and-die man.”
I met Mr. Ross a few years back when he was touting his investments in shipping companies. Those firms were, as many still are, very distressed. But Mr. Ross has also dabbled in mining, tractors, energy and other machinery. What is distressed investing? Simply recognizing when a seller is desperate to unload, at almost any price. The trick is patience and an iron gut—oh, and deep pockets.
In 1998 I sat across from a South Korean executive in need of hard dollars as the Korean won imploded in the nasty currency crisis. Our fund was a co-investor in a company that pioneered HDMI for high-definition TVs. I watched as sweat dripped from his face. Clearly distressed. We lowballed an offer. He took it. Nine months later the company went public at 10 times our bid. Distressed investing never leaves you. Much to my family’s annoyance, I only buy distressed tickets to sporting events. I even bought tickets to the Super Bowl at a serious discount the morning of the game.
Treasury Secretary-designate Steven Mnuchin made a fortune buying mortgage company IndyMac in a distressed sale about eight years ago. The government was so anxious to unload, it protected Mr. Mnuchin and his group from almost all losses over 30% on many mortgages. Nice deal if you can get it. (He was the only bidder.)
The guy that knows the most about distressed properties is President-elect Donald Trump—except he was on the other side of the table. His Atlantic City casinos were bleeding losses and desperately needed cash. Even Mr. Ross figured that one out and put up capital, but not before Mr. Trump turned the tables, commanding concessions by insisting any new investors would be distressed without the Trump brand on the building. The distressed turned distressor.
Which brings me back to Mr. Ross at the Commerce Department. This usually seems like a do-nothing job—see President Obama’s choice, Penny Pritzker of hotel-empire fame. So why pick Mr. Ross? Well, distressed is what we need. No, not here in the U.S., where a little tax reform and regulatory relief could reignite the stimulative fire. It’s the rest of the world, I can’t help but noticing, that’s a hot mess.
You can buy most of Venezuela in exchange for a Happy Meal. Many real-estate properties are at a deep discount in Brazil. We’re one dead Castro away from JetBlue flights filled with roller bags of cash headed to Havana. The euro is closing in on dollar parity. A Grecian earns less today than 10 years ago. Italian banks are threatening collapse and causing political turnover. Et tu, France?