I interview the US Editor at “The Barron’s”, The Trader columnist whose job is to provoke debate. I meet Vito Racanelli at Bar Pitti, a very trendy downtown Italian restaurant that looks like an Italian trattoria and where the meatballs and the spinach are as excellent as the pannacotta. It is not easy to find a table here unless you are a star or have been a customer for a very long time. Vito Racanelli studied Psychology in a PhD programme but left because ever since he was eleven he has wanted to be a writer. He became a journalist because he was paid for writing:-
“I started in a Greek American newspaper in the eighties. I wrote in English about Greek Americans. Then I moved to Energy User News because they had an Italian office, but they did not send me to Italy. So I went to Dow Jones News and the Associated Press Dow Jones and in 1994 they transferred me to Milano. In 1997 I went back to New York and started to work at Barron’s.”
Can you describe Barron’s?
I say it is the best financial weekly in the world, because we do a lot of research and we have a high level approach to investing and we speak for some of the best investors in the world.
You started with European Markets?
Yes, I was the European Editor for eleven years and now I am the US Editor and I mainly cover US stocks.
Do you write “The Trader” column every week?
Yes, every week I try to bring one or two compelling stock ideas for my readers. That’s what they want.
Is it a big responsibility?
I have a good readership. Altogether, including the internet, we have 500,000 readers. The US investor is fairly parochial. Single stocks of foreign companies are not very popular. There are exceptions like Nestle, Unilever, Roche, some UK stocks. Some foreign stocks trade on the New York Stock Exchange.
What about currencies?
If you hold a stock in another currency you have two risks: the stock and the currency.
In the US does every kind of people buy stocks?
It is a very long tradition and I get letters from truck drivers and widows.
But the Stock Market is extremely volatile?
Extremely. The stock market needs a long term approach; three to five years and sometimes more. There are two kinds of people: traders and investors.
What is the difference?
A trader must pay attention to the market 24 hours a day, 7 days a week, because they only look for the quick profit; and it is legitimate, but it is a real job that takes all your attention. An investor is someone that looks at the long term and looks at a company that will make profits over the long term. A good example of a stock like that would be Procter & Gamble, McDonald’s, Microsoft, General Electric, Apple. They are not going to disappear tomorrow but the stock is not going to double in a few months. Traders prefer to buy faddish stocks. Now, for instance, biotech is very in, like the internet stocks were ten years ago. By the way those are coming back, with Facebook, Twitter, Google.
Companies like Amazon, Apple, Netflix… are they a one man show and therefore risky?
No, Amazon has a legitimate business, Netflix too. Apple is making some of the best devices in the world.
You said that US investors are less interested in the rest of the world. But the US economy also depends on foreign markets?
Psychologically this is true, but in fact I think that roughly only 5% of US exports go to the emerging markets, and mostly to China. Europe is a much more important market for the US. For instance, for McDonald’s 40% of their profits come from Europe. But the average American person probably does not know. That, for instance, is what I do: try to explain to my readers what they may not know.
On the long term is a stock investor a winner?
The Stock Market always goes up. We are talking about twenty year increments.
What should the small investor do when the market plunges?
One, be patient and two, buy cheap stocks that he/she likes. It takes a lot of courage. From March 2009, which was the bottom of the crisis and everyone was saying the world is ending, the US market is up 170%.
Is the Stock Market a gamble?
Warren Buffet says, “The Stock Market is a casino in the short term and in the long term a scale.” Because over the long term the capital goes to the best investments. Buying on margin is very dangerous and that is a real gamble.
Are American investors nervous?
Not now. They seem to be very bullish. But people who invest now missed the 170%.
What do you consider a good portfolio?
It depends on your age, but regardless of age you can have 60% in stocks, 40% in bonds or something else. I would never advise to have 100% on the market.
How do you make the choice of the stocks you recommend watching?
I talk on the phone all the time with big investors who are buying millions of dollars’ worth of a company and they give me ideas. Then I do my own research and I may even call the company; and at the end I make up my own mind. On Wednesday I have ten names and out of them I pick about two, because I think they are the most compelling of the ten.
Do you have preferences?
Yes, for the best investment! Today, as I said before, traders like biotech companies like Amgen or Genentech. They like them because biotech is different from drugs and cannot be copied easily. As for fracking, some people consider that there are still risk issues because of water, and they may be damaging the water around the world. I personally don’t think it is true.
Content is important for the entertainment companies. Sometimes companies are just gone. The market decides. Look at Blockbuster. E-books killed big book store chains like Barnes and Noble. Music publishing is over in the old model. Print publishing is facing the same problem.
What do you like about your job?
The intellectual challenge. I have to write a convincing narrative about stocks.
Sometimes you are wrong?
Lots of times, but luckily I am more right than wrong.
You are also a fiction writer and you just finished a book on the Ustica mystery?
Fiction writing is an emotional challenge, the US stock market an intellectual challenge. My job at Barron’s is to provoke debate and I hope that I am right.
Do companies fear you?
Barron’s, not Vito Racanelli! Especially on Mondays, Barron’s has influence on the market.
Is New York the center of the world?
New York is the center of capitalism and of the US. Paris is the center of the world.
New York, February 12, 2014