Wall Street guru bullish on Wisconsin
By Steve Jagler, SBT Executive Editor
Wisconsin’s economy has a not-so-secret admirer on Wall Street. Jeff Gendell, a money manager and founder of Tontine Management LLC, a major investment firm, recently spoke of the strength of the Midwestern economy in an interview in Barron’s magazine.
“When people ask us if we are bullish, we say given the outlook for Mishawaka (Ind.) and Milwaukee, we’re incredibly bullish,” Gendell told the magazine.
“If you live in the heartland, the area, say, between Pennsylvania and the Mississippi River, where they’ve gotten used to slightly higher-than-normal unemployment rates, industries are suddenly coming back. There’s going to be unbelievable job growth. People aren’t going to be too worried about inflation,” Gendell told Barron’s.
“I’ll make another off-the-wall prediction: State revenues are going to go through the roof. These deficits everybody is talking about at the state level will dissipate,” he told Barron’s. “A lot of the deficits at the state level have occurred in the Midwest, where the economy hasn’t been strong enough to overcome the spending increases. If we start seeing employment gains of 200,000 a month, which we expect because of the surge in the manufacturing sector, and GDP growth of 4% to 6%, there will be some fairly hefty increases in state revenues.”
Gendell, who has an office in Greenwich, Conn., is known in Wall Street circles as a contrarian. A very successful contrarian.
Gendell says the Midwestern manufacturing economy is on the verge of a full rebound, even though Americans are losing jobs to the cheap labor in China.
“Now we think the positive surprise will be in the manufacturing area. A lot of people think U.S. manufacturing is dead. This is going to be the strongest recovery in the last 25 years – my entire investing career – and it is all going to be centralized in the industrial sector of the economy,” Gendell told Barron’s.
Reached by telephone to explain his optimistic outlook on Midwestern manufacturing, Gendell told Small Business Times that he is a native of Ohio, and he is predicting that China’s advantage of cheap labor will soon be negated by the rising costs of shipping and the costs that nation will incur as it attempts to ramp up its infrastructure, including its energy and transportation system, to meet the demands of its growing economy.
The rebirth of Wisconsin’s manufacturing sector will translate into growth for the state’s banking industry, Gendell said.
“We are buying up all the banks in manufacturing towns in Indiana and Illinois and all the hot spots between Pittsburgh and St. Louis, up through Wisconsin,” Gendell said. “There will be a lot of demand. A lot of people will be going back to work. A lot of the thrifts and banks we own are going to start seeing deposits flood in.”
Gendell’s company owns stock in several Wisconsin bank holding companies, including 611,823 shares, or 9%, of the outstanding stock in State Financial Services Corp., the parent company of State Financial Bank that will move its headquarters from Hales Corners to downtown Milwaukee early next year.
“That’s the kind of bank we buy – a great retail bank and well run,” Gendell said. “We’re bullish on Midwest banks and manufacturing.”
Gendell predicts 2004 will be “the most active for bank acquisitions in the last 10 years.”
Dec. 26, 2003 Small Business Times, Milwaukee
