Value Added: Taking Advantage Of Opportunities
One of my favorite experiences is jetting to Phoenix, Ariz., each January, where my wife, Polly, and I visit her parents and I attend the FBR Open, one of the wilder events on the PGA Tour and a corporate schmoozefest sponsored by Friedman, Billings, Ramsey Group, the Rosslyn investment bank.
It's a great place to make contacts, and I have met lots of interesting politicians and businesspeople there. Two years ago I met Teddy Downey, who at the time was one of FBR's research analysts and is the son of former congressman Tom Downey. Tom Downey represented Long Island for nearly two decades and is now a Washington lobbyist.
Teddy Downey, 26, recently left FBR and is now heading up Potomac Research for Washington entrepreneur David Bradley. Potomac Research is a new company aimed at acquiring intelligence on how federal activities will affect the private sector and then selling that information to investors such as big mutual funds, endowments and hedge funds. The model is similar to Bradley's predecessor companies, the Corporate Executive Board and the Advisory Board Co., both of which sell research to corporations through a subscription-based service.
I have written a few blogs lately about the scions of famous people. Entrepreneur/author Christopher Gergen, son of political journalist David Gergen, was the first. Fannie Mae CEO Dan Mudd, son of longtime CBS correspondent Roger Mudd, was the second.
Some people questioned whether the Gergens and Mudds and other achievers should be celebrated for being successful, since they grew up in prosperous families. I asked Teddy what he thought.
"It's helped in a lot of ways because of growing up in D.C. around big decision-makers like Nancy Pelosi, George Miller, Chris Dodd, Dick Durbin, Chuck Schumer. Just growing up and getting to be friends with them and their staff, meeting with them, has been a huge advantage understanding how the Hill works and getting information on specific situations that affect investors."
Lobbyists, many of whom are former lawmakers, "are at the center of all this information through their personal relationships. They are very plugged in. I know them through my dad, partly through social contacts. My family is extremely plugged in."
Downey has tons of friends from his days at St. Albans School in Northwest. He lives with a houseful of former high school friends over in Georgetown. A St. Albans' friend helped link him to Potomac Research.
"St. Albans has been good to me," he says.
Then Columbia University. Nice. But everything didn't come from dad.
"My dad is still very helpful to me, and he keeps me in mind. But hard work and really endless curiosity and a desire to learn separate me from others. It's not just sitting on your laurels. Part of it is taking advantage of the possibilities that are open to you."
After college, he worked on the Kerry-Edwards campaign as an advance man. He has also tried advertising and polling. He was hired by FBR three years ago as an analyst in its Washington Policy Research Group, alongside Andrew Parmentier and Kevin Book, both friends of mine, providing hedge funds and mutual funds with the same Washington intelligence that Potomac Research sells now. Teddy concentrated on financial services, health care, energy and what is known as "TMT" for tech-media-telecommunications policy.
"I got hired because of my ability to write and think clearly and being personable and well-liked, not only around Democrats but around Republicans and being able to go deep into issues that wind through Washington and affect companies on a large scale, like Internet gambling, asbestos, and mergers and acquisitions."
"One of the things that really is a big difference between Washington and Wall Street is the pace...People are used to working hard in the White House and on the Hill. But it's a whole other level of intensity and efficiency required when you are dealing with investors. You can't pontificate. You have to diligently dig for information and translate that effectively for investors."
Any home runs at FBR? He and Parmentier correctly predicted that big asbestos legislation would not pass Congress, which would have been a windfall for insurance companies. He also correctly called the failed acquisition of 3Com by Bain Capital and a Chinese Company, preventing some investors from taking a bath and helping others to short the stock.
I had to ask because I am a reporter: What is your best resource for finding stuff?
"A lot of the information-gathering is really done on Mondays and Fridays, when members aren't in session, and you can meet with the committee staff. They are able to go deepest on issues."
Downey said Potomac Research will concentrate heavily on federal agencies like the Federal Communications Commission and the Center for Medicare and Medicaid Services. They both have a big effect on everything from how much Medicare will reimburse health care providers to whether a communications merger will be approved.
He spent the last few weeks on a road show drumming up clients. It's a great time to start this company.
"With the 2008 elections, there is going to be a tidal wave of new regulations and a tremendous amount of change, whether it's [Barack] Obama or [John] McCain, in the key areas we are focused on, including financial services, health care, energy and telecom. The change and uncertainty in Washington creates risk and opportunities for investors," said Downey.
Downey said there is one Washington prediction that is fairly certain: he won't be invited to next year's FBR Open.
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