Philip L. Carret spread The Wall Street Journal across his desk, scanned the advertisements placed by companies announcing stock offerings, and shook his head.
"This," he said, knitting his bushy white brows, "is a very bad sign. These are all good companies, but all these offerings signal the peak of a boom."
Mr. Carret is hardly alone in his bearishness. But when it comes to coping with the capriciousness of the market, the chairman of New York- based Carret & Co. includes banks among his favorite investments. And what he says carries a considerable amount of weight, because he draws on an unparalleled 77 years of experience in the investment game.
Mr. Carret (pronounced cah-RAY) will celebrate his 100th birthday Nov. 28. Born the same year the Dow Jones industrial average was launched, he has experienced 30 bear markets, 20 recessions and the Great Depression. He's writing his fourth book, under the apt working title "The Patient Investor."
He has also won the admiration of Warren Buffett, the legendary investor and chairman of Berkshire Hathaway Corp.
"I've known Philip Carret for 44 years, which also means that I've enormously admired him for 44 years," said Mr. Buffett, who is 66. "He has the best truly long-term investment record of anyone I know, living or dead."
Mr. Carret, who invested in Berkshire Hathaway in the 1960s for less than $400 a share and has watched it soar to more than $30,000, is modest about his friendship with Mr. Buffett.
"I can call him on the phone, and he'll pick up," Mr. Carret said with a shrug.
Frank Betz, a Carret & Co. spokesman, said Mr. Carret is far too humble. He recounted the time when Mr. Buffett introduced Mr. Carret at Berkshire Hathaway's annual meeting in May.
"Five thousand people stood and cheered, and at the end of the meeting he was mobbed as if he were Mick Jagger."
Though he seldom has made predictions in his lengthy career, Mr. Carret said he expects the Dow Jones to shed more than 1,000 points between Labor Day and Christmas.
Behind a desk piled high with annual reports, prospectuses, and newspapers, he explained how banks, often perceived as interest rate sensitive, can be an investor's best friend when other stocks fall.
"I have always been fascinated by banks. The banker who doesn't make any bad loans is doing a lousy job for his stockholders, and if he makes too many bad loans he is doing lousy for the bank. They have to strike a happy medium.
"Moderation in all things," Mr. Carret said. The axiom has carried him through a lifetime of successful investments.
Indeed, he spent 55 years building the Pioneer Fund, one of the oldest U.S. mutual funds. When he resigned in 1983, the investment management company, Pioneer Corp., controlled $4 billion in assets. .
He also abides by a formula of strong balance sheets and relatively low price-to-earnings and price-to-book-value ratios when he selects a bank stock.
Mr. Carret also likes to see a year or two of management's salary in stock. "If the management doesn't want to invest in the company, why should I?"
Mr. Carret is particularly bullish on First National Bank of Anchorage, because of its low debt and strong fundamentals.
Mr. Betz, the spokesman, said Carret & Co. "loves small banks."
"First National Bank of Anchorage has a lot of attractive characteristics," he said. "We think it is good franchise in a very underbanked big state, which we think, is well run."
Mr. Carret has also invested in Norwest Corp., a larger bank with a low debt level and strong reserves. The bank attracted his interest during a chance meeting with a company executive on a cruise.
"I am a cautious guy by nature," said Mr. Carret. "I look at the reserves that are set up for bad debt. I like being overreserved."
Other banks and thrifts in which Mr. Carret has invested include National City Corp., Cleveland, BSB Bancorp, Binghamton, N.Y. and Progressive Bank Inc. in Pawling, N.Y.
He conceded that he missed out on the opportunity to buy Wells Fargo, a bank in which Mr. Buffett has invested.
"It had gotten away from us," said Mr. Betz. "We didn't recognize the value in Wells Fargo, and by the time that everybody knew that Buffett was in it, it was too late."
Another misstep was Bank of New England, in which Mr. Carret invested in the late 1980s. Mr. Carret bought the bonds at 10 cents on the dollar; Mr. Betz bought the shares at three dollars. The Bank of New England later folded in 1991.
"Nobody is perfect," said Mr. Betz. "We're in the story-telling business, and some of them we buy and some of them we don't, but as long as 65% or 75% of the stories work out, life continues to be good."
Although Mr. Carret no longer has an equity stake in the company that bears his name, David J. Olderman, who bought the company in 1986 still follows the veteran investor's lead.
"He's the boss." said Mr. Olderman, jabbing a finger at Mr. Carret.
Carret & Co. has $700 million under management. Mr. Olderman said the company's portfolios are overweighted in banks. He said he sees value in First Chicago, PNC, and small regional banks, because they are good takeover targets.
"We believe that there has only been a pause in merger activity," said Mr. Olderman. "It will pick up again very soon."
While Mr. Carret's personal and professional portfolio is predominately industrials, he is optimistic about banks because they charge fees for services.
"And I am sure that one day, they will win their battle to get into the insurance business."
Although Mr. Carret believes a market correction is imminent, he said he is not anxious.
"If a hurricane happens there is no way you can stop it," he said. "Once it is over you pick up the pieces and go on with your life. That's the key to investing."
Mr. Carret expects the Dow to shed more than 1,000 points between Labor Day and Christmas.
