Business Titans
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In this episode of Uncorked: Wine-Business-Life, hosts Bill Green and Jerrold Colton sit down with Fred Fraenkel, a Wall Street veteran and wine enthusiast whose career spans decades of financial success and entrepreneurial ventures.
Fred takes us on a journey from his early days growing up in Allentown, Pennsylvania, to becoming one of the most influential figures in investment banking. Hear how Fred's relentless drive and strategic thinking led him to roles at Goldman Sachs, Lehman Brothers, Cowen, and beyond. His insights into financial markets, investment strategies, and the evolution of Wall Street make this episode a must-listen for anyone interested in the world of finance.
Beyond business, Fred shares his passion for wine with an enthusiasm and expertise that are nothing short of remarkable. His wine palate is both sophisticated and adventurous, with an impressive knowledge that spans Old World classics to New World innovations. Fred reflects on his first taste of fine Bordeaux, his love for bold Italian reds, and his experiences with rare vintages at prestigious auctions. As a dedicated collector and connoisseur, he shares unforgettable stories of meeting legendary winemakers and exploring renowned vineyards, offering listeners a masterclass in appreciating and curating exceptional wines.
Join Bill, Jerrold, and Fred for a captivating discussion blending financial acumen, entrepreneurial wisdom, and a shared love for extraordinary wines. Cheers!
Introduction and Early Background
Welcome to Uncorked: Wine, Business, and Life with Bill Green. I'm Gerald Colton, along with Bill Green, from beautiful Boca Raton, Florida. We have another very special guest today. My good friend, new friend—we are in a wine club together—Fred Fraenkel.
Fred grew up in Allentown and, like everybody else in Allentown then, got his MBA from Wharton. It’s not exactly the Billy Joel song. But Fred, I really want you to tell us about those early years and how you became one of the most iconic Wall Street bankers for a long time.
I don’t think I did, but I'll tell you how I got to where I was going. The common denominator is that I was lots of places because I just couldn't hold a job. I had to keep finding the next thing to do. That kept a fire behind me going.
I grew up in Allentown and went to college ten miles away in Bethlehem, Pennsylvania, which is what the Billy Joel song was really about. It was a steel town, but "Allentown" just fits a lot better. There were all kinds of overtones. Then I made a huge move all the way down to Philadelphia for graduate school. I had a sixty-mile ring around me for the first twenty-four years of my life. I didn't get out of that ring.
Becoming a Security Analyst
I had gone to Lehigh for undergraduate and another man went to Lehigh as well. Both of us went to Wharton. We were getting near the end of our second year and I had no idea what I wanted to do. I asked him what he was going to do, and he said he was going to be an investment banker. I told him I didn't really want to be an investment banker.
He asked what I was good at, and I said I was pretty good at going to school. He said there was a job like that called a security analyst. You study about stuff, you write reports, and instead of paying tuition, they pay you a whole lot of money. I thought that was the first good thing I’d heard since I’d been there.
I went to the library and Institutional Investor magazine had just rolled out an issue with the All-America research team. Somebody was number one in every category. They had a cover where everyone was in a football jersey, standing there like an All-American team. I decided that was what I wanted to do.
I went through the process to try and get on a job track to be a security analyst on Wall Street. Back then, the firm that was number one was Oppenheimer, so I wanted to go there. I did all the networking. My uncle knew one of the partners and got me an interview.
I sat down and the guy asked why I wanted to be an analyst. I gave him this MBA answer I had prepared. He stood up, pointed at me, and said, "This interview is over and you're never going to be an analyst. The only reason you want to be an analyst is to make a lot of money. That's the only reason you'll get up early and do the stuff you have to do."
Later, I got an interview at an up-and-coming research department called Goldman Sachs. I sat down with a guy who looked like my grandfather. He asked why I wanted to be a security analyst and my life passed in front of me. I wondered if I should tell him I wanted to make a lot of money or give my MBA answer. I went with the MBA answer. He said it sounded good and invited me to New York to talk to people.
The Turning Point at Goldman Sachs
I went back to New York seven interviews later. I didn't know that I was entering the job market in one of the biggest bear markets in history, '73 and '74. No one was giving out jobs. Goldman Sachs had decided they were going to hire only one MBA. After seven interviews, it was down to me and a guy from Harvard.
I went back for the eighth time and sat with the administrative head of research. He was about to tell me I didn't get the job when the partner in charge of research walked in. He said he needed bond tables because he had to value his portfolio. I looked at him and said I could actually do that.
My parents had bought me a fancy calculator for graduation and I offered to do the values for him. He brought it over, I gave him the numbers, and he said, "This would be a good young man to have around here." He walked out, and the guy from Harvard still doesn't know why he didn't get the job.
That was a case where timing is everything. I'll give myself credit because I was willing to put my hand up and say I could do it, but other than that, it was 100% pure luck. You have to get there in the first place, but there are lessons in that for everybody.
A Venture into Cellular Technology
My next interesting step was when I left Goldman Sachs because of a boss who eventually became a very good friend, Leon Cooperman. He was running research at Goldman Sachs and lives in our neighborhood here now. He and Bill Keely were building a great research department. It was unbelievably valuable to watch them do that. The people we were there with were amazing and all turned out to be famous.
I had gotten a call from my father and uncle. They had put some family money into a crazy company in Philadelphia that was one of the first companies inventing cellular technology. There was nothing there yet—no flip phone, no DynaTAC, nothing.
They asked me and my brother to get on the Metroliner, go down to Philly, and tell them what to do. We came back and said it could be an amazing company, but the scientists would just spend the money because they weren't business people. My family told me to go run it.
I was at Goldman Sachs, so I went to Bill Keely. He told me I was out of my mind. He said I was friends with the guy who was going to run the firm and I would be one of the youngest partners. He told me to just go back to my office and write reports on banks.
Then I went into Leon Cooperman’s office and told him the same story. He asked how much money I could make. I told him I thought we could take the thing public in a couple of years. He said, "Oh, you've got to go." So I quit and went down to do that.
The company was called International Mobile Machines because the founder wanted it to be like International Business Machines. It eventually turned into InterDigital. So far, they've done six or seven billion dollars worth of royalties. They never went into manufacturing, but everybody had to use their technology for 1G, 2G, 3G, and 4G.
I figured out very quickly that I didn't know anything about radio frequency engineering. If we were going to take it public, we needed a real guy. We got a four-star general who was running the Signal Corps, and I went back to Wall Street.
Revisiting Wall Street and Lehman Brothers
I went to E.F. Hutton to work for a strategist there. My wife was part of the journey the whole way. She didn't mind the crazy idea of going to Philadelphia and leaving the nice job. My father had a laundry company, and at one point, my uncle asked me to come back and run one of the plants.
My wife asked where we would go. I told her we would end up in Reading, Harrisburg, or Lancaster, Pennsylvania. I wasn't selling it very hard because I knew who was on the other side of the sales pitch. She said, "Let's go to Wall Street."
We stayed on Wall Street and I went through Hutton and then to Lehman. Looking back on fifty years, including twenty-five in investment banking and twenty-five in investing, I think Lehman was my greatest accomplishment. I had moved from Prudential-Bache where I was running research.
Lehman recruited me because they had a disaster of a department. When they merged Shearson and Lehman, the Lehman guy was made director of research and the Shearson guy was fired. The Shearson guy then went around, fired all the Shearson staff, and then quit to go to another firm. All the Lehman guys were left without a leader. It turned into research anarchy.
Early Experiences with Fine Wine
I started drinking wine when I was a kid. When I got out of college, I was drinking Mateus or Gallo from a jug. Boone's Farm Strawberry Hill was my first. Then three of my friends and I went to a guy's house who said we were going to have a special wine.
He said he had something called Chateau Lafite Rothschild. He poured some and it was different than anything we’d ever had. He said it cost $15 a bottle. I couldn't believe anything could cost $15 when I was paying $1.75. That was enough to get me interested.
In the mid-70s, when I was at Goldman Sachs, my brother and I took wine tasting courses at the World Trade Center and the Four Seasons Restaurant. We really got bit by the bug. You've been into wine a lot longer than I have, Fred, but I'm going to tell you my wine investment banking story.
Bill Green’s Wine Journey
In 1996, I was taking my company public. I was at the Beverly Hills Hotel with my investment banker from Alex Brown and my CFO. My banker asked what I wanted to drink. I asked for a Tom Collins. He told me I had to try wine.
I told him I didn't like wine and asked for a white wine. He handed me the wine menu and told me to pick anything I wanted. I saw a bottle—I don't remember if it was Mouton or Lafite—but the last word was Rothschild. It was $800 in 1996. It was probably only worth $100, but that’s restaurant pricing.
I tasted it and told him it was like candy. He told me that was fine wine. For the next two weeks, we traveled the country pitching banks, including Furman Selz. Three days after I got back, I went to a friend at a liquor store and asked him to teach me about wine. Six weeks later, I was at a Sotheby's auction and couldn't keep my paddle down.
Tasting Saddle Hill and Cabernet Franc
Fred, you have the best wine palette of any of my guests, so I’d love your thoughts on this wine you’re tasting. I like this. There’s a lot going on and it’s all pleasant to me. I’m tasting Cabernet and Cabernet Franc.
This is Saddle Hill wine. It’s a Bordeaux blend with Cabernet Franc, Cabernet Sauvignon, and Malbec. It is Exquisite. In the United States, the Cabernet Franc is normally pretty identifiable. It has become a standalone favorite in Napa.
When I started planting in 2021, I decided to plant ten acres of Cabernet Franc. It was a risk, but I’m betting on the fact that it will continue to be a great blender and a single variety wine. Our rosé is even Cabernet Franc.
My winemaker won’t touch anything unless it’s been on the vines for three years. We had two-year Cabernet Franc and we made sangria out of it. Most of our clones are from Napa. This wine doesn't have that "crunchy" taste some people get with the grape; it is very true to the style. It’s probably the most expensive New Jersey wine at $60 or $70, but we’re pushing the envelope.
Insights from the Barron’s Roundtable
I lived in New Jersey for thirty years and this is the first wine I’ve ever had from there. It’s history in the making. One thing that fascinates me about Fred's career is the Barron's year-end roundtable. That must have been unbelievable.
It was amazing because of the people involved. Alan Abelson used to run Barron's and would pick the participants based on ideas from staff writers. One writer had been an editor at Goldman Sachs and we were friends.
I was in a group of three. One of the guys, Ed Yardeni, is still one of the greatest economists in the world. He’s been the most accurate for at least ten years. We were working on what would be different under Reagan. We predicted disinflation that would be extensive and long-lasting.
No one agreed with that then. Everybody thought inflation was coming back. Barron's did an article on us called "E.F. Hutton Talks." This writer told Abelson to have "this kid" on because I had different things to say.
Joe Granville, who was a big shot technician on Wall Street then, broke out into laughter when he heard me recommend International Mobile Machines. I was scared, but I did the roundtable for five years. It was the best people on Wall Street.
Eventually, I moved into things where there was a conflict. It’s hard to be on the sell side of Wall Street making recommendations on the roundtable while also pumping them. There was a natural exit point for me, but it was so much fun listening to those older guys pontificate.
The Evolution of Venture Capital
After Lehman Brothers, we took the 15th best research department to number one in four years. That was fame-creating for me. Then the Furman Selz guys asked me to help them. We grew 300% in three years. Then a Dutch bank, ING, bought us for six times book value, which is insane.
An Israeli engineer I knew through Wall Street had started doing venture capital deals. He asked me to do deals with him. We started in the late 90s when there was a huge wind at our back. Anything we touched went up. Institutions told us to start a fund so they didn't have to approve deals one at a time.
We started a fund in the year 2000, which was the worst year ever to start a venture fund because of the March 2000 crash. We spent nine years earning people a return. There were no IPOs for companies under a billion dollars between 2000 and 2009.
Investment Lessons and Market Volatility
When I took my company public in '96, we were mid-cap. By '99, we were small-cap. It was crazy because my company was performing well, but investors wanted to pivot to "flyers" like Priceline that didn't have profits or sales.
Julian Robertson, one of the greatest hedge fund managers, closed down because he wouldn't put money in that "crap." My stock was at 28 in late '98, then dropped to 13 in '99 just because we weren't popular anymore. We decided to take the company private, which turned out to be amazing.
I always had the feeling you should never look a profit in the face. I make my investors more money than I make myself. I had great relationships with bankers, and the key is to treat them right and not screw over the analyst. Loose lips sink ships, and you have to keep your mouth shut on Wall Street.
From 2000 to 2009, everyone was convinced stocks were the best thing and would go up 10% a year as a God-given right. After the 2000 crash, Wall Street found a new bait: that the price of houses never goes down. We had a decade of people buying multiple houses and leveraging up until the huge housing collapse.
Acquiring Rare Bottles and Auction Disciplines
I started collecting wine in '96 and went for high-end Napa wines to get on the mailing lists. You couldn't just buy them. In 2010, I got a letter from Screaming Eagle saying I was on the list. All the hedge fund guys who were paying stupid money couldn't afford it anymore.
This wine we’re having now is a 2009 Screaming Eagle. It was a dumb amount of money, but it’s one of my best investments because it’s probably 4x now. My first Sotheby’s experience was funny. I had become a student of Robert Parker and had a list, but I got competitive.
I wanted a case of '82 Lafite and broke my own rules on what I wanted to pay. That night, the lady said the bill was $53,200 and she needed two credit cards. I learned you have to stay disciplined. Sotheby's and Christie's let you fax your bid in. Once I was in the room and saw someone outbidding me, it didn't matter. Faxing kept me disciplined.
I think the Saddle Hill wine is better than this. Well, it's different. This is 100% Cabernet. We had a Colgin IX Estate on our last episode. The first bottle of Screaming Eagle I ever opened, I had with hamburgers in my backyard. It was great.
Travels Through the Italian Wine Regions
Fred, you have a lot of knowledge, but you really love Italian wine. I just had the best wine experience of my life in Italy for my 75th birthday. My wife and I went to Barbaresco. You can't just go to Gaja, but if you offer a charitable contribution to the local hospital, the head of marketing will take you around.
We showed up and I started completing the marketing head's stories and telling her things she didn't know. She ran out of the room and Angelo Gaja walked in. He spent an hour talking to us about life. Then his daughter, Gaja, who is the CEO, did an hour-long tasting with us from her library.
Gaja is the gold standard. Forty years ago, Barbaresco was table wine that cost $7. Angelo Gaja decided they had the right terroir and sun angles. He brought in the right clones and changed everything. All the other Barbaresco makers copied him and got rich off his vision.
In the U.S., Napa drives the market. In Italy, you have Tuscany and the Piemonte region where you find Barbaresco and Barolo. I prefer the Tuscan region for vacations. Italy is amazing. If someone said I couldn't live in the U.S. anymore, I’d go there.
A Philosophy of Business Leadership
For a young business student today, I don't think the school's curriculum is where you get dramatic insight. It's the practice of business that gives you the opportunity to add to the world. My best accomplishment was turning around that research department at Lehman.
We weren't just buying analysts; we were growing a culture. I observed that the management of smart people can't be done in a normal pyramid hierarchy. To accomplish things with productive people, you have to turn the pyramid upside down.
The boss has to take away the problems of the people who report to him. By the time you get to the top, if all the problems have been removed for the mass of people working there, you’re going to get a lot done. Authority and respect often get in the way of accomplishment.
Corporate Turnarounds and Retirement
I'm very proud of what I did at Cowen, even though it got complicated. I went there to fix the asset management company. The first year was rugged because I had to get rid of bad pieces that weren't good for investors.
I became known as a "black hood" guy to some people because of the firings, but if you weren't offering something good for clients, you had to go. We built products in biotech and green technology and were super successful. We raised billions of dollars.
When TD Bank bought us, they didn't want that part of the business, so they gave it back to the portfolio managers. I retired the day the TD Bank deal closed in February 2023. I’m not bored yet; I've still got a lot of stuff going.
Iconic Bottles and Final Reflections
As for wine highlights, tasting Domaine de la Romanée-Conti for the first time in Burgundy was a tremendously awakening experience. It is one of the rarest wines in the world and it really is a special event to drink that.
I've never had a DRC. Next time we go out, the four of us should go to a great restaurant here in South Florida. I’ll bring a Bordeaux and you bring a DRC. We’ll just have to pay the corkage fee, which can be up to $250 at some places. It’s insanity, but compared to the wine list, it’s a good deal.
Fred, thanks for the wine, business, and life stories. They’re all fabulous. An amazing 75 years with a whole lot more to go. Cheers. We’ll see you next time on Uncorked.
