samwheat
11-24-2004, 10:26 AM
I joined the Wall Street firm of White Weld & Co. Inc. in 1970, having just completed my studies in economics and knowing nothing at all about tockbroking and security analysis. In early 1971, this clubby and blue-blooded East Coast firm, well known for its growth stock philosophy, hired Mr. Alan Greenspan, then a principal of Townsend Greenspan, as a consulting economist. I was put in charge of research liaison for White Weld’s overseas offices, which were located in several major European financial centres, and in Caracas, Montevideo, and Hong Kong. My job entailed attending analysts’ and companies’ meetings, replying to research enquiries from our overseas offices, and attending the monthly economic presentations of the present chairman of the Federal Reserve Board, which took place in White Weld’s stuffy boardroom. Looking back, I have to admit that I had no idea at all about what was going on in the world of investments and my main achievements were to pass on the stock recommendations of our research department to our overseas offices (by telex, since fax machines didn’t exist at that time), whose prices subsequently dropped, on average, by 90% in the bear market of 1973/74. I also never understood what Mr. Greenspan was talking about, but I may not have been the exception. When Mr. Greenspan first came on board at White Weld as a consultant, 30 or 40 people from the firm’s various departments would attend his meetings. Within a few months, however, attendance had dropped to just a handful of White Weld employees. By then, I had also learned that the easiest way for me to communicate the (to me) incomprehensible remarks of the good doctor to our overseas offices was simply to summarise the previous day’s news from the front page of the Wall Street Journal. In any event, in one of the very few fundamentally correct and timely investment decisions White Weld ever made, it got rid of Mr. Greenspan in late 1972 and hired instead the economist Gary Shilling, who had just been sacked by Merrill Lynch for having the audacity to predict a recession for 1973, at a time when the “thundering herd’s” top management was firmly bullish about America. In an irony of life, the unprofitable White Weld operation in the US was acquired in 1978 by Merrill Lynch. The day the takeover was consummated, Gary Shilling, who by then had become a good friend of mine and with whom I have stayed in touch ever since, was sacked for a second time by Merrill Lynch, despite having been spot on with his predictions concerning the 1973/74 recession! (In retrospect, his dismissal may have been a blessing in disguise, since Gary recently celebrated 25 years at the helm of his own successful economic advisory business.) In fact, the end of the “gentlemen’s” firm White Weld was no great tragedy. The head of research married his secretary. The photography analyst, Brenda Landry Lee, whose beloved Polaroid stock had dropped by more than 90% in 1973/74 and recently filed for Chapter 11, became a star analyst at Morgan Stanley. Jerry Kenney, who at White Weld had been the mobile home analyst and most of whose stock recommendations went out of business, became head of research at Merrill Lynch and one of that firm’s top executives. David Mulford was appointed undersecretary of the Treasury under President Reagan. Bob Day, who had already left the firm in 1971, formed Trust Company of the West. Brian Little made headlines during the takeover mania of the 1980s as a partner of Forstman Little. Alan Greenspan became Fed chairman. And I, after having been promoted to senior vice president in recognition of my succinct services in research liaison and faithful communication of White Weld’s analysts’ worthless recommendations to its overseas clients, was sent on Hong Kong in 1973 to develop White Weld’s Asian business. (I’m not exaggerating when I say “worthless recommendations”, because several of White Weld’s top picks became zeros.) In 1978, I was appointed to run Drexel Burnham’s Asian equity business. I have always thought that America is a wonderful country and that Wall Street, with its short memory and willingness to forgive, is, along with central banking, one of mankind’s greatest inventions. Wall Street firms and central banks deserve credit for being institutions that have always managed to fool all the people all the time.