Tuesday, December 27, 2011


There are 600,000 people who are not 1 percenters working at Citicorp and Bank of America. 600,000 People!

The Obama administration recently prided itself on collecting a $335 million dollar fine from Bank of America for the egregious activities of Countrywide Mortgage well before the bank acquired Countrywide.

The bank now has $335 million dollar less to pay its employees, build up its reserves, invest in plant and equipment and make loans.

The few executives responsible for the Countrywide fiasco have long ago walked away, many of them extremely wealthy.

The headlines in the media about the great punishment of Bank of America is a complete farce. It's only value is to lie to the public. It sounds good to get that "big bad" bank. The poor 600,000 employed by Bank of America and Citicorp don't count because they don't have a voice.

The dynamics of the letting 600,000 employees bear the brunt of Barney Frank's hypocrisy does not speak well for the character of our nation.

In theory, lets fine the government every time they make a bad decision, starting with Solyndra.

Tuesday, November 22, 2011


A while back we wrote about the effect of the tablet on PC sales. At that time we didn't fully grasp the competitive impact. It's real, it will continue.

Meg Whitman is a smart woman. She was recently appointed CEO of Hewlett Packard. Traditionally, a new management of a historically great company, with a low share price based on historical financial relationships, would be a good place to consider investing. Over time, many financial assets that go out of favor return to favor at another time. But some do not. They go down, they stay down. Looking backwards to their prior greatness becomes a loser's game.

I took a quick look at the recent financials on Hewlett. I hadn't done it in awhile. What I found was a company with about $127 billion in revenues and costs which used up $115 billion of the $127 billion in revenues. That means that before taxes, interest and depreciation, Hewlett was making about $.10 per dollar of revenue. Now imagine this, you have to sell $130 billion dollars of goods, have a couple of hundred thousand employees and end up with what is low return on a dollar of sales.

But that's not the real story. The real story is much more dramatic. The implications are scary.

Way back when, a company like Hewlett Packard went to find manufacturers overseas for its products. It significantly dictated the terms as the foreign manufacturers needed business. Now, whether we like it or not, the negotiating power has shifted. It's as if the foreign manufacturers say "We'll make the product for you, we'll let you sell it under your name, but most of the money from the sale of the products will go to us". There are only so many places an American company can go to offset this type of negotiating tactic. It's complicated to change manufacturers. The net result is that power, in terms of trade, has shifted more than most of us realize. Obviously we now know what CEO Meg Whitman has to do, drive the cost of sales down .

Fifty years ago, the President of US Steel, when I asked him about imports said, "We are US Steel, we never lose".

Friday, November 18, 2011


We sent our daughter to a Jewish religious school. One day my former wife and I came across a teacher beating up a ten year old child outside the classroom. We intervened but were told to mind our business. We were large contributors to the religious school. We went to see the Chairman of the Board to register our disgust. He was a much larger contributor than we were. We were actually told that we didn't know what we saw and should mind our business. We were told the reputation of the school was more important than the event. We went to see the Rabbi, but the Rabbi could be fired by the Chairman of the Board. He told us the kid probably needed discipline. We didn't go to the police.

A Cantor, at one of the most famous Jewish temples in New York City, was once arrested for child molestation. I don't know what happened to him but I'm pretty sure he was found guilty.

A few years later a Senior Rabbi at the same Temple was arrested for soliciting an underage child for sex.

My wife and I recently found an article about a Lutheran preacher who was arrested for solicitation for underage sex.

What's occurred with the Priests in the Catholic church is arguably among the most atrocious events in the history of this important institution.

The myriads of scandals in the Presbyterian and Baptist religious orders have made significant headlines over the years.

The point of this discourse really concerns an editorial by a well known left wing writer in a well known New York newspaper. I quote from this editorial:

"In words and deeds they have shown that their priorities are askew. After its death sentence SMU football (other crimes) never regained its previous prominence. But it would be okay if it wound up permanently diminished like SMU". (i.e. Penn State)

The writer in his egotistical wrath actually used the words "after its death sentence."

In accordance with this kind of thinking the mentioned Jewish temples, the Catholic Church, the Lutheran orders and the other religious orders would also be accorded a "death sentence" according to his way of thinking.

Human nature, being what it seems to be, dictates that in every large institution there will be transgressions by the criminal, psychopathic, borderline, narcissistic, weak minded personnel. With this writers kind of thinking, every city would be closed down because within it you would find criminal elements.

The criminal actions of a few individuals within a large institution or group should not constitute a "death sentence" for the entire institution or group. In all fairness, if that was the case, the abuses that have occurred in the large religious institutions would have also commanded enforcement of some type of "death sentence" to them also and society in general.

Mr. Sandusky maybe guilty of horrible crimes, but courage to step forward in a judicial process that would take ten years to convict him is naive especially when the perpetrator has power.

Wednesday, November 16, 2011


The government fines an airline for keeping people in a plane for too long during a storm. The government fines the airline almost $1 million dollars. Now the airline has $1 million dollars less for raises, fuel purchases, airplane maintenance, etc. The airline will simply transfer this expense back to the consumer in the form of higher ticket prices.

Picture this plane, safety is first, therefore in trying to avoid a storm they get sent to a new landing field. When the plane gets there its storming. The weather forecast says it will clear in an hour. The airport tells the unexpected planes, "hey guys, clearing in an hour", but the weather forecast changes and the storm continues. So many planes have unexpectedly overloaded the airport that all the gates are filled. Its tough to move the planes out of the gates because there is nowhere to put them. The storm makes its dangerous to move the planes in the first place. There aren't any extra employees at the airport and certainly no highly trained ones. Several more planes arrive because all the other airports are closed. The pilot has rightfully upset passengers on the plane. These passengers have connections to make to get to where they were going in the first place. They are held up by the storm and throughout the whole country planes are waiting for passengers that never show up. Who was responsible to move a plane from the gate during the storm? Who would be responsible if a gate was cleared and a serious accident occurred by moving planes under hazardous conditions?

Some people think it was the airport that should have paid the fine. The airports are concrete and wires. The fact of the matter is that there is no system in place where the staff is large enough and trained enough to accommodate our airline system during unexpected hazardous weather conditions.

Fining the airlines, which is a paper entity, is another example of political expediency before honesty. There will always be a set of conditions where we can't get people off planes which might be a greater risk than leaving them on them.

So again instead of telling people the truth that no matter how hard we try, individual people, usually with limited authority and responsibility, will generally not take the risk of some extraordinary action plan that could jeopardize their jobs.

Monday, October 17, 2011


The left wing socialist writer at that New York newspaper is so wrong about so much that it's just plain sad. On Monday, October 17th, he failed to recognize that one of the major reasons for the slow down in income growth from 1980 to 2007 was inflexible wages in our major manufacturing base.

We lost a major share of the auto, steel, textile, clothing and computer manufacturing business to countries with much cheaper labor.

Good, bad or indifferent, the millions of people employed by banks, pension funds, mutual fund companies, insurance companies, equipment leasing companies, lawyers, accountants, secretaries, cleaning people, and everybody else, was almost forced upon us by fear and ignorance and actually saved the economy from severe deprivation and depression.

It was government policy to provide homes for everyone.


Thursday, October 13, 2011


The rain didn't come. The country was already suffering. The crops withered and then withered some more. The land, the asset of productivity, became baron, and still the rain didn't come. To a great extent we were an agrarian society. The several hundred thousand tenant farmers, through generations of sweat but at the same time life, were obliterated by the drought. And so with no education, no money, no medical care, no unemployment benefits and really no food, they were ejected from the land by owners and circumstance.

They packed their bags and went into cars and trucks that would hardly move. They headed west, for what was thought of as a "place of plenty".

There were no real jobs, it was all fictitious. Some found jobs for 30 cents only to find hundreds of thousands of others willing to work for 20 cents and then 10 cents. At this point you couldn't buy food let alone anything else. The horror of the American farmer at that point of history is hard to comprehend. This was part of the Great Depression and a people without a backup plan and is the background for the classic book The Grapes of Wrath.

Obviously there are many questions, but who were these people? Who were their parents? They were farmers, they came from a farmers background. They were hard working; but their history, their struggles, their nature went from one generation to the next. Only a few had the luck or the psychological stamina to move away from the soil.

The Jews of the world have tended to be a persecuted minority for centuries. People have found that the Jewish people have dealt with the psychological trauma of Anti Semitism in different ways. Many converted, often believing that conversion would allow them to escape from discrimination. Many changed their names to non Jewish sounding names. Many chose the path of rising up to separate themselves and say "Look at me I'm successful". A good example would be Larry King whose birthname was Lawrence Harvey Zeigler.

The New York Times is a premier example of assimilating. The extent of the New York Times failure to support Jewish causes during the Holocaust belies why any Jew would ever buy this newspaper. The Roosevelt administration's complicity of not helping to save Jews from Hitler and the subsequent overwhelming support of the Jews for the Democratic party is the delusional aspect of historical victims separating fantasy from reality.

So the farmers suffered, the Jews suffered and now we see 40% unemployment in black teenagers and a black unemployment rate almost double the rest of the population.

The delusion of the blacks, as a general group, towards Obama and Democrats is the same as the Jewish delusions was towards Roosevelt and his Democratic administration.

See the farmers were left to starve, the Jews were left to die and Blacks are left to be unemployed. It is essential to recognize not as an excuse or an appeasement of any sort, but just the reality that the American attitude towards the Black community has impacted the psychology of the group. Granted some Blacks have moved beyond but many have not been able to.

The Farmers, the Jews, and the Blacks each have had historical problems impacting their behavior. For the record, there are many other groups within our society who have suffered through their own feelings of discrimination and chosen similar methods to address their situation.

But who are the Occupy Wall Street people?

Friday, September 30, 2011



Many months ago when I bought my first IPAD I said to my business partner, "Holy Moly-this product is going to have some huge impact on PC sales". Months have passed and I have begun to think of how many people are employed in making PCS and their ancillary equipment.

The gadget that brought down an industry and we didn't see it coming. Holy Moly???

P.S. I must be crazy. "Laugh of the Day"

Many months ago I first published the blog above about the IPAD. Now a second catalyst has caught our attention and seems to be just as destructive as the IPAD. The fact that a retailer (Amazon) is now manufacturing its own tablet is incredible. Not only does it appear that Amazon's tablet is quite a capable machine but it's also to be sold at a significant discount to its competitors. Look at what's happened to both Hewlett Packard and RIMM with their venture into the tablet business. One can only wonder what the implications are for the rest of the computer hardware industry.

At one point in time the only device used to draft written correspondence was the typewriter. With the introduction of the personal computer the days of the typewriter were limited. Will the same fate lie ahead for the manufacturers of portable computers as the competition increases and the prices decline with the perfection of the industry?

Thursday, September 22, 2011


While the Democrats focus on "class warfare" and the Republicans focus on spending cuts the "battle to right the ship in a storm" is being lost. (The Forgotten Man)

Both parties are focusing on the wrong battles. The Republican party is so split that it's hard to see how they can beat Obama, in spite of his huge failings.

In June 1930, as the Depression was unfolding, the Congress actually passed a tariff bill intending to protect American business from competition. Instead, there was worldwide retaliation.

A stronger dollar, at this time, under these conditions is exactly the same as the tariff bill passed in 1930.

All the above, tax increases, confidence lost, potential for stronger dollar and balanced budgets are so wrong as to make one think the country is being run by people who actually want us to go down the drain. Let's hope that President Obama has the courage to resign.

Thursday, September 15, 2011


In a recent blog we discussed the extraordinary risk to the marketplace that computerized trading is likely to cause at some unexpected time.

The recent trading loss that occurred at UBS is another example of activities that clearly shouldn't be allowed in the banking system.

Permitting banks to be in the trading business, usually conducted by young inexperienced personnel, is so dangerous to the monetary and fiscal well being of the banks, the government and individuals that there are few words to describe the risks involved.

In America we have depository insurance which would leave untold billions of depositors uninsured in the case of huge losses by traders.

The banking system should not be in the trading business with derivatives and options, etc. It is wrong, dangerous and must be stopped.

Unfortunately, when traders make money they get big bonuses, buy big apartments and consequently the huge risks are not faced unless there is a significant crises. One of these days, with these kinds of absurd activities continuing to be permitted, government policies will not be able to fix the problem fast enough. This will make the housing crises seem trivial.

Tuesday, September 6, 2011


To see the President of the United States cowering behind his Union supporters seems to indicate that he is certainly no George Washington where courage is concerned. For alot of different reasons I happen to think well of the Teamsters Union and its leader, but to hear him talk in terms of "war" sounds almost like a call for a fascist state. The "common man" will not cower in the face of demagogic bluster.

Friday, September 2, 2011


The poor struggle for subsistence. The middle class realizes that our manufacturing jobs have been sent far away. The rich, no matter what they say, are tired of being made scapegoats for the country's problems. The corporations, where most Americans still work, are made out to be the enemy. Banks are attacked as if they were supposed to have known what mortgages to write and what mortgages not to write. The Unions hang on to antiquated work rules. The Politicians have no creative capacity. The Tea Party, well meaning or not, advocates totally disastrous economic policies. The liberal left actually believe people are "entitled" without having to earn it. The public school system is frozen and outdated. Wasteful financial transactions are accepted as a crucial part of capitalism's strength.

You could write all the offsetting positives to the above you want, but as long as the standard of living is stagnant, you would just be plain wrong.

No jobs, no growth, no improvement...just the opposite.

Tuesday, August 16, 2011


On June 26, 2006, Warren Buffett, the man who wants to be the protector of society, wrote in a letter to the Board of Directors of one of the Buffett Foundations, "THE ONLY CONDITION TO THIS COMMITMENT IS THAT THE FOUNDATION MUST CONTINUE TO SATISFY LEGAL REQUIREMENTS AND QUALIFYING MY GIFT AS CHARITABLE AND NOT SUBJECT TO GIFT OR OTHER TAXES".

So here you have it ladies and gentlemen. Avoidance of taxes through legal means which would be fine if he wasn't acting as a hypocrital man in my opinion.


Whether some people like it or not, the Keynesian economic model is a pretty realistic view of how things work or should work.

Monetary policy, no matter how easy, and fiscal stimulus have a hard time igniting sustained recovery without confidence on the part of our people.

With Obama constantly raising the tomahawk of class warfare and evil corporations, (even telling people not to go to Las Vegas), and the Tea Party advocating a totally wrong economic model that won't lead to recovery, its no wonder confidence hasn't returned. Until both sides can see the factual difference of their dialogue, the two necessary ingredients for recovery; low interest rates and confidence, won't come together. So we muddle as the politicians vie for power above all else.

Monday, August 15, 2011


I agree with you Mr. Buffett. We should stop coddling the Super Rich. I propose there be a 99% asset tax on those with assets over $1 billion dollars. Let's start with you. Contribute your money to the government NOW!


The fake genius of Paul Krugman...Read most of what he says and you'll see alot of complex words, but he really is just a troublemaker in the ilk of Saul Alinsky, disguised as an intellectual. He may like hiding behind his beard, but he is just an angry man who gives teaching talent to the elite, instead of working more in the middle range schools where the students are generally much poorer.

The second paragraph of his piece in the New York Times is telling everyone who reads it we should all feel "anger" because the "influential people", which I guess he is not, are the culprits responsible for our economic crisis. Who are these influential people...I say just typical Krugman propaganda.

Stand up people, feel your "anger", sounds like the first step before advocating riots in the streets. With all the violence in the world today, why would you want to incite such "anger" in people?

You be angry, Mr. Krugman, but you probably would be better off proving the real value of your economic thoughts first. Cut the crap!

In the last paragraph Krugman's writings of August 15th in the New York Times titled the "The Texas Unmiracle", he states "when Mr. Perry presents himself as the candidate who knows how to create jobs, don't believe him".

You may not like to pray, Mr. Krugman, that's your business but why in the world should people believe you. Get it straight. You are just a Professor, of which there are many, not the "Messiah", who tells people who to believe in or not.

Monday, July 11, 2011


In the 1930's President Franklin Roosevelt's administration created the Social Security program. There was strong political opposition based on the argument that this program would create a socialist state,reduce people's incentive to work and to save, and thereby reduce economic activity. In order to get the Social Security Administration bill passed, Roosevelt agreed the bill would be self funded. We all know we pay from our earned income a tax towards our future social security receipts.

The Medicare and Human Services expenditures by the Government are mainly funded by charges deducted from our weekly wages.

Only a hand full of the other government budgetary expenses account for the remaining government outlays.

A significant portion of this category is defense outlays. Historically the right wing of the Republican has been pro-defense expenditures.

The fact of the matter is there have only been three years, in recent history, that have accounted for the acceleration and the rate of growth of the debt level.

We have covered this analysis before. We have tried to explain that there is absolutely no way out of this without a significant increase in personal income. That requires a very positive capital formation environment. I don't mean to be trite, but the argument about corporate jets is about as trivial as it comes since every one of them is made by Union workers and using the political bogeyman is again an attack on our own people. For politicians like President Obama, being elected seems to come first.

Let's see the government publish how many planes it uses in its non-defense fleet. You mean government can use small jets but business owners can't. As long as political manipulation outweighs honest analysis, jobs will come slowly, the country will continue to retrogress and the world wide competitive environment will slowly but surely overtake us.

Thursday, July 7, 2011

In a world full of so many social needs, I find it beyond explanation that the media has rallied behind our "First Lady" and her entourages trip to Africa.

Imagine, we have a First Lady...what in the world would make Michelle Obama a First Lady except marrying Barak. She's no First Lady, she's just Michelle Obama. I mean its almost hysterical, the "First Lady Arrives In Africa".

I was talking to a brilliant, poor, educated Ugandan. She was explaining to me that what her people needed was erasers. I said erasers, yes she said, erasers. She explained that if we get an eraser, then we have to get a pencil. She said that right now in her town in a school she recently visited, there is one eraser in the whole classroom.

You see erasers lead to pencils, pencils lead to paper, paper leads to books, books lead to teachers, and teachers lead to schools.

We are spending how much money announcing the arrival of our First Lady to meet Nelson Mandela, when what the people need is real caring rather than political hubris.

You are not going to get rid of AIDS until you face up to the promiscuous sex and the religious base which supports population growth that can't be afforded. Our First Lady arrived in Africa, not with truth, just ceremony.

By the way, I really like Michelle Obama, they don't come much better than her.

ADDENDUM: There are over 2 million people suffering from AIDS in Africa. That is almost 20% of the population. There are over 2 million children who have lost their parents to AIDS in Africa. These facts may clarify this blog.

Saturday, May 28, 2011


For many years after the continuous attack on my credibility from some of my former senior executives at Alliance Bernstein (formerly S.C. Bernstein & Co.), I made very serious efforts to maintain a personal relationship with some of them. It was kind of like a "forgive and forget" and move on with life.

Finally the obnoxious comments of Roger Hertog at a dinner with our wives was the last straw in forgiving and forgetting. If it wasn't for Roger's inflammatory comments about my personality, the blogs that I have written probably would have never been done.

Ethics is a strange thing. It can be used to cover up subtle unethical behaviors, and when truth be told, it's characteristic to cry "How could you do that to me?"

I wasn't just an employee at S.C. Bernstein, it was my company and a significant loophole in the corporate papers, was turned against me by two greedy associates.

As fate would have it, I received a call from Sanford Bernstein's brother, Paul Bernstein. He informed me of how he was writing a book about his life with his brother and will be coming down to Florida to interview me. He assured me of his integrity and positive intentions. (He has never shown up or called again.)

When he called he reminded me of a totally true story, that many of you will think is inappropriate to publish. It is a small truth about a wicked man, who in his later years seemed to hide behind religious activities to cover up his abuses of other human beings, many of which I was personal witness to. Whereas Roger Hertog and Lew Sanders, appeared to stand in the background, seemingly afraid to raise their voices.

When Paul phoned he recalled his humiliation when his brother, who was then CEO of the company, took out his private parts, and p----d upon his desk in front of other employees.

Paul's story reminded me of a time when this same Bernstein, at a corporate party, took out his private parts in front of woman for reasons that you can analyze on your own. Several partners of the firm thought this was funny and that it was just Bernstein. Please note in the Bernstein eulogies by Hertog and Sanders,(earlier blog) the comments about his continual use of vulgarity and sexual innuendo. This was the real Bernstein, this is a small part of what I dealt with as President of the company, all else is tragic.

I certify this to be true.

Friday, May 13, 2011


When I was elected President of Sanford Bernstein and Company, after the disastrous management of the accounts under Bernstein's leadership, I had to start from scratch. There was no understanding of the firm or its product by the salesforce. There were no systematic rules of investing. You might say that speculation was the rule of the day and diversification standards hardly existed. The following is part one of a speech that I made to our employees in an attempt to step forth into a professional investment methodology. There are five parts to this speech.

The first step in the development of most industrial companies is the definition of that which it is going to do – a simple step, perhaps, but one which the securities industry has rarely taken. Think about this: We cannot control the price of what we sell; we cannot determine its distribution, nor for the most part can we even be free from a competitor offering, not only a similar product, but the exact thing that we are selling. Yet, for years the brokerage industry has prospered without a discernible product, which has insatiable advantages to the people who purchase it. Our key is our ability to position assets to meet a detailed, refined set of agreed-to objectives to a list of customers.

Wall Street has primarily been merchandising business. In the 1920’s (prior to the crash), a book was written titled, “Where are the Customer Yachts”. That title had implications then and meaning up to 1974. Very few investment concerns can point proudly to the product which delivered the customers a yacht; at the extreme, but very few can even point proudly as to how they achieved the goals of the investors who have come to Wall Street with need. As a matter of fact, very few investment mediums can point to any long-term success as it relates to the individual investor as a group. Most mediums for investments do not even attempt nor have they bothered to publish their record. One of the subjects that has come up is what is the product of Sanford C. Bernstein & Co.? Over the last 18 months or so, I have asked many of you individually what you thought the product of Bernstein was. Some of the time it was because I was trying to find out if you knew what it was, but most of the time I was trying to get as much information as I could in order to see the development of the product too place along the lines that would be professional and beneficial to every one of us.

I have been in Wall Street since 1955, since 1960 full time. The world will not allow us to look back; there will be other people developing improved money managing products; the format that we basically have here, as hard as it is to believe, the discretionary format, is still unique. The original idea which we will discuss in a short while is exceptional in its concept because of a number of reasons. But just to give you one, which might concern each of your livelihoods, even with the failures that we have had, the basic format is not only potentially unique in its framework of profitability so that if we can combine the necessary talent and have the necessary discipline, we have a framework that can make us proud. The basic framework is unique in its ability to be able to manage thousands of clients for their individual needs. Very few firms have been able to put together that capability, and generally the number of accounts and the types of accounts that can be managed are very few. Now we have another business: we have institutional business. The institutional business as you all have read – and I would like to suggest that each of you re-read for understanding and so that your total participation and feeling towards the firm maintains a very high level, the Policy and Procedure Manual, which in itself took a great deal of work – seems like very little. But just the putting together of it was an extremely hard task. You should all read it and understand it and feel that you are a part of this and that it is basically the business that we are in. We are additionally in the institutional business; for all its merits, for all its time and potential, it is a separate business from the management of individual accounts, and I repeat this meeting is to discuss the product as it relates to the management of individual accounts.

Wednesday, May 11, 2011

COMING SOON - ATALANTA SOSNOFF STORY (In order to clearly read the articles simply double click to expand)

Before we begin to write the story about my time with Atalanta Sosnoff we decided to publish a few old articles from the Wall Street Journal. (In order to clearly read the articles simply double click to expand.)

Tuesday, May 10, 2011


There is a substantial art business in New York. Art prices have appreciated, but very few people point to their record of what they have sold in total in the art business as to its appreciation. They point to their successes, but they do not quite say they have sold 200 Picassos over the last 50 years because they were smart to discern that it was merchandise for them to be selling. In this room, except for one old man on my left and two medium aged men on my right, I do not think we have anybody who has reached the ripe age of 40. So that in fact we have a very young average age. We are in the investment business to provide account management appropriate to the needs, the different needs, the various needs, and the changing needs of primarily individual investors and pensions. We admit that we have had some failure, but I view these as I view the potential of this group, more or less, as an opportunity to create in this firm the discipline, the courageous, organized, coherent, repetitious, explainable, inheritable approach to the management of the funds that people have entrusted to our firm. We may not, probably will not and should not, aim to point to our ability to deliver the customer’s yacht. Nevertheless, we can deliver to the customers what they are entitled to, what is explained to them and what is developed for their best benefit.

The New York Stock Exchange not too long ago said that there were 30 million individual investors. That same figure in 1948 was 4.7 million. Those individual investors (it is fascinating what I am going to say now) invested their money primarily not totally up until 1956 and 1957 as individuals, and that is when the mutual bond business really started to grow. These individual investors, how did they invest their money? There were a few unique individuals who studied the markets and invested in it, but most of these people did it as an ancillary activity primarily employed in some other capacity rather than investing. The stock market was merchandised and promoted. It was promoted by the New York Stock Exchange; it was promoted by Merrill Lynch; it was promoted by what was then the great firm of Francis T. DuPont and Co. It was promoted by the Reynolds, the Shearson and Hammills and the Shields and the Paine Webbers and the Hayden Stones. There are literally 5 or 100 relatively major brokerage firms that employed thousands, and we will leave it at that: individual stock brokers who were told to go out and recommend securities to various types of individuals. That started after the war. To this day, except for one study that was done by the Brookings Institute, there is no way that anyone can really trace how these individuals investors performed – how they invested, why they invested, the techniques they used, the success or failures that they had. It is not available anywhere. It is an interesting question; why is it not available anywhere because no organization among the ones mentioned would be proud of the record of success that they had in regard to their record of investments as it related to their individual recommendations. As a matter of fact, there were some studies done by the accumulation of research reports, and I am sure that if we had been in business in those days, at the same time our record would not have been different, but that is where the opportunity of this young group lies, including myself. There were not records because there was limited success and because the individual investor was not given the opportunity, for whatever reason, and it is complicated. It relates also to the fact that the levels of competence among the brokers was low, that the levels of compensation that Wall Street was able to earn on its commissions were extraordinary, and it became a business of potential greed and avarice, with no records, and it was management by levels of profitability as it relates to the firms and differentiated from levels of profitability as it relates to the client. So in the 50’s someone decided (IDS was there early) that the individual investor could not by and large achieve successful investment results on their own. Therefore, a completely managed, highly diversified portfolio in which he could be told that was owning a piece of America and could get the “Professional Management” and that they could not have on their own. It was out of that that the mutual fund industry developed.

Thursday, April 28, 2011


This blog is dedicated to my daughter.

It's been said that the Harvard Business School teaches you a lot of things, but not how to read people. The following vignette concerns a particular part of my history, which I hope by sharing, will help young people as they negotiate their way through life.

It all started back in 1960. I was laying in a muddy trench on the machine gun range, luckily in Fort Dix, New Jersey. The mud was six inches deep. I did not expect a jeep to ride up and down the firing line yelling out my name.

When they finally found me I was told to report to the Captain's office, relieved of my firing, and was given a jeep ride to the barracks. Reporting to the Captain I was handed a telegram. I opened it and it said I should call a number at EF Hutton and Company and ask for Gerald M. Loeb, the senior partner of Hutton. I called and he said he wanted to see me about a potential job offer as I had exceled at my finance studies at CCNY.

A month or so later I was interviewed in the marble clad offices of Hutton's executive towers, in total awe of the presence of a Wall Street Legend, Gerald Loeb the writer of the Wall Street epic, "The Battle for Investment Survival".

A few months later, after being released from the service, I went to work as Assistant to Gerald Loeb. What I did is not worth commenting on since it wasn't much, but in essence, in the days before computers, I posted all the customer trades to a ledger book. Loeb would carry this book with him at all times. I posted thousands and thousands and thousands of trades.

After a while I began to notice, that in many cases, the customers would make 1/2 a point or a point, we would get over a point commission, and invariably the stocks would go up substantially higher after we sold them. Being naive, I thought it was my duty to point out to Mr. Loeb, that if we kept these stocks the customers would make alot more money.

I was told that I didn't understand the brokerage business, that it was our job to make commission income and as long as the customers made profits, all was well and good. I should go back to work and keep posting. When I tried to explain to my boss that we would have a lot more money to generate commissions if the customers made more money, I was given more or less a warning to mind my business.

A month later, we had a parting of the ways. You might say I was fired, I would say I quit. I had no negotiating leverage, either when I took the job or when I left it. I never should have taken the job, I didnt even think that I had any right or power to look into the character and personality of the person who was going to employ me.

Even at the beginning of your career you must start to develop strong negotiating skills no matter whom you are negotiating with. Never give up on your thoughts and ideas, no matter who you are up against. My concept of holding investments in order to make the clients a bigger profit, vs. their desire to make commissions for the firm the priority, eventually succeeded in my upcoming business ventures.

Wednesday, April 13, 2011


There has been a lot of focus on taxing Internet sales that in certain cases are not taxed today but are taxed if the same products are purchased in a brick and mortar store.

One thing for sure, the Internet is potentially the "ultimate weapon" against the oil cartel. The potential for reducing miles driven without reducing economic activity lies therein.

Monday, April 4, 2011


When a company named S & P is responsible for rating government debt, the crazies are loose. What an inept company - throw out their junk.

Monday, March 28, 2011


I just received the latest issue of Commentary magazine. On page 1 they had photos of the Commentary second annual roast honoring Roger Hertog.

Congratulations Roger. My invitation must have been lost in the mail. Don't worry though, I have prepared a few words to honor you on your achievements.

A December 12, 2003 Washington post article titled “Alliance Struggles to Settle With Regulators” was summarized on the Motley Fool’s website as follows:


I still find it absolutely amazing your involvement in this alleged super fraud being in the Vice Chairman position at the time.

The $600 million settlement entered into by Alliance, potentially to avoid any criminal or civil complaints against the company executives, was one of the largest settlements ever.

Did anyone bring this up at the Roast?

Monday, March 14, 2011


Hear Yea! Hear Yea! Coming forth the Atalanta Sosnoff Story.

A tale of hubris, greed, mistaken priorities and the near destruction of a good firm.

Stay tuned for the intriguing true story...

Friday, March 11, 2011


If you input a search for "Lewis Sanders Capital investment performance record" the first website Google refers to is a blog that I wrote about my version of the early years of my business experience.

I wish I could report otherwise but when I looked at the Vanguard Windsor Fund's performance record for 2010, it was ranked in the 87th percentile. According to public documents, Sander's firm, where he is CEO and Chief Investment Officer, began managing money for the Windsor fund in January 2010. (Historically the Windsor Fund seems to have ranked in the top half of money managers prior to the year in which Sanders joined its roster of managers.)

It would be interesting to see the individual performance of Mr. Sander's firm for the past year considering the lackluster performance by the Windsor Fund for 2010.

Needless to say, I am still having trouble with where Sander's "Legendary Investor" status emanates from.

Friday, March 4, 2011


Obviously the significant change in the price of oil affects all sorts of economic variables. Adjustment to meaningful price changes requires all sorts of variable economic changes. But our economy makes them and we go on.

Unfortunately the real issue is not so much the price changes. Imagine sitting down to negotiate with an opposing force that has all the power, whether it be military, contractual or any other form of overwhelming power, versus the party they are negotiating with.

Because of our inability to make significant adjustments to our oil usage we cannot negotiate with the oil suppliers from a position of equality, let alone a position of strength.

We cannot continue to delude ourself into thinking that they need to sell their oil more than we need to buy it. But imagine if the likes of Chavez, Kadhafi, Iraq, Iran or Russia decided to curtail shipments to us (somehow), there would be no Nash Equilibrium or literally any possible response short of catastrophe.

It is absolutely urgent that a great nation not stay in the position of ultra-vulnerability to the fluke of nature that placed oil in very unequal distribution around the world.

It's kind of like smoking, it will get you often enough to force most intelligent people to stop.

The situation with oil can't keep up whether the price is $75 or $175, the underlying weakening of our independence is overriding.

Friday, February 25, 2011


Back in the day brokerage firms were owned by partners. If the firm lost money, the partners were personally liable. Commission charges to buy and sell stocks and bonds were extremely high but no one forced anyone to buy and sell stocks and pay those fees. When I was originally a broker at E.F. Hutton and Company and I wanted to get a quote on a stock, I walked up to the front of the room, stood in a long line, picked up the phone and was able to request one quote and only one. I then had to find my way back to the desk through the throngs of other brokers, I would give my customer the quote which really wasn't current anymore, I would write out the order on what was called a trade ticket, I would put it in a vacuum tube, it would travel a long distance and about an hour later I would know if we bought the stock or not. Times have changed.

Somewheres along the line the powers that be decided that fixed and high commission rates were not the way to grow a hearty participation in American Capitalism among the people. Rates were then lowered, then lowered, then lowered, and then lowered. It also came to pass that "money management for a fee" began its monumental growth. We now can trade billions of shares a day explained by the cult of the necessity for a liquid market. The liquidity is well out of balance with the actual need and has turned stocks into the semblance of a gambling casino with all the rules and regulations of such activity very much in place within our markets. Research is superficial and shoddy at best, but thinking, fortunately, keeps evolving through higher and higher levels.

About the same time,Donaldson, Lufkin and Jenrette found a way to pierce the wall of the New York Stock Exchange prohibition requiring all member firms to be private. The cry became "the road to growth requires public capital and we as partners can no longer foresee having enough capital to sustain significant growth". The members of the exchange tried to maintain their historical rules of private companies but the opportunity for making the existing partners wealthy men controlled the outcome. So the door was opened and privately owned firms were able to create great wealth for their owners by selling shares in their privately owned companies. There is no question that I personally benefited from this "time in history". The combination of much lower commissions and the loss of the future money management asset growth, made the traditional brokerage business a heck of lot less profitable, even with the ancillary interest income.

In order to understand where I'm going with this you will have to allow me to tell you a quick story. My wife Sally and I, during the Internet bubble, were invited to attend a presentation by one of the best asset management firms in the world. This firm had scrupulously avoided investing their clients money in the overpriced dot.com companies. Unfortunately, it's performance had lagged its peers that had invested in those companies and the firm lost thirty percent of its assets under management, solely because they were thought to be an old dowdy company. At the meeting we attended, we were immediately introduced to the new Internet guru of this wonderful asset management firm. We were told he had appreciated money at an annual rate of 500% in the last year and now was the time for all the money that had left their firm to return and they would do all they could to compete with their new investment guru. Only a few "special clients", like us, would be "invited" into this "fantastic investment opportunity". In other words, at the very peak, the rate of asset loss to this money management firm and the enormous emotional pressure they felt was so great, they could not stop themselves from attempting to participate in the craziness. The Internet boom went bust a few months after this presentation, the young money manager was fired, all the money was lost, over $200 million dollars, and quite successfully, this money management firm continues to deliver a steady investment product.

Now we return to the public nature of brokerage firms and banks. As I have said in prior blogs, the recent financial crisis was all started by the government when it decided that housing had to be made more easily available to more and more people. My parents bought their first house for $4,000, then they bought a second house for $11,000, several years later it sold for $42,000 and no one at that time, many years ago, foresaw housing prices going up and up and up. There was absolutely no clear cut series of reasons to forecast that one should not liquidate their home because the prices would keep going up and up and up, even though homes were the ultimate symbol of success and the savings and capital base of most of our people.

Presidents Reagan, Eisenhower, Clinton, Bush, Nixon, Carter, let alone President Roosevelt, used the rhetoric of home ownership as a lever to attract votes. To try to explain what happened when the housing prices broke is as impossible as trying to determine what the true value is of almost anything.

Just to make this even a little clearer, if a bank received depository inflows from a poorer area and did not lend that money out to the people that wanted home loans in those areas it was called redlining or discrimination, it wasn't called determining if the potential homeowner was likely to pay the loan or not. It didn't matter to the mortgage lenders at that time because the new theory was the prices of the homes would go up anyhow, they always had. So wherever you went to get a mortgage loan, it had to be given to you at terms that were better than the terms up the block, because if my bank didn't give you the loan, then another would. Guess what would happen if I didn't give you the loan? The earnings of my bank, or institution or brokerage firm would slow down relative to my competitors, the shares of my company would not rise as much as my competitors and I would be criticized for not participating in what was obviously going to "go up forever". In other words, I had to get into the Internet boom or I would lose my assets under management and go out of business, and I had to give bank loans to virtually anyone or my shares would go down and I'd lose my job, since after all if the country allowed this, who was I (CEO of any Bank) to stand alone against the crowd. In so many respects corporate and investment decisions are nourished by a short term mentality.

I remember an investment manager yelling a the CEO of Fannie Mae, "you idiot, make more loans, I own your shares, you work for me".

This is what really happened, all else is sand on the beach.

Sorry for the length of this. Have a great weekend.

Wednesday, February 23, 2011


A quote from a very high ranking European Union politician: "How can we use our warships to stop the Somali pirates...Frankly we have to be concerned about their human rights."

Holy Moly.....

Tuesday, February 22, 2011


As the protection of minorities from the majority was central to Madison's Republican formation of our constitutional government; it shall be asked "Is a majority strictly to be measured by counting people or can a majority of power, in any format, be the equivalent of kingship?"
Obviously, ascending to power by the control of force or threat, short of or including armed conflict, is a form of power without votes.

It is very difficult to measure the inherent size of a mob protest, as most people won't come into the streets for fear of their person.

In America , the interactions of our society among and between and within groups, allows for the minimization of enduring conflict among persons. But Madison in the Federalist Papers, ascribed to humankind an innate propensity for conflict and aggression within almost any type of politically based organizations. Consequently, to know when accumulated duress will lead from active protests to an escalated road of violent protest, is always seen after the fact.

Such is the dilemma between any interest group and those not within its sphere of opinions.
As way of example, how can we ascribe, or even begin to understand, the hugeness of the mistake that would have been made by Israel if it would have allowed itself to be manipulated into appeasing neighboring countries, who are now being seen not to have had a propensity for binding agreements at any point.

There was a time when unions were an absolute necessity. But as we have said in earlier blogs, unionized industries have played a significant part in the weakening of our industrial base. It might have been better, from their own prospective, if they could have accepted an adjustment to their total compensation programs years ago so as the union movement would not have plunged into such a loss of membership in our industrial companies.

The challenge is clear, the long term answers may be simpler than many think. Stay tuned...

Monday, February 14, 2011


An interesting event occurred. The announced merger between the German exchange company, Deutsche Borse and the New York Stock Exchange. Rightly so, there will be people who feel that merging a major symbol of the American economy with a foreign entity should not happen.

There is a another side to the equation, the implied innuendo that if you attack New York, you also attack Germany. Positive internationalism in defiant terms.

Friday, February 4, 2011


President Roosevelt was arguably one of the top two or three Presidents in our country's history. I try to make a point in this blog, that's all.

When President Roosevelt proclaimed his consumer bill of rights he mentioned seven primary entitlements for the American people. The entitlements included the right to a useful job, the right to earn enough to provide basics including recreation, the right of the farmer to a decent living, the right to not have unfair competition, the right to a decent home, the right to medical care and health, and the right for economic assistance in old age.

Nowhere did he proclaim how these entitlements were to be paid for. He never said you have to earn it, he never said that people would get these things at different times, he never said certain people would not get them at all, he just said we were entitled. Possibly during the dark days of the depression, President Roosevelt's proclamations were necessary, but today is today.

Why may this be important? I lived most of my life in New York City. I traveled from the Bronx to City College and spent ten years in Harlem at the Fifth Avenue National Guard. I witnessed that the standard of living, in the most liberal city in the United States, didn't seem to rise significantly for most, for some time. I know there are some people that live a sheltered life in Manhattan proclaiming the merits of the intellectual capital and cultural base . They are mostly living behind security alarms, doormen, and have a huge police force to separate them from the reality that the standard of living in the city has gone nowhere for most people.

It's now seventy year later. We have to accept that we may be entitled to everything, but the world hasn't created a system that provides all these things to everyone in equal proportion and at the same time. That leaves us with only one thing to reflect on. How do we improve the standard of living?

The inflation adjusted per capita standard of living hasn't increased for nearly two decades, despite the huge technology and housing booms, a huge entitlements boom, and the lowest interest rates practically ever. Simply stated; we are in an economic mess. Sure we are in recovery from a severe recession. Economic cycles are nothing new.

The entitlement society, I believe, is just another form of semi-false security if stripped to its roots. The entitlement list will grow; we will all be entitled to a cell phone, a refrigerator, an air conditioner, luxury food, blood pressure machines, air conditioned cars, the best mattresses, lights everywhere, computers and on and on the list goes.

The entitlement mentality knows no end. Those who use its rhetoric are usually elected for a short time as voters love to feel they are going to get more and more seemingly for free. Well it just won't work. It can't work and will ultimately contribute to another severe recession and less security as the number of people doing the paying for the entitlements, can't keep up with the demand. Think about it.

The people who finally put together our constitution understood varying views. The impact of the Internet and the speed with which information travels may take the constitutional ball game outside the box.

Thursday, January 20, 2011


In our blog dated January 11, 2011 we wrote about the unionization of public workers. I asked you to consider the question "Are unions likely to destroy the government?".

On the Bloomberg website today the following article was written "Public-Worker Unions Battle U.S. Governors Over Benefits in Change of Role". This article seems to support the questions I was asking. I thought you might find it of interest. The link to the story is:http://www.bloomberg.com/news/2011-01-20/public-worker-unions-battle-governors-on-benefits-in-role-shift.html

Tuesday, January 11, 2011


On August 27, 2010, we said in a blog that "Almost every significant unionized industry in America has failed. Now the largest unionized segment in America is government."

In the January 8, 2011 issue of the Economist magazine the lead story is titled "The battle ahead - Confronting the public-sector unions."

If you accept the thesis that I'm even partially correct about the negative effect of unions and their inflexible total compensation costs being responsible for destroying the competitive condition of significant industries, you will be well advised to ask "Are unions likely to destroy the government?"

Isn't it only a matter of time before some union representing the fire department, police department or the post office, goes on strike? Obviously it will happen. It's tough to change people. Note carefully the behavior of certain union members during the recent New York City snowfall.

Friday, January 7, 2011


We have been asked to say more about the investment rules we published on December 6th. Let's start with "KNOW YOUR RISK LEVEL."

If you define risk as what the overall market is going to do, you will never get it right over a period of years. No matter what you do most portfolios will be plus or minus 3% from the average over almost all periods.

The return of the market is what the average portfolio made or lost in the time period you are referring to. The only way to beat the market is to concentrate your investments or use leverage. If you significantly overweight any sector, industry or company you are concentrating your investments. If you pick the best performing sector and put all your money in it you will undoubtedly outperform the market. If it does worse, you will do worse. Let's say you picked the natural resource sector, "energy sector" and you picked the best performing stock and put all your money into it, you will do great. But if energy does well and you pick the wrong stock, even sector strength won't help you out.

If you pick a strong sector and the best stock and add leverage you will win big. Obviously the reverse is also true. This is one of the reason most professional money managers run diversified portfolios. Their objective is not to make you rich, at best it's to keep you from getting poor. You can add you own thoughts to the rest of this.


Shepard Osherow. All Rights Reserved