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Changing the Rules

Adventures of a Wall Street Maverick
By Muriel Siebert, Aimee Lee Ball

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Chapter One

STREET PEOPLE

Know a lot about a little.


When I left Cleveland with five hundred dollars and a used Studebaker just before Thanksgiving 1954, I had been away from home and family only once. Travel was too extravagant and expensive in my childhood, except for the occasional overcrowded, overheated motor trip to Florida. But that one trip the previous summer was a vacation in New York City with two girlfriends.

Our teenaged excursion with a busload of other gawking tourists included the New York Stock Exchange, where a guide explained how the market was made: Trading was conducted at oak-and-brass posts called horseshoes, connected by pneumatic tubes to the stock ticker. Outside the posts stood specialists, who were expected to maintain an orderly market by buying and selling particular securities for their own accounts and by acting as agents in specific stocks. Members of the Exchange negotiated with these middlemen and with one another. If, for instance, the highest price anyone was willing to bid for "ABC Widget" was $65 and the lowest price anyone was offering for selling the stock was $66, the specialist might bid $651?2 to narrow the spread between supply and demand, entering his buy and sell orders in a loose-leaf notebook.

Fines were imposed on the clerks who wrote the orders and took them to the brokers if they ran rather than walked across the imposing room, two-thirds the size of a football field, with rich Georgian marble and a five-story-high ceiling decorated in genuine gold leaf. When a broker was summoned (in this antediluvian time before beepers and pagers), a metal card with the number assigned to him would slide out and flap on a giant black annunciator board -- as if for a customer awaiting éclairs at a crowded bakery -- over the Juliet balcony where opening and closing bells were rung.

What I saw as I looked down from the visitors' gallery was a sea of men in dark suits, punctuated by the occasional pastel jacket of a runner or clerk. The wooden floor itself was literally covered with paper slips, the detritus of deal making, to be swept up at the end of the day. What I heard was the clamorous human buzz of those thousands of deals, none of it muffled by the bullet-proof glass that now protects the inhabitants of this microcosm from the public. (The glass went up after a 1967 Yippie protest led by Abbie Hoffman, who rained dollar bills down on the traders' heads.)

Only a few flimsy stadium-style seats that flipped up when not in use lined the walls of rather ramshackle wooden cubicles around the circumference of the room. But nobody was sitting down. Quite the contrary -- the very act of standing in place seemed to constitute an isometric exercise, so inclined to motion did everyone seem. I didn't understand any of the arcane two- or three-letter symbols for the companies scrolling by on the "black box" ticker, but I realized that every one of them represented a transaction taking place -- perhaps a hundred shares, perhaps a million.

I never had a strategy, no long-term game plan. But after absorbing all that fierce energy, I turned to my friends and said, "Now, this is exciting. Maybe I'll come back here and look for a job." At that time, tourists were given a piece of ticker tape printed with their name as a souvenir. I still have the few inches of worn and faded tape that said, "Welcome to the NYSE, Muriel Siebert."

Turns out I wasn't so welcome after all.

There really was a wall at Wall Street, although it was actually more of a wooden stockade -- built by the Dutch when New York was Nieuw Amsterdam -- to keep the villagers' goats and hogs from straying into the surrounding countryside, and to protect their trading post from the pushy British, who managed to take over anyway. The Street became synonymous with finance in 1792, when the New York Stock Exchange was established according to a set of rules known as the Buttonwood Agreement, named for a tree on lower Wall Street where business was often conducted. Twenty-four prominent brokers and merchants, in powdered wigs and waistcoats, agreed to trade public stock -- bidding on only one at a time -- and to bet on foreign battles, elections and cockfights, thus creating the world's most exclusive boys' club.

There was no actual wall to scale 175 years later, when I made the Stock Exchange coed. Although I purchased a "seat" on December 28, 1967, there was no place to sit down, either. The symbolic description is a throwback to the days when brokers sat at tables on the trading floor. I'd been told that there might be media coverage to witness the swearing in of the first woman on the New York Stock Exchange, and I considered having my hair done and makeup professionally applied, but the NYSE elected not to allow TV cameras or reporters into the boardroom where it took place. Friends and family are not invited -- the occasion is more pro forma than inaugural or even ceremonial -- and the Board of Governors had decided to treat me like anyone else being sworn in, which was fine by me.

The moment my hands really shook was when I signed the register. There's a lot of history in that book. It's huge -- about nine inches thick, with the entire constitution of the Stock Exchange written in longhand and the signatures of everyone who's ever been a member. I saw names from the Civil War, when the country was saddled with several billion dollars of debt and Wall Street was the place to trade it. The volume literally overflowed to the street -- the origin of the Curb Exchange, which later evolved into the American Stock Exchange. I saw names from the outbreak of World War I and the ensuing economic panic, when the NYSE actually had to close in August 1914. It reopened six months later, only after Europeans started sending gold to this country for safekeeping. Our country's na-scent promises of free enterprise and prosperity to more than a century and a half of immigrants were written in the white spaces between the names.

The only tangible memento of that memorable day was an oval white metallic badge, approximately the size of a political button, with my name printed in black and the number 2646 in red. I received it about six months later. There was a clip on the back meant to fit the breast pocket of a man's suit. I spoke to a jeweler about converting it, but I was furious at the price named for such an adjustment and ended up fastening it with a safety pin. I guess he felt entitled to charge me $11.50 when told that the badge had cost me $445,000. It was by far the most expensive piece of jewelry I owned or would ever own, and I wondered what it would look like on a formal gown.

Not long after my bid card was accepted, a note arrived from an elderly gentleman who remembered a Broadway musical more than fifty years earlier called The Wall Street Girl. A popular actress of the day named Blanche Ring starred as a "brokeress" whose investment in a Nevada mining company saves her father from financial embarrassment. Will Rogers played the rope-twirling Lariat Bill, and Ms. Ring sang a song called "I Should Have Been a Boy." A review of the play noted: "She puts through some vastly successful financial deals, the like of which, if they were actual, would make real Wall Street quiver with excitement."

The Wall Street Girl opened at Geo. M. Cohan's Theatre on April 15, 1912 -- the same day that a new steel ship weighing nearly fifty thousand tons called the Titanic sank in the icy waters of the northern Atlantic. I hoped it was not a bad omen.

My older sister was already living in New York, divorced and working in public relations, when I arrived in 1954, several credits shy of a degree from Flora Stone Mather College, the women's division of Case Western Reserve, where my father had gone to dental school. Women were expected to study teaching or nursing, but I decided to take a course in money and banking at the men's college -- I was the only woman, and the teacher would call on me as "the delegate from Mather." But in the early 1950s, my father became ill with what was generally referred to, obliquely and in hushed voices, as "the big C." His brother, a doctor who held the lease on my father's office, had him evicted, installing as tenant his own son, a dentist who assumed my father's practice (my first experience with a hostile takeover). This was the same "Uncle Doc" who billed his mother for medical counsel when he visited her in the nursing home and was off getting an honor from his Masonic lodge when my dying father was calling for him.

The dying was happening during my junior year at college, and my only respite was playing bridge, a pastime that became so all-consuming that I didn't bother to graduate (although I got master points in bridge). At the funeral, Uncle Doc's sisters (Aunt Rena, Aunt Flo and Aunt Shirley) refused to speak with their brother. My father's $5,000 insurance policy paid for the burial expense, but several years of medical bills had eaten up his savings. There was no other estate.

And there were few job prospects for me when I arrived in New York. I applied at the United Nations, where my cousin Alvin Roseman was one of the U.S. representatives, and at Merrill Lynch, which I remembered from my visit as the biggest brokerage on the Exchange. Both prospective employers turned me down -- the United Nations because I didn't speak two languages and Merrill Lynch because I didn't have a college degree. On my next interview, at Bache & Co., I lied about my degree and was offered two positions: The accounting department paid $75 a week; the research department paid only $65, but it sounded more interesting.

As a trainee first assigned to the wire desk, my responsibility was taking telexes to the senior analysts from Bache brokers in out-of-town branches who had questions on behalf of individual clients or institutions -- pension funds, mutual funds, bank trust funds, college endowments and foundations -- wanting to know: What do you think of General Electric? Should we buy or sell General Motors?

The institutional investor was a relatively new breed on Wall Street. Some were limited to a legal list of government securities and corporate bonds; others had more leeway to buy common stocks but were restricted to quality lists. (The blue chips then were companies such as U.S. Steel and Standard Oil.) Certainly no institutions were investing in the small technology stocks of the day. Until the 1950s, many financial bodies, traditionally guided by prudence, considered the stock market too wily and mercurial. Recognition of the usefulness of potentially higher-return assets happily coincided with my own arrival on the Street.

I was really a glorified gofer, but you create opportunities by performing, not complaining. I paid attention and picked up on why the experts liked a particular company or industry. Analyzing the market is both an art and a science. The financial data that indicate how a company fits into the economy make up the science part; seeing a pattern in those numbers and then looking ahead is an art. From the beginning, the recondite world of figures seemed like second nature to me. At college, I didn't have to do any homework in my accounting courses and still could ace the exams because I could look at a page of numbers, and they would light up like a Broadway marquee.

After six weeks at Bache, I was given a raise of five dollars a week, which meant an extra twenty cents a day for lunch and a new apartment in the former maids' quarters of a Park Avenue building, reached by the freight elevator. (My sister got the one small bedroom; I slept on a couch in the living room from a furniture store called Foamland.) Trainees were required to use opinions generated by the company elders, who all had special bailiwicks of responsibility. Any time the market got tough, research looked like an expendable commodity, and when an analyst left a brokerage, he was not replaced -- his industries were reassigned to someone else in the office. When business improved, the senior people were allowed to lighten their load by dumping what was considered a "doggy industry" on one of the trainees.

Sometimes the one who gets dumped on gets the goods. Werner Baer, the man in charge of chemicals and drugs, had been given radio, TV and motion pictures, but he wasn't interested in those businesses, so I inherited them. A distinguished veteran analyst named Henry Van Ells had responsibility for transportation -- everything that moved on land or sea or air -- but his heart was really with the railroads. He knew every line, every mile of track, where every boxcar could be found, and his language was peppered with railroad slang and the colorful nicknames assigned to rail stocks based on the company's name or ticker symbol. (Delaware, Lackawanna & Western Railroad was known as "Delay, Linger and Wait.") Jet aircraft had been invented during the Second World War (the Boeing 707 was adapted from the air force jet), but Van Ells didn't believe there was much future in airlines -- didn't think the companies could even finance the next round of equipment -- so, despite my total lack of background or interest in aviation, he gave me that industry to learn and cover. The following year, turboprop aircraft were introduced. It wasn't long before jets revitalized the industry, and eventually commercial jets came along. I was at the threshold of a major chapter in economic history.

Van Ells knew the people, the history and the statistics of the industry he covered, and he could make a shrewd guess as to the future performance of every rail line in the nation. He taught me that it was necessary to learn everything possible about a company, to let the numbers tell the story. The depreciation and cash flow I had learned in accounting classes became much more valuable than any interpretation of Beowulf or conjugation of Latin verbs. And having my "own" industry entitled me to attend noon meetings of the New York Society of Security Analysts. The Coachman Restaurant would send up food, and the waiters would hang around hoping for tips (the information kind).

My motto was: Know a lot about a little. I zeroed in on fifteen to twenty companies and really delved into my subject, spending time with executives and keeping up to date on all contracts, cancellations, slowdowns and bids. I tried to study everything there was to know about management, production, suppliers, competition, research and labor conditions. If a company had a disappointing quarter, I could figure out whether it was a systemic problem in the organization or something beyond its control. Companies were willing to provide information to investors, large or small, but they weren't going to blurt out everything. You've got to know the right questions to produce the right answers. As Hamlet put it: By indirections find directions out. A senior officer of a company I was analyzing once said to me, "There's something in the back of your head that you want answered. Gradually it will dawn on me what you're really after, and you might not even know it yourself." It wasn't hard to put two and two together and come up with four. When I analyzed United Airlines, I was just one penny off the company's own internal estimates.

There were one or two other female analysts in my firm and several on the Street, but they were generally given "ladylike" industries such as food or cosmetics or retail, since of course women were supposed to be good at cooking and shopping. One woman who covered drugs was a winner with the company that developed the birth control pill. I was certainly the only woman reading Civil Aeronautics Board Reports and Missile and Space Daily in the beauty parlor.

The leaders of the aviation industry then were mythical figures known far beyond the business world, comparable to Bill Gates today. Juan Trippe, the founder and then president of Pan American World Airways, had begun his career on Wall Street as a bond salesman. But he'd been in love with flying ever since boyhood, when his father took him to an air race between the Wright Brothers and their lifelong competitor Glenn Curtiss. Trippe started his first endeavor, Long Island Airways, by purchasing five navy-surplus single-engine floatplanes for five hundred dollars each in 1923. He financed the new airline by selling stock to his Yale classmates. The company flew to Atlantic City and other vacation spots, and Trippe handled every aspect of the business, from keeping the books to carrying the bags.

Cyrus Rowlett Smith, the president of American Airlines, came to the aviation business in the days of open-cockpit biplanes. Working from the age of nine as office boy to a Texas cattleman, he was also a cotton picker and bank teller until being hired at an accounting firm whose client was launching and absorbing small airlines. Named president of the newly formed American in 1934 (and known to everyone in the organization as "Mr. C.R."), he helped design the DC-3, the workhorse of passenger planes in the 1930s and 1940s, and led American into the jet age with the introduction of the first nonstop transcontinental jet service in 1959.

One of the legends of the industry was Captain Eddie Rickenbacker, the celebrated air ace of World War I, who was running Eastern Airlines. He was scheduled to come in for one of the research meetings that Bache held every Wednesday with the salespeople and senior partners. I had been at the firm about six months, and the airline industry was now mine, under the guidance of Van Ells, so I was entitled to pose some questions. In those days, analysts were more polite and less probing, but I broached some touchy subjects. Several heads turned disapprovingly to see who was giving this demigod of aviation such a hard time. I had read in a footnote of Eastern's annual report that the company depreciated its aircraft three different ways: five years for taxes, four years for stockholders, seven years internally. (This accounting strategy is all legal, but no company wants to deal with taxes in any but the most aggressive fashion.) It didn't occur to me to be timid, not even when facing the tall, commanding figure of Rickenbacker.

"Captain," I said, "I've figured out the company's earnings three ways, based on the three different depreciation schedules."

"Young lady," he replied, "are you permanently employed? If not, there's a job for you at Eastern Airlines."

I declined. The Street still had allure, even though it wasn't paved with gold. After getting another raise I became the first of the trainees to earn one hundred dollars a week. Bache had a policy that any employee who hit that mark was taken off the time clock, but the bosses knew that the other trainees would realize what I was making, so they took everybody off the clock. I doubled my salary in two years, was earning $130 a week and living much better, but I was still way behind the men at the firm and knew I'd have to change jobs to make any significant headway. At my request, the "Captain" introduced me to two of his bankers: Hugh Knowlton at Kuhn, Loeb & Co. and William Barclay Harding at Smith Barney. Appointments were arranged at both firms, but neither had ever employed a woman as anything but a secretary, and they weren't about to hire a female analyst. One interviewer said I'd be prohibited from going out of town to represent the company; the other said I'd have to wear a hat and white gloves in the elevator like the rest of the "girls."

My analysis was showing a potential profit in the fact that different air carriers had opposite and thus complementary seasonal traffic patterns. Those flying to Florida needed all kinds of capacity from November to April, while those flying transatlantic were busiest from May through October. With all the airlines reequipping, I had the idea of a leasing company that would buy the planes and enter into long-term contracts with the carriers that needed them for their seasonal use. Bache didn't have a new business department to develop such an ambitious project, so I asked for and received permission to take the idea to the investment house of Loeb Rhodes & Co. For a while, it looked as if my idea was a "go" project that we'd work on together, and one of the partners suggested that there was a job for me there. Thinking I had a firm offer, I foolishly told my bosses at Bache that I wasn't happy and was asked to leave the same day. But the job at Loeb Rhodes didn't come through, and I found myself unemployed. What's more, the long-term leasing plan fell through because the airlines couldn't agree on the configuration of the cockpit.

Sending my résumé around the Street didn't produce a single response. When the placement bureau of the New York Society of Security Analysts sent out the same résumé using my initials rather than my first name, M. F. Siebert got an interview -- and a job -- in the research department of Shields & Co., for $9,500 a year. It was 1958, and this somewhat enlightened brokerage permitted a female analyst to travel, but even more important, I could follow any company in any industry. One of my reports was about a conglomerate called Ogden that was planning to spin off a lucrative subsidiary called Syntex, a drug division that had produced some of the original allergy medicines. For every two shares of Ogden a stockholder owned, he'd be allowed to buy one share of Syntex at two dollars. That made it a tax-free transaction for both company and stockholder.

One day on the subway, I bumped into another woman who had worked in sales at Bache. "What do you like?" she asked. I told her that I was recommending Ogden. She took that idea up to Ed Merkle, president of the Madison Fund, and when I got to Shields, he called me to say that Madison had made money on my report and therefore owed me an order. Problem was, I wasn't licensed to sell, wasn't supposed to sell, had never tried to sell. I went into the office of the partner in charge of research and asked, "Shall I wait until I get registered?" He practically shoved me out the door. "Go get the order," he said, "and we'll make it up to you at Christmas."

The Stock Exchange takes a very dim view of selling stocks or soliciting orders without being authorized. In order to get a license, you must be sponsored by a member firm and take the General Securities Registered Representative License, also known as Series 7. The extent of my ignorance was vast. For the first time I had to learn exactly what a broker can and cannot say about a stock. I learned about "call options" and "put options" (the right to buy or sell a specific amount of a stock or commodity); about "margin requirements" (the amount that must be deposited in an account before buying securities with borrowed money, using the shares as collateral); about "selling short" (borrowing a security from a broker and selling it with the understanding that it will be bought back later, hopefully at a lower price, and returned to the broker). Fortunately my college course on money and banking had been a primer on the Federal Reserve Board. The nation's central bank controls the money supply by setting margin requirements for credit extended by brokers and dealers to investors, setting interest rates that banks pay for borrowed funds, and buying and selling government securities on the open market. Simply stated, when the Fed tightens money, interest rates tend to go up because the demand for money exceeds the supply; when the Fed eases up, interest rates tend to go down.

Sometimes a partner in the firm would call me trying to unload a block of stock on one of the clients who relied on my research. I'd say, "Look, Madison Fund expects me to know what I'm recommending. Why don't I get the annual report and visit the company tomorrow?" I knew perfectly well that there wasn't time for all that -- the block would be gone by then or given to another firm to sell. But I wasn't going to jeopardize my relationship with clients simply because it was expedient and profitable for the firm, and for me. Analysis took time.

That was just one of my continuing frustrations. After a year at Shields, I had brought in National Aviation and several other funds, but I was still making just $9,500 a year, plus 20 percent of the commissions I generated. Two guys hired straight out of B-school were put on salary at $8,800. One of my fellow analysts knew of my mounting irritation and informed the partners, who called me in and asked, "If we raise you to $12,500, would that make you happy?" But a male colleague doing the same work was making more than $20,000, which the partners justified because he was a man with a family. That's take-a-vacation money or buy-a-new-car money or start-investing-your-own-money money. Realizing that I was underpaid gave me the gumption to move on.

My reports regularly appeared in a weekly investment advisory newsletter put out by a Shields analyst named Walter K. Gutman, who was known as the Proust of Wall Street. He had the ability to describe something technological, such as lasers, in accessible, vivid lay language, and his newsletter, a blend of fact, opinion and philosophy, was widely followed, hot as a pistol but a little half cracked. In mid-1960 Gutman told me that he was planning to start his own firm with Teddy Rosen, who headed sales at Burnham (later to become the beleaguered Drexel Burnham Lambert), and Roland B. Stearns, who was running Stearns & Co., a small firm that already had a Stock Exchange seat. (His father was one of the founding partners of Bear Stearns, but that firm had a policy of not hiring relatives.) I was asked to come in as a partner. When the rumor got out, I was fired at Shields.

The minute I lost my job, a colleague named Green called Madison Fund to get the account. Ed Merkle, president of the fund, phoned me to say, "I didn't know you were fired. There's an office here you can use until the new firm gets started, and I think you should be sitting in the room when Mr. Green comes in next Tuesday." It was actually a rather clever little plan for showing me support while keeping the door open for any business Shields might still bring his way. And Green looked satisfyingly miserable when he saw me. Merkle became a lifelong friend, and I repaid his many kindnesses any way I could. He had asked for contributions to help rebuild his church, and years later, at his funeral, the pastor came up to introduce himself. "I wanted to meet you," he said and pointed at a beautiful stained-glass window. "You paid for that."

When plans for the new firm were announced in the Stock Exchange Weekly Bulletin, I got a call from a friend at Goodbody Stockbrokers, where Gutman had worked, warning that he would be blackballed as an allied member because he was too controversial. One rumor was that he had gone to the brokerage with his girlfriend, who was black; interracial dating, in those times, was not thought of benevolently. The warning turned out to be dead on: Gutman's NYSE application was turned down. Instead of becoming a senior partner in a new firm, he was hired to head the research department at Stearns & Co., where I became a partner. The coup de grace came when Gutman published a nasty diatribe against a policeman who'd ticketed him for driving -- with Jack Kerouac as a passenger, no less -- with an open bottle of wine in the convertible. Gutman unwisely printed the cop's badge number and advised him to be more respectful in the future. I was the partner who got called down to the Exchange and was told in no uncertain terms to supervise and edit what he wrote.

One of Gutman's December 1960 newsletters recommended U.S. Photo Supply Corp., a company that claimed exclusive American distribution rights to a French device for making prints from negatives in ten seconds in normal daylight -- a breakthrough in amateur photography. The stock became a "hot issue" in the bear market of 1961, taking off in an almost perpendicular rise in price from $2.50 to $105. But in 1962, as part of a broader investigation into the financial markets, the Securities and Exchange Commission (SEC) claimed that Stearns had "pushed" the stock and that relatives of several men in the firm (including Gutman's son and former wife) had purchased stock, through discretionary accounts, before the investment letter got out. Then they had sold their shares at a large profit in the swift market that followed. In a heated exchange with the SEC lawyer, Roland Stearns testified that he had been "away for Christmas" during the time in question but that my analysis was chiefly responsible for recommending the stock to customers. No longer restricted to following aviation, I had become enthused about electronics, and I thought that if the ten-second wonder worked in real life as it did in a controlled environment, the company would have been a major player. But when the device was demonstrated at a press conference, it basically curled up and died. By the time of the SEC probe, the stock price had dropped below one dollar.

Company policy, Stearns said, permitted insiders to buy Gutman-recommended stocks but required that any such purchase be held for at least a week after the market letter came out. But he admitted that it was the U.S. Photo transactions that had demonstrated the need for such a policy. Until then, there had been a "hedge clause" in fine print at the end of the market letter that seemed to be license for Stearns officials to make use of the information any way they chose. It read: "In the general course of business, partners and/or employees may or may not have a position, long or short, in the securities mentioned and from time to time may be executing buy and/or sell orders for themselves and/or their customers." The Gutman newsletter was discontinued that spring, citing "belt-pinching," and at the end of the year Stearns was censured by the SEC for "conduct inconsistent with just and equitable principles of trade."

The decline and fall of U.S. Photo and the subsequent SEC investigation got a lot of coverage in the many New York newspapers published at the time. I was not subpoenaed and had no real fear of personal recrimination: even though I had bought some of the stock myself, I hadn't traded it. (The worthless stock certificates are still stuck in a desk drawer somewhere.) And I had left Stearns. The firm's potential for growth was impeded when Gutman was blackballed and Teddy Rosen decided to stay where he was. I was one of only a few female partners on the Street, but my philosophy differed from that of my partners. They were interested in speculative hot stocks; I wanted to concentrate on larger, more substantial companies, like airlines and the aerospace industry. But I was finding no welcome mat rolled out for me when I looked for another job.

I had been doing some volunteer work with the Henry Street Settlement on Manhattan's Lower East Side, working with the children of recent immigrants. We read to them, taught them how to play baseball and Ping-Pong, tried to help them acclimate to American customs. Henry Street was a favorite charity of several young Wall Streeters -- perhaps because so many of our parents and grandparents had come to this country similarly overwhelmed by the strangeness of a new land. One of the people my own age whom I met there was Mark Finkle, son of David Finkle, who had been a senior partner at Bear Stearns and left to start an eponymous brokerage. Mark had no interest in dealing with clients himself, the glad-handing, entertaining, schmoozing part of the work -- he wanted to be on the floor trading. He went to his father with the suggestion that I join Finkle & Co., which had no analyst. "She's clean as a whistle," he said, "and these firms are being unfair to her." I was offered 40 percent commissions plus 5 percent of the partnership's pretax profit.

It was tradition that when a broker changed firms, former clients would put in a "good will order." On my first day at my new job, I got an order that netted a commission of $2,000.

"Isn't this great?" I said to David Finkle.

"That's shit," he said evenly.

It was at Finkle that I learned that "crossing the block" did not mean darting across Fifth Avenue to get a closer look at Bergdorf Goodman's windows: Davey Finkle was on the executive committee of the old Chicago & Northwestern Railroad Company, where he'd helped a man named Ben Heinemann get control of the company. Chicago & Northwestern wanted to buy a railroad called Gulf, Mobil & Ohio. Finkle was trying to persuade institutions to buy GM&O and to vote in favor of the sellout to Chicago & Northwestern. When I looked in a publication called Vickers that listed the holdings of all mutual funds and other institutions, I saw that the Channing Fund owned a block of GM&O. One of Channing's directors was Tom Lenaugh, then the treasurer of the Ford Foundation. He was the head of research at Goodbody who'd warned me that Gutman would be blackballed. I called Lenaugh, said I'd like to talk to the fund's portfolio manager and was told to call Norman Walker. GM&O stock was selling at $22 a share, but Channing's investment committee had voted its stock for sale at a higher price of $24. Walker said that if I found a buyer at that price, I could have the order and the block of stock. That meant finding a buyer willing to pay "over the market," or more than it was selling for at the time, in order to get a good-sized block.

Wally Bowman, who was running Delaware Income Fund, was interested but never bought anything unless he met with the management. So I flew out to Chicago and together we went to see Ben Heinemann. I'd done my homework to figure out how efficient the operation was, how the new acquisition would fit in, whether Chicago & Northwestern would be adding new tracks, what kind of service it would offer, whether anybody else was offering that service already and whether the acquisition would produce savings. When we left Heinemann's office, Bowman said, "I'll take the block at $24." Delaware Fund gave us a big enough order to bid GM&O up to the price where Channing had authorized the sale. Finkle "crossed the block," meaning that we handled both the buy and the sell, earning commissions on both parts of the deal. I made about $8,000 that day, which was a lot of money. At the time, I was paying $185 for a studio apartment with a raised dinette and good closet space overlooking the courts at the Town Tennis Club.

The next day, Davey Finkle was clearly interested in my Rolodex. "How do you know these people?" he asked.

"From the New York Society of Security Analysts," I said.

"I'm head of the airlines committee."

"You come sit here next to me," he said, pointing to the trading table. That's where I learned a new language consisting mainly of four-letter words. Traders were from different backgrounds, with different pressures than the analysts, who tended to be more refined. These were Damon Runyanesque characters, known to throw telephones or yank cords out of the wall if things didn't go their way. Under their tutelage, I soon became an expert in vulgarity. But I also learned how to trade stocks and saw that I could make serious money by getting the whole order instead of a small payment for research. Finkle would call people he knew and say, "Listen, I'm sending you my partner. She's a girl, but she can still pick up the lunch check." To me, he'd say, "Don't speak to the analysts. Speak to the portfolio managers because they'll think of you down the line, and you'll get the orders. Speak to the traders because they give out the orders, and if they don't think you're capable, you won't get the business even if the portfolio manager recommends it." He would tell me to call so-and-so, and I'd ask what I was going to call so-and-so about. His typical response: "Aw, I don't give a fuck, just call him."

Sometimes he'd grab the phone out of my hand and tell me I didn't know how to close a sale. He had grown up at Bear Stearns as a bond trader and ending up owning a big chunk of the firm because of his production, making bids on blocks of bonds and moving them from customer to customer. If, say, Metropolitan Life Insurance Company had $20 million of bonds to sell -- maybe for reasons that had nothing to do with the value of the bond; maybe to buy a piece of real estate -- the firms on the Street would make bids for the block. When the pension plans were growing and starting to buy common stock, Finkle was instrumental in getting Bear Stearns to make bids on blocks of stock, just as the firm did on bonds, sometimes buying a piece and putting it in the firm's trading account in order to facilitate the deal.

With bonds, brokers didn't need numbers about a company's earnings or revenues because bond-rating agencies did all that work, based on debt coverage and other kinds of information. I once heard Finkle call up Brother Parker, who founded the Putnam Fund. This was the entire conversation from beginning to end: "I got this block of XYZ stock. I don't know shit from pound cake about the earnings. All I know is it sells for twenty dollars, and it pays a dollar and a half dividend. You'll take the block, Brother? Fine." He expected me to cross a block like that too. But I had come up as an analyst, and clients counted on me to know the companies. Finkle had little use for analysts. "Who needs 'em?" he'd snarl. "In a bull market, everything goes up, and in a bear market, they break you."

My heart pounded when I had to call on the men who were responsible for investing such enormous sums of money. I was not a natural salesperson, and I'm a disaster on names. I remember numbers. Often the men were embarrassed when I picked up a check -- they'd suddenly become acutely interested in the bottoms of their briefcases or else go to the bathroom. But I knew the product I was selling, and I learned how to convey information with clarity, authority and brevity. Gerry Tsai, a former analyst at Bache who was managing Fidelity Capital Fund, once said, "If you can't tell me why I should buy or sell a stock in a page and a half, you don't know the company." And I had a knack for cutting through trivia. A potential client can be overwhelmed by too much detail and consequently be indecisive in making a commitment.

The first stock I really pushed was Boeing. When everyone else was saying "Sell," I was telling clients to buy, and the institutions that bought it tripled their money. Boeing already had the 707 jet (a commercial edition of the military jet tanker) and the three-engine 727. The new 737 was a two-engine jet that could get into smaller airports and could make money with fewer passengers. What made me take a stand on the company was a senior official from United Airlines telling me that the Boeing plane had passed every performance test it had been given on the day it was delivered. Terry Drinkwater, who was running Western Airlines, actually gave me the brochure showing the interchangeable spare parts that could be used for different planes in the fleet, thus lowering the operating costs. ("I know you're going to ask me for this," he said, "so I might as well give it to you.") Today that might be called insider information, but I considered it doing my homework. I studied companies from every possible angle, and I talked to customers, suppliers and engineers, but some of my best recommendations were based on what the SEC now calls the "knowing possession" of material nonpublic information.

Rudd-Melikian Corporation in Philadelphia had invented the coffee vending machine under the name Kwik Kafe. Stearns had brought the company public, and I placed a lot of the stock with institutional clients, including the Madison Fund, which had given me my first order. The underwriter of an initial public offering, or IPO, having raised the cash, usually gets the privilege of putting somebody on the board of directors to watch its investment, and I was elected. Some months later, there was a new board member named C. Stanley Allen, who had been chairman of National Cash Register. He introduced himself by saying, "Call me Chick." One day I got a call from an analyst at T. Rowe Price, the money manager that runs mutual funds, which had bought Rudd-Melikian on my advice and was concerned that the company's payables were late. If the bills weren't being paid on time, it meant trouble. At the next meeting of the board, I asked a lot of questions but could not figure out what was wrong: The company's assets and liabilities showed plenty of cash to meet obligations. But if something smells, there might be a dead fish somewhere.

The next day I sent a registered letter to Mr. Rudd and Mr. Melikian asking for a breakdown of assets on the balance sheet. They finally admitted that there was nothing collateralizing their IOUs to the company, which were on their balance sheets as current receivables. In other words, they had lied, and the balance sheet was not as strong. When the auditing firm of Coopers & Lybrand certified the financial statements, it should have checked if the company's IOUs were backed by the collateral described, but it hadn't. (It turned out that Madison Fund and Rudd-Melikian both used Coopers & Lybrand -- the former in New York, the latter in Philadelphia. Ironically, the investment company had a loss because of the sloppy accounting of the auditor's other branch.)

Mr. Call-me-Chick Allen resigned from the board immediately and said to me, "Young lady, if you're smart, you will get out of here with me." I was not sophisticated enough to know what my fiscal responsibility was; depending on the state where a broker is chartered, this sort of situation could land a person in the middle of a lawsuit. But I had clients who owned a lot of stock and sold it at tremendous losses. I had an obligation. Madison had the biggest outside holding in Rudd-Melikian, but the fund never would have bought the stock if the balance sheet hadn't been good. And if I didn't have a gut feeling about analyzing the balance sheet, I never would have found out about the crooks. Madison ultimately held the stock for years, never suing because of the shared accounting firm, and Rudd-Melikian was later merged out for very little money.

When Call-me-Chick Allen came onto the board of Rudd-Melikian, I had looked at National Cash Register's annual report and saw that it depreciated its computers fast: the first year, 40 percent; the second year, 30 percent; the third year, 20 percent; and the fourth year, 10 percent. That method is called a four-year "sum-of-the-digits," and any revenue after the four years was all profit, with no depreciation expenses. I played around with the numbers and said to Allen, "You know, NCR looks cheap." He had never encouraged my interest in the company, but one day he said, "You might be right. Maybe you should go out to Ohio and visit NCR." It was rather pleasant going to my home state to meet the chairman of a national corporation. I had looked at every available piece of public information about the company and had a list of questions that I still wanted answered. The answers confirmed my numbers. NCR was not in the forefront of new technology, but it did have a lot of computers in the field. I started to recommend the stock because the earnings were going to pop as the computers that were installed became fully depreciated. But I wouldn't have earned much if I had just gotten a lousy research chit.

If I started recommending a stock, I called the institutions that already had holdings in that company to see if they wanted to buy more before I called accounts that didn't own it. When I had an order to buy, I would call the institutions that didn't want to buy more, in the event that they wanted to sell. Then I could get the order and cross the block. Chase Manhattan Bank had a large piece of NCR but didn't want any more. One day I was told, "We've just voted the sale of the stock. Come in with a bid, and it's yours." I'd never met Jack Bridgewood, the man who ran the entire investment department at Chase, but I called him, explained how NCR's earnings were going to increase sharply because of the depreciation schedule and advised him not to sell the stock but to buy more. An hour later I got a call from Joe Debe, the head transportation analyst at Chase, who was on the investment committee.

"What did you do?" he asked. "Bridgewood just came into the meeting and unvoted the sale."

Jim Lane, who ran many of the largest corporate pension plans, was in on the meeting and asked, "Who is this Siebert, God?"

"No," said Bridgewood, "she just knows more about the company than we do."

I probably lost $200,000 in commission on that NCR sale, but the next time I called Chase, I had a customer -- and a friend. The friendship would prove invaluable when I wanted to join the Big Board.

Pretty early on in my career, I realized that some of what was good for the goose would be good for the gander -- that several of the stocks I researched for institutions would be good investments for me, if I only had the money. A client once asked if I owned any of the stocks I was recommending. When I said I didn't have that kind of capital, he introduced me to a loan officer at Irving Trust Company who arranged for me to borrow against what I was buying, always asking about my purchases and making similar ones himself. I imagine I helped him accumulate a tidy sum because in three or four years, I ran a $500 investment into $500,000 equity. If you're buying with borrowed money, it doesn't mean it's your money. In the sudden bear market of 1962, when President John F. Kennedy told the steel companies to roll back their prices, the market broke and my profit disappeared -- all but $20,000. If you owe money in securities you've purchased, the bank isn't the loser, you are. I vowed I would never be fully hocked again.

I had some money of my own to invest when I became a partner at the brokerage firm Brimberg & Co. There I was paid 45 percent of the commissions I generated, which were about $600,000 a year. The iconoclastic and gargantuan Robert Brimberg was the real "Scarsdale Fats" of the pseudonymous Adam Smith's best-selling 1976 book The Money Game. Partners at the firm had placed a scale by his desk as a silent reproach, but it did no good. I'd go to a breakfast meeting with him and have my half grapefruit, my stinky poached egg and dry rye toast, while he'd have pancakes with a quarter pound of butter, syrup in between and scrambled eggs on top. Brimberg was known for inviting big portfolio managers to informal lunches at the office, seating them on metal folding chairs at plastic tables, plying them with corned beef and meatballs -- and a little booze -- while gleaning information about what they were buying and selling. ("Adam Smith" estimated that if all the funds in a group and all the trusts in a department were counted, the eight or ten guys in the room reaching for deviled eggs and pickles represented a shade under $9 billion, which, in those days, was real money.) In three years at Brimberg & Co., I gained ten pounds and a ton of knowledge, like the legitimate investment reasons why one institution might buy a stock while another would sell at the same time: A fund could be changing holdings in an industry, could have different investment objectives, could have holdings that no longer qualified as income stock or could need to take a profit to pay capital gains to holders.

Brimberg was an artist at picking up nuggets that could be used to his advantage, and everyone on the Street envied his skill. If you could find out what the big boys were up to, and he could, all you had to do was play follow-the-leader and call other money managers, who would often buy or sell the same stock. Money handlers of this ilk dealt in such gigantic blocks that any move they made could affect prices, up or down. The portfolio managers loved this informal way of talking with peers. The rule was: everything off the record, no names. Just "Hey, Joe, I see you bought some utilities last week at the bottom" or "Where's the market going?" or "What three stocks do you like?" And there were fascinating guests, politicians such as Senators Birch Bayh and Eugene McCarthy, who liked the honorariums and the chance to meet the people who were running the country's big money pools.

Brimberg's wealthy father was a furrier then working at the brokerage. He had special permission from the NYSE to keep a bottle of Scotch in his desk -- for his heart condition. Maybe it was the fur dynasty, but Brimberg thought that I lived too frugally and didn't dress well. He offered to take me shopping and wanted to put up half the cost of a diamond bracelet that cost $35,000 if I paid the other half. "Let me manage your money," he insisted. "At every top I'm worth more than you are."

"But at every bottom I'm worth more than you are," I answered. "And I don't have parents like Louis and Bessie to bail me out."

During the three years we were partners, Brimberg and I never had a serious disagreement, and when I told him I was leaving, he offered me the supreme compliment of saying he would put my name on the firm: Brimberg, Siebert & Co. Even though my income and commissions were growing nicely, I wanted to be at a larger firm. The big man worked round the clock and always wondered why I didn't want to socialize with clients on weekends.

But he worked -- and literally ate -- himself to death: he died in a restaurant.

By the mid-1960s, security analysts had become Wall Street's darlings. The booming bull market, an increased institutional interest in common stocks, the appetite for information and the ability to generate complex computerized evaluations transformed the stature of the analyst. Since 1963, anyone who passed an exam acquired an impressive-sounding set of initials: CFA, for Chartered Financial Analyst. It was the era of the "selling analyst," some of whom were breaking off and starting their own firms. Even old-line members of the Stock Exchange turned their efforts to research for the fastest-growing segment of customers: the institutional investors. Between 1964 and 1969, the number of active funds doubled, and knowledgeable observers claimed that somewhere in America there was a fund with an investment strategy to fit any customer's appetite for risk. Some highly regarded firms even started recruiting analysts from the ranks of the industries being researched, taking the approach that insider understanding was incomparably valuable. Geologists were becoming oil analysts; drug marketers were becoming health care analysts. But that word insider was also becoming a pejorative. If an analyst was brought in from the underwriting department of a corporate client, it was referred to as coming in "over the wall," since legally these two departments were supposed to be kept separate (as if by a Chinese wall) because of the potential conflict of interest, and the analyst was not to provide opinions on the corporation involved.

Long before the insider trading scandals of the 1980s, new rules to promote the full and fair disclosure of information evolved from a case the SEC brought against the Texas Gulf Sulphur Company. A court ruled that top officers and directors of the firm had violated securities laws by conducting transactions in their stock without telling the public what they knew about a rich Canadian minerals strike the company had made. The SEC also took administrative action against Merrill Lynch, charging that the country's largest brokerage had passed inside information about an earnings decline at Douglas Aircraft Company. The way I protected myself against any charges about privileged facts and figures was to make sure that buyers and sellers had the same research from me. And I got some of my information in ways that could hardly be claimed proprietary. One time, while vacationing in Puerto Rico, I passed the first supermarket ever built there. I gave up a day at the beach to meet with the management and then recommended the stock, which worked out beautifully. When I heard rumors about a new development at Kodak, I stopped in at two camera stores on Wall Street and asked the salesmen, "What do you think?" One told me that the company was planning to introduce a drastically different model in two or three months. He let me have one of the cameras, and I was fascinated because it was so easy to use -- a no-brainer. I took it to a Christmas party, and it caused quite a stir among the other guests. When I saw that it was a hit, I visited the company's operations in Rochester, New York. The numbers made sense: The stock was priced without reflecting any new possible developments, so I recommended it. The Kodak treasurer asked how I'd heard about the breakthrough. "From one of your customers," I replied. That camera was an Instamatic. By 1970, 50 million had been produced.

Copyright © 2002 by by Muriel Siebert

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