If Something Happens to Me, Whatever You Do, Don't Sell My Ibm

by “ADAM SMITHS,”who is not 245 years old but is instead a pseudonymous chronicler of the mystification and mores of Wall Street. Next month Random House will publish his book THE MONEY GAME, from which these comedies of the investment life are taken.

NINETY percent of investors don’t really care whether they make money or not,” I postulated to my friend Harold the Psychiatrist, “They say they do, and that, of course, is the name of the game, but my downtown savants say that they don’t. What do you suppose they are in it for?”

“I haven’t a clue,” said Harold the Psychiatrist, over his corned beef sandwich at lunch. Harold the Psychiatrist and I occasionally retire to a little coffee shop near his office on the West Side of Manhattan. “Practically all of my patients are in the market, and it means something different to each of them. They’re not seeing me because they’re in the market, but people who can afford a psychiatrist can also afford a broker, and money is part of the Geist. I’m working on their personal problems. Why don’t I loan them to you, and you can talk to them about the market.”

I began going to lunch with some of Harold the Psychiatrist’s patients, and eventually with some of their friends — also patients somewhere— until I was the lunchtime Boswell of the set that takes taxis at midday to see their doctors. First they would talk to Harold — or whomever — for an hour, and then they would come to the coffee shop and talk to me. I would like to be able to report some learned conclusion, but when I group my notes they begin to take on a strange tone, as if Danny Kaye were attending Freud’s Wednesday Evening Association: “Und zo, zen I began to notice in zis patient strange symptoms: ven she took off her chooze . . .” Therefore I will let you come to your own conclusions.

A. CUDDLING COMSAT

“I don’t really know anything about stocks,” said the bright-eyed pretty thing across the tabic. “But I love the market. All the men I know love to talk about the market, and if a girl can listen to them about the market, it makes them feel good.”

“So you talk to the men you go out with about the market,” I said. (I picked this technique up from Harold. You never really have to say anything, you just agree gently with what was said and maybe form a question a tiny step forward from that.) “That’s where you find out what to buy.”

“Sometimes,” said the bright-eyed thing across the table. “I came out about even on those. Some of them went up, and some of them went down. Right now I only have one stock, and I thought of that one all by myself.”

“You thought of that one all by yourself.” (You begin to see the technique. It helps if you have a pipe and go mmmm, as well.) “And what is the stock you had yourself?”

“Comsat,” said the bright-eyed thing. “What do you think of Comsat?”

“What do you think of Comsat?” I said, with the proper turnback technique.

“I just love it,” said this pretty girl. “I got it, well, right when it started, practically the first day. And it’s grown and grown. I just love it.”

I wanted to know what was so lovable about Comsat.

“It’s satellites, you know,” said the girl, stirring her Tab. “And rockets, and the future, I got it when it was 22, and now it’s 70, and it was all my idea, by myself. Every time they fire off one of those satellites, I think, That’s mine, that’s my baby.”

“Do you know anything about tire prospects for Comsat? What kind of money it’s making, or could make?”

“No. I don’t care. I don’t understand that anyway. I just love Comsat, and I’ll never sell it. I don’t care if it goes down.”

“You don’t care if it goes down?”

“No, I wouldn’t care. I won’t ever sell it. Someday it would come back up. It’s too well behaved to stay down; whenever it goes down, it comes back up, anyway.”

“The men you go out with — what do they think of your Comsat?”

“Oh, they all have other stocks, but Comsat is really something you can’t disapprove of.”

“A noble institution.”

“Yes, and it was all my idea.”

About a month after this lunch, which I had mentioned to Harold, I got a call from him,

“I thought you might like to sec her again,” Harold said. “She just had another one.”

So the bright-eyed girl and I met again at the coffee shop.

“McDonnell Douglas,” she said. “What do you know about McDonnell Douglas?”

“What do you know about McDonnell Douglas?”

“I think it’s very exciting. They’re in missiles and jets and things like that.”

“What happened to Comsat?”

“Nothing happened to Comsat. I still love Comsat. I always will. But you know, you don’t want to have just one, all alone.”

B. I WANT TO BE LOVED FOR MYSELF

I didn’t meet Edward in the coffee shop, I met him at his club in midtown. Edward has a management consulting business that does very well, and whatever he was seeing a doctor about has no relevance here. Edward was interested enough in the market and in the vocabulary everyone picks up from those taxi trips to the shrink to explore his own market experience.

“I started with a big problem,” he said.

“You started with a big problem,” I went along.

“Yes, you see I inherited a couple million dollars’ worth of Avon Products.”

“I can see where that would be a problem.”

“I haven’t told you the problem yet.”

“Sorry.”

“I knew I was going to inherit this money, so I went to work at a bank, to learn how to handle money. I was quite young, just out of college, and just learning the securities business. And Avon had had a big run, and all 1 had was Avon. I got very nervous. Against the advice of the bank, and of the investment counselor who handles the family’s funds, I sold out a big chunk of it. You know what happened then.”

“I know, it went up tenfold, probably, since you sold it.”

“I felt very dumb about that, and I felt bad because it was the family stock; my grandfather was in the company.”

“You could have bought it back.”

“That never occurred to me. I don’t think I ever even thought of it. You sec, Avon is the family stock. But it isn’t mine. I found one while I was working at the bank; in fact, I found a couple, Schering was one, in the 50s. I took it to all the members of iny family, but none of them would buy a share. I bought a big chunk of it, and I did very well with it, very, very well. And I’ve had others.”

“You’ve done just as well with your own choices as you would have holding the Avon,” I suggested.

“I don’t know,” Edward said. “I never Lotaled it up. I don’t want to. flic point is, somehow there was no way of me participating in Avon. It was already there. What I really enjoyed was doing the work on a company, checking with the management, finding out all about the company and its problems, making up my mind, and then telling everybody about it. That way, it would be my stock.”

“Do you still do this?”

“No, I don’t really have time. I do dabble just a bit here and there, but mostly the bank does it for me. They’ve come up with some real winners this year. They had Leasco at 30 and Mohawk Data in the 20s.”

“Don’t you get a kick out of that?”

“It’s nice to have the money, but my business is doing very well and I really don’t care—at least I don’t care the way I did when I picked them myself and convinced people to do the same and then watched them go up.”

Later, over dessert, Edward said, “You know, if you meet a girl and she’s ready right away to hop into bed with you, you might as well be some sailor ashore from Venezuela; she doesn’t even know who you are. You want to take her out to dinner, to talk to her, to have her get to know you. You want at least a little give and take, a little resistance. Then it means something. Right?”

The bright-eyed girl might not have been conscious of what Comsat meant to her, but Edward was more perceptive about what the market had been to him. Maybe that is why he got out of it.

C. WAS I DUMB! WAS I DUMB! KICK ME!

You would never have known it, but Arthur actually did very well in the market, I suspect over every vibrating impulse in his body.

“Are you in Solitron?” he asked me.

“Are you in Solitron?” I asked him back, using Harold’s stone-wall questioning technique.

“I am,” Arthur said. “I bought it at 60 on the old stock, so that’s 30 on this stock.”

“Brilliant,” I said. “You made eight times your money.”

“Yeah,” Arthur said sadly. “I remember the day this guy called me up about it. I was going to buy 300 shares, but it looked too high. So I only bought 200. Was I dumb!”

“You’re doing all right,” I said.

“Every time it goes down, I feel better,” Arthur said. “Isn’t that silly? I get nervous when it goes up, and I feel better when it goes down.”

“But you don’t sell from nervousness,” I said.

“I can’t,” Arthur said. “My Solitron is margined to buy my Ling-Temco-Vought. I bought that around 50.”

“Fantastic,” I said. “You almost quadrupled your money on that one.”

“Yeah, but I did something really stupid,” Arthur said. “I sold half of it at 100. Somebody should kick me. I’m so dumb I make myself sick sometimes. I just got too nervous watching it go up, and it never went down enough so I could relax.”

“Too bad about that,” I said.

“Did you catch Burroughs?” Arthur asked.

“Did you catch Burroughs?” I asked.

“I missed it completely,” Arthur said. “I was in my broker’s office, and he told me to buy it; it was around 50 then, so it’s more than doubled. And I didn’t buy a single share. Boy, did we miss a good one there.”

“Why didn’t you buy Burroughs?”

“I don’t know,” Arthur said. “I already had a computer stock, and I thought another one would be too much. I remember, I wrote a note to myself, Buy 500 Burroughs. Just think, I lost a profit of 80 points on each 100. $8000. Incredible! I lost $40,000 by not buying Burroughs!”

“What was the computer stock you had?”

“Oh, I bought some Control Data just before that.”

“But Control Data tripled! It’s tripled since then!”

“How could I have missed that Burroughs when I was so close to buying it?” Arthur mourned. “I’m so stupid! Somebody ought to kick me!”

Arthur, as you can see, had all the winners in the market, and had probably seen his money increase 500 percent. But he didn’t feel very good about it. If the stock went up, he should have bought more, so he was stupid there; and if it went down, that proved he was stupid there. Some people go to all the trouble of actually losing the money just to have that sheer wallowing joy of losing, but Arthur only talked it.

“When a stock goes down, I feel that’s where it probably should go,” Arthur said, “and when it goes up, the higher it goes, the more I feel it’s going against its natural tendency.”

“You’ve done very, very well,” I said, “so you must be under a terrible strain.”

“It’s terrible,” Arthur agreed. “I don’t think I can stand it much longer.”

I suppose some people are only really happy with motherly sympathy, and sometimes it gets hard to find a reason for mother to be sympathetic, if things go too well.

D. IBM AS RELIGION: DON’T TOUCH, DON’T TOUGH

Here are some short notes from a broker who happens to be on Harold’s circuit, all sworn and attested to be true.

Once upon a time there was a very astute gentleman we will call Mr. Smith. Mr. Smith was so astute that many, many years ago he invested in a company called International Tabulator, which was a predecessor of IBM. Mr. Smith had great faith in the company, which in due course became IBM, waxed fat, and prospered. Mr. Smith and Mrs. Smith had issue, and the children grew up to be nice children. Mr. Smith said to them, “Our family owns IBM, which is the greatest growth company in the world. I invested $20,000 in IBM, and that $20,000 has made me a millionaire. If something happens to me, whatever you do, don’t sell my IBM.” Mr. Smith himself never sold a share of IBM. Its dividends were meager, naturally, and so Mr. Smith had to work hard at his own business to provide for his growing family. But he did create a marvelous estate. Eventually he became a grandfather, and he made gifts of the stock dividends of IBM to his grandchildren. And at family Thanksgiving, he counseled: “If anything happens to me, whatever you do, don’t sell IBM.”

Mr. Smith died, and divided the IBM among his children. The estate sold only enough IBM to pay the estate taxes. Otherwise the children followed their father’s dictum, and never sold a share of IBM. The IBM grew again, made up for what had been amputated to pay estate taxes, and each of the children grew as rich as Mr. Smith had been because the IBM kept growing and growing. They had to work quite hard at their own businesses, because their families were growing and their only money was in IBM. They followed their father’s dictum and never sold a share. Only one of them even borrowed on his IBM, to get the down payment for a heavily mortgaged house. And the faithful children were rewarded by seeing IBM multiply and grow. Mr. Smith’s original $20,000 has become millions and millions.

The Smiths are now in their third generation of IBM ownership, and this generation is telling the next, “Whatever you do, don’t sell IBM. And when someone dies, only enough IBM is sold to pay the estate taxes.

In short, for three generations the Smiths have worked as hard as their friends who had no money at all, and they have lived just as if they had no money at all, even though the various branches ot the Smith family all put together are very wealthy indeed. And the IBM is there, nursed and watered and fed, the Genii of the House, growing away in the early hours of the morning when everyone is asleep. IBM has been so good to them that even after divisions among children and rounds of estate taxes they are all millionaires or nearly so.

Presumably the Smiths will go on, working hard, paying off their mortgages, and watching their IBM grow with joy, always blossom, never fruit. It is a parable of pure capitalism, never jam today and a case of jam tomorrow, but as any of the Smiths will tell you, anyone who has ever sold IBM has regretted it.

E. CAN I TELL ROSALIND? CAN I TELL HARRIET?

The gentleman who supplied this one works in the Street and trades actively.

“My grandmother,”he said, “is the very picture of a Norman Rockwell sweet old lady. Gray hair and little old glasses and a black dress and those little-old-lady shoes. As you know, my grandfather was in the Street, and he left my grandmother well provided for with trusts and whatnot. In spite of having been married to my grandfather for fiftytwo years, she really doesn’t know a stock from a bond. One night she tells me she wants to open an account with me. I tell her I am not in her kind of stocks—she must own Jersey at $1 a share— but she wants to do it anyway. I tell her she mustn’t tell anybody; the other members of my family certainly wouldn’t approve.

“So we open an account, and I tell her the next swinging stock I am about to buy. She gets a very conspiratorial air about her. ‘Wonderful,’she says. ‘Can I tell Rosalind?’ Rosalind is her buddy. Grandma is seventy-nine, Rosalind is eighty-one.

I tell her sure, she can tell Rosalind. ‘Can I tell Harriet?' Harriet is her other buddy; Harriet is eighty-three. All these ladies are well provided for, the Morgan bank is managing the trusts their husbands left, their children are well provided for, the grandchildren come to see them on Sundays sometime, and here they all are chasing hot computer leasing stocks.

“Well, things roll along, and the ladies do very well. Then I come across a real find. It’s a small electronics company with good earnings, not much stock out, and for some reason nobody has found it. ‘Oh, how exciting,’says my grandmother, when she buys the stock. Grandma is now used to making five for one on her money. ‘Can I tell Rosalind?’ she says, with that secret, conspiratorial air. I picture these sweet old ladies in Schrafft’s, having an afternoon soda in their black dresses and black shoes, and I say she can tell Rosalind.

“As I said, there isn’t much stock around, and all of a sudden I find it hard to buy. The stock is 24 asked, and I reach for it and I get 200 shares, and it moves up to 28, zingo. I call the dealers, I scout around — the stock keeps moving away from me. Somebody else is accumulating it! Zingo, it’s 33! Very discreetly, on little cat feet, I pad around the Street, but nobody has heard of it; my information is very good, somebody is indeed accumulating it, but nobody knows who.

“You guessed it, it comes to me in a Hash. Grandma has told Rosalind and Harriet, and each of them has told two other friends, and a bunch of sweet old ladies in Schrafft’s is accumulating a massive position and upsetting my game completely. So I am quite irritated when I call her. These ladies have buying power just a bit bigger than the Bank of England.

“‘Grandma,’ I say, ‘I said you could tell Rosalind. One friend. Rosalind. You’re chasing this stock away from me.’

“‘Adele and Dorothy wanted some too,’ Grandma says.

“‘Lay off my stocks,’ I say. ‘You shouldn’t even be in this kind of stock.’

“‘Why not?' Grandma says. ‘I have to own growth companies. I’m getting a stake together for my old age.’

“I let Lhe reference to old age pass. ‘The Morgan bank is doing a very good job,’I say.

“‘I looked up those stocks the Morgan bank manages,’Grandma says. ‘Boring. They never move.’

“ ‘Now listen!’ I say, my voice rising. ‘If you and your friends don’t lay off, I’ll never tell you another stock!’

“’Don’t say that, don’t say that,’ says Grandma, her voice querulous.

“‘Then behave,’ I say.

’When you’re eighty,’ Grandma says quietly, ‘it gets lonely. I bore you all, I know that. And I want my friends to call me. This is the most fun in years. Don’t take my stocks away.’

“What could I say?”

F. THEY MAKE ME DO EVERYTHING WRONG

“A broker,” said this Mr. Thatcher, “is a true parasite. He is the most overpaid individual in the world. He doesn’t produce anything. He doesn’t make shoelaces, he doesn’t tell you the law, he doesn’t make the traffic move. He just takes orders, like a clerk, and for this — do you see the size of those commissions? Fantastic! When trading gets light, the brokers scream, they want to raise the commissions. But when the trading goes from five to ten million shares a day, do we hear the commissions are being reduced? We do not. The brokers just sit there piling up money.”

“You’re not happy with your broker,” I ventured.

“The one I’ve got now,” said this Mr. Thatcher, “is no more a thief and no less a thief than the rest of them. The jails aren’t big enough to hold all the brokers who should be in them. Take information. When a broker gets a piece of information, does he call me right away? No. First he buys some himself, then maybe he calls me. Of course, when I want to talk to the bastard, half the time I can’t get him on the phone.”

“He’s busy.”

“He’s busy all right, the lousy tout. And take selling. You think they tell you when to sell? Never. First they sell themselves, then you watch the stock going down day after day, you can’t get them on the phone, finally you get them, they say, ‘While the outlook near term is uncertain, longterm holdings need not be disturbed.’ They suckered me in with that a couple of times, but no more. That means, ‘I sold last Tuesday, Charlie, and I forgot you were still in that dog.’”

“You haven’t done too well in the market, I gather.”

“I’ve done just as well as anybody else, you can’t believe half of what people tell you. Especially brokers. Did you ever hear a broker say I don’t know’ when you ask him a question? No. He’s always got an answer. ‘Why is my stock going down?’ Profit-taking, he says. ‘Why is the market going down?’ Taxes are going up, he says, or the President is having a press conference this afternoon, or there is a war somewhere. They can never tell you anything straight, ihey’re so used to lying.

“Take my Syntex. 1 should have sued the lousy thief who put me into that. This was on the last swing. The stock has a good move, from 80 to 110. I tell this lousy tout, I say, I want to sell if it’s going down. He says the future looks good. The stock drops to 70, Fm actually losing money. At 70 all of a sudden he sees the problems, the stupid lousy tout. He wouldn’t let me sell at 110, but at 70 he makes me sell.

“Well, naturally, 1 canned that guy. But the next broker was no better. First he touts me into a couple, they barely move, he touts me out again. Then 1 give him one I heard at the country club, United Fruit isn’t making bananas anymore, something like that. The stock is 28, at 35 the lousy tout makes me sell. The stock goes right on to 55, but the lousy tout makes me sell. Then he makes me buy some piece of junk lie’s touting.”

“It sounds like you need a better broker.”

“There’s no such thing. They’re all lousy touts hustling commissions. They’re always right a little, and then they tout you out of what you know is right.”

“You ought to follow your own impulses.”

“That’s all very well, but I’m a busy man.”

“It sounds like you ought just to use a broker to execute orders, not for any kind of advice.”

“I should. I should. I’d be a rich man today if the lousy touts didn’t always make me sell at the wrong time, or buy the wrong stock.”

The list of roles investors play could go on and on, but an archetypical origin of the species is missing. Perhaps, as the savants say, the investors are in the market for something else. I have a friend who runs a small clearinghouse shop, and this is what he says: “I don’t care whether they’re big investors or little investors. If they make a little money, they’re happy; if they lose a little money, they’re not too unhappy. What they want to do is to call you up. They want to say, ‘How’s my stock? Is it up? Is it down? What about the earnings? What about the merger? What’s going on?’ And they want to do this every day; they want a friend, they want someone on the telephone, they want to be a part of what’s going on; and if you gave them a choice between making money, guaranteed, or staying in the game, and if you put it in some acceptable face-saving form, every last one of them would pick staying in the game. It doesn’t make sense, or the kind of sense you expect, but it makes a nutty kind of sense if you see it for the way it is.”