by James Grant
Praise for Bernard Baruch: The Adventures of a Wall Street Legend
“Fortunately, the fallible, erratic Baruch of fact that emerges from Grant’s book turns out to be more fascinating than the blander one of legend.”
—Tony Bianco, Business Week
“Anyone who reads Bernard Baruch: The Adventures of a Wall Street Legend will discover why James Grant has become our finest narrative historian of money. No one dissects the idiosyncrasies of supply and demand with greater wit and intelligence. While Baruch has had many biographers, none of them have attained Grant’s aesthetic sensibility, understanding of finance, or his inability to be more respecting than respectable.”
—Matthew Winkler, Editor in Chief, Bloomberg Business News
“Similar to Reminiscences of a Stock Operator, only all fact, is James Grant’s excellent biography, Bernard Baruch. Not only does it cover such great moments as when Baruch visited the Tacoma suburb of Boston to acquire the copper mill for American Smelting, but all sorts of sophisticated dealings on Wall Street. It also contains Baruch’s set of trading tips.”
—Greg Heberlein, The Seattle Times
Grateful acknowledgement is made to the following for permission to quote excerpts:
• From the Herbert B. Swope Collection, Howard Gotlieb Archival Research Center at Boston University.
• Princeton University
• Bernard M. Baruch Papers. Mudd Manuscript Library. Department of Rare Books and Special Collections. Princeton University Library.
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Table of Contents
Praise for Bernard Baruch: The Adventures of a Wall Street Legend
Preface
Preface to the Earlier Edition
One: A Doctor’s Son
Two: Three Dollars a Week
Three: Baruch’s Wall Street
Four: “Wealth Commenced to Pour In on Me”
Five: His Own Man
Six: The Baron of Hobcaw
Seven: Striking It Rich Reluctantly
Eight: Poison-Pen Letter
Nine: Captain of Industry
Ten: Plainspoken Diplomat
Eleven: Farming, Money, McAdoo
Twelve: “I Would Stand Pat”
Thirteen: Suffering Roosevelt
Fourteen: “His Métier Was Peril”
Fifteen: The Atom and All
Notes
Index
About the Author
Preface
Bernard M. Baruch and I were at each other’s sides for four years, he in posthumous, archival form. We had our ups and downs together. I began work on his biography with the hypothesis that there was less to the legendary investor and mythical Adviser to Presidents than met the eye. Bringing out the truth, I hoped to put a famous American life in the context of almost a century of American financial history.
I was successful in one thing, at least. I was able to show conclusively that Baruch, as a moneymaker, was only human. Thus, he did not sell out at the top in 1929—he was, indeed, bullish—a fact that may prove to be of more than academic interest in the highly speculative market environment of 1996. However, what I quickly came to understand was that this fallibility was worthy and appealing. Certainly, the success that the mortal Baruch enjoyed through trial and error was harder won than any that the legendary Baruch might have achieved through pure clairvoyance. My skepticism turned to admiration.
And presently, admiration was mingled with affection. As I read Baruch’s correspondence and talked to some of his surviving friends, I began to like him. (“I nearly laughed myself sick at the idea of your looking dignified at the time the degree was conferred upon you,” Baruch wrote to his old friend Frank Kent, star political columnist of the Baltimore Sun, on the occasion of Kent’s receiving an honorary degree for which Baruch had nominated him. “Your poor wife! Your poor wife!”) I, too, became his friend. And then, as the years passed and as my research moved into the public phase of his career, all previous feelings gave way to an overwhelming sense of exasperation. By the time the first book was published, in 1983, I was glad to see the back of him. Then, again, I have no doubt, Baruch would have been delighted to be done with me.
The differences in our lifestyles were unbridgeable. Baruch, who was born in 1870 and died in 1965, lived in a Fifth Avenue mansion, a South Carolina plantation, and a Scottish castle, among other splendid addresses. He loved hunting, racing, boxing, motoring, speculating, and passing the time of day with his boon companions. He would travel to Saratoga for the racing season and to Europe to take the waters. He was a man’s man and a ladies’ man all at the same time. The circle of his friends naturally tended to exclude biographers, harmless, bookish people who are always writing (or preparing to write or pretending to write) and who tend to talk about little except their subjects. Baruch loved to talk about himself, but even for him there were limits.
The paucity of sex in this book (with which I was taxed by some readers after its first publication in 1983) can be put down to my determination to hold to the same high evidentiary standards in romance and adultery as in speculation. The unintended consequence of this scruple is the impression conveyed through omission that Baruch was not very interested in the opposite sex, that his marriage was a success, or both. Neither was true, in fact. The evidence on this score, although circumstantial, is strong and convincing. Baruch’s marriage having become a formality, he ardently sought female companionship outside of it. He loved women and they him.
As for the financial side of things, previously untapped primary sources helped to shed new light on Baruch’s speculative and investment methods. These sources included the documents in which Baruch carried out some stock market-related litigation, the minutes of the New York Stock Exchange deliberations in which he participated and—a particular gold mine—the correspondence that traced his venture-capital investment in what was to become the Texas Gulf Sulfur Company. I studied his brokerage house records from the late 1920s and early 1930s and old documents, interesting and otherwise, from the State Department and the Federal Bureau of Investigation. None of these, I think, had been cited before.
Rereading my record of Baruch’s life, I thought that the speculator particularly distinguished himself at the Versailles Peace Conference. In service of his hero Woodrow Wilson, Baruch brought a rare and valuable common sense to the economic negotiations, in the process crossing swords with John Maynard Keynes. As a rule, Baruch’s pronouncements on public issues were oracular or platitudinous, and he was a tireless defender of the institution of the garrison state, from which the end of the Cold War has delivered us. At Versailles, however, his special Wall Street intelligence—intuitive, incisive, down-to-earth, impatient for results, focused on future outcomes—was just what the historical moment seemed to need.
My politics are libertarian, whereas Baruch’s were not. Or, more correctly, his were usually not. Sometimes, he was the epitome of the Grover Cleveland Democrat, a proponent of limited government, hard money, and individual liberty. More often, he seemed to profess something else. In the political arena, he seemed to have no clear purpose, except patriotically to advance the interests of the
United States as he understood them. Once he condensed his ideological contradictions into a single sentence of moderate length: “I have unlimited faith in the American people taking care of themselves—if they are told what to do and why.”
In finance, in clear distinction, his life was purposeful, artful, and even inspirational. In the stock market, he realized harrowing losses as well as fabulous gains. In venture capital, he sometimes miscalculated (as with his attempted rehabilitation of the Wabash Pittsburgh Terminal Railway Company); or, calculating correctly, he sometimes committed himself too timidly (as in Texas Gulf). He did not buy the market at the 1932 bottom any more than he sold it at the 1929 top. Still, he made his millions, and, more impressively, he kept them. If he bought too little, sold too soon, or seemed on occasion to be otherwise risk-averse, it was perhaps because he was mainly risking his own money. He was a freelance capitalist, a type rarely seen in the institutionalized financial markets of the late twentieth century.
At this writing, the stock market is higher and more popular than it has ever been before, and the idea that a mutual fund is little riskier than an insured savings account has gained credence.[1] Baruch would have disagreed, I suspect, although there can be no telling how he might have been positioned in this, the greatest bull market ever. Possibly, he would be even more bullish than the next fellow, as, indeed, he was in the terminal phase of the Coolidge boom. Baruch’s speculative genius was his trader’s flexibility. What he said (or was quoted as saying) was less important than how he acted. That he was able to regain his bearings and salvage the greater part of his fortune during the long bear market of the early 1930s was a feat of discipline that every investor must admire.
Baruch was an old-fashioned millionaire who had less money than the public imagined but more than enough to live as the public imagined that every millionaire should live. Was his a happy life? He was a poor father, he presided over no railroad (a lifelong ambition), and he spent the last several decades of his political career on the outside looking in. However, he was exceptionally happy in his own skin. His vanity was pure and innocent. “What a fine figure of a man I am,” he would say, meaning every word of it. Walking down Madison Avenue in New York, he would beam at passersby, trusting that they would beam back at him, which they often did.
In the special cutting department of the Brooks Brothers store on Madison Avenue and 43rd Street today is an unidentified portrait of an elderly gentleman, luminous, elegant, well tailored, and quite clearly pleased with himself. It is none other than Bernard Mannes Baruch, my friend.
JAMES GRANT
New York, New York
December 1996
1. Higher as measured by the ratio of stock-market capitalization to gross domestic product; for example, more accessible as measured by unprecedented, $20 billion-per-month inflows into equity mutual funds.
Preface to the Earlier Edition
Dorothy Parker once said that two things confused her: the theory of the zipper and the exact function of Bernard Baruch. If by function Mrs. Parker meant a salaried, every day job, Baruch was without one for most of his adult life. As a self-made millionaire he didn’t need one, and as a man who, in the public arena, would rather advise than act, he usually didn’t want one. In 1903, at the age of thirty-three, he gave up a lucrative partnership in a Wall Street brokerage firm in order to invest and speculate with his own money. In this he succeeded brilliantly, though not without suffering an occasional loss that (as he put it) “would make an ordinary married man go out and shoot himself.” He remained a private investor until the First World War, when his function became the tangible one of heading the United States War Industries Board, an agency that sought to reorder the market economy with a kind of makeshift central planning. After the Armistice he traveled to Paris to serve with the American peacemakers, then came home to tend his fortune and to make a career in the ethereal capacity of counselor: to Presidents, the Democratic Party, farmers, Congressional committees, and, through his many friends in the press, the public at large. Though from time to time he did consent to serve in one official capacity or another—after the Second World War, for instance, as American delegate to the United Nations Atomic Energy Commission—his ordinary role was that of self-appointed consultant, not office-holder. As a literal matter he preferred the sunshine to any office, and the familiar photographs of him cogitating on a park bench across the street from the White House somehow reassured millions of Americans that the nation’s leaders were being sensibly advised. Following his stint at the United Nations (which followed years of wartime advisory work) there was an outpouring of public affection for Baruch the likes of which few elected officials have ever enjoyed. For years, honorary degrees, testimonials, commissions, resolutions, awards, and citations poured in on him, not excluding a framed membership certificate from the Society of Yogurt Eaters in 1955 and, in 1956, a certificate of Honorary Membership in the Class of 1918 at West Point.
After his death in 1965 at the ripe age of ninety-four, National Review perceptively described him as a “good citizen” in the Stoic tradition, someone “not passionately committed to party, faction, or cause . . . but . . . firm in his belief that lawful government is a part of the reasoned order of nature. When lawful government [was] in danger from domestic or external enemies, he [was] ready to do his part in defending it.”
It might fairly be asked what more can be said about a man whom four biographers have already tackled and whose autobiography runs to two volumes. My answer is that Baruch’s financial career has been largely unexplored, except by Baruch himself, whose recollections on the subject were perhaps understandably selective. From time to time he would bemoan the myth of his trading infallibility, but he could bring himself to deflate only so much of it. He was, in fact, a gifted trader, but the details of his career as a New York Stock Exchange governor, as an unlucky railroad bondholder, and as a temporarily bewildered investor during the 1929 Crash have never been told before. Through most of this book my emphasis is on money and markets.
Anyone who made $1 million in the stock market then put that first million at risk to earn a second, less important million, and so on until he accumulated roughly $25 million, as Baruch did, obviously was willing to climb out on a limb. “The very contemplation of it,” wrote Fred Schwed Jr. of that speculative cast of mind, “makes my bourgeois soul shudder.” Baruch amazed his middle-class friends with his proclivity to gamble—he told Harold Ickes that he had put $10,000 on Roosevelt to win a third term in 1940, and that the President, not unreasonably feeling a proprietary interest in the outcome, had asked to be cut in on the winnings, and was—but by his forties he had put his plunging days behind him. In his middle and late years he conserved and husbanded his fortune. So careful a venture capitalist was he in what proved his grand coup, the founding of the Gulf Sulphur (later Texas Gulf Sulphur and still later Texasgulf) Company, that he declined repeated offers by his fellow investors to take the property off their hands for a song.
By necessity, a successful stock trader holds no brief with lost causes. If he’s wrong on the market, he must cut losses or risk financial extinction. Baruch brought this trader’s flexibility to national politics. In general he believed in the old-time Democratic tenets of hard money, low tariffs, and individual liberty, but when the political trend changed during the New Deal he bowed to the new age. In public life he was the least audacious, most risk-averse of men. As a young man he grew rich by taking chances, but as an old man he became famous by playing it safe.
Besides his autobiography, Baruch left behind an extensive and magnificently accessible archive at the Seeley G. Mudd Library of Princeton University, a lifetime’s trail of legal and corporate and public documents, and a small army of friends, admirers, and detractors. The years have thinned the ranks of that army, but a number of people whose lives touched Baruch’s were kind enough to share their reminiscences with me or in other ways to lend assistance. I am beholden, then, in strictly alpha
betical order, to: Adele J. Busch, Benjamin J. Buttenweiser, John Chamberlain, Margaret Coit, Thomas G. Corcoran, Stanley T. Crossland, John Davenport, Harold Epstein, Virginia Epstein, Mae Fitzsimmons, Kathleen Gilmore, Eric Gordon, Luther H. Gulick, W. Averell Harriman, J. Victor Herd, W. J. Hirsch Jr., Ira Langsan, Samuel Lubell, Clare Boothe Luce, Marcia Kendrick McCue, John F. McHugh, Robert G. Merrick Sr., Robert Moses, James Myers, Elizabeth Navarro, Joseph Orecchio, Dorothy Rosenman, Vermont Connecticut Royster, Paul Sarnoff, Dorothy Schiff, Ella A. Severin, Oscar Straus, Henry J. Taylor, Blanche Higgins Van Ess, Dr. Henry Viscardi Jr., Irving Weiss, and Dr. Martin Zweig.
As far as possible I have tried to work from original sources and documents, but without the assistance of numerous experts, researchers, scholars, and archivists, that ambitious undertaking would have been impossible. I would therefore like to thank (also in alphabetical order): Katherine K. Baran, Florence Bartoshesky, John P. Boland, Nancy Bressler, Franklyn J. Carr, Mary Cope, Cindy Crowley, Ruth Dennis, Josephine C. Dzikowicz, Robert H. Ferrell, Deborah Gardner, Stephen P. Gietschier, Benjamin Greenberger, Gary Gunderson, Henry R. Hecht, Sim Johnston, John C. Kavanagh, Maria K. Kavanagh, Frank R. Levstik, Carol K. McGinley, Nicholas X. Rizopoulos, Michael Sandroni, Darnall C. Steuart, Harold Swarthout, Kenneth W. Thornton Jr., Eliot B. Weathers, Dianne Yaeger, and Peter Yaeger. Special thanks go to Mark Fury, an indefatigable reporter, and to a scholar whom I have never had the pleasure of meeting, Jordan A. Schwarz, author of the rich political and economic study of Baruch titled The Speculator: Bernard M. Baruch in Washington, 1917–1965 (Chapel Hill, North Carolina, 1981). And my appreciation of the scrupulous checking and editing of Patricia Miller is very great indeed.
My thanks, too, to my editor at Simon and Schuster, Alice Mayhew, and to my editors at Barron’s, Alan Abelson and Robert M. Bleiberg, for their repeated gifts of that most precious commodity, time.