Changing the Rules: Adventures of a Wall Street Maverick

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9780743211147: Changing the Rules: Adventures of a Wall Street Maverick

When Mickie Siebert arrived in New York in the mid-1950s, she had $500 in her wallet and drove a used Studebaker. Almost fifty years later she is known as the "First Woman of Finance," the only woman to head a publicly traded national brokerage firm. Pithy, vastly entertaining, and full of behind-the-scenes anecdotes, "Changing the Rules" reveals how Siebert forged her phenomenal success in the chaotic and cutthroat world of Wall Street. Three four-letter words are behind Siebert's career success: One is work -- she learned everything there was to know about a company before recommending its stock. The second is luck -- as an analyst in training, she had the good fortune to follow a fledgling industry that nobody else wanted. (The "dog" industry was airlines.) The third word is risk -- she knew how to assess liability and make a decision. Siebert recounts the resistance of the good gray Stock Exchange when she dared to infiltrate the boys' club, threatening to have a Port-O-San delivered to the NYSE luncheon club if they didn't add a women's bathroom. She reveals the backstage stories about saving Lockheed and selling Conrail (at the time, the largest stock offering in Wall Street history), as well as the changes on the Street that led to May Day, 1975, when she was first in line as a discount broker (and considered a pariah by industry standards). She tells of her memorable encounters with such legendary figures as Captain Eddie Rickenbacker, the World War I flying ace who ran Eastern Airlines, and Robert Brimberg, the iconoclastic "Scarsdale Fats" whose investing acumen was the envy of the Street. Writing with equal candor about the politics of finance and the financeof politics, Siebert recalls her five years as Superintendent of Banking for New York State -- when she helped to prevent a national fiscal crisis during the Iran hostage situation -- and her experiences as a pro-choice Republican senatorial candidate. Siebert's reputation for rocking the boat is legendary, and "Changing the Rules" is both a fascinating biography of a true pioneer, and a valuable strategic and informational tool for anyone who deals with or dabbles in the money game.

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About the Author:

Muriel Siebert is founder and president of the discount brokerage that bears her name, established in 1967. In addition to her work as Superintendent of Banking for New York State under Governor Hugh Carey, she is a founder and former president of the New York Women's Forum, a past president of the New York Women's Agenda and a member of the Committee of 200 (an international organization of preeminent businesswomen). In 1994 she was inducted into the International Women's Hall of Fame. She is currently on the boards of the New York State Business Council and the Greater New York Council of the Boy Scouts of America. Siebert lives in New York City.

Excerpt. © Reprinted by permission. All rights reserved.:

Chapter One

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 p...

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