Monday, November 21, 2005

Shrewdness and Gumption

Younger readers of the Guinness Book of World Records during the 1960s and 70s probably reserved a special chamber in their tortured little psyches (one shared with that image of Margaret Hamilton riding her bicycle through a Kansas twister in The Wizard of Oz) for that photo of Hetty Howland Green, branded by the McWhirter brothers as the "world's worst miser" -- that one where she is marching through Manhattan cloaked in a drab black dress and hood, clutching greedily at some variety of commercial paper like Simon Legree clutches Little Nell’s mortgage.

While it is true that she achieved terrifying new extremes of avarice while preserving her investment corpus (letting her son go lame and suffer a leg amputation rather than taking him to a doctor, goes one example), undoubtedly inhabiting a pathologically compulsive plane, history has been unfair to the Witch of Wall Street.

"Her talk about things in general is full of quaintly original sayings, New England shrewdness and 'gumption.' She is 'down' on trusts, lawyers, professional reformers and 'new woman' fads. She believes in the bicycle but draws the line at bloomers." -- H. Tyrell, Demorest (May 1897).
Henrietta Howland Robinson was born on this day in 1834 in New Bedford, Massachusetts. At an early age she was given opportunities to understand and even control the flow of finance in ways for which most men -- let alone the fiscally-marooned women of her time -- had little appreciation. She was, to put it plainly, a financial genius. To be a little fairer than the McWhirters, perhaps her realization that men resented her control over her own finances not only drove her to dominate her own considerable wealth with a vengeance, but to hoard it as well.

Her Quaker father taught her to value plain living and profitable investments, getting her to read the stock market reports to him as soon as she could make out numbers. Finishing school in Boston did not break her spirit, and after inheriting the million-dollar fortunes of her parents and her maiden aunt, she spurned the attentions of fortune-seeking suitors, settling on a man of independent means, Vermont trader Edward Green -- but not before getting him to sign a prenuptial agreement whereby she would not be responsible for his personal debts.

She bore Green two children while wheeling-and-dealing in the London financial markets, favoring real estate and railroads rather than more ephemeral stock investments. Within a few years, Green had spent himself into penury, and Hetty separated from him, building her $5 million dollar inheritance into a fortune of $25 million by the time she left Green through reinvestment and providing high-interest loans to desperate entrepreneurs.

Taking plain living to an extreme, she wore the same shabby greenish-black dress, washing only the hem to conserve water and soap; conducted her business from the inside of a vault at the Chemical National Bank; stayed in dingy apartments; and heated her oatmeal dinners on radiators. While visiting a friend, at the age of 82 Hetty suffered a stroke arguing with her friend's cook over the merits of using skim milk in a recipe instead of whole milk, and died shortly thereafter, on July 3, 1916, in Manhattan.

Although her one-legged son Ned was a spendthrift and her daughter Sylvia was a financial neophyte, Hetty had resolved to keep her entire fortune in the family, leaving the two of them $100 million. When Ned died, Sylvia was the guardian of a $200 million estate, which she bequeathed "like someone throwing handfuls of money from a tall building" (according to one Time-Life writer), apportioning it among hundreds of charities, churches and universities.

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Anonymous Anonymous said...

My grandmother (1894-1974) was a small beer version of Hetty Green. My grandfather died in 1935, and his estate consisted mainly of a $125,000 life insurance policy, which she first invested in apartments. After a tenant took her to court for unauthorized entry, and won, she sold her apartments and bought stocks, possibly on the advice of an advisor whom she sorely missed after his 1957 death in a car crash. With the benefit of hindsight, we can see that she got into the market around the eve of WWII, when stocks were weirdly cheap. For example, the dividend yield on the S&P90 exceed 9% in 1941. 1942-72 was a long bull market, and she rode that bull for all he was worth, which led her to have a very high opinion of her financial acumen. Her estate was settled near the bottom of the 1973-74 bear market, which markedly reduced its estate tax liability. When I calculated the annual rate of appreciation of her portfolio over the 39 years after the death of her husband, I obtained an unimpressive 5.4%/year.

She was a miser who made my father and uncle suffer for it. She went to her grave cursing my father for the money he cost her when his Krohn's disease was operated on in 1937. Every morning she would turn to the financial pages and recalculate her net worth. While she lived in a fine neighborhood, her house was arguably the most modest one in it. She drove small ugly cars which she kept until they failed, and ate one meal a day in a working class cafeteria. She wore simple 1920s clothes until her death. Her only luxuries were summers in in northern Michigan and winters in Tucson AZ, residing in cheap hotels for the elderly. She gave nothing to charity except a few dollars to her church. When she died, the only people at her wake were friends of my parents; she had no friends.

On one level, I despise my grandmother for her miserliness, arrogance, and the harm she did to my father's personality. And insofar as my mother was concerned, she was the mother in law from hell. But I must confess that in some ways, I walk in her footsteps. I drive a 20 year old car and wear Sears Roebuck clothes until they wear out. My house has but one bath and a 30 year old kitchen, a house simpler than the ones in which I grew up. Most of all, what I inherited from her 30 years ago, I invested in mutual funds which I hold to this day. Like her, I reinvest a fair part of my dividends.

Unlike her, I do have a life: a week ago I paid $120 to see Bob Dylan live.

10:20 PM  
Anonymous Anonymous said...

please read the book millionaires handbook

7:37 PM  

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