Streetwise for Sunday, June 17, 2018
Today is Father’s Day, a sad reminder that it has been 16 years since you passed away. I know I can never actually give you this letter but if you could read it I know you would be even more shocked and overwhelmed by what is happening in the world and in the financial markets than you were when I wrote to you a year ago.
As always, I cannot help but reminisce over the early 50’s. You had your own brokerage firm, a seat on the Big Board and trading took place on Saturdays. And, as I always do on Father’s Day, I again read the first book you gave me about Wall Street. It has an inscribed date of 1955.
Remember how I was the Saturday chalk boy, ripping the latest Dow averages off the teletype machine each half hour and writing them on a blackboard for everyone in the office to see.
Although both computer technology and sophisticated mathematics have become an integral part of the investment world, many of the principles you taught graduate students using Graham and Dodd’s classic “Security Analysis” text remain relevant, even in today’s complex world of financial engineering.
I still have my well used and underlined fourth edition, although it is buried deep within a compliment of investment tomes, most of which bear a striking resemblance to treatises on advanced mathematics.
Perhaps if Wall Street had shown a greater adherence to Graham’s principles, we would be not undergoing the rampant greed that continues to trample the average investor.
Yes, the major equity indexes have reached record levels that both you and I would have thought impossible when you were still in the business, and even after you retired.
The fact that the markets continue to move upward, despite the rising degree of political polarization on both a national and global basis, validates your continued belief that it is our economy that drives share prices.
You would probably agree that moving toward a disabling protectionist trade policy is likely to chill both the economy and the financial markets over a growing concern that tit-for-tat escalation could lead to a full-blown global trade war.
I remember vividly when you left Wall Street because you concluded that the ethics of the Street had degenerated. Unfortunately, what troubled you about the Street back then would not even merit a slap on the wrist today.
The elimination of regulations, such as the Glass Steagall Act, which kept a degree of order and sanity on the Street, was in no small part responsible for what history will refer to as the Great Recession.
Congress subsequently tried to atone for the error of its ways by passing the Dodd-Frank Wall Street Reform and Consumer Protection Act. However, Congress is now in the process of repealing or defunding much of what Dodd-Frank put in place. Will we never learn.
As I wrote to you last year, you would have been astonished at the unorthodox monetary policy the Federal Reserve was forced into to resurrect the economy and reduce the unemployment rate.
The Fed was successful in bringing us back from the edge of the abyss and is now in the process of unwinding its accommodative monetary stance by raising interest rates.
At the same time the Fed is also reducing its large portfolio of Treasury and mortgage backed securities by not rolling them over when they come due. What many do not realize is that the Fed returns all its profits, i.e., interest payments on its holdings, back to Uncle Sam.
Well Dad that is all for now. I continue to follow in your footsteps by teaching investment courses for the Lifelong Learning Academy, now part of the Ringling School of Art and Design.
In addition, I just began teaching undergraduates for the University of South Florida’s Sarasota-Manatee campus. Wiley & Sons will be publishing my book on value investing at the end of the year. It was delayed because I keep finding new material I want to incorporate.
Oh, and remember I said I was working on my doctorate. Well, after nearly four years of study the end is in sight. I should receive my degree this coming December.
Your loving son.
Lauren Rudd is a financial writer and columnist. You can write to him at LVERudd@aol.com. Phone calls accepted between 9 AM and 3 PM at (941) 706-3449. For back columns please go to www.RuddReport.com.