Thursday, December 2, 2010

The Greatest Fund Raising Event of All Time

Background Leading Up to The Event
I was born in early January 1936 so I was old enough to form vivid memories of the attack on Pearl Harbor on December 7, 1941. In fact I can remember exactly where I was and what took place. With some friends, I was at the movies in the Kingsbridge movie house on Kingsbridge Rd in the Bronx. The film suddenly stopped, the house and stage lights went on, and the “matron” (that particular movie house always had a sort of headmistress - a very stern woman in a white dress - who stood guard, so to speak, keeping kids in line and maintaining order) strode onto the stage and announced that “the Japs” had bombed Pearl Harbor. I think it was from that moment on, by the way, and throughout the duration of the war, that the operative name of our enemy was usually “the Japs" as opposed to “the Japanese." (Certainly we didn't call it “The Second World War” until, I don't recall when, but sometime much later and probably well after the war ended in 1945) Everyone referred to our terrible enemies across the Atlantic Ocean interchangeably as either “the Germans,” “the Nazis” or “Hitler’s army.”

I am mentioning all of this because I'd like to make clear to you that my memory of when I was a five year-old is still very clear to me. In fact I have very clear memories from an even earlier age.

One of those memories is that we always had a small blue and white “JNF” (Jewish National Fund) metal donation-box in our apartment. I recall that my parents, and sometimes I, were always putting some coins into that box. The money was sent to Palestine “to help the Jews.” During the war years I think the money was also sent to people in Europe, Jews who we referred to as “refugees,” who were starving. (It was typical in those days that when children wouldn’t eat all their food, parents would remind them to eat because, “There are people starving in Europe.”) Of course it turned out that while there may have been some Jews and maybe other people being helped, what we didn't know until the end of the war was that these poor “refugees” were people who were being rounded up night and day by the Nazis and sent to their deaths in concentration camps in what came to be known, after the war, as the Holocaust. I have often wondered, but never investigated, where the coins collected in the JNF boxes from Jewish homes all over this country actually went.

Upon starting DeWitt Clinton High School in September 1949 I learned that this Bronx public school would be the first one in New York City, and probably in the county (possibly in the world) to offer Hebrew as a second language, alongside French, German, Italian, Spanish and Latin. Since Israel had just become a country, Hebrew, for the first time, was considered a living language and would be taught in a public school. I, of course, immediately enrolled and took three years of Hebrew course classes. Please don’t ask me why I am unable today to speak more than a few words of Hebrew.

By telling you all of this, the key point I want to make is that, from a very early age, I understood that it was very important, indeed that we had an obligation in general, to help Jews around the world and, in particular, to help Palestine which we always thought was the Jewish country, though of course it was not actually a country. Throughout my childhood the belief that Palestine would become a Jewish country seemed only to be a dream in our family; a hope, as far as I knew, of Jews everywhere. There was even a prayer, especially recited in our synagogue and all synagogues, for there to one day be a Jewish homeland, i.e. a Jewish country.

In May 1948 that prayer was finally answered. The United Nations voted to partition Palestine into a Jewish state, an Arab state, and an international zone around Jerusalem. The Jewish homeland was recognized and the State of Israel was born. After a bloody war with the Arabs who immediately invaded Israel in what came to be known as The War of Independence, the Palestinians (which is what the Jews were called at that time) had a country of their own to build. Two puzzling oddities remain; Israel became a country but was called a "State," and all the "Palestinians" overnight became "Israelis" while the Arabs suddenly were called the Palestinians.

1966 Visit to Israel
Since 1948 I always wanted to make a trip to Israel. However, I was only twelve years old when the nation was born and, more to the point, the cost of such a trip was not something my parents could afford. So, once I became an adult and established in my own right, I finally felt I could afford to satisfy this longtime desire. In August 1966 I told my five-month pregnant wife, “We are going to Israel.” Our first-ever trip abroad was not going to be to Europe, as most of my friends were doing, but much further, to the land of my long-held thoughts and dreams; Israel.

I procured a copy of Israel on Five Dollars a Day as our guidebook, purchased tickets on a four-engine propeller-driven El Al airliner, booked a room at the Tel Aviv Hilton (one of the only two big hotels in Tel Aviv; the other being the Sheraton) and arranged to rent a car at the airport. Off we went for three weeks, with a plan to drive all through the country to which we were drawn and where we knew not a single person.

We took off on a very hot day in August and arrived about 12 hours later on an even hotter day in Tel Aviv. The plane was noisy -- if you can remember what four-propeller engines sound like you’ll remember them as very noisy and that they cause entire plane to vibrate jarringly. We sat window-side in three-across seats. I sat in the middle seat next to a chap named Shapiro (inexplicably, he pronounced his name Sháp-a-row), a furrier from Philadelphia, who had made a reverse-aliyah from Israel to the US at the age of 17 or 18 - I think he was at the time in his late thirties - and was returning to Israel to visit family for the first time. When we neared Israel he asked me if I would carry a movie camera he had purchased for the trip until we got through customs. He wanted me to give the camera to his brother in case he, Shapiro, was detained. It seems he was afraid that, since he never served in the IDF (Israeli military), it was possible that he would not be allowed into the country unless he went into the army, which he was not prepared to do. Long story short, they detained him and told us they were putting him on a plane back to the States unless he agreed to military service, which he did not.

Another thing happened to us on the plane. The last several hours before you arrive in Israel the plane flies over the nothing but water; the Mediterranean Sea. In due course of the last hours of a long twelve-hour trip it came to pass that suddenly we saw land. What happened at that point was that my eyes watered up, tears streamed down my cheeks, and I was filled with unexplained emotion. The same thing happened not only to my wife but probably to just about everyone aboard that plane. On my next trip, which wasn't until 26 years later, in 1992, the same thing happened to me. Since that time I've made some ten more trips to Israel and each time I continue to have the same tearful experience. Understand of course that these are wonderful, joy-filled tears, not tears of sadness. My wife Barbara has made more than twice as many trips to Israel as I have and she too constantly tears up upon citing land, the Land, the Promised Land, the land of Israel.

A few words about what Israel looked like in 1966. The Shalom Meir Tower, completed just the year before was, at 34 floors, the only high-rise building in Tel Aviv and thus the tallest building in all of Israel and, in fact, in the entire Middle East. All the rest of Tel Aviv comprised two-story buildings and most roads to anywhere you wanted to go were sand roads; all cars were covered with sand dust.

In Jerusalem we stayed at the famous King David Hotel about which there is so much history to be told. One can easily look the history up on the Internet so I won’t comment further here. But I will tell you the experience we had upon being led by the bellhop into our hotel room. He opened the drapes covering glass doors opening to a balcony. Stepping onto the balcony we could see the lawn and garden below, behind the hotel. At the rear of the garden was a stone wall and beyond that, a large area with a barbed wire fence. Further beyond, over a distance the equivalent of several New York City blocks, was an area of sand and stones and rocks and lots of garbage. This was Jordanian territory, I realized. Beyond that we could see the walled, Old City of Jerusalem which, of course, was in Jordan, and the old Hebrew University grounds on Mt Scopus, to which Israel sent a weekly truck “caravan” because the University was occupied by a small body of Jewish police and caretakers. Each week a driver and two women and maybe a policeman went through the Mandelbaum Gate, past the Jordanian Guard post, and up the mountain to the University buildings. Over time (years) they smuggled every single book out of the University library by hiding them in their undergarments.

In the distance, beyond the Old City and the University, I saw an unusual building which appeared to have many huge glass windows, rounded at the top and as tall as a multi-storied high-rise building. I asked the bellhop what this building was that was very clearly to be seen from our balcony. His only response was dead silence. He “saw nothing.” I later found out that the building was a hotel. I think, but am not certain; it may have been called the Pan Am hotel (or a similar sounding name). The reason the bellhop would not say what it was that we were both viewing, was that he chose not to see Jordon, i.e. not to recognize or speak about what was in full view because it was in Jordan, which did not recognize Israel as a country, had no relations with Israel, and was still the enemy. For him, anything in Jordan did not exist.

One day we took a half-hour flight down to Eilat. The airport there consisted of a shack and a dirt field. At the beach there was another shack that combined a food-stand and locker rooms. A short distance up the beach there were a couple of old glass-bottom boats. We took a ride and viewed the coral reefs. Eilat in 1966 was nothing more than a frontier town similar to what you’d see in an old western…only smaller. When you visit Eilat now it is difficult to imagine what I saw in 1966, given that the beach area of Eilat today resembles Miami Beach.

During our entire three-week trip the principal news was that there was an Israeli PT boat stuck on a sand bar in the middle of the Kinneret (the Sea of Galilee) which was being shelled daily by Syrians firing cannons and machine guns from the Golan Heights above the great lake. This continued for many more weeks beyond out visit. Fortunately the Syrians had terrible aim and/or meager explosives in their shells because the PT boat somehow was not severely damaged. The Israelis apparently did hit some of the Syrian troops ensconced in bunkers on the Heights as each day Israeli Mirage fighter planes fired on them. One could often hear the sounds of the aircraft and occasionally the weaponry. Little did we or anyone know that this would be one of the events that was a prelude to the Six Day War which commenced less than a year later, on the morning of Sunday, June 5, 1967.

Rudolph Sonneborn
There are only a few people who can qualify for nomination as "the person most responsible for the existence of the State of Israel.” In my opinion one of those people is most assuredly Rudolph G.Sonneborn.

In 1919 (aged 20) Rudolf visited Palestine from January to August, acting as the Secretary to the Zionist Commission. He was investigating the feasibility of creating an independent Jewish State of Israel on its territory. A detailed account of his trip was recorded in “Letters Home.”[1] During this trip Rudolph began a close friendship with David Ben-Gurion, which lasted the rest of their lives.

In 1947, shortly before the end of the British mandate, David Ben-Gurion asked Rudolf for help. Ben-Gurion explained that the Arabs states that surrounded Palestine were arming to the teeth and that when the British pulled out the Palestinians (the Jews) would be attacked. They would need all sorts of war supplies ranging from the obvious; guns, bullets and explosives, to the not-so-obvious; brassieres, because women would have to fight and be clothed as well as men.

Rudy, as his friends and family called him, immediately sprung into action and made the necessary telephone calls to American-Jewish activists, telling them only that their presence was required at his apartment at a particular time and date. A small gathering of these gentlemen assembled at his apartment and were addressed by David Ben-Gurion, who explained the situation, what was required and why their help was urgently needed to send supplies to the Jewish community in Palestine and its military force, the Haganah. The group became a secretive, nationwide organization led by Mr. Sonneborn: Materials for Israel, also known as the Sonneborn Institute.

In my opinion there are only a few people who can qualify for nomination as "the person most responsible for the existence of the State of Israel." One of those people is indeed Rudolph G. Sonneborn. The amazing part is that the only place you will ever read anything about him and his enormously critical role during the period prior to the War of Independence, and about his unique group, the Sonneborn Institute, is in Leonard Slater’s book entitled, The Pledge. (Robert St. John, in several of his books about Israel such as, Shalom Means Peace, mentions the Sonneborn Institute maybe twice, and Rudy's name possibly once.) The Pledge, a fascinating and, for me, spellbinding true story, contains mystery, intrigue, defiance of the U.S. ban on shipments of war materials and violation of The US Enemy Neutrality Act (which had never been invoked since it became law in 1776), ingenious maneuvering, secretive meetings and purchases, hidden shipments and even the sexual encounter of a Central American dictator. Everyone interested in Israel should read this book and know not only the fascinating story, but learn about Rudolf G.Sonneborn, one of the most important, yet most private of men, in Jewish history. There are no monuments of plaques to be found honoring Rudy. Although his last wife, who had been his nurse, arranged for a sentence about him to be etched in stone on a lookout point below Hebrew University, overlooking the great city of Jerusalem.

Burnham & Company
Having started out at the very bottom of the institutional research department at Burnham & Co. in December 1959, by 1962 I was a one promotion away from becoming a fledgling security analyst in the research department. My desk was outside the door of two senior analysts David Norr and John Furth. David was a brilliant and quite successful analyst who was a prodigious producer of written research reports. He wrote more reports than anyone in the department (of course it helped that he wrote in the style of a Western Union telegram) and they were all good ones.

Norr ran an advertisement for an assistant. He hired the best responder, a fellow named John Z. Katz. John was a nephew of Rudolph Sonneborn (John's mother was Rudolf’s sister) and worked for his uncle's company, Sonneborn Oil and Chemical. A little bit of trivia is that her name was Amalie, and her brother named his brand of motor after her and it became quite a well known brand. Today Amalie markets motor oils, hydraulic oils, gear oils, greases and a variety of commercial and industrial lubricants.

The Sonneborn Institute was moving its New York City office to Mahwah, New Jersey and as Katz had no desire to become a commuter, he became David Norr’s research assistant. Shortly after his hire however, David Norr quit the firm when he was passed over for a partnership while his roommate John Firth was made a partner. I'm sure David thought he was a superior analyst, and that he was passed over because he came from the wrong side of the tracks. Moreover he couldn't, I think, abide Firth approving all of his outgoing letters (a partner had to approve all letters on company letterhead) and research reports. So he quit the firm and John Katz was left hanging in the air, "boss-less."

Joe Kirchheimer, the head of research, asked me to oversee the activities of John Katz and look after him, i. e. to be his boss… sort of. John and I worked closely together, co-authored numerous research reports and quickly became close friends. I was one of the few analysts in the research department who was registered as a stockbroker and had some brokerage clients; I had developed a "book” of customers and managed their accounts on a discretionary basis. Not to toot my horn, but I was pretty good at picking winning stocks and I made money for my clients. Noticing this, John told his uncle Rudolf about me and pretty soon made an introduction. Uncle Rudolf gave me a sum of money to invest for him at my discretion and so I made investments for and got to know Rudolph well. Although not so well that I was invited to his wedding when he later married Dorothy Sarnoff.

Slowly, over time, I learned from John all about Uncle Rudolf, his 1947 - 48 secret activities with the code-named Sonneborn Institute, and how he knew all of the leadership in the government of Israel (though it was more like the leadership of Israel all knew Rudolf Sonneborn).

Western Union Telegram
On Sunday, June 5 1967 war broke out between Israel and its surrounding (and other) Arab countries. Everyone everywhere was glued to the radio. Every day we would hear the Israelis were clobbering the Arabs. The armies of Jordan, Syria, Egypt and the others were being run over and cut down like a hot knife going through butter. Their air forces were decimated; it turned out Israel had struck first and knocked out most of the Arab aircraft on the ground. Israeli ground forces, tanks and infantry men, moved rapidly forward as the war was taken to their enemies, outside the Israeli borders. The speed at which the Israeli forces moved and the distance they covered was simply astonishing.

On the afternoon of Wednesday, June 9, the fourth day of the war, I received a Western Union telegram in the office. No one had ever witnessed the delivery of a Western Union telegram to the office, certainly not to anyone in the research department. The only Western Union telegrams that were sent to the firm were sent to someone in the syndicate department, which probably received them every few days from underwriters confirming Burnham & Company participation in a stock or bond offering.

I thought the telegram to me had to be a mistake but no, it was addressed to Lawrence J. Goldstein. I pulled the paper out of the envelope, unfolded it and read the following, urgent meeting, my office, 4 PM today, your presence required. It was signed Gus Levy.

Now of course I knew who Gus Levy was. Everyone knew who Gus Levy was. But Mr. Levy, pardon me "Gus," couldn't possibly have known me. Let me put it this way; Gus Levy didn't know me from a hole in the wall and I simply knew who he was; we’d never met. Mr. Gus Levy was the most powerful senior partner of one of the most powerful Wall Street firms, Goldman Sachs.

Why was He sending me a Western Union telegram and why did he want me to come to his office and what was so urgent? I was flabbergasted. I didn't have a clue. I took a walk around the research department and peered into the various offices and looked over at the desks of the analysts, who sat in a large open area separated by partitions, and quickly concluded no one else gotten a telegram.

Then I saw my friend John Katz. He had a Western Union-yellow piece of paper in his hand and on his face the same look of puzzlement with which I must've been walking around. Yes, my friend John had also received a telegram from Gus. In unison, John and I recited "urgent meeting, my office, 4 PM today, your presence required." We just stood there dumbfounded. I looked at John and John looked at me. John looked at me and I looked at John.

All morning and into the afternoon John and I thought about why we had received a telegram, why we had received this invitation - or should we call it a summons? - from none other than Gus Levy, the senior partner of Goldman Sachs. We racked our brains to think of a viable reason. Then we speculated.

Finally it dawned on us that it must have something to do with Israel, that it must have something to do with the war, which, ongoing as it was, was not yet called “the Six-Day War” of course. Maybe there was to be some kind of briefing? But why invite us? Why brief us? How come, as far as we can tell, no one else in the firm was invited, or ordered, to Gus's office?

I started to wonder, “does Gus Levy know my past, the interest I had in all things Jewish and my great devotion to Israel? Did he somehow know about my background, my visit to Israel as I’ve detailed above?”

After a lot of thought we had an “aha, that must be it” moment and concluded that it must have been that Gus and uncle Rudy knew each other extremely well and for a long time. People at the United Jewish Appeal surely knew Rudy and therefore must have known that John Katz was his nephew and thus also that John was employed at Burnham and, somehow, that the two of us worked very closely together. The fact that each of us made annual contributions, as modest as they may have been, to the UJA possibly also entered into it. Somehow they might also have been aware that we contributed to the Jewish National Fund, Federation of Jewish Philanthropies and other Jewish charities and that we bought Israel bonds as well. That had to be it!

Gus Levy was known to be very charitable with respect to Israel and very involved in Israeli causes and philanthropy. The same is also true of his firm, Goldman Sachs. These two facts were well known by us. Israel, the war, a briefing…we paused and lingered on the last thought, namely philanthropy and our support of both Jewish Israeli causes and - oh my gosh! - being a contributor as well. Could it be that the meeting would be some kind of fundraiser? Yes, maybe it was going to be a fundraiser!

But we still couldn't get over the fact that as far as we could tell we were the only two invited from our firm because, when it came to annual earnings and net worth, Jesus, we would be near the bottom of anybody's list of big givers at Burnham & Company. A large charitable gift for me at that time was chai ($18) or $25. So I prepared myself to go to a meeting at which, if they were asking for contributions, I could afford to make, perhaps, another $25 gift.

At about a quarter to four that afternoon we walked out of our 60 Broad Street office and across the street to the building in which Goldman Sachs had its offices. A uniformed "lobby man" directed us to an elevator. Several older gray-haired gentlemen attired in dark-colored or pinstripe suits got into the elevator with us. The elevator operator pushed the elevator doors closed, then the elevator gate, and leaned down on the handle of the elevator throttle as up we rose to the appointed floor.

The Greatest Fund Raising Event of All Time 

Upon reaching our floor the elevator gate was pushed open and the elevator doors opened by the elevator man. Stepping out of the elevator we found ourselves in a rather large nondescript room with a wood floor and bare walls. Rows of folding chairs had been set up auditorium-style with an aisle right down the middle and aisles on either side. Up front, right smack in the middle, was an opened, double-sized bridge table. Very nattily dressed men were to be seen, many with gray heads; most were milling about, speaking with one another and taking seats. I was 31 years old. Everyone else in the room appeared to me to be much older and some, clearly, twice or more my age. Even John Katz was older; though I had always taken it for granted that John was about my age, eventually I was shocked to learn he was 10 years my senior. Even so, everyone else in the room looked to be considerably older than John.

I took an aisle seat on the right side of the room about two thirds of the way from the front and John took the seat beside me. Very soon the room was brimful of men and all the seats - there may have been 100 or more - were quickly filled. As I looked around the room I recognized some of the faces. Not that I knew the people or had ever met them but, rather, I had seen their photographs in newspapers and magazines. There was the elderly, little and enormously powerful, André Meyer, the senior partner of Investment banking giant Lazard Frères. My heavens! There was the man I recognized as the senior partner of Lehman Brothers! I recognized the senior partner of H. Hentz & Company. I actually had met him once when my cousin's father-in-law, who was a broker at the firm for a zillion years, introduced me to him. There was Jack Nash and Leon Levy of Oppenheimer. It became obvious that the senior partners of every single Jewish-run firm were present and that all in attendance, save for John and myself, was a Wall Street bigwig. I. W. “Tubby” Burnham II, who sent his son Jon, who came in late and stood leaning against a wall near the front right side of the room. (So someone else at Burnham and Co other than Katz and I had in fact received an “urgent meeting, 4 PM, your presence required" telegram after all. Because the two Burnhams officed on a different floor than John and I did, we hadn’t known.)

Suddenly, I recognized Gus Levy rushing into the room to stand behind the double bridge table set up at the front of the room. Right behind him was a tall, slender, bespectacled older gentleman; well he was not old (he was 59) he was just older-looking. I recognized him as Max Fisher, National Chairman of the UJA at the time (and from 1965 to 1967).

Gus Levy banged loudly on the bridge table and the crowded room of men grew silent. He said, "Max is just back from the front and wants to tell you what's going on.”

The lanky, formidable looking man stood erect, looked out to the assembled audience and described where he had been and what he had seen and what he had been told by the IDF’s Chief of Staff and the Israeli Prime Minister during an unbelievably quick and short whirlwind trip to Israel. “You all know how the war is going, and it is going very well for us. Every day you are hearing on the radio and reading in the papers about the astonishing, rapidly moving Israel Defense Forces knocking out the Arab forces, having complete superiority in the air, disabling Arab armor and ordinance, tanks and trucks, killing thousands of their soldiers, taking thousands more as prisoners and capturing land as they move into the surrounding countries of Egypt, Jordan, Lebanon and Syria. They will finally capture the old city of Jerusalem, East Jerusalem and territory on the West Bank. Our soldiers are doing an unbelievable job, as you know. However, what you may not know is that we lost a couple of airplanes, and they cost many millions of dollars. We lost several tanks and they cost millions more.”

Gus Levy suddenly stood up and interrupted Fisher by banging with a gavel on the table, and said, "Alright, enough. You all know why we're here. Let's get started!”

With that, someone began calling the roll of attendees in alphabetical order. The first one to have his name called obviously had a last name beginning with the letter “A”. I can't recall his name, but it might've been Adler. He was a tall, slender, old looking gentleman. I will never forget his words. He said, "On behalf of my firm, we’re contributing $10 million.” But the guy didn't sit down. He then said, "And because I am a Jew, I myself am contributing another $10 million.” (While I don't remember the exact sum after all these years, believe me when I tell you I am not far off.)

There wasn't a peep in the room, not even a murmur. It was sort of like the rest of the crowd couldn't be impressed with what they had just heard.

I started to cringe in my seat.

They moved along through the alphabet calling each of these captains of finance in turn, by name. Each time a name was called the gentleman rose, said a few words about being supportive and being proud and announced a contribution. The amount of almost each contribution sounded like telephone numbers to me! (Telephone numbers then, as today were seven digits long. I think to make a long-distance call in those days one had to contact the operator to place a call. It was before the breakup of AT&T and I don't think area codes had yet come into usage, so my analogy of the contribution amounts resembling telephone numbers, I believe to be accurate.)

At the point after I entered the room and realized what was going to happen, that the purpose of the meeting was to raise money, I started thinking to myself well, maybe I could make a stretch to $50. I don't know what the net worth or the annual earnings of the people in this meeting room were but I guarantee you, at most, I might have had a teeny-tiny fraction of a percent of what any of theirs was.

I don't recall exactly what I was thinking I would do when my name was called, as the telephone number-like contributions added up as rapidly as a gas pump meter’s total, spinning larger and larger. But I finally became resolute, maybe it was $100, as I said to myself, “Self? Look, you can only give what you can afford. You're not in the same class as these guys. So just stand up when your name is called, announce your contribution and sit down.” My name being Goldstein and the letter “G” coming up seventh in the alphabet, that is, pretty early on, I resigned myself to what I simply had to do. Nevertheless I think I was shivering in my shoes.

My time had arrived; the name caller had arrived at the last names beginning with “G.” I was a nervous wreck but I was ready to do what I had to do, indeed, all I could do; announce my hundred-dollar contribution and sit down. I don't think talking to myself stopped the sweat from pouring down my back.

All at once it happened. “Lawrence Goldstein,” the roll-caller called out. Whereupon the man sitting right behind me stood up and shouted, "You mean Morris Goldstein.” And that was it. I don't know what he said after that. I don't know what he contributed. I don't know what people following Morris Goldstein [2] said or contributed. I don't remember much more at all. They continued through the roll call, naming the rest of the donors, and when it was completed everyone headed for the elevators.

I believe at least $100 million was raised in less than an hour for the UJA to provide assistance to Israel. I don't believe there's ever been as much money rose as there was that afternoon certainly never before and I'll bet never since. This was the Greatest Fund Raising Event of All Time.

[2] Morris Goldstein was the partner in charge of the research department of the stock brokerage firm of Glore Forgen. I knew Morris Goldstein, though we were not related. As an analyst I covered, wrote research reports, and liked National Service Industries, Inc. (NSI) and Morris Goldstein was a member of that company's board of directors. From time to time I would speak with him about the company. In fact he enabled me to have good insight into the management and the business, which was purchased by a private equity firm in 2003.

Thursday, November 25, 2010

Oldie But Goodie Offering Encouragement to Young People Interested in Security Analysis

The University of Michigan Business School Dean's Seminar Lawrence J. Goldstein

The University of Michigan
School of Business Administration
Ann Arbor, Michigan

Dean's Seminar
February 8, 1988

Who is Lawrence J Goldstein? What makes him tick? How does go about making investments? Asked by the Dean of The University of Michigan Business School back in 1988 to speak to anassembly of MBA students and to tell them exactly “what he does, how he does it, and how he cameto do it, he delivered the following talk. We present it here because we believe it will provides youwith insight as to just who and what and why our founder is and what we may do for you.

I founded Santa Monica Partners six years ago in order to seek long-term capital appreciation; build net worth for my partners and myself utilizing a single pool of capital; and, at the same time, have some fun.
What we have been doing is attempting to exploit what I call the "overlooked and/or ignored by otherwise intelligent investors" segment of the market.

What I want to do now is define this market for you, explain why it is the area of my prime focus, and then discuss my approach to investing.
Before going further, it might interest you to know something of my background. You will also see the genesis of and the basis for my views.

Born, raised, and schooled in New York City - I attended New York University. Upon entering I knew what I did not want to be -- neither doctor, lawyer, Indian chief, nor engineer or teacher, which were the two most popular professions for boys and girls respectively in my era.
I took a freshman course in investments and liked it a lot more than anything else I was into and achieved a good grade to boot. I found my calling: Wall Street became my goal. The way I summed
it up, it had everything one could want.

There was no chance for boredom - one day you could be in the automobile business, the next day in the furniture business, the day after you could be in the brewing industry, and you could look into a variety of companies within the industries.

Moreover, one could wear many hats. That of a security analyst, trader, salesman, deal maker, arbitrageur and so on.

As a further attraction, Wall Street was where the money was.
Unlike today, when I understand college grads go out into the real world and obtain several years of work experience, I attended University of Michigan Business School immediately upon graduating from college. I got my MBA after being here for 12 straight months (two semesters and summer school), which I gather is not possible today. Then I did my time with the U.S. Army, which also is not required of young people today.
Late in 1959 I was ready to give myself to Wall Street.

I decided to aim at becoming a security analyst in the research department of a brokerage firm. At that time Wall Street firms did not recruit as they do today (or did until October 19, 1987). The road to the Street was typically through nepotism. You had to be related to either the partners or the firm's best customer. Falling into neither category, I got out the Manhattan yellow pages and wrote to every single brokerage firm listed - there must have been several hundred. I'll spare you the details of the months that followed my mailings.

In the last week of December 1959, I started work as the most junior person in the research department of Burnham and Company. I talked them into starting me at $80 a week. (Previously I managed to land a job at a tiny firm for $70 a week, but they bought my lunch each day which I figured came to almost $10 a week. Therefore, I incorporated $10 in my $80 per week request at Burnham.)

After three days on the job I received a check for a week’s salary as a bonus. If you worked for the firm, you got a bonus! On the fourth day, I got my salary for the week because they paid every Thursday. So after four days at Burnham and Company I had two weeks salary in my pocket. I figured it was a good place to work and stayed 23 years at which time I left to start my own business.

Burnham and Company in 1959 had a very large research department even by today's standards. Their analysts covered every important industry and their reports were aimed at the institutional investor. My initial job was answering wires from the branch offices. If the analysts covered the company, I had to read their pearls, or question them to obtain an opinion. If the company was not covered, I had to dig into the company myself. I lived in hopes of moving up to be a junior analyst/assistant to one of the senior analysts.

One day in 1960 I picked up a tabulation of revenue and profit comparisons for a list of some 50 trucking companies. I noticed all had revenue increases while all but four had profit declines or losses. They were: Overnite Transportation, Roadway Express, Merchants Fast Motor Lines and Denver Chicago Trucking.

My curiosity aroused, I investigated. Do you know that one stock, Overnite, which was growing annually, had a $5 P/S BV, $1.15 of EPS and a 40¢ dividend -- yet was available to be purchased at $3 P/S (about 2.67 times earnings, 60% of book and yielding 13%).

I told my boss, the Director of Research, about the company. He pointed out the fact that the company only had 500,000 shares outstanding, half of them owned by the founder, Harwood Cochrane, and the stock wasn't "listed." It was in the Pink Sheets. No matter, this was a bargain. It wasn't of institutional quality according to my boss and this was an institutional research department. I was told to forget about it.
This was my first exposure to both the bargains in the Pink Sheets and also to the institutional mentality.

Overnite went on to earn $2.26 in 1961, and when the stock was at $15 per share (up five times) my boss relented some and allowed me to put out a research report. But it had to be on green bordered paper and reproduced in purple ditto rather than the regular photo offset black print on white letter head paper that regular research reports went out on. The company grew and grew and eventually in 1970 it listed on the New York Stock Exchange. On December 16, 1986, Overnite sold out to the Union Pacific Railroad at $43.25 per share. However, by this time, solely as a result of stock splits, there were 28 million shares outstanding. Adjusted, the 1960 $3 price and the 1961 $15 price worked out to $2,422, a not too shabby 31% and 23% compounded respectively over 25 years.

Soon, in addition to answering wires, I became the trucking analyst at Burnham and issued reports on the likes of Roadway and others. I even managed to round up four other analysts who specialized in this little, but key, industry and formed the Motor Carrier Analysts Group, one of the first splinter groups of the NYSSA.

In order to become a full fledged senior analyst, I, of necessity, sought out other niche areas so that I could have several groups to follow and thus be the analyst, on a level with the other seniors.

I discovered industries with four principal companies each, i.e. the brewing Industry, the Railroad Tank Car Leasing Industry, and also business service companies which permitted me to look at a whole host of companies that did not fall into a nice little industry niche. Included were cleaning and maintenance companies, advertising agencies, uniformed guard agencies and others. Finally I created enough industries and companies on which to provide reasonable coverage to become a full fledged senior analyst.

But always I was looking for ideas off the beaten path. Always I seemed to be looking for values that no one else had been interested in or even knew about. I think I came by my approach to investing honestly. Given the need to create my own niche in a research department covering the major industries, I simply had to look in the nooks and crannies of industries and the market if I were to become a regular member of the Burnham Research Department.

Other analysts were less interested in finding values and more interested in following the major industries and the major companies to the exclusion of all else - "maintenance research," as it came to be known. "Give the institutions what they want research" I called it. Filler for their files to support their belief that their growing funds should be invested in Fortune 500 type companies is what it really was.

I came to believe that the institutions were, contrary to popular belief, not interested in making money for their clients, not interested in income, not interested in beating inflation, and not interested in preserving capital. Rather they were bureaucrats behaving like bureaucrats. Their interest was in keeping their jobs. Thus, you buy IBM because if it goes down you say, "But it's IBM! You know IBM! Everyone owns IBM!"

On the other hand if you buy "I Never Heard Of It, Incorporated," and it goes down, you lose your customer. And if you lose your customer you lose your job.

Moreover, if "I Never Heard Of It, Incorporated" goes up tenfold in a year . . . . maybe, maybe at best you get a "thank you."

Therefore, mainstream investing, as opposed to "off the beaten path investing," has developed and flourishes among the entire institutional investment community.

Everyone focuses on relative value as opposed to absolute value. If the average company using some index is at 20 times, then the Blue Chip at only 15 times becomes undervalued in the institutional jargon and is a buy. Never mind that the index wasn't ever worth the 20 times. In my view the discount from the ever escalating index average method of justifying new investments is just the greater fool theory in operation.

More recently the institutions jumped on the latest bandwagon of conventional wisdom, the index fund. This hasn't made them money, only conventional, as they all knew when they lost 23.6% on October 19, 1987.
Now that you've got the flavor (and fervor of my views) you can see where I am coming from and you will better understand where I am leading you.
The Overlooked and/or Ignored Segment of the Market

There are some 2,200 stocks traded on the New York Stock Exchange, another 1,000 on the American Stock Exchange and about 5,200 traded OTC on NASDAQ. In all, 8,400 stocks for which the world can obtain instant price quotations. To my knowledge, fundamental information on most, but not all of these stocks, can be accessed and massaged via the various vendor data bases. And everyone does just that. Everyone has his criteria, sets up his screens and scrutinizes his list. But there is another large market segment for which this has not been possible. This is the Pink Sheet market. These are the less visible, nearly invisible stocks. The stocks in the shadows of Wall Street. The under-researched group or, more correctly, the not-researched group. This is the inefficient market. This is what I call the overlooked and/or ignored by otherwise intelligent investors segment of the market.

The market that I am talking about comprises some 14,000 stocks and accounts for 63% of all publicly traded equity issues. But it has a market value of $24 billion which represents less than 1% of the total available U.S. equity market value. The vast majority of these OTC issues are, as I say, overlooked and/or ignored. Many reasons exist for this situation; however, the principal contributing factor is the growth and concentration of substantial pools of funds under management by large banks and other institutions coupled with the trend toward fewer and larger brokerage firms servicing the investment community.

Large pools of money have consequently sought investment in larger companies with large market capitalizations. In addition to the economics of a company, the ability to move large dollar amounts in and out of stocks has become a key criterion in the decision to invest. Brokers, in turn, cater to this need to the exclusion of investments in most small capitalization companies. Both believe that it is more productive to put research man hours into a situation in which business can be done (i.e., significant amounts of shares and dollars can be traded) than into a situation in which profit potential may be substantially greater but volume transactions are not possible. Brokers, in particular, are reluctant to spend any time on a recommendation which cannot be disseminated to a very broad clientele without impacting the market. Of course, the need to generate commissions is also an important factor necessitating the dealing in securities with large capitalizations. This is particularly true since the advent of negotiated commissions which has further heightened the trend toward investing in big companies.
The effect of all this is to limit investing to only the largest companies. Some will consider investing in so-called small companies with market capitalizations as small as $100 million, while others will have special funds which consider $50 million and up, and on occasion a few institutional managers will go as small as $25 million.

The average OTC issue has a market value of $20 million (up from $6 million when I started my firm) or well below the size criterion of any institution worthy of the name. The average Pink Sheet stock is, of course, much less, having a market value of under $2 million. In effect, by ignoring the Pink Sheet stocks, investors are saying that about three-fifths of American management (of publicly held companies) are not worthwhile investments. However, it should be obvious that there are many smart managements among the approximately 14,000 - 19,000 issuers whose shares are eliminated from investment consideration. Furthermore, the excellent managements among the population of small companies eliminated from consideration are often available for investment at bargain prices.
What we have is a vicious cycle which has created a substantial pocket of opportunity in the aggregate for us to exploit. Stocks overlooked and/or ignored by otherwise intelligent investors. Stocks with market capitalizations which are small because they are ignored, and, in turn, stocks which are ignored because they are small.

It is important to note that we are not necessarily talking about small companies. Nor are we always thinking of small capitalization in dollar terms. Often it is just the number of shares outstanding that is small.
By way of example, Young's Market Company had 1987 sales of $500 million and market value of $87 million, but it had only 51,000 outstanding shares. Two years ago, Doubleday had sales of $500 million and market value of $56 million. Its outstanding shares totaled 139,000. You probably never heard of the former, and most investors never knew that the latter was public. A year ago Doubleday sold out to Bertelsmann for $500 million.

The Approach - How and What We Do
In order to find investment opportunities we had to have information. So we did the obvious thing. We wrote and telephoned companies until we built files on a large number of Pink Sheet trading companies.
By cross referencing the material with the Standard & Poor's Corporate Records and Moody's OTC Industrial Manual we were able to separate out those companies for which there is either no listing or only outdated summary data. Surprisingly our list includes hundreds of NASDAQ listed companies. All told, we have some sixteen thousand green file folders according to a Wall Street Journal reporter who counted them in 1979.
Because we maintain reports on thousands of non-reporting companies, our files are more comprehensive than those of the SEC. These non-reporting firms are probably among the most interesting bargain investments of all. They are companies with fewer than 300 shareholders that have elected not to report, i.e. not be 12G companies - they do not file 10-K's, 10-Q's or comply with proxy requirements.

I say that this group of firms may hold the most interesting bargains because these companies are hidden in the darkest shadow of Wall Street and there seems to be a very logical hierarchy of stock prices that exists.
Generally speaking, stocks trading in the non-NASDAQ segment of the market will sell at a discount from stocks trading over-the-counter on NASDAQ, and the latter, in turn, typically trade at a discount from comparable stocks listed on a stock exchange. The less visibility and the less information available to the investor, normally the larger the discount from "real worth." In short, when people don't know about a stock it usually sells for less than when many people do know about it. Consequently, there are far more opportunities for discovery in the inefficient markets than there are in the larger listed and NASDAQ markets. Furthermore, the degree of swing from undervaluation to overvaluation that is possible in the inefficient sectors makes for larger profit potentials than is generally available in the more efficient markets.

In the last decade, in each stock market cycle the amplitude of movement has been telescoped into shorter and shorter spans of time. This is the result of the increasing institutionalization and over-professionalization of markets. The odd lotter is no longer around to sell to. The continuing trend toward what today must be the maximum institutionalization of stocks has also led to the greatest stock volatility of all time. Exclusive of all the derivative products and program and insurance trading, institutions tend to want to buy their positions "now" and to sell "now," all at once. The less visible markets we prefer to deal in continue to exhibit long cycles and low volatility. So if you are patient and willing to do research, you can gather information while others gather stock, and you can do some real investing.

You know the age-old philosophical question: If a tree falls in the forest and no one is there to hear it, did the tree fall? Well, we geared up to listen hard while wandering around in a forest full of falling trees while everyone else was looking for needles in the haystack of the New York Stock Exchange or, more realistically these days, simply playing musical chairs.
At the heart of our approach are three tenets:
1. Avoid loss.
2. Diversify.
3. Believe in yourself, i.e., have the courage of your convictions.

Any damn fool can buy a stock and make money. My experience is that most who win big also lose big. The key to making and keeping money is avoiding loss. Therefore, I am not interested in hitting a grand slam home run at the risk of striking out.

I am not looking for the next Xerox, nor am I very interested in speculating in a company that will be worth a lot more if this, that or the other thing happens. Because if this, that or the other thing does not occur, then the stock probably goes down a lot because it wasn't worth what it was selling at in the first place.

For much the same reason I avoid investing in New York Stock Exchange stocks. Look, the minute you buy a stock on the Big Board it can go down on the next trade. Furthermore, if the earnings are only up 50% and the army of analysts following the company held expectations of a 55% or 60% gain, they all rush to sell. You see examples of this regularly.
This is exactly what happened a few weeks ago with IBM. In fact in that one, the analysts not only didn't get what they wanted, a more than 50% earnings gain; they also didn't like the factors that went into the increase, i.e., lower tax rate, currency translation benefits, etc. Everyone had what to say.

Now when we buy a Pink Sheet stock there is no immediate trade that follows. More likely it trades by appointment and we hope to have the next appointment and likely at the same price no matter what is going on. Furthermore, there are no other analysts with expectations to be shattered.

1. Avoid Loss

So, how do we avoid loss, you ask?
Well, the quick answer is that we look for stocks with low risk characteristics. The ingredients for this include the following.
As a general proposition, you must accept and agree that we are looking at a population of securities from which risk has often been drained out of their prices. This is by virtue of having been ruled out of consideration for investment as well as years of investor neglect during which the companies continued to grow and prosper.

Next we search out stocks with characteristics such as very low price/earnings ratio (such as two, three, four or five times current earnings), market price less than cash per share, market price less than current assets minus all liabilities, solid free cash flow at very low multiples, say two or three times, and high rates of earnings growth.

We look for firms which are top heavy on the top left side of the balance sheet and bottom heavy on the bottom right side of the statement.

In addition we see opportunities, exclusive to this sector, to reduce risk by making initial purchases at old, stable prices which haven't changed in months or years. Such stability is highly beneficial in avoiding loss. For example, if we discover a neglected stock which has been selling at $2 per share for two years and which we would agree might be worth $8 or $10 if it were "out in the open," and we purchase shares at $2, we probably could also agree that our risk is nil. Were we to buy the stock at $3 per share, while our risk would probably be considered very small, we could argue that we now have risk of about $1 because our own buying pushed the price up. If we remained convinced of the stock's value being at least $8, we then might conclude that we should accept the additional $1 risk because the potential is so large . . . . and we might do that. We might also consider paying, say, $4 for stock in "size" if it became available. Thus, we could limit our purchases to the $2 per share price in the interest of accepting what is deemed to be nil amount of risk or we could decide to take a certain amount of additional risk. The overriding factor determining our decision would be our judgment, after taking into consideration such factors as near and long-term appreciation potential, degree of our confidence in the potential for appreciation, amount of money we can invest, market environment and the available supply of alternative investment opportunities. Each situation is judged on its own merits.

Another risk reducing factor we take advantage of is conventional wisdom.
The way I see it, conventional wisdom won't make you money, only conventional.

Example 1: The Conventional Wisdom Regarding Low Priced Shares
Most investors assume that because a stock is low in price, i.e., under $10 or under $5, it is more speculative, riskier or, plainly put, junk. Moreover, if a stock should sell below a dollar, such folks will assume that stock to be in the category of garbage. While this may of course be a correct assumption at times, research shows it to be an incorrect generalization very far from the truth.

For example, is a company with an $8 book value per share, $6 per share of cash, no debt whatever, a long-term record of annual profits, in a steady to rising pattern (currently earning 70¢), and shares which can be purchased at $1.75, speculative junk? We think not, and this is a real situation.

Is a shell corporation with 2 million shares outstanding, one asset, namely $400 million in cash ($200 per share), no liabilities and a $400 million net worth ($200 per share), selling at $100 per share, a high grade security? If you agree with us that it is high quality at a bargain price, then perhaps you will also agree with us that a company with the same 2 million shares but which is only a hundredth the size, i.e., $4 million in cash ($2 per share) and a $4 million net worth ($2 per share), selling at $1 per share, is also quality at a bargain price. The former was a mythical company while the latter is real. It was at $1 for months and traded in volume (we bought lots of it). It was there only because it was a "dollar stock" and therefore a "garbage stock" to most investors. Most investors simply won't bother to look into the "dollar stocks."

Consider still another real case study with the following set of facts: The company operates in a growth industry. Earnings have risen six fold in six years with gains having occurred annually. Current net earnings are about $2 per share. Cash equals $9 per share and book value is $11 per share. Equity is four times debt while others in the industry all have more debt than equity. Is this stock speculative, risk laden or low in quality because its shares have traded under $6 in the past year? We think not. You can't, indeed you shouldn't, judge a book (a stock) by its cover (low price). But others do.

Example 2: The Conventional Wisdom Regarding Inactive or Thinly Traded Stocks

Closely held stocks are of great interest to us because others will not even consider them for investment.

We like to be invested along with major owners of a company. This is especially important when it comes to takeovers as I'll explain in a few moments. When we hear others who have looked at an inactive stock ask, "How are you going to buy enough stock?" and "What is going to make it go up?" and "How will you get out?’ we know we have the makings of a winner.

It has long been our experience that investing in hard-to-buy stocks makes lots of sense because you are forced to be sure you want to own the darn thing for the long haul; you do not buy such stocks in order to sell them quickly.

We think in terms of being willing to buy the whole company at the price at which we initially are willing to buy some shares.
If you buy a good company at a good discount from real value and you are willing to hold indefinitely, you make money and you've avoided loss. If you have a "good" company and it is regularly increasing its net worth, it is going to go right on building value. So even if its stock price doesn't change for a long period of time it matters little.

After buying shares at more or less the same price for years, you eventually reach a point where the nth share can only be purchased, and, in fact, does trade at a price which rewards you handsomely for years of patient waiting.

Being willing, ready and able to perform thorough research, even though we may only be able to purchase an initial position of modest size, works. If we believe risk is low and profit potential very large, we would do all the work necessary and would willingly buy just a few hundred shares if that was all that was available at our price. No one else is willing to do this. By exercising extreme patience, we are able to acquire worthwhile positions gradually over weeks, months and sometimes years. As I mentioned earlier all too many professional investors want to get in only in a hurry and/or only in a big way. They won't even be bothered to consider what even they agree is an otherwise very attractive investment. Of course, there are also many occasions when blocks of stock become available to us.

Frequently, we find our largest haul of shares can be made at year-end when people sell for tax purposes or houseclean what they consider to be cluttered portfolios. We are willing to patiently wait, maintaining a bid should anyone care to sell during the year or at year-end. Seldom do we find a need to chase after stocks. After all, there is usually no need to hurry if we are fishing in neglected waters. When there is a hurry, as there may be on a rare occasion, then we might consider reaching up for
stock and taking offerings in a particular situation.

2. Diversify

By being willing to own a very large number of individual issues with low risk characteristics, we believe we can further mitigate risk and yet not reduce the potential for unusual profit. We do not have any magical number of companies we would be willing to own. We do have positions in hundreds of stocks and are ready to own still more. The greater the supply of "nil risk" stocks of the ilk described earlier, the larger the list of companies which we think it is desirable to own.

We also see no advantage to having a rigid requirement for minimum size position. If a stock has a great deal of attraction and a limited amount of risk, we want to own it even if we are able to buy only 100 shares at our price. Conversely, we have also bought as much as 20% of an attractive investment when that was possible.

Given the vast number of investment opportunities with moderate risk to choose from we have built a broadly diversified portfolio. Again, it has been our experience that we only need a few stars to help us to a pleasant annual result and to achieve the goal of long-term substantial gains overall.

Buying inactive or closely held stock is very much like investing in private companies. Even though you do not see the price every day or see it changing, you know the value is growing. So you need a different mind set and a different mentality from most other stock market players.

I would like to say a few words about takeovers with regard to our market.
The acquisition and merger technique of growth has become an established fact of corporate life. We have, of course, been living in an age of competitive tender offers.
Unlike the typical stock exchange listed target company where key management players generally are not significant owners of the business but rather just hired hands, management of many over-the-counter companies and particularly the non-NASDAQ Pink Sheet segment own either the majority or a very substantial portion of the corporation. Consequently, the former are motivated to make a deal to keep their jobs while the latter only want the best price. Where management doesn't control much stock, the premiums paid by acquirers have typically ranged between 40% and 70% over market (occasionally as much as 100%). The more closely held over-the counter companies, on the other hand, usually sell out only for "real worth." As a result they have been able to obtain premiums of several hundred percent with 200% or 300% being more typical, and as much as 1,000% being paid on occasion.

While friendly deals can be made in the arena of the larger, more widely held company, the number of unfriendly takeovers or attempts at takeover is significant and apparently growing. Acquisitions of smaller, more closely held firms more often must take the form of negotiated transactions. You can buy them but you generally can't "steal" them near their unrealistically low market quotes where you can buy some shares. Consequently, potential for profit is larger.
In addition to large appreciation potential from takeovers, there are simply more companies in the over-the-counter markets to consider taking over. Non-NASDAQ companies are particularly alluring candidates to big companies because it is easier to do a deal out of the limelight. The scrutiny of government, competition and the press may well be much less. To fill in a product line it is less of a big deal and, in fact, there is even a willingness for a Fortune 500 company to overpay where a small obscure company is the takeover target. They will often pay more because they can make their very large or special capabilities available to rapidly expand the company's product or operational base. Often they decide that buying a "peewee" company is easier and faster than building a new plant.

3. Believe in Yourself, i.e., Have the Courage of Your Convictions

While I am talking about investing, I have got to tell you I think this also applies to all you do in life. I can't be sure that what has worked for me will work for everyone else, but I do believe that there is nothing you can't do if you really want to do it and you put your mind to it. There is no such thing as impossible. Cross out the word in your dictionary.

I mentioned early that when people say, "How are you going to buy enough shares?" and "What is going to make it go up?" and "How will you get out?", then I know that I have a winner. It means you will have that investment opportunity all to yourself until the day comes that the stock breaks out into the open territory of the visible efficient market. A good example of this is Oshkosh B'Gosh, which a year or two ago split 20-for-1, sold some shares in a public offering and listed on NASDAQ. To top things off, it was even included in the S & P 500.

I have professionally encountered three main types of people. Glib salesmen who only tell you all the attributes, hard nosed analysts who tell you all the reasons why something won't work. and salesmen-analysts and money managers who won't even bother to look or listen.
So believe in your own abilities -- they are probably no worse than others and possible a lot greater than others. Don't get turned off just because others don't agree with you.

In my investing, as in life, I have found:
1. Sometimes following the crowd doesn't get you where you want to go!
2. Sometimes it pays to be different!

And I said it before, but I'll say it again . . . .
3. Conventional wisdom won't make you - fill in the blank, in this case, money - only conventional!
4. Don't be afraid to go it alone and see if anyone follows!

Finally, I think one of my most successful business friends said it best when he said --
5. "Do what you like and do it well."

Thanks for listening.

Monday, November 15, 2010

New York Giants At Meadowlands Stadium

Dear David:

I sincerely want to thank you for your most generous gift of treating me to a Giants football game yesterday. My son and my wife asked about the game and my son who is a giant fan too said sorry the team did not show up; how was the new stadium. So I decided to answer him in writing. This is what I wrote. Please, please know it is absolutely no reflection on you or your generosity to me. I never look a gift horse in mouth. I did as I said above appreciate and again, thank you for the treat.

Oh one other thing would you believe I heard Mike on the FAN (WFAN radio) this evening talking about the lack of sit down eating facilities for the ordinary fan at the Stadium. I don’t know what price is considered above ordinary but I noticed that too. I am actually amazed fans don’t rise up and tell the owners a thing or two.

So here I go with how my trek out to the Meadowlands to see a giants game went.

Monday November, 15, 2010

I went to my first and probably last New York (that’s a joke as they are located in and only play in New Jersey) Giants game yesterday at the new Meadowlands Stadium

For me it is now an once-in-a-lifetime experience which nobody needs to experience.

I was thrilled when a friend invited me to see a game and mailed me a $100 ticket. Wow I thought this is going to be great. Back in the late 50s and the 1960s I had a season ticket with two friends. We went to the Giant games which were played in Yankee Stadium and subsequently in the now torn down Giants Stadium built in the Jersey Meadowlands before the new sports complex was built. In the dozen or so years we attended religiously the team was a perennial loser, as we three single guys became family men we found spending Sundays away from family, and especially to watch a team that always lost, we gave up our season tickets. In the years since I attended on game at the old stadium. This was to be my inaugural visit to the new Giants and Jets stadium and maybe would give me a taste to return to see games in person once again. I have long been an avid Giant fan but strictly a TV viewer

with great anticipation, I drove from Southern Westchester and reached the Sports complex fairly easily. The first thing I encountered was signs at all the very many parking lots reading “parking permit” parking lot. So I drove around looking for and expecting to find a parking lot at the complex where a permit was not required.

I was soon to learn nothing like that exists in the sports complex.

There were also signs “non parking permit.” So I followed one of the signs along twisting and turning roads and lost complete site of the stadium and the sports complex and found myself on Route something or other and then saw various private parking lots. If you don't have a parking permit (I had neither any clue I did not needed one nor would I have known how to obtain one) you park somewhere NJ where you have no idea where you are but are a long way from the stadium.

The first couple of lots, and I use the word advisedly, which I passed were really empty lots. Not empty of cars but areas that are nothing more than empty lots when they're not parking cars.You know, areas full of weeds and rocks and dirt and ground that is not level.

Then I came upon one which was not really one lot but a series of interconnected parking lots of various fast food dives and bars. They had a sign “shuttle bus.” That was appealing as I had no idea where I was. So I pulled in and immediately encountered a burly parking lot guy who said "$25 please.”

So I concluded that parking facilities in the sports complex are apparently only available to season ticket holders (I assume if they pay through the nose for the permits) as I saw red permits and blue permits and lots marked accordingly depending I would imagine on proximity to the Stadium. Suffice to say parking is atrocious and the arrangements despicable for anyone else who was as I was, “an anyone else.”

As I said I parked in a lot that had (lousy old) shuttle busses.

As I am giving you a picture of getting into the Stadium let me tell you here and now about getting out of the stadium-- and I left early with 7 minutes to play – it was awful. First of all I had to join the fast growing crowd at the appointed place we were told to wait for the buses at the end of the game. The crowd at the point was like time Square on New Year's Eve. When the bus arrived the crowd pushed and shoved to climb aboard. I declined to join the crowd but I really lucked out because the very next bus that came along stopped so that the entrance door was exactly in front of me. I was the first to climb aboard. The poor souls who followed pushed and shoved and stood so close to one another aboard the bus that I imagine not all of them were able to breathe at the same time.

The traffic getting out was bumper to bumper and moved extremely slowly at less than a snails pace. It too quite a long time to arrive at the now pitch dark interconnected lots where I was parked and had to really search around for my car

The traffic home was just miles and miles and more miles and more than halfway to the G W bridge not o dissimilar from the crowded parking lots; stadium egress is one awful and ridiculous experience

Now for the stadium and game experience.
The stadium lights went out three times and once left us in pitch darkness. It was a bit scary given 80,000 people mostly boisterous men; many looking a little thug-like.
Concerning the blackouts .....they told us nothing. Anyway even if the had the loud speaker system is so bad it is impossible to hear what is being said.

There were several penalties during the game that were not signaled by the refs and were not announced by the refs on the P A system which as I said was difficult to hear. Thus in many situations the crowd had no idea what happened

There were several TV reviews of plays BY THE REFS and while their are "giant" TV screens in four locations, they not once showed the play being reviewed and in fact they also repeat (do not show) any controversial plays.

The stadium is pretty and was totally full. The entry and egress is worse than awful – it is terrible

Fortunately I had no hunger because the food stations looked full of unappetizing offerings and I only saw them on way in and way out and the prices I noticed were out of this world.

The men’s room was tiny compared with Shea or Citifield or Yankee Stadium old and new.

The fact that the Giants won most of the game’s major stats as they gained more yardage, completed more passes, had the ball for more minutes, but showed no defense and made more errors meant they were on the short end of the score, and the interception of a Manning pass led to a 100 yard TD which is something rarely seen, but was exciting even if it wasn’t for my team.

Other than that I am glad to be home after a 2 hr return trip home which is normally on a Sunday a 35 min drive at most.



Thursday, June 24, 2010

Norman Oder says Mikhail D. Prokhorov and Bruce C. Ratner had lots of taxpayer help in the construction of an arena

A Russian Billionaire, the Nets and Sweetheart Deals

New York Times

Norman Oder says Mikhail D. Prokhorov and Bruce C. Ratner had lots of taxpayer help in the construction of an arena. ...

The New York Times

Dear Editor:

How is it that with N.Y. State broke and N.Y. City in financial distress, to the point that Governor Paterson and the NYS legislature yesterday had to announce a raise in cigarette taxes, to keep “New York Running” (Cigarette Tax Is Increased to Keep New York Running, Nicholas Confessore, June 22, 2010) and the MTA had to announce a $3.7 million in subway cut two days earlier (“More Reductions Proposed in Subway and Bus Service”, Michael M. Grynbaum, June 20, 2010), both in the $millions, that the City saw fit to allot sweetheart deals of $105 million and the State $511million respectively to private developer Bruce Ratner for his private profit making project? (“A Russian Billionaire, the Nets and Sweetheart Deals” by Norman Oder, June 22, 2010).

Saturday, May 1, 2010

New York Times May 1, 2010 Op-Ed "Who Lives in Sheik Jarrah?"

May1, 2010

New York TimEditor
New York Times

Dear Editor

Re May 1, 2010 Op-Ed Who Lives in Sheik Jarrah?

There are loads of reasons too numerous to mention here, including those that P M Netanyahu gave in the very same speech the writer quoted a line from, to realize this tale, sad as it may appear to those unfamiliar with all the facts, is one sided propaganda. Unfortunately the Kalbian's lived in Jordan, a country which "argued" not with it's mouth or pen in law suits, but with guns, and attacked the new state in '48 and then again the established state in '67. The result was Jordan lost the war and failed to conquer all of Jerusalem which the U N gave to Israel in '48 and eventually in '67 lost both the war and the land they Jordan occupied. Of course too the writer conveniently never mentions the numerous Arab countries in which Jews lived, were forced out of, their properties taken, and the word compensation not found in their Arab dictionaries.

Sunday, April 18, 2010

Warwick Valley Telephone Company's Extraordinary Orange County Poukeepsie Limited Partnership

Warwick Valley Telephone Company (WWVY) owns a passive 8.108% limited partnership interest in the Orange County-Poughkeepsie Limited Partnership (OCP). Verizon Communications (VZ) is the general partner and owner of the remaining 91.892%. WWVY carries the OCP investment on its balance sheet at $7.669 million.

OCP has for over two decades consistently produced extraordinary financial returns. It is arguably the most profitable company and strongest to be found anywhere.
For example, OCP has a 342.77% ROE on a HUGELY overcapitalized Balance Sheet where Equity amounts 98.7% of Assets.

Pretax Profit margin is “only” 83.7% (only maybe a company into “drugs”or pornography could possibly be as good – to some people phone service may be like a drug).

Over some 20 years OCP has achieved annual growth in Revenues and Profits, interrupted just one year, in 2006, when Verizon decided to cut rates drastically. Growth then picked up again and has been annual, reaching Revenues of $183.8 million and Pretax of $153.3 million in 2009 and is expected to be at least $206 million and $173 million respectively in 2010.
WWVY share of OCP earnings should exceed and pay it $14 million in cash in 2010 -- some $2.60 per WWVY share.

In our view the OCP itself is worth several times the $81 million ($15/share) which the WWVY Company market capitalization amounts to today, dragged down by its actively managed, cash flow positive, although in 2009 it reported net income losses, small land line ($23 million Revenue) telephone operations in the Warwick, N Y and nearby N J franchise area and newly acquired upstate N Y CLEC ($2 million Revenue) operations.

Were the operating telco to “live” on its own FCF, which is relatively material in amount, WWVY could pay, net of tax, the entire  present $14 Mil OCP payment it passively receives, in a dividend today of about $1.60/share ($14 Mil–$5.6Mil/5.4 Mil shares Mil) = $8.4 Mil/5.4 Mil shares) vs. the 96 cents present dividend. The value of WWVY based on its present 6.4% yield would rise from $15 per share to $25 as the total market cap of WWVY rose from $81 Mil to $135 Mil.

Were the company reengineered (e.g. telco sold), and the OCP made a pass-through entity, the $14 Million plus it is currently bringing in to WWVY could be paid out in full, amounting to $2.60/share. Accorded the very same current 6.4% yield ($0.96/$15) that WWVY's shares are yielding today, the OCP entity paying a $2.60 dividend would at the same yield trade at about $40.625 per share by itself ($2.60/$40.625 = 6.4%).

The OCP market value would become $219 million vs. today’s WWVY market value of $81 million. The operating telco business would still be worth something additional to shareholders whether it continued to be owned by them or sold for value.

WWVY will remain undervalued until such time as the above facts are realized and appreciated by investors or the WWVY the company rids itself of the operating business and ideally enables the remaining holding, the investment in the OCP, to become a pass through entity with a current run rate dividend of about $2.60 which should grow annually.

It should be noted that on the 23rd of April shareholders are to vote on two non-binding shareholder auction proposals to maximize value were included by the board in its 2010 Proxy and will be voted upon. Oddly, this is the first time in corporate history I believe that two identical shareholder proposals were in a company's proxy.

Even should WWVY's shareholders and board not see the light, the OCP should continue its growth while the land line business, as is the case nationwide with most all telcos, will continue at best to be a sub performer.

Value will out
one way or another in the fullness of time. Perhaps sooner if shareholders were to vote wisely in their own interests. Unfortunately shareholders in this company have in the past demonstrated an unwillingness to vote in their own best interests when presented with multiple opportunities. Hope springs eternal however, so if not now, later.

Friday, March 26, 2010

On U.S./ Israel Relation -- Senator Lindsey Graham

BY Senator Lindsey Graham AT

Allow me to urge you to let him know you appreciate his support

    Senator Lindsey O.Graham
    Washington Office
    290 Russell Senate Office Building
    Washington, DC 20510
    Main: (202) 224-5972 8:30AM - 6PM

Please note I am from the Northeast and NOT from South Carolina and I am not saying I am proud of that.

Thursday, March 11, 2010

Government Of The People, By The Real Estate People, For The Real Estate People.

  This country which is supposed be run by a government of the people, by the people, for the people. Sadly it is observable that it is not, but is rather a government of the people, by the real estate people, for the real estate people.  Or isn't land grabs by eminent domain for private developer profit really wonderful fellow Americans?

  Daniel Goldstein, his wife, Shabnam Merchant and their daughter Sita, will receive a formal eviction notice soon because the go-ahead in the Atlantic Yards Brooklyn neighborhood land grab by Forest City Ratner seems to be at hand.

  Shamefully, Bruce Ratner’s $5 billion Atlantic Yards project can move forward after a New York state Supreme Court justice last week rejected a group of building owners’ and tenants’ challenge of the state’s use of eminent domain. Their legal fight against the project, documenting the condemnation was not for a public benefit but for lining the pockets of a private developer with riches, lasted six very long years.

  The Empire State Development Corporation, the N Y State agency seizing the land, has now announced permanent street closures t begin this week.

  The decision was a blow to all who opposed the Ratner boondoggle, perhaps none more visible than my son Daniel Goldstein, the six plus year long lone holdout in his Pacific Street condominium located center court in the arena to be in the huge 22-acre footprint that will bring first a basketball arena as the home for the New Jersy Nets, fittingly the worst team in NBA history and eventually, supposedly, a dozen plus skyscrapers adjacent to what is already Brooklyn's most crowded with traffic intersctions at Flatbush and Atlantic Avenues. What will be the closest thing to hell on wheels will be the traffic jams at that intersection when an event is scheduled at the arena; as if he traffic jams today aren't bad enough. Of course about no one attends Net games in New Jersey now so maybe given the teams specialty --losing games -- it will not attract New Yorkers to the area in Brooklyn.  Brooklyn after all suffers no fools, or losers, other than its foolish politicians.

  “Our state government, long mired in corruption and scandal, has bent over backwards to give Bruce Ratner whatever he wants, including my home, and the homes of other citizens,” said my son Daniel Goldstein. He is besides a key nemisis of  Ratner, unfortuanately also a victim; he is also the spokesman for Develop Don’t Destroy Brooklyn. Sadly this Daniel could only slow, not slay this Goliath this time.
  Brooklyn Borough President Marty Markowitz, cheered the decision as paving the way for the first professional sports team in the borough in 53 years. Some team! Bums but no way will they be welcomed as successors to "Dem Brooklyn Dodger Bums" who broke thier fans hearts. These bums only broke the backs of residents of a wonderful neighborhood which stood up to three NY Governors, Pataki and dem bums Sptzer and Patterson, dem bums in the NY State Legisalature, numerous agencies and commissions and the term unlimited Mayor of NY City, Mr. Bloomberg and his City Council.

  Amazing to me is how so many Americans are all just marching merrily along like sheep to the slaughter to the tune of a government of the people, by the real estate people, for the real estate people.

Saturday, March 6, 2010

Corporate Boards Must Represent Sharholders Not Themselves

One of the best quotes ever seen on shareholder representation:

        “Up until now, it’s been sort of a Soviet system,”
said Stephen Davis, executive director of the Millstein Center for Corporate Governance and Performance at the Yale School of Management. “We have been operating in the United States under the myth that boards have been [first and foremost] accountable to shareholders."


Thursday, January 21, 2010

Whoever said Warren is unwilling to tout his company or his company's stock?

Sort of reminds one doesn't it, of the frequent line of dialogue in the cowboys and indians movies of yesteryear, "White Man Speaks With Forked Tongue?"

Berkshire Surges After CEO Buffett Says Stock Is Undervalued
2010-01-21 15:26:45.401 GMT

By Andrew Frye

Jan. 21 (Bloomberg) -- Warren Buffett’s Berkshire Hathaway Inc. climbed to a 14-month high a day after the billionaire chief executive officer said the company’s stock is undervalued.

Berkshire Class A shares advanced $4,890, or 4.8 percent, to $109,180 at 10:01 a.m. in New York Stock Exchange composite trading. The company has surged 9.1 percent since the close of trading on Jan. 19, the biggest two-day gain since March.

“On a historical basis, Berkshire is selling quite low, relative to book value,” the measure of assets minus liabilities, Buffett said yesterday in an interview in Omaha, Nebraska, where the company is based.

Berkshire traded at about 1.23 times book value on Jan. 19, compared with the average of about 1.76 over the past 15 years.

Evaluating Berkshire by book value “makes a fair degree of sense,” Buffett said in the interview. Buffett spoke before a meeting in which shareholders authorized splitting the lower- priced Class B shares to facilitate Berkshire’s $26 billion purchase of railroad Burlington Northern Santa Fe Corp.
Editors: Erik Holm, Dan Kraut

To contact the reporter on this story:

Andrew Frye in New York at +1-212-617-1869 or

To contact the editor responsible for this story:
Dan Kraut at +1-212-617-2432 or


Wednesday, January 20, 2010

Outrageous Misuse of Eminent Domain - Avaricious developers and governments twist the meaning of 'blight'

Another Outrageous Misuse of Eminent Domain Published in The Washington Post

I - Avaricious developers and governments twist the meaning of 'blight'

By George F. Will

Sunday, January 3, 2010


On Aug. 27, 1776, British forces routed George Washington's novice army in the Battle of Brooklyn, which was fought in fields and woods where today the battle of Prospect Heights is being fought. Americans' liberty is again under assault, but this time by overbearing American governments.

The fight involves an especially egregious example of today's eminent domain racket. The issue is a form of government theft that the Supreme Court encouraged with its worst decision of the past decade -- one that probably will be radically revised in this one.

The Atlantic Yards site, where 10 subway lines and one railway line converge, is the center of the bustling Prospect Heights neighborhood of mostly small businesses and middle-class residences. Its energy and gentrification are reasons why 22 acres of this area -- the World Trade Center site is only 16 acres -- are coveted by Bruce Ratner, a politically connected developer collaborating with the avaricious city and state governments.

To seize the acres for Ratner's use, government must claim that the area -- which is desirable because it is vibrant -- is "blighted." The cognitive dissonance would embarrass Ratner and his collaborating politicians, had their cupidity not extinguished their sense of the absurd.

The condo of Daniel Goldstein, his wife and year-old daughter, which cost Goldstein $590,000 in 2003, is on part of the land where Ratner's $4.9 billion project would be built -- with the assistance of more than $1 billion in corporate welfare from the state and city governments, which are drowning in red ink. The Goldsteins' building would not seem blighted to anyone not paid to see blight for the convenience of the payers. Which is of constitutional significance. The Constitution says that government may not take private property other than for a "public use." By "public," the Framers, who did not scatter adjectives carelessly, meant uses -- roads, bridges, parks, public buildings -- directly owned or primarily used by the general public. In 1954, however, in a case concerning a crime- and infectious-disease-ridden section of Washington, D.C., the court expanded the notion of "public use" to include removing "blight."

Since then, that term, untethered from serious social dangers, has become elastic in the service of avarice. In 2005, the court held, 5 to 4, that New London, Conn., could take the property of a middle-class neighborhood and transfer it to a corporate developer who would pay more taxes to the city government than the evicted homeowners had paid. Justice Sandra Day O'Connor, dissenting, warned that the consequences of the decision would "not be random." The beneficiaries would be people "with disproportionate influence and power in the political process."

Enter Ratner, with plans to build a huge complex of high-rise residences, commercial properties and a basketball arena for the NBA's New Jersey Nets, which he bought. The city and state governments salivated at the thought of new revenue -- perhaps chimerical -- to waste. The problem was, and is, that people live and work where Ratner wants to build.

So blight had to be discovered. It duly was, by a firm that specializes in such discoveries. New York's highest court ratified that finding, 6 to 1.

But a week later, Columbia University, which has plans for a $6.3 billion expansion in Manhattan, was stymied in its attempt to wield the life-shattering power of eminent domain against several local businesses that do not want to be shattered. A state court held, 3 to 2, that condemnation proceedings had been unconstitutional. The court said the blight designation was "mere sophistry": "Even a cursory examination of the study reveals the idiocy of considering things like unpainted block walls or loose awning supports as evidence of a blighted neighborhood." The idiocy was written on Columbia's behalf by the same firm that Empire State Development Corp. hired to find blight at the Brooklyn site. Both Columbia and Ratner are operating in partnership with the ESDC, an arm of the state government. Both Columbia's and Ratner's attempts at seizing property are "pretextual takings," using trumped-up accusations of blight to concoct a spurious "public use" for a preconceived project.

The Atlantic Yards nonsense was compounded when Ratner, to bolster his balance sheet after the real estate collapse, sold the Nets to a Russian billionaire, who stands to benefit from Ratner's government-subsidized seizure of other people's property. Those people can only hope that New York's highest court will grant their appeal for reconsideration on the grounds that Ratner's argument is about as good as the Nets are. Through Saturday, their record was 3-30.


II Nine days later A letter to The Editor follows as The Avaricious Developer Cries….

Atlantic Yards project was not properly presented
Tuesday, January 12, 2010

George F. Will's Jan. 3 op-ed column, "In N.Y., government's eminent arrogance," attacked the Atlantic Yards project in New York because of the use of eminent domain.

Mr. Will never contacted the developer -- my company -- or supporters of the project, who include the governor, the mayor and the Brooklyn borough president. Yet he concluded that a "politically connected developer" is the recipient of largesse because the state agency leading the development can use eminent domain to obtain the remaining properties of individuals who refuse to sell. And he failed to note that my company controls 85 percent of the 22-acre site. Mr. Will also did not mention that nearly 40 percent of the site is a submerged rail yard, long a scar dividing this area of Brooklyn, and that the project will create nearly 17,000 construction jobs, 8,000 permanent jobs and 2,250 affordable apartment units.

At the start of this project, my company announced that it would try to avoid the use of eminent domain. To that end, we bought properties in the footprint, many of which were abandoned warehouses and empty lots. A group of holdouts announced early on that they were opposed to the development and pledged to sue often. They kept their word -- but lost every battle.

New York's unemployment rate is above 10 percent. Construction has all but halted there. We need to look to build in a way that can improve communities by creating mixed-income housing, jobs and vibrant centers that will attract visitors and residents.

Charles Ratner, Cleveland
The writer is president and chief executive officer of Forest City Enterprises, the developer of Atlantic Yards.|

III A week later, today, the falsity of Developer Charles Ratner’s response is shown again

Seeking N.Y. land, developer twisted meaning of 'blight'

Tuesday, January 19, 2010; A16 George F. Will's Jan. 3 column on eminent domain for the Brooklyn Atlantic Yards Project, "In N.Y., government's eminent arrogance," focused on the perversion of "public use" to include "blight" removal and the perversion of "blight" to mean whatever land-hungry developers and their political partners want it to mean.

Developer Charles Ratner responded to the column with a misleading letter ["N.Y. project: Beyond eminent domain," Jan. 12]. Tellingly, his letter ignored the blight issue.

Mr. Ratner pretends the Atlantic Yards project site is little more than a rail yard, warehouses and empty lots. This is false. Before his firm, Forest City Enterprises, came along with its eminent domain and demolition plans, it was a gentrifying but mixed-income, mixed-use home to about 400 residents and 35 businesses.

Forest City would like everyone to think it tried to avoid using eminent domain and would use it only as a "last resort." But eminent domain was purposely a first resort -- it was the threat of eminent domain used as a gun to the heads of property owners and tenants that allows Mr. Ratner to think -- delusionally -- that he hasn't actually used eminent domain. The threat and the use are precisely the same, equally insidious and achieve the same result.

Daniel E. Goldstein, New York
The writer is co-founder and spokesman for Develop Don't Destroy Brooklyn.
Disclosure: Daniel E. Goldstein is my son and I am his proud father

Tuesday, January 19, 2010

This teacher is truly a genius!

This teacher is truly a genius!
    As the late Adrian Rogers said, "you cannot multiply wealth by dividing it."

An economics professor at a local college made a statement that he had never failed a single student before, but had once failed an entire class.

That class had insisted that Obama's socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, "OK, we will have an experiment in this class on Obama's plan".

All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A...

After the first test, the grades were averaged and everyone got a B..

The students who studied hard were upset and the students who studied little were happy.

As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.

The second test average was a D!

No one was happy.

When the 3rd test rolled around, the average was an F.

The scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

All failed, to their great surprise, and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great but when government takes all the reward away, no one will try or want to succeed.

Could not be any simpler than that. Mmmmm there is a mid-term congessional election in 2010!