Friday, August 28, 2015
The Lion of Wall Street.
In 1951, a lion emerged from the subway station near Wall Street. The advertisement of the animal's emergence marked the beginning of the hoi polloi's entry into the stock market via the mutual fund. In a career that took him from a ne'er-do-well to the people's choice, Jack Dreyfus took on the SEC and the FDA as he not only helped the middle class join the investor class, he battled depression and championed the drug that got him out of the funk.
Born on August 28, 1913, in Montgomery, Alabama, to Ida and Jonas Dreyfus, a candy maker, Jack Dreyfus was a distant relative of the French bankers who shared his surname. His parents had some money and sent him to Lehigh University in Bethlehem, Pennsylvania. He was a lousy student and later told people he graduated "Summa Cum Ordinary."
After graduation, he sold candy but mainly wanted to goof off. In his memoir, Dreyfus wrote of a fantasy of meeting John Davison Rockefeller, who “was overloaded with money, but was too old to enjoy it,” to give him a million dollars.
“I could play golf, chase girls, travel around the world, and he could enjoy this, secondhand. I never got around to asking him. If I had, my whole life might have been changed. I’m sure he would have given me the million,” Dreyfus wrote.
Finally, his father convinced his stock broker to hire him, with the father covering the first 20 weeks of the son's $25-a-week paycheck.
He took to the stock market like a duckling to water. He had the two things a trader needed most in those days: A loud voice and the ability to do fractions in his head. The difference between 9/16ths and 3/4ths could mean millions. Later, physicians diagnosed him as suffering obsessive-compulsive disorder, and attention-deficit disorder, which likely helped him succeed in the stock market.
In 1947, Dreyfus teamed with former stock exchange official Max Jacquin Jr. to open a brokerage house. While Jacquin was an experience trader, the New York Times described Dreyfus as "a bridge player and golfer of note." At 34, those were his only accomplishments. The time had come to grow up, and he did. After Jacquin retired, Dreyfus began retail advertisement of his firm, with one ad calling Christopher Columbus “America’s first speculator.”
But it was his acquisition of the Nesbitt Fund -- one of the first mutual funds -- that launched him into Wall Street stardom. He renamed it the Dreyfus Fund, took a picture of a lion at the subway station, and began pitching his mutual fund to the masses. His philosophy was buy high and sell higher. His stock picks were extraordinarily successful. Between 1953 and 1964, his picks posted a return of 604 percent, according to Investor's Business Daily. That was 102 points higher than the second-best mutual fund, and Dreyfus beat the Dow Jones Industrial Average by 248 points.
However, the Securities Exchange Commission ruled that he could not advertise his mutual fund like that. Eventually, though, his success got the SEC to reverse its decision, making Dreyfus and ad salesmen happy. He also made thousands of middle-class people investors long before the IRA or 401-k,
Success also brought depression. His doctor prescribed, an anti-epileptic drug, Dilantin (phenytoin). With his depression gone, Dreyfus championed the drug and believed it had many other uses. But with the patent about to expire, Parke-Davis was not interested in investing money in the drug. Dreyfus championed the cause and over the next 30 years, he spent $100 million promoting the drug and battling the Food and Drug Administration. He made his case to presidents, congressmen, governors and the public, once writing, "Without FDA approval, drug companies cannot market phenytoin as anything other than an anti-convulsant, and most doctors remain in the dark as to its versatility. Millions of people in this country alone suffer because of the letters FDA."
Another time, he wrote, "Apparently full disclosure is required on the negative side, but no disclosure is permitted when the evidence is positive, unless it has an FDA-listed indication of use. No matter how flimsy the evidence for the negative, it must be disclosed. No matter how solid the positive evidence, it may not be mentioned. It seems a poor way to run a railroad."
And in 2005, at age 92, he wrote, "The FDA requires everything bad about a drug be included in their literature, and nothing good, unless it's had their approval."
But Dreyfus was not some maniac obsessed with a drug. He continued to play bridge and golf, winning 18 amateur golf tournaments. At 62, he won the U.S. Open Doubles Lawn Tennis Championship for those 60 and over. The Encyclopedia of Bridge declared him "the best gin rummy player in the United States." And he not only raised a horse at his farm in Ocala, Florida, that beat Secretariat -- he raised two of them: Onion and Prove Out.
In 1994, at age 81, he cashed in his chips and sold off the Dreyfus Fund, which is now run by the Bank of New York Mellon.
Jack Dreyfus died peacefully on March 27, 2009 at the age of 95. Rockefeller did not give him a million bucks, but Dreyfus earned millions on his own and still got to do what he wanted: play golf and chase girls.
He also gave financial security for thousands and championed a drug that helped thousands more.
My first collection of "Exceptional Americans" is available here. And the Kindle version is here.
Volume 2's publication will be on Tuesday, September 1, my 62nd birthday. It will be available here, and on Amazon and Kindle.