Old lessons for a new financial crisis
Advice from an old-time Wall Streeter still holds true in times like these. One of John Loeb's 10 points: Be patient.
NEW YORK (Fortune) -- When FORTUNE published a picture of John Loeb, then 68, in a 1970 article called "Wall Street on the Ropes" (yes, there have been earlier periods of pain), the son of an editor regarded Loeb's imperious mien and said, "That's what people my age think all Wall Street executives look like." But behind Loeb's hauteur were decades (including the 1930s) of business experience, much of it spent running Wall Street firm Loeb, Rhoades & Co.
Fortunately some of the lessons John Loeb learned got set down on paper, and lately his bullet points have been making the rounds. Here they are:
- Once in every seven to ten years, there is a period of excessive general speculation culminating in a severe panic or depression when the man who is borrowing money is at great disadvantage and he who has ready cash stands like a tower, four-square to the ill winds that blow.
- Extreme situations do not last, no matter what the apparent justification. While we may have "new eras," old laws will still operate.
- Avoid commitments, particularly of the delayed variety; they are more insidious. Also, be definite about commitments made to you by others. When the storm comes, misunderstandings are so easy and so natural.
- In both 1920 and 1929, the so-called "big fellows" in general said everything was okay. But if the big fellows in general thought otherwise the stage could not be set for the unexpected. Panics occur because the leaders themselves have lost their way.
- Never borrow money without continually reviewing and questioning your ability to pay it back under the worst conditions.
- It's right to be an optimist, but always be prepared for the worst.
- People borrow money in good times and pay it back in bad times - just the opposite of what they should do.
- The public is just as blind in recognizing the bottom of a depression as it is in recognizing the top of a boom. While there is no ladder that reaches to Heaven, the ladder that reaches all the way down to Hell in a country like America is just as fantastic.
- A reputation for fair and honest dealing will be your greatest asset.
- As my father used to say, "Don't forget, the soup is never eaten as hot as it is cooked."