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Merryle Stanley Rukeyser, Pioneer Financial Commentator

04/22/03 04:07:46 PM PST
by James Maccaro

There's a lot you have to think about before putting money at risk.

Louis Rukeyser is the country's most successful financial broadcaster. His PBS series, Wall $treet Week, was the first television series about finance to reach a wide audience. It ran from 1970 to 2002, when it was canceled despite high ratings because of the network's decision to jettison Rukeyser. The move caused great controversy and outraged Rukeyser's fans.

Rukeyser made an almost immediate comeback. He returned to national television as the host of Louis Rukeyser's Wall Street, broadcast by CNBC on Fridays and by many public broadcast stations the following Friday and Saturday. In this way, Rukeyser has maintained his status as the host of the most widely watched financial television program.

Although Louis Rukeyser is a pioneer of financial journalism and has perhaps the largest following of any Wall Street commentator, he is not the first Rukeyser to have these distinctions. His father, Merryle Stanley Rukeyser, blazed a trail as a financial commentator and public figure.

RUKEYSER THE ELDER

Merryle Stanley Rukeyser was born in Chicago in 1897 and graduated from Columbia University in 1917, receiving one of the first bachelor's degrees in journalism awarded by the Ivy League university. His classmates included musical legends Lorenz Hart and Oscar Hammerstein, as well as M. Lincoln Schuster, a cofounder of the Simon and Schuster publishing company. Rukeyser was an early investor in Simon and Schuster (which earned him a small fortune) and served as a member of the firm's board of directors.

He went on to receive a master's degree in economics from Columbia and shortly thereafter began his career as a reporter for a small daily newspaper. In 1920, he joined the New York Tribune as the illustrious paper's financial editor. In 1923, he moved to the New York Evening Journal, and from 1927 to 1958 he was a columnist for the Hearst newspaper chain, which made him the most widely read financial journalist of the day. He also taught in the 1920s at Columbia University, wrote a column in the 1930s for Nation's Business (the leading business magazine at the time), was a commentator for the Mutual Broadcasting System radio network in the 1940s, frequently appeared on television programs such as Meet The Press in the 1950s and 1960s, found the time to serve as president of the New Rochelle, NY, Board of Education in the 1960s, and wrote numerous books. Among them were the bestsellers The Common Sense Of Money And Investments, Financial Security In A Changing World, and The Diary Of A Prudent Investor.

Like his son, Rukeyser expressed great faith in the free market system. "The free market vests the ultimate power of decision in the customer, who is the real boss," he said at a time when many questioned whether capitalism could withstand the challenge of communism. The key to the superiority of the American free market system, according to Rukeyser, was the market discipline applied to the decisions of those in power. "In a sense," he said, "stock prices dwell in the world of ideas. They depend on the pictures in men's minds, but at every rung of the price ladder some groups are testing speculative behavior against the real achievements and prospects in the business world of reality, the citadel of profit and loss."

Underlying all of Rukeyser's writings about personal finance is the assumption that the goal of investing in the stock market is to improve the investor's long-term financial health, rather than short-term gains. He advised people to be aware of both the risks and rewards of stock market investing "business and the business of living can never become a riskless adventure," he wrote. Therefore, in Rukeyser's opinion, individuals should conservatively invest money that they might need in emergencies, and make sure that they have enough insurance to provide for their families before putting money at risk.

Although Rukeyser stated, "It is visionary to seek to escape risk," he also wrote that "there are practical techniques of investment analysis, diversification, and balancing of funds, which reduce the element of hazard to manageable proportions." He may have had his experience as an early investor in Simon and Schuster in mind when he wrote, "In our competitive society, the rewards for risk-taking can be spectacularly great. Those who put themselves through shrewd timing in the line of economic growth may indeed be dramatically enriched."

Rukeyser advocated that people should have patience as they focused on the goal of eventual financial independence. In this vein, he wrote that "a good portfolio of stocks and bonds can make it possible for you to express yourself in life and make it possible for you to avoid stultifying yourself with uncomfortable associations and actions on the grounds that you 'need the money.'"

Independence of thought coupled with a willingness to act was the hallmark of Rukeyser's approach to investing. Writing in early 1963, immediately after a significant bear market decline, he noted that "the dramatic cutting away in recent times of an inflated superstructure of stock prices opens up new opportunities for the investor. You can now make the buying power of your cash savings go much further." Likewise, he also stated that "except for financial morons, the markdown of the price tags on prime securities doesn't make them less attractive but more."

SEVEN RULES

The seven keys to stock market success set forth by Merryle Rukeyser are:

  1. Stop being a sucker that is, someone who engages in wishful thinking. As an example of someone not being a sucker, Rukeyser cited the experience of his friend M. Lincoln Schuster, who in the late 1920s made a $60 per-share profit on the shares of a firm called Combustion Engineering. Upon investigating the reason for the price rise, Schuster discovered that the Wall Street operator William Durant had been manipulating the stock. Since this was an arbitrary, albeit lucky, turn of events, and since it was impossible to make a rational estimate of future price moves, Schuster took his profits and never looked back.

  2. Accept the reality of risk. Unpredictable events occur, so investors should be alert. "Obviously, the crystal ball is far from a perfect device," Rukeyser wrote. "At best, the well-informed can make an educated guess into the unknowable future and provide a working hypothesis about the shape of things to come." Practical steps to put rule 2 into effect include diversification, both among equities and among asset classes (such as equities, mutual funds, bank deposits, and real estate). Equally important, investors should be willing to recognize when they have made a mistake. Rukeyser noted that "when a theory conflicts with facts, then something is the matter with the theory."

  3. Do not overpay during bull markets. In particular, lofty price/earnings ratios are a danger signal.

  4. Keep a reserve of cash and short-term fixed assets so you will have buying power during bear markets, when bargains can be found.

  5. If you are not sure if it is the right time to buy a stock, "dollar-cost average" by buying a set dollar amount of shares over a protracted period of months, quarters, or even years.

  6. If you want professional management, use mutual funds.

  7. Don't despair merely because the national economy has taken one step backward before taking two steps forward.

"It takes imagination and courage to sense potential opportunities for growth and expansion during interludes of pessimism when gloom is fashionable," Rukeyser wrote. He noted the example of the Rothschild banking family of 19th-century Europe, whose fortune was established by investing during the French Revolution, "when blood was coursing through the streets in Paris."

Based on Rukeyser's extensive writings and public statements, I would add three additional rules, bringing the total to 10.

THREE MORE RULES

The three rules to add to Rukeyser's seven are:

  1. Do not believe everything that Wall Street experts tell you. Have a healthy skepticism. Rukeyser stated that "in making your own investment decisions, bear in mind that history doesn't support the myth that the stock market, sharing the gifts of the Olympian gods, is prescient: always knowing perhaps six months in advance the precise shape of things to come." More to the point, he added, "As a forecaster, the stock market sometimes goofs."

  2. Keep a sense of humor about money. Even during the bleak bear markets of the 1930s, Rukeyser managed to joke about Wall Street. For instance, in June 1930 he claimed that when steamship passengers returned to New York from the Caribbean, they would throw coins into the water so stockbrokers could jump in after them.

  3. Be forward-looking. "Yesterday is dead in Wall Street," Rukeyser wrote. "Today and tomorrow possess the stuff out of which fortunes are made."

Rukeyser issued a call to action. "You won't accumulate a financial nest egg by joining the Monday morning quarterbacks and pontificating after the event," he said. "Success lies not in what you abstractly know, but in what you actually do."

James Maccaro is an attorney and freelance writer. He has written articles for Newsday, Ideas On Liberty, The Massachusetts Law Review, and other periodicals.

Current and past articles from Working Money, The Investors' Magazine, can be found at Working-Money.com.



James Maccaro

James Maccaro is an attorney and freelance writer. He has written articles for Newsday, Ideas on Liberty, The Massachusetts Law Review, and other magazines. His law journal articles have been cited in several legal decisions, including by the US Court of Appeals for the DC Circuit and by the US Supreme Court. James A. Maccaro is an attorney and freelance writer. He has written articles for Newsday, Ideas on Liberty, The Massachusetts Law Review, and other magazines. His law journal articles have been cited in several legal decisions, including by the US Court of Appeals for the DC Circuit and by the US Supreme Court. He may be reached at jam@juno.com.

Address: 154-61 22nd AVE
Whitestone, NY 11357
E-mail address: jam@juno.com


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