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Trade secrets: University of Pennsylvania's Wharton School

Many famous financiers attended the University of Pennsylvania's Wharton School.

Many famous financiers attended the University of Pennsylvania's Wharton School.

By Hal Lux
February 2002
Institutional Investor Magazine

Michael Steinhardt may be the only one whose father couldn't attend Parents Weekend because he was incarcerated in Sing Sing prison for selling stolen jewelry.

Steinhardt, of course, went on to become one of Wall Street's legendary traders, running his eponymous hedge fund for 28 years. He was almost a caricature of a Wall Street trader - bellowing at his staff, pulling pranks on Wall Street salesmen and feeding such personal indulgences as a backyard zoo that included a Vietnamese pond deer and a Sicilian donkey.

Steinhardt's memoir, No Bull: My Life In and Out of Markets, more than does justice to his colorful life. Although he no doubt leaves out some embarrassing stories, Steinhardt digs into personal territory, whether it's his touch of gluttony - "I would fantasize about past meals" - or his passion for Judaism, a love that is complicated by the fact that he's a devout atheist. After many tirelessly self-congratulatory books by Wall Street moguls (see Bloomberg by Bloomberg), No Bull is a delight.

The son of parents who divorced when he was just one, Steinhardt was raised by his mother and grandmother in Bensonhurst, a working class, Italian-Jewish neighborhood in Brooklyn. His mostly absentee father was a gambler, bookie and entrepreneurial jobber in New York's diamond district who spent much of his time with mobsters.

"To me, my father was larger than life and, as a child, I idolized him," writes Steinhardt. "I remember once bragging to a friend that my father had played in the baseball minor leagues. He had told me this, but it was a total fabrication."

When he graduated from high school at 16, Steinhardt was already smitten with the market, thanks to his father's gift of a few hundred shares of Penn Dixie Cement and Columbia Gas System. After school he hung out in a Bache & Co. brokerage office in Brooklyn.

Wharton was his springboard to Wall Street. His father had urged him to attend because he noticed in The New York Times wedding announcements that "a lot of wealthy Jewish boys" had graduated from the school. Sol Steinhardt, who had yet to be indicted, also promised to pick up the tuition. (Steinhardt says his father was a bookie but insists he was unfairly accused of the jewelry fencing charge.)

In 1960, as a newly minted MBA, Steinhardt landed a $75-a-week job as a statistical assistant for a white-shoe mutual fund company, Calvin Bullock.

He broke through to the Wall Street majors at the age of 24, with a job as a research analyst for the old-line German Jewish firm of Loeb, Rhoades & Co., where he specialized in trendy conglomerates such as Gulf & Western Industries, Studebaker Worthington Corp. and Bangor Punta.

"I believe I was the first to introduce the word 'synergy' in explaining the virtue of conglomerate investing," he writes. "Several times, when I recommended a company, an imbalance of buy orders delayed the opening of the stock on the New York Stock Exchange the next day."

In 1967 Steinhardt went out on his own, setting up his hedge fund out of small offices with a bumper pool table. He delves into his investing philosophy, which includes focusing on contrarian opinions - he calls them "variant perceptions" - and identifying the trigger event that makes a stock move. And he credits much of his hedge fund success - $1 invested at the launch of Steinhardt's operation would have been worth $481 when it shut down in 1995 - to his native market instincts, developed by making individual judgments about individual companies. But if he has a secret formula for investing, he doesn't give it away in this tome.

Steinhardt sprinkles No Bull with frank descriptions of the many famous people he's met over the years. For example, Townsend-Greenspan and Co. economics consultant Alan Greenspan: "I recall being disappointed that I had learned little from listening to him, and that what he said was mostly an extrapolation of the obvious."

In 1995, burned out and very rich, Steinhardt shut down his hedge fund. Though he still sometimes trades his own money, Steinhardt says that he's not in the least bit curious about Wall Street these days. Steinhardt is reportedly one backer of a new New York City newspaper to be launched this spring, the New York Sun. He spends most of his time and money on Jewish issues. He wants, for example, to reduce the rate of Jews marrying outside their religion - not the most popular philanthropic cause. Ever-practical, he bought a New York brownstone and turned it into a luxurious meeting place for Jewish singles.

Trying to reverse a 50-year demographic trend is no small task. But Steinhardt has always thought big.

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