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Maverick Wizard Behind the Wall Street Lion
Life Magazine, 1964
By Marshall Smith
Sunlight filtered down through the skyscraping spires into the canyons of lower Manhattan. The day was perfect and Keith Funston, president of the New York Stock Exchange, was catching a breath of air in Battery Park. With a certain detachment he viewed the collection of bums and winos who were taking their vicarious ease there, close to the big money. Suddenly Funston found himself staring at one of the idlers. Like some of the others the man was stretched out full length on the grass; indisputably, however, he was wearing a suit that cost at least $300. He was also shoeless and he was luxuriously engaged in wiggling his toes. Unbelieving, Funston moved in for a closer look at…Jack Dreyfus!…fellow member of the Exchange, head of a thriving Wall Street brokerage house, entrepreneur of the nation’s most successful and spectacular mutual investment fund.
As Funston stood here, momentarily undecided as to what reaction his official position called for, Dreyfus raised himself on one elbow, smiled and issued an invitation, “Take off your shoes, Keith, and join me.”
Jack Dreyfus is founder of the billion-dollar Dreyfus Fund, whose lion stalks so imperturbably across his TV tube, and president of the brokerage firm plugged by a pair of old TV coots who play languid ping pong while discussing the fantastic view of the harbor offered by Dreyfus & Co. He is a quite implausible creature to be found maneuvering among Wall Street’s bulls and bears. A slender, soft-spoken perfectionist at 52, he has thrived on the extreme competitive pressures of his environment. Indeed, many of his contemporaries regard him as an overcompetitor—not only in the realm of high finance but in almost anything else he lays a hand to—including golf, tennis, horse racing, bridge and gin rummy, at all of which he has been enormously successful. Yet he has the eye and ear of an artist and the impulses of a beatnik.
For almost two decades Dreyfus has taken impish delight in stepping on Wall Street’s respectable corns. He has been called an upstart, an interloper and a genius. Yet he is, without question, the most singular and effective personality to appear in Wall Street since the days of Joseph Kennedy and Bernard Baruch. When late last year he decided to get out of the biggest of his enterprises, his exit was as theatrically pleasing as either of these two predecessors could have devised.
“Dreyfus has made some eyebrows lift in this business,” admits Funston, who has followed his career with admiration and, occasionally, alarm. Dreyfus first shook up the Old Guard 15 years ago with a bold new approach to investment-house advertising. His ads, and later his market letters, were written in bright, brisk English instead of the traditional Wall Street Choctaw. At a time when mass participation in the stock market was really beginning to burgeon—until, today, one of every six Americans is involved in some way—Dreyfus decided to woo the public with whimsy, TV cartoons and wry admissions of fallibility. “Management can see things clearly and still be wrong, you understand,” he once advised his shareholders, going on to characterize a certain action the fund had taken as “an admission-of-ignorance position…. Had we been smarter, we would not have taken the…position at all.” On another occasion he summarized for a financial reporter a part of his market philosophy: “In today’s market, studying securities can be fatal. While you’re studying them, they’re apt to double and, by the time you find out that you wouldn’t have bought them in the first place, they will probably have tripled.”
Under different circumstances Dreyfus’ tradition-shattering methods might have been considered frivolous and beneath note. But the fact is that Dreyfus has excelled at the one thing Wall Street really respects—making big money—ever since, at the age of 32, he first focused his enormous intelligence on the market. His ability to prophesy the stock market dips and rises has made Dreyfus preposterously rich. It also made millionaires of a number of his friends and added substantially to the worth of several hundred thousand ordinary citizens who own shares in the Dreyfus Fund, the institution which made Dreyfus’ name in The Street. Like all of the mutual funds, the Dreyfus Fund enables the small investor, to “get into the market” without having to be either an expert or a born gambler. Anyone who can afford to invest even a modest amount in the market—with some funds, it may be as little as $10—can put his money into a mutual fund which owns a varied portfolio of securities and is managed by experts. In almost all funds, including Dreyfus’, a part of the investor’s outlay is kept by the managers as a sales charge—or “load”—to cover operating costs.
Depending on the state of the market and the judgment of the managers, a fund will consist of a “mix” of stocks and bonds and a certain amount of cash. Mutual funds, which also invest money for such large institutional vehicles as pension, profit-sharing funds, have wrought enormous changes in the traditional concept of capitalism. They have turned bus drivers and ditchdiggers into stockholders and transformed huge sections of what Karl Marx viewed as the exploited proletariat into vested owners of industry. More than three-and-a-half million Americans have amassed a staggering $35.2 billion stake in U.S. capitalism through the medium of funds—and another $4.5 billion is added every year. In the canyons once controlled by Jay Gould and J. P. Morgan, the 225 active mutual funds now constitute one of the largest and most powerful sources of investment money—and Jack Dreyfus’ fund early became the most dramatic symbol of this phenomenon.
The Dreyfus Fund differs from the others mainly in the matter of profit. This is sometimes referred to as “how the numbers come out” and they have come out very well indeed for Dreyfus. Money invested in his fund just 12 years ago and left there to grow has increased by 604 percent. Over the same period the next most successful among all the funds lags 102 points behind this figure. (The Dow-Jones industrial averages over the same period rose by 346 percent.) Dreyfus’ total impact on Wall Street, however, was achieved less by the “numbers” than by the kind of magic once used by P. T. Barnum.
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