A system based on non-obvious clues

After work he would go to the night trotting races wearing sneakers and a sports shirt and bet an average of $4,000 a night on the daily double. He won too regularly to avoid notice. When word got back to him that he was getting a name as the biggest bettor in the New York area, Dreyfus regretfully stopped attending the trotting races. As the head of the fund he couldn’t afford such publicity. He dabbled in moviemaking and in 1962 he was co-producer of Long Day’s Journey into Night. But on May 28, 1962—a day better known on Wall Street as Black Monday—Dreyfus was right back in the middle of the maelstrom. Flanked by his pupils, he stood in the trading room at Dreyfus & Co., watching the stock market take its worst one-day pounding in more than 30 years.

In anticipation of the setback his team of assistants had put the fund in a 20 percent cash position. But what was happening exceeded their most pessimistic estimates. As wave after wave of selling accelerated the downward spin, Dreyfus turned his attention to his old adversaries, the speculators. The selling that was buffeting the market was forced selling-and, in Dreyfus’ view, only speculators who had gotten too far out on the end of a limb were susceptible to forced selling. “Forced selling is the stuff which causes general bear markets.” he had preached. “It sets off a chain reaction like a bowling ball hitting the head pin. The weakest group goes first. This puts pressure on the next weakest group and the situation keeps snowballing without any relation to value.” The question, as he stood there, was how far the debacle would go. Would it be another 1929? When the overburdened tape ticked out its last bit of bad news at 5:58 p.m.—almost two and a half hours behind schedule—Dreyfus aroused himself from his meditations. Politely he asked his bookkeeping department to make an overnight spot check on the condition of margin accounts throughout the firm.

He got the answer next morning. Most of the shaky accounts had been cleaned out the day before, he was told, and those on the books seemed in fairly healthy condition. On the basis of this information, Dreyfus made the big decision. He would start buying. He queried his partners on the floor of the Exchange as to what was available. Stocks had resumed their headlong tumble that morning, but when word came back that 10,000 shares of American Tel and Tel were available at 100, he said simply, “Take it.” With those words $1 million of Dreyfus Fund money went back into the market—and it happened at almost the precise moment that stocks ceased their downward plunge. A.T.&T. has never been bought that cheaply since. Before the day was out, another $2 million of the fund’s money was poured into stock—and by that night the market had recovered most of its disastrous losses of the day before.

Jack Dreyfus’ crystal ball had worked again. But the strain of operating it was almost too much. That night he retreated to his penthouse on Manhattan’s East 75th Street and engaged in a therapeutic ritual. Putting a longplaying Charleston record on his stereo set, he worked off the pressure with a solo dance that made the room shake for almost half an hour. The only witnesses to this energetic performance were two dogs—one a Boston terrier and the other a Mexican Chihuahua. Since his marriage broke up more than 20 years ago, Dreyfus has lived the solitary life of a bachelor. He has one son, Johnny, 23, who is an accomplished golfer and works in the research department at the fund.

In the middle of last year Dreyfus decided that the time had come for him to get out. Howard Stein, the former violinist, had been elevated to the rank of president and was running the fund exactly as Dreyfus thought it should be run. Convinced that he could withdraw without jeopardizing his shareholders’ interests, Dreyfus began proceedings which would give Wall Street one last surprise. He told the Securities and Exchange Commission that he intended to sell the management corporation which operated the Dreyfus Fund. Shares in the Dreyfus Corporation were put on the market at public offering. The issue was subscribed—for $45 million. Dreyfus’ personal share came to $26 million. The money, however, was not the most important consideration. What really excited him—even though he agreed to make himself available as a consultant for five years—was that the biggest obstacle between him and his professed ambition of doing nothing, of “being a bum,” had been eliminated.

For openers he thought he might travel, slowly, around the world. But that was five months ago and he hasn`t started off yet. Most of his friends doubt that he ever will. Whoever heard of a custom-suited, bridge-playing, bet-a-million financial wizard who could really settle for being a bum?

Read the second Life magazine story

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