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by Thomas Herzig
Since its founding in 1957, P.R. Herzig & Co., Inc
has evolved as Wall Street has changed.
The Early Years
Originally a retail broker and a member of the New
York Stock Exchange with “customer’s men,” the firm
flourished in an era of fixed commissions and low
volume. By the early 1960s the firm also had an interest
in a specialist’s book on the floor of the New York
Stock Exchange.
The assassination of John F. Kennedy challenged the
firm’s resources. When news of the tragedy emerged, the
market sold off sharply and was finally closed early. As
the firm's founder, Philip Herzig, later recalled, “We
went home broke that night ... half of Wall Street was
broke!" Georgia-Pacific was the major stock in the specialist book. Fortunately, the
market rallied strongly when the market reopened and
P.R. Herzig & Co. continued to flourish.
50 Broadway
P.R. Herzig & Co. maintained its offices at 50
Broadway. In those early years, the Wall Street
community was much smaller and close-knit than it is
today. Before the electronic age, firms had to be close
enough together so that "runners" could physically
deliver securities to settle trades. Being in
close physical proximity also made it easier to exchange
ideas.
Recalls Art Cashin, a former partner and now UBS
PaineWebber's director of floor operations at the New
York Stock Exchange, in his February 23, 2004
Cashin's Comments: "...Under Phil Herzig, our
offices were like one of the fabled Paris salons. There
was always someone different dropping by, and
each brought a different idea. Many, actually most,
would later become legends of Wall Street. But, at the
time they were just Wall Streeters dropping by to bounce
an idea off Phil Herzig."
Gold
Throughout the 1960s Philip Herzig pursued his
interest in gold as an investment vehicle. He had
written his senior thesis at Princeton on the role of
gold in the international monetary system.
"Phil was ...one of the first people to see incipient
inflation and that gold would explode," writes Art
Cashin in his June 30, 2003 Cashin's Comments.
"How many folks do you know who gave out copies of 'Fiat
Money Inflation in France' in the mid-60s?"
As early as 1962 Philip Herzig traveled to South
Africa to learn about the gold mining industry about
which he became an authority. When asked why he was so
interested in South Africa, he responded, “That’s where
the gold is!”
As the decade unfolded, gold continued to rise as the
inflationary pressures from the Vietnam War and
President Lyndon Johnson’s Great Society programs began to
debase the U.S. dollar.
The Golden Years
The 1970s was a period of great prosperity for the
firm. The gold price kept climbing and investments
in gold mining shares rose with it. Philip
Herzig, previously derided as a “gold bug,” continued to
guide clients to profitable investments in mining
shares. Yearly trips to Johannesburg, South Africa kept
him up to date on developments at the mining companies.
Meanwhile, the stock market crash in 1974-75 made
Wall Street a gloomy place. Our holiday party in
December 1974 was a disappointing affair. No one showed
up. Yet it had been the best year in the firm’s history,
for both it and its clients.
For the rest of the 1970s, the firm
prospered. I joined the firm in 1976 and spent two
years in South Africa in the late 1970s learning about
the political and economic issues that faced that
country. By 1980, the gold boom had largely run its course.
The firm sold its gold mining shares and moved on to new
areas of investment.
Time of Transition
The 1980s was a time of transition. President Reagan
was elected and his Chairman of the Federal Reserve,
Paul Volcker, put the brakes on inflation. By 1982, the
stock market was ready to take off on the back of
falling inflation and lower interest rates.
At this time, P.R. Herzig & Co made another
transition. Harnessing the goodwill of its clients, the
firm became an investment advisor, shepherding its
clients’ assets into the new bull market. Throughout the
1980s and 1990s, client assets grew. There was little
marketing to get new accounts and the firm concentrated
on managing Herzig family investments and those of
long-time outside clients.
The Bubble Years
Then came the bubble years… Ironically, it was during
the boom times of the late 1990s that the firm
struggled. Technology, the internet ... such investments
did not fit within the conservative, value based
investment philosophy that had served the firm so well
over the years. The firm refused to get involved in the
frenzy and some long-time clients became impatient and
closed their accounts. Subsequent events proved the firm
correct, as the markets imploded and crashed. Clients who
had the patience and fortitude to follow the firm's
advice eventually weathered the storm and came out
ahead.
The Firm Today
Today, P.R. Herzig & Co. remains a vibrant and
growing investment firm. Philip Herzig passed away in
February 2004, but his vision and philosophy remains a
cornerstone of the firm’s approach to investing. We are
iconoclastic, value-driven and independent thinkers. We
are performance-driven; we do not chase short-term
numbers, but we know if we make the right investments,
performance will take care of itself. We value our clients' interest above all. We invest our
money alongside that of our clients. If our clients do
well, we do well. We
value integrity and strive to be responsive and
attentive to the needs of our clients at all times.
November 2004
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