We Make Money The Old Fashioned Way

We make money the old-fashioned way. We earn it.

Bennett Gerli

Vice President - Equity and Index Sales at Eurex

Published Jul 11, 2016

I was helping my wife's grandfather clean out his house this past weekend as he prepares to downsize -- which is really just code for weeding through research reports from the 80s and flip charts that are now all available online to find anything worth saving from his career on Wall Street.

But hidden in between those boxes of recyclables, I came across this article (picture attached) highlighting his accuracy in market predictions from a Business Week magazine published in 1977. At the time he was the Chairman of Smith Barney's investment policy committee, a group that identified that the market surge in the mid-70s was a bubble about to burst when all other economists on the street were saying "buy, buy buy!"

If it were a recent clipping, you would think they figured it out through a complicated excel model, forecasting based on leading indicators, or some tip in an earnings call's Q+A, but the reality is much simpler:

"Helman gives credit to Smith Barney's insistence on valuations -- 'the basic fundamental that the value of a common stock is equal to the present value of its future dividends.'"

It's a beautifully simple thesis -- no matter how many ways you package it, the core of economics will always drive our markets. Those who want to create lasting value for their portfolio should approach their research the same way. As the old Smith Barney slogan says -- to make money the old fashioned way, you have to earn it.