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April 17, 2003 The Bottom Line 5

Read Between the Lines:
A Brief Response to Last Week’s Article “Look Beyond the Words”
By Rob Tarulli express his beliefs, however abhorrent and hateful made during ‘officially sanctioned classroom experi-
they may be. I also believe that we, the students, ences’ (i.e. class), disciplinary action may have been
Andrea Alban-Davies wrote a very interesting employees, alumni, and trustees of the University, inevitable. My argument has been that these state-
article last week asking for the student body to write must do everything we can to disassociate ourselves ments were indeed made by a Columbia Professor
to President Bollinger and ask “that he uphold argu- from him and from the repulsive actions he promotes. speaking at an event organized by other Columbia
ably the most important right given to us by our con- Mr. De Genova has unveiled a venomous disgust for Professors on Columbia’s campus and therefore the
stitution – the right to freedom of speech. Ask him to many of his fellow Columbians and has sought to professor/individual distinction cannot be made; that
respect Professor DeGenova’s right that he exercised incite violence against them. There are upwards of because of the nature of the event and its organizers,
when making his comments; ask him to encourage 50 students on campus who still have active com- Mr. DeGenova was speaking as a Professor. This
each member of our community to speak his or her mitments to the military and are therefore targets does not depend on what the definition of ‘is’ is.
mind without fear of any repercussions”. of Mr. De Genova’s tirade. This is both inappropri- It is evident to those of us who follow the news that
Mr. De Genova, like all Americans, has the right ate and completely unacceptable. This is not about there has been some backlash towards the University
to exercise freedom of speech. However, Mr. De Mr. DeGenova’s freedom to speech, it is about the on this matter. When I first called the University to
Genova, like all Americans, does not have the right to University providing an environment that is con- make a complaint, I was informed that they were
hold a prestigious position as a professor at Columbia ducive to learning and ensures the safety of its stu- receiving thousands of calls a day on this issue
University. I can offer you numerous examples of dents. I strongly feel that if his comments were made alone. I am quite confident in saying the vast major-
individuals who have worked for private, public, and against any other student group (ethnic, social, reli- ity of these calls were not congratulatory in nature.
academic institutions who have lost their jobs based gious, etc . . .), the university would have formulated Recently, 104 members of the U.S. Congress House
on comments or actions that exhibited extremely poor a much stronger response to ensure the safety of the of Representatives co-signed a letter to President
judgment and have seriously offended the organiza- students on campus. Bollinger urging that Mr. DeGenova be fired.
tion’s stakeholders. Some recent examples are Trent President Bollinger explains his actions (or When Mr. DeGenova made those comments at
Lott and Peter Arnett. More notable is University of rather inaction) by proclaiming that Mr. DeGenova Columbia University on March 26, he seriously tar-
New Mexico history professor Richard Berthold who was speaking as an individual, not as a Columbia nished the University’s reputation and brand. It is
on September 11 became infamous for telling a class University Professor. President Bollinger states in on these grounds, along with his calls for violence
that “anyone who can blow up the Pentagon has my his press-release, “His comments were not made in a against certain students on campus, which I believe
vote.” The University issued Mr. Berthold a letter classroom, but rather at a teach-in, an informal gath- disciplinary action is called for. If you agree with me,
of reprimand and he voluntarily retired a year later ering where faculty and students come together to I urge you to make your voice heard - stop by my
because it became evident the University’s adminis- discuss and debate the pressing and important issues folder on the second floor of Uris and sign my peti-
tration was making life difficult for him. of the moment. They are not authorized or officially tion. If you don’t agree with me, I still urge you to
But this is not an issue of free speech. I wholly sanctioned classroom experiences.” This distinction make your voice heard - I think Andrea has a petition
acknowledge that Mr. De Genova has a right to is made because if Mr. DeGenova’s comments were for you in her folder.

Going Out on Top: Walter & Edwin Schloss
By Eli Rabinowich for them. ting into the statistical depart- a growth company. I remember WS: That’s right. They like
ER: How did you first get ment, but he said he couldn’t he took Colgate-Palmolive, a growth. A lot of people are
Welcome to “Profiles in started in research? do it. He suggested I read value company, and Coca-Cola, more interested in a company
Investing”, brought to you WS: In the 1930’s my mother Ben Graham’s book, Security a growth company, and com- doing better next year than this
by The Bottom Line and The had a good friend who was Analysis, which had just been pared them. He also compared year. Now what we do in our
Heilbrunn Center for Graham married to a member of the published and said ‘if you read Dow chemicals (growth) and business is try to relate the mar-
& Dodd Investing. Every week New York Stock Exchange. I that book and know everything Distiller Seagram (value.) ket price of the stock to what
we will profile a leading inves- used to visit them and I liked in it, you won’t need anything ES: How do you compare we think it is worth. When
tor and get an inside look into the lifestyle, they had a kind of else.’ Ben Graham was a cus- two different companies in dif- we buy a stock we don’t try to
their investment philosophy. project what the future is going
Up next, Walter and Edwin to be, we’re not able to do that
Schloss. particularly well. To do it well,
For sheer uninterrupted you need to know a lot about
excellence few investors can the company, you need to talk
match Walter Schloss. For to their competitors, suppliers –
45 years, from 1955 through we don’t want to do that. We’re
2000, Walter Schloss has man- a small little office here. So we
aged the same investment look at the numbers rather than
partnership. The compound
rate of return for his Limited
PROFILES IN INVESTING run around the country, like
Peter Lynch used to do.
Partners was 721.5x or 15.7% ER: What was the first great
per year compared to a gain joie de vivre about the way they tomer of Loeb and was teach- ferent industries? stock call you ever made?
for the S&P Industrial Average lived. He was a specialist on ing courses at night. So I took WS: He was using the statis- WS: Well you have to under-
of 117.5x or 11.2% per year. the Exchange, but I didn’t like two of his courses – I think tics. He wasn’t using industry stand that I had no money, but
In 1973, Walter’s son, Edwin, the speculative nature of the ’36 and ’39 – at the New York analysis. He was using the the first stock I remember buy-
joined the partnership and the work. I could see instinctively Institute of Finance, which was value of the company. He was ing was ten shares of Standard
fund became known as Walter what I liked – I like numbers. then called the New York Stock looking at relative value to see Gas and Electric, $7 preferred
& Edwin Schloss Associates. So after high school, in 1934, I Exchange Institute. I took if the company was relatively stock for $15 a share. I ended
In 2001, Walter and Edwin went to work at Loeb Rhoades, Graham’s course and I just fell cheap to book value. up buying and selling the stock
decided to close up shop and then called Carl M. Loeb & Co. in love with the approach – it ES: You’ve always said some a couple of times and made
liquidate the fund. I sat down I started working in the cage, made sense. He liked to take people latch on to the value some money, with the stock
with Walter and Edwin and doing clerical work, recording companies listed near each approach, they really fall in eventually working out at over
asked them about their careers, trades for customers. A year other on the exchange and to love with it and other people $200. The thing about Ben
why they decided to shut down, after I arrived, I went to speak compare them. One would rep- don’t have any affinity for
and what the future has in store to one of the partners about get- resent a value stock and another value…
Continued on Page 6
6 The Bottom Line April 17, 2003

Profiles in Investing: Walter & Edwin Schloss
Continued from Page 5 The important part is to have of the reasons people stayed been sick for a long time. the most important thing is
some money in the stock. If in this market when they had About sixth months after she price. You have to be careful
Graham’s approach is that you you don’t have any money in no reason to be in the market. died I went with the Museum not to overpay. It may be a
made money but not a great a stock you tend to forget about When Edwin said to me in of Natural History to South very good company, but it’s not
a deal of money. You would it. We then buy the stock on the 2001 that he couldn’t find any Western France. On the trip a good buy if it’s selling at a
double your money and then way down and try to sell it on cheap stocks – and that was were six couples, nine single steep premium.
get out of the stock. His focus the way up. a great call – it was a great women and myself. I met one ER: What would you advise
was on doubling your money ER: You have an unusual fee excuse for us to quit. of the women, we got along newly minted MBAs?
and that’s it. structure. Tell me about it. ES: I have a list of stocks that nicely and I’ve being seeing WS: A number of things. Be
ER: Does this philosophy WS: I wanted to put myself could be on our buy list and I her ever since. If all goes well, honest with yourself. Don’t
impact your portfolio construc- on the same side of the table find that invariably when it gets we will get married. let your emotions affect your
tion? as my investors. Most funds down to less than five stocks ES: Right now I have quite judgment and get an idea of
WS: One of the things we’ve are set up for managers to get the market’s too high and when a full plate, but I like work- what you want to get out of life
done – Edwin and I – is hold 1% of the assets and 20% of it gets down to two or three it’s ing with people. I think I may itself. If you really don’t like
over a hundred companies in the profits. I wanted to be in the a danger signal eventually teach. I am also Wall Street, you shouldn’t go
our portfolio. Now Warren same position as my partners. ER: ..and that’s why you interested in short story writing in just because it is a place to
[Buffet] has said to me that, If they didn’t make money I decided to get out? and playwriting. I started out in make money. You should really
that is a defense against stupid- didn’t make money. If they WS: Yes. Stocks are no the arts, not in business. In a like what you’re doing. Also,
ity. And my argument was, and made money I wanted to be longer that cheap. If you look way I feel like it is my turn to try to deal with honorable and
I made it to Warren, we can’t part of it. So I got 25% of the at the book value of value do certain things that I wasn’t good people.
project the earnings of these realized profits, but that’s it. stocks, you’ll see a book of able to pursue. ES: I think it is important to
companies, they’re secondary If the market went down we six and the stock is selling at ER: What’s the best piece build on you strengths and not
companies, but somewhere would have to make up the loss 20, down from 50. Well its still of business advice you ever on your weaknesses. It’s impor-
along the line some of them until my partners were whole. 20, and on a statistical basis it received? tant to have other interests
will work. Now I can’t tell ER: So few investors have is still not that cheap. You have WS: Probably when the besides work. And finally, it’s
you which ones, so I buy a been able to beat the market to realize that there are over partner told me about Ben good to learn to play bridge.
hundred of them. Of course, for an extended period of time 50,000 Chartered Financial Graham’s book, Security ER: Gentlemen, it was an
it doesn’t mean you own the – What’s your secret for con- Analysts which you didn’t have Analysis, and said if I learned honor and a pleasure.
same amount of each stock. If trolling the fear and greed that 35 years ago. everything in that book I Please email comments and
we like a stock we put more has affected so many investors? ER: So, what’s next for you? wouldn’t have to do anything suggestion to ERabinowich04
money in it; positions we are WS: We don’t like to be WS: My wife died about else.
less sure about we put less in. greedy. I think greed is one three years ago, after she had ES: From Walter I learned

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