Worldly Philosophers Club

The Worldly Philosophers, Vol.1, Number 3	April 22, 2007
THE Worldly Philosophers Club For Individualists Who Seek Worldly Wisdom

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About the Editor

Bernard Baruch was famous for giving advice to people
including presidents while sitting on a park bench.
In 1960, upon his 90th birthday, a commemorative park
bench near the White House was dedicated.

THE PARK BENCH ADVISOR:
BERNARD BARUCH'S TEN RULES OF INVESTING
By Mark Skousen

     In this issue…..
       -- Baruch’s ten rules of investing
       -- Baruch’s advice to Will Rogers that saved
     his financial life
      -- More on upcoming Worldly Philosophers
     conference

“I have heard many men talk intelligently, even brilliantly, about something -- only to see them proven powerless when it comes to acting on what they believe.”
--Bernard Baruch, “My Own Story,” p. 105.

One of my favorite worldly philosophers is presidential advisor and speculator-king Bernard Baruch (1870-1965). As a young man, I read with fascination his 2-volume autobiography, “My Own Story” and “The Public Years.” Although out of print, it’s still worth reading.

   Baruch was my kind of man. He made his money in the private sector, confirming what Ben Franklin wrote many years ago:

   “I am of the opinion that almost any profession a man has been educated in is preferable to an office held at pleasure, as rendering him more independent, more a freeman and less subject to the caprices of superiors. My grandson Benny being a very sensible and good lad, I had thoughts of fitting him for public business, but being now convinced that service is no inheritance. I determined to give him a trade that he may have somebody to depend on, and not be obliged to ask favors of office of anybody.” (See pages 50 and 296 of The Compleated Autobiography by Benjamin Franklin, compiled and edited by Mark Skousen).

   Baruch made millions on Wall Street (more on his techniques later), and then used his money and influence for public service, especially during war time. He focused his energies on war production during both the first and second world wars -- how to fight the war by efficiently producing war materiel. But he avoided full-time government service. He was always merely an “advisor.” (Economist Milton Friedman took the same approach and never regretted it.) Franklin Roosevelt begged Baruch to be Secretary of the Treasury, but he turned it down. He invented the term “cold war” in 1947 to describe relations with the Soviet Union.

Bernard Baruch’s 10 Rules of Investing

   In his memoirs, Baruch listed his 10 rules of investing in a chapter entitled “My Investment Philosophy.” The rules are worth apply today.

   1. Don’t speculate unless you can make it a full-time job.

   2. Beware of barbers, beauticians, waiters--of anyone--bringing gifts of “inside” information or “tips.”

   3. Before you buy a security, find out everything you can about the company, its management and competitors, its earnings and possibilities for growth.

   4. Don’t try to buy at the bottom and sell at the top. This can’t be done--except by liars.

   5. Learn how to take your losses quickly and cleanly. Don’t expect to be right all the time. If you have made a mistake, cut your losses as quickly as possible.

   6. Don’t buy too many different securities. Better have only a few investments which can be watched.

   7. Make a periodic reappraisal of all your investments to see whether changing developments have altered their prospects.

   8. Study your tax position to know when you can sell to greatest advantage.

   9. Always keep a good part of your capital in a cash reserve. Never invest all your funds.

   10. Don’t try to be a jack of all investments. Stick to the field you know best.

Baruch Saves Will Roger’s Financial Life

   One of my favorite stories of the park bench advisor came in 1929, when Wall Street was in a bull market frenzy. Baruch worried that the market was getting too speculative, and started liquidating stocks and investing in bonds, gold, and “hard cash.” In the spring of 1929, the famous humorist Will Rogers asked Baruch for advice. Rogers told Baruch he had nearly a million dollars to invest, and wanted to invest it in the stock market.

   Baruch warned him, “What you want to do is gamble. But I want to tell you that you’re sitting on a volcano. That’s all right for professional volcano sitters, like myself, but an amateur like you ought to take to the tall timber and get as far away as you can. There may come a time when the man who holds your mortgage will want his money and you may not have it, and your friends won’t have it either.”

   Two years later, after the crash and the middle of the Great Depression, Baruch ran into Will Rogers at the Capitol in Washington DC, and asked him, “Will, how did you come out of this?”

   “I did what you told me,” Rogers said, shifting his gum, “and you saved my life.”

Update on Private Conference for Worldly Philosophers

   This story reminds me of the French political philosopher Bertrand de Jouvenel’s line, “A forecast is never so useful as when it warns man of a crisis.”

   And this brings me to our upcoming private conference for worldly philosophers, FreedomFest. I dare say we’ve invited the best group of worldly wise philosophers ever in one room. Speakers include John Mackey, CEO of Whole Foods Market; Muhammad Yunus, this year’s Nobel Peace Prize winner; Art Laffer, the father of supply-side economics; Nassim Taleb, author of “Fooled by Randomness”; Michael Shermer, columnist for Scientific American; Nathaniel Branden, author of “The Psychology of Self Esteem.” Marketing guru Ted Nicholas on “17 Life Changing Success Secrets.” James O’Toole of the Aspen Institute; George Murdock on “The China Study,” the revolutionary diet; and Charles Murray, author of “Human Accomplishment” and “The Bell Curve.” Plus a Big Debate on U. S. foreign policy between Dinesh D’Souza and Congressman Ron Paul.

   There’s never a dull moment at FreedomFest, with seven sessions going on simultaneously, including discussions and debates about investing, philosophy, history, science & technology, geo-politics, health, and the arts.   We offer an exhibit hall, a bookstore, several cocktail parties, lunches, and to top it all off, an incredible never-to-be-forgotten 7-7-7 Gala Banquet on Saturday night, where three Founding Fathers will entertain us (Thomas Jefferson, Ben Franklin, and Patrick Henry). All in one of the world’s most exciting cities.

Where will you be on 7-7-7? Make it unforgettable.
Call Tami Holland, Conference Coordinator, 1-866-266-5101; go to www.freedomfest.com.

Good living, AEIOU,

Marcus Aurelius

P. S. On a personal note: I’m happy to announce that New York University Press has just released a paperback version of my magnum opus, “The Structure of Production,” with a new 30-page introduction. It is considered an underground bible for supply side and Austrian macroeconomics. Management guru Peter Drucker read it twice! And Rick Rule considers it his favorite book for commodity investors. Price is $25, including shipping. To order, call Eagle Publishing at 1-800-211-7661.