HETTY GREEN

By Naoma Welk

When we think of women in history who have been wealthy, we think of names like Astor, Vanderbilt, Rockefeller or Hearst. We need to add Hetty Green to that list of mega-bucks’ investors.

Meet Hetty

Born in 1834 in New Bedford, Massachusetts, as Henrietta Howland Robinson (Hetty) was happy being at her father’s side. Her father, Edward was involved in the family whaling ship business, which his great grandfather launched the previous century. Edward was a clever businessman and increased his inheritance twenty-fold.

Hetty spent time with her father as he conducted his daily business in New Bedford. Her favorite reading included the New York and Boston papers. Hetty was more interested in investing than being social. At an early age, became dedicated to learning how to make money … and how to keep it.

Hetty’s Inheritance

In 1865, 31-year old Hetty’s father died. He left her an annual income from his $5 million trust and $6 million outright. That same year, Hetty’s Aunt Sylvia Howland bequeathed her $1 million. The combined $7 million translates into $100m in today’s dollars. Prudent investing enabled Hetty to turn her inheritance into $200 million ($17 billion in today’s currency).

Hetty’s astute investing and money management led investors and the public alike to refer to her as “the richest woman in America.” Her stinginess earned her the moniker, The Witch of Wall Street.

In 1867 Hetty married Edward Green, a Vermont businessman who made money in the Philippine silk trade. Hetty and Edward signed a pre-nuptial agreement…and only spent Edward’s money. Edward and Hetty had two children, a son Edward Howland Robinson Green (Ned) and a daughter, Hetty Sylvia Ann Robinson Green (Sylvia)

 

 

 

 

 

Beyond Frugal

In the late 1870s, despite an annual income in the mid-six figures (millions in 2012 dollars) Hetty became obsessed with frugality: her children wore second-hand clothes to school. In winter, she lined her son’s jackets and shoes with paper. Hetty fought with everyone over money and how much she had to pay. Hetty’s personal hygiene began to suffer. She rarely cleaned her clothes and kept wearing them long after they had fallen apart. Shopkeepers dreaded seeing her dirty hands handling their merchandise.

The most severe example of her frugality is when she treated her son’s injured leg (in a sledding accident) at home. Why spend the money when she could do it herself? Her remedy was not working, so she later took Ned to doctors for help. Ned still became lame in his teens, and following years of unsuccessful treatment, Ned’s leg was amputated above the knee.

Edward Green’s $2 Million

By 1881, Hetty’s husband had lost most of his money by speculating in the stock market, so she left him. Hetty had no interest in spending her money to maintain the household, so she took her children to New York where she could be closer to Wall Street. Hetty was successful as an operator on the Stock Exchange. Her peers watched in amazement as the rumpled, dirty little woman took large positions in the unregulated stock market (she liked railroads).

Hetty made money. The market was not her focus; rather Hetty’s main business was buying mortgages and lending money to bankers and brokerage houses on tough terms at high prices. Hetty liked to hold mortgages on churches and if they defaulted, she had no problem foreclosing.

Hetty’s investment strategy involved conservative investments, substantial cash reserves to back up any movement and a “cool head” in crazy times. She bought bonds when they were crashing and sold them when they were in high demand.

By the 1890s, Hetty had increased her fortune six or seven times. She kept $20 million to $40 million (half a billion in today’s dollars) in cash at all times for quick loans. More than once, the City of New York called to ask for loans.

Hetty Green was a lender in JP Morgan’s emergency operation to save the banks during the Panic of 1907 when she wrote a check for $1.1m (50 times that in today’s market). As payment, she took short-term revenue bonds.

Skinflint

During lunch, at her Wall Street office, Hetty dined on a can of oatmeal. She heated it on a radiator and ate it dry. The press followed Hetty and by the 1890s, her name was synonymous with “skinflint” or “miser.”

Hetty was always on the run from tax collectors; she felt she owed the government nothing. She moved her children from one cold-water flat to another and she took furnished rooms that were always under $22/month.

Hetty was paranoid and convinced that everyone was out to kill her. Biographer Jeffrey Tucker writes, “When a wood beam fell nearby, she was sure that it was intended for her. Same with every mishap.” In Hetty’s mind, the entire world was organized against her; she hated everyone and everything.

Hetty worked every day until she was in her mid-70s. When she was 77, she became ill with pneumonia and moved into her son’s second townhouse. As rent, Hetty paid her son amount she had been paying in her rooming house.

Hetty passed away in 1916 at the age of 81; her estimated estate was close to $200 million ($17 billion in today’s dollars). By comparison, in 1913 JP Morgan’s estate was just $80 million.

Ned Green

After a frugal existence in Chicago managing his mother’s assets, Ned moved to Texas where he managed his mother’s railroad investments. His success gave him access to large sums of money and he was able to start “living large.”

Later Ned moved to New York to oversee his mother’s financial affairs, took a large suite at the Waldorf-Astoria and later, two townhouses on West 91st Street and Central Park. In order to protect the family funds, Hetty made Ned promise to never marry. Instead, he lived with his girlfriend Mabel until his mother died.

Ned lived very well on his multi-million-dollar annual interest income from his $100 million estate. He made some generous contributions, including turning over his Dartmouth, MA estate to MIT scientists who conducted various research projects. Ned died in 1937; his estate was still valued at $100 million, the bulk of which he left to Sylvia.

Sylvia Green Wilks

Sylvia and Matthew Wilks lived in New York and were married for 15 years. In 1926, Matthew passed away. Sylvia, who was reclusive and eccentric, died in 1951; she left an after-tax estate of $90 million. Unlike her mother, who never tipped or gave money to anyone, nearly all of Sylvia’s estate was distributed to schools, hospitals and charities.

In a 1908 interview with Howard Noble, a reporter with the Boston Traveler, Mrs. Hetty Green discussed The Panic of 1907.

Below is an excerpt from Hetty’s comments:

“I saw this situation developing three years ago and I am on record as predicting it. I said then that the rich were approaching the brink and that a ‘panic’ was inevitable.”

“There were signs, which I couldn’t ignore. Some of the solidest men of the ‘street’ came to me and wanted to unload all sorts of things, from palatial residences to automobiles. The New York Central quietly negotiated with me for a big loan and that made me sit up and do some thinking, for that road is one of the wealthiest in the world”

“There had been an enormous inflation of values and when the unloading process was begun, the holders of the securities found great difficulty in getting real money from the public. The stringency was felt by the big brokers and manipulators long before the people had any inkling that such a condition existed.”

“I saw the handwriting on the wall and began quietly to call in my money, making for new transactions and getting into my hands every available dollar of my fortune against the day I knew was coming. Every real-estate deal which I could possibly close-up was converted into cash. I never buy real estate. First mortgages are good enough for me.”

“When the crash came, I had money and I was one of the very few who really had it. The others had their ‘securities’ and their ‘values.’ I had the cash and they had to come to me. They did come to me in droves. Some of them I lent money to and some I didn’t. That was my privilege. Those to whom I loaned my money got it at 6 per cent. I might just as easily have secured 40 per cent. But never in my life, no matter what has been said against me, have I practiced usury, and no one knows it better than the wealthy men who have had business dealings with me.”

“I loaned money to the New York Central, but when the Vanderbilt family applied, I refused them. They came to me some time ago—that was before the wedding—and brought a box two feet long containing the famous Vanderbilt jewels. They wanted me to take them as security and lend them money, but Lord bless you, I know nothing about diamonds and such things. This may have been worth all that was claimed, but I don’t deal in diamonds. I know a few things about real-estate mortgages, but not jewels. I have no use for them in my business.”

Hetty at Work

In 1886 a group of New York investors aimed to gain control of the ailing Georgia Central Railroad and sell off its assets. Hetty got wind of the plan and started buying shares at $70. The stock climbed to $100. Hetty could have unloaded her stake for a quick $200,000 profit. Instead, she sat tight. When the New Yorkers’ candidate for president, E.P. Alexander, offered her $115 per share, she demanded $125. If Hetty would only cast her vote his way now, said Alexander, he would meet her price eventually. Hetty’s response: “If I have to wait for my money, the price is $130.” Alexander countered with $127.50, cash on the barrelhead, and Hetty walked away with a $385,000 gain. (Forbes 11/1/2004)

Hetty’s Second Love

Hetty’s most faithful friend was a mongrel dog (Dewey). Dewey had a bad habit of biting her visitors. Most of the dog’s victims who were anxious to not offend the rich woman, tolerated the animal, but one friend had had enough. “Hetty.” She said reproachfully, “that dog bit me again. You’ve got to get rid of him.”

 

 

 

 

 

 

Hetty refused. “He loves me,” she explained, “and he doesn’t know how rich I am.” (A pawprint.com anecdote)

Although Hetty didn’t waste money for food for herself (she cooked oatmeal on an office radiator and munched on raw onions for her health), she fed steak to her dog, Dewey.

Lessons from Hetty Green

• “There is no great secret in fortune making. All you do is buy cheap and sell dear, act with thrift and shrewdness and be persistent.”

• Buy quality assets when they are cheap.

• Invest money where there is growth.

• Hetty wanted income producing assets so she could reinvest the cash.

• She learned from her father that politicians are for hire.

• Use tight-fisted management disciplines.

• Hetty liked collateral.

• She loaned money to customers she knew and on collateral she knew.

• In the 1907 panic, Hetty had cash; everyone else had securities or their “values.” Many went to Hetty to ask for loans. She charged 6% when she could have gotten 40% but she didn’t want to practice usury.

• In 1908, Hetty had $100 million+ in blue chip stocks, that she bought cheap, many first mortgages and other quality debt. She also had $20 million in cash.

 

MARK’S WORKSHOP JOURNAL

Mark decided to make his workshop more professional; he converted his workshop into an office by putting a sign on his front door and listing himself as the Village Investor. Mr. C T. Trend, a newcomer to Investorville, liked Mark and offered to help in his workshop. C.T. has spent years studying Benjamin Graham’s “Mr. Market” and has developed ways to better understand “Mr. Market”. His work compliments Mark’s for an interesting approach to value, income and growth investing.

My friend Marcy and I were looking at the life and investment lessons taught by Benjamin Graham, the father of value fundamental analysis. Marcy wanted to tell me about her grandmother.

Marcy smiled, “Grandmother invested conservatively and held back a lot of cash, she was opportunistic, focused on income and pinched pennies and evaded taxes. Her tax evasion practices including putting properties she owned in different names, which made it difficult to estimate what she was worth.

When Grandmother died, she owned about 6,000 pieces of real estate across forty-eight states including railroads, theaters, cemeteries, hotels, office buildings, and mortgages to nearly six hundred churches.

“Not bad for an old lady,” said Marcy. Then, Marcy said “Grandmother has another name- you might know her as The Witch of Wall Street.

”A “Witch” Named Hetty

I had heard of a woman named Hetty Green, known as the “Witch of Wall Street,” but I had not really looked into her life until Marcy became interested in women investors.

I wondered, what could I learn from a “witch” who was born in the 1830s and amassed her fortune during the Gilded Age?” It turns out…a lot!

Hetty learned about stocks from her father who left her a fortune. She was a savvy investor during the panics (today called corrections) of 1873, 1884, 1890, 1901, 1903 and 1907.

In 1873, she had plenty of cash to buy railroads and real estate. She bought real estate on the outskirts of growing towns, like Denver, Chicago and St. Louis. Then, she waited for the towns to grow and expand. When that happened, she sold the property for nice profits.

She did the same thing with stocks. She always had cash to buy stocks near the bottom of a panic and then waited for the prices to rise.

The Good Thing About Cash

Hetty liked to see a cash flow from her investments so she could reinvest in other things (a century before Warren Buffet did the same thing).

When she saw enormous value inflation, she would raise cash and wait for the eventual fall in prices. She didn’t need a computer to figure it out for her. She had cash in 1907 because she saw rising prices as early as 1903 and she started selling.

Hetty raised cash to invest again. Today, cash seems like a bad thing. Everybody is hedged and leveraged because they think their computer programs will bail them out. Ask Chase’s CEO Jamie Dimon about hedges and Chase’s $9 billion loss.

Income and Value

Like Hetty, John Templeton and T. Rowe Price (in the late 1960s) and Larry Tisch (in 2000 when he only had 10% of his portfolio in stocks) knew the value ofcash.

Income and value were Hetty’s game. Perhaps I should have more cash available for the next panic. The enormous inflation is now in Treasury Bonds and money supply.

It looks like value and cash has been a winner for centuries.

 

 

 

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