One day in 1958, the phone rang at Werner Renberg's home. Was it a crank call? Renberg felt he had no choice but to respond with biting sarcasm.
"This is Gerald Loeb," the man on the other end of the line said.
"I thought he was pulling my leg. Mr. Loeb was very well known back then, an author of a best seller," Renberg says. The mystery man told Renberg that he had just won the inaugural Gerald M. Loeb award for distinguished business and financial journalism in the magazine category.
"My initial reaction was something like someone saying, 'This is Santa Claus.' Yeah, and I'm Mrs. Claus," Renberg says. Mr. Loeb was not pulling the Oklahoma native's leg.
Renberg soon got a formal letter of congratulations from the dean of the business school at the University of Connecticut. Weeks later, Renberg found himself sitting with Mr. Loeb, members of the judging committee, and David Steinberg, reporter at the Herald Tribune and winner of the newspaper category, while having lunch in a ballroom at the Waldorf Astoria hotel in Manhattan.
Steinberg passed away this spring.
To say that Renberg was surprised to hear he had won the award may be an understatement. His bosses at Business Week hadn't bothered to tell him they'd submitted an entry. But the magazine certainly took the competition seriously.
According to Renberg, the publisher's office submitted a collection of eight articles that focused on the theme of regional economic development and cooperation between the public and private sectors.
At the time, Renberg was head of a one-man "regions" department. The articles featured how business people, municipal leaders and labor unions joined hands in working to boost the economy. The articles covered regions including Dallas- Ft. Worth, St. Louis, and Newark, N.J. Renberg recalls penning three or four of the pieces and commissioning the others to freelance writers.
"We were very proud of the award at McGraw-Hill," Renberg says, referring to the former owner of the magazine. "We had beaten Fortune, Harvard Business Review, Time, Life, Barron's Newsweek and Dun's Review.
"To fully appreciate the significance of a Loeb award for business and financial writing in newspapers and magazines, one has to recall the few awards available to business and financial journalists when it was created," Renberg adds.
He vaguely recalls a separate award that was sponsored by a trade organization, but can't remember whether there were any awards that had the backing of The Associated Press Managing Editors Association, business journalist organizations, or Sigma Delta Chi, a fraternity for news writers.
"For sure there was no Pulitzer, and I believe there is none yet," he says.
Today, we clearly know why Loeb began the awards.
On its website, the UCLA Anderson School of Management writes that "his intention was to encourage reporting on business and finance that would inform and protect the private investor and the general public." Harold Williams, a former commissioner of the Securities & Exchange Commission and dean of the UCLA business school back in 1973 when Loeb (1899-1974) decided to move the home of the awards from University of Connecticut to the west coast institution, offered a second reason.
"The eld of nancial journalism is changing and continues to change dramatically," Williams was quoted as saying in an article by Amanda Andonian. "In order to live up to what Gerald had in mind, I think it's the responsibility of those leading The Loeb Awards to change with it."
Change indeed. Today, journalists across the country compete in 12 categories, spanning from breaking news to commentary to international topics.
Still, one has to ask: Why did Loeb have such vision that others on Wall Street did not? Why did he have as much passion for good writing as he did for buying and selling common stocks with great success?
A deeper dive into Loeb's life may help provide the beginning of a complete answer.
Loeb was born into wealth, but he quickly learned how wealth can vanish fast.
His father sold a thriving wine retailing business in New Orleans and moved to the west coast in search of new riches. Loeb’s maternal grandfather made a fortune by investing in silver in Nevada, then shifted his winnings into real estate in the Bay Area. However, the 1906 San Francisco earthquake struck a big blow. Two years later, Loeb’s father and grandfather died within two weeks of each other.
“Gone, too, was the fancy Loeb home in San Francisco with its maid upstairs, maid downstairs, cook, nurse, gardener, coachman, and the beautiful coach with the two handsome horses,” the prolific Ralph G. Martin wrote in “The Wizard of Wall Street: The Story of Gerald M. Loeb.”
Forced to live in a boarding house with his widowed mother and younger brother, Loeb then suffered polio at age 11. But the illness couldn’t stamp out a deep desire to learn through books and childhood mentors.
Loeb gave up on a dream to become an architect. But a decent-sized inheritance sparked a strong interest in investing, and he apparently got hooked at age 21 when he decided to invest his $13,000 inheritance in a corporate bond. That wad of cash was originally $75,000, to be divided equally by Loeb and his brother. But family friends who were asked by Loeb’s mother to manage the stake ended up losing nearly two thirds of it.
“I didn’t know a stock from a bond, and the first purchase I made was a very silly one,” Loeb was quoted as saying to Martin. “I saw an ad for S.W. Straus Real Estate Bonds, and the thing that sold me was their slogan, ‘Six percent for safety. . . 36 years invested without a loss to any investor.’”
Impressed by pictures of fancy buildings that the bond sellers apparently invested, Loeb immediately bought a $1,000 face-value security that matured in 15 years, “without asking anybody’s advice, without checking into the company.”
According to Martin, Loeb’s biographer, Loeb later sensed something was amiss with the investment. He redeemed the bond within a year for a small loss.
Little did he know how poorly S.W. Straus had managed proceeds from the bonds. Since the bond didn’t trade on any exchange, the market price was completely arbitrary. The bond managers could afford to pay a 6% coupon because big profits from the sale of the bonds could offset the obligations to bond holders and any small investment losses year to year.
Martin wrote that if the bond had traded on an open market, investors would’ve demanded a much higher interest rate to compensate for the high risk.
Eventually, bond holders got wiped out years later after the Strauss-owned properties plunged in value.
“If you invest all your funds at once, you must be very expert to select just the right time,” Loeb wrote. “If you hold funds back and invest a fraction, say 10 percent, or 20 percent when available, and a second fraction a month or two or three later or on some seemingly favorable market juncture, you reduce risk.”
In other words, use time as a way to diversify.
Markets are irrational. Loeb learned from other investing pros, such as Bernard Baruch, about how important it is to be aware of the madness of crowds, and passed it along. I think being contrary successfully is being late, he wrote. The man who shes for the bottom or reaches for the top is never the winner. Keep your contrariness under wraps until you think you sense the exhaustion of the trend.
As he illustrated in chapter 21, “Contrary Opinion as a Tool in Stock Selection,” Loeb knew the mighty strength of the market and encouraged others to be humble. “When the crowd takes the bit in the teeth, price movements always go to excess. There is an old stock exchange proverb: ‘No price is too low for a bear or too high for a bull.’”
“It is usually better to err in selling too soon than not to sell at all,” Loeb wrote. “One of the considerations in determining a selling spot is to sell on great strength and not wait for trouble to spur you to liquidate.”
Loeb found an edge in Wall Street with charts. He stopped short of saying that any stock chart gave an absolute exit point for every investor. But in chapter 20, “Do Something About Selling,” he made it clear that investors need to make critical decisions on cold facts, not on hot emotions. So he advised, “to consider selling any stock which reacts 10 to 15 percent from its top.”