Wall Street Follies
Griffin, C. W.
63 Wall Street Follies THE GO-GO YEARS^ by John Brooks. Weybright and Talley. 375 pp. $10. reviewed by C. W. Griffin Throughout the 1960s, Wall Street vibrated to the rhythms of...
...More important, he sets his financial story in a much broader cultural matrix...
...Established stock brokerage houses, rewarded with generous blocks of NSMC stock as "finder's fees," helped Randell blow up the bubble...
...It must continually feed rising expectations, which require inflated predictions ever more difficult to fulfill...
...in 1970, the nation's financial community nearly collapsed in a rubble of rampant greed, speculative fever, and myopic venality...
...A Prescription for the Urban Crisis" just published by Pitman...
...The degeneration of our national political life into farce had a minor parallel in the financial community, which violated its own rules for member firms' capital as casually as President Nixon violates the U.S...
...With his $10 million profit from Four Seasons computed on a daily basis, Clark will receive roughly $80,000 a day for paying his debt to society...
...Not long afterward, the bubble burst, and NSMC had to announce a first-quarter loss in 1970 of $1.2 million...
...The chief business of NSMC, reports Brooks, was not selling goods and services to the youth market...
...63 Wall Street Follies THE GO-GO YEARS^ by John Brooks...
...Forced to resign NSMC's presidency, Cort Randell retired as a millionaire...
...Clark will be eligible for parole in a few months...
...By the end of the decade, the fun was over...
...Computed on the Four Seasons' investors' losses, his jail time will atone for his crime at the rate of $2 million a day...
...included $2.8 million in "unbilled receivables"— i.e., money that had not even been requested...
...Its chief business was selling stock to Wall Street, a job at which its young president was fantastically successful...
...Constitution...
...He also shows how President Nixon met the nation's stock-market crisis with brazen incompetence: Just when the speculative binge was cresting, and a strong Securities and Exchange Commission was needed, Nixon proceeded to weaken the SEC...
...Offered originally at $6 a share, it soared to $30 within six weeks, to $82 within six months...
...Acquisitions, the key to "performance," kept the bubble aloft several years...
...Mr...
...He portrays the effects of the national demoralization on the financial community's daily operations, notably in the backroom sweatshops where the big record-keeping foul-ups occurred...
...Promoting the nation's fast-growing youth market, thirty-yearold Cortes Wesley Randell founded NSMC in 1965, with sales of fad items like posters and paper dresses and distribution of samples and employment guides on college campuses...
...By 1969, Randell was forced into "creative accounting" to meet his perennial prediction of tripled annual earnings...
...America is still the land of opportunity...
...Two qualities distinguish Brooks's fascinating chronicle...
...First, he explains the financial manipulation with greater clarity than other popular financial writers...
...Randell supplied plenty of hot air, with annual predictions of tripled earnings to securities analysts...
...included $3 million in profits of NSMC "subsidiaries" that the company had not even acquired...
...A conglomerate selling for 100 times earnings can produce spectacular results by acquiring companies with price earnings ratios around 10...
...Qriffin is the author of "Taming the Last Frontier...
...At constant price/earnings ratio, the parent company's artificially bloated profits keep boosting its market price...
...A Nixon-appointed judge, Thomas P. Grieso, gave Clark a one-year jail sentence, with no fine whatsoever...
...reviewed by C. W. Griffin Throughout the 1960s, Wall Street vibrated to the rhythms of conglomerate mergers, performance concepts, "go-go" mutual funds, and "creative accounting...
...But like the chain-letter racket, the performance game soon collides with reality...
...By 1968, with nearly 600 campus representatives, NSMC was ready to go public...
...According to John Brooks's report in The Go-Go Years, blind luck saved the New York Stock Exchange from the disastrous fate it richly deserved...
...Among the purchasers of NSMC stock were Bankers Trust, Morgan Guaranty, and the State Street Fund of Boston...
...To produce a reported $3.5 million net profit, the company's accountants performed these financial gymnastics: deferred to a future year the reporting of a $533,000 research and development expenditure already spent...
...With the stock selling at a stratospheric price earnings ratio of 100, the bubble required a steadily increasing volume of hot air to maintain its lofty altitude...
...Brooks's account of the rise and fall of National Student Marketing Corporation illustrates how the merger game was played...
...Last autumn, Jack L. Clark, an Oklahoma businessman who headed the notorious Four Seasons Nursing Centers of America, pleaded guilty to conspiracy in a stock fraud that netted 66 (Continued from Page 63) him $10 million and fleeced investors of $200 million...
Vol. 38 • March 1974 • No. 3
