Daily Speculations The Web Site of Victor Niederhoffer and Laurel Kenner

08-Feb-2006
J.P. Morgan, Sr. and Harry Smalls, from Stefan Jovanovich

Reading Art Cashin's tribute to Harry Smalls this morning (see below) made me think yet again about J.P. Morgan, Sr. and his fanciful notion that only character mattered.

What I have concluded (at least for today) is that Morgan's notion was the elemental wisdom of a lifetime of game theory. Morgan thought that character mattered because it was, in fact, the one constant in a world of reliably unpredictable fluctuations. The best anyone could do was to use their best judgment about risk and honor their trades and trade only with people who honored theirs.

Morgan was hardly a skeptic about accounting, but he remained a persistent agnostic about the ultimate value of numbers. His reorganizations always started with getting a proper set of books, but he seems to have thought that numbers had as much (if not more) capacity to lie as they did to tell the truth.

What makes his attitude seem utterly alien to most modern minds is that it had no "system" behind it other than faith in something that could not itself be quantified.

Here is the piece by Art Cashin, UBS:

Monday morning I learned that a dear friend and a Wall Street icon had passed away over the weekend. His name was Harry Smalls and when I first became a member in 1964, Harry agreed to be one of my two sponsors. At the time, there was a very vigorous (and occasionally painful) admission process. The appearance before the Admissions Committee in those days was somewhat like being grilled before a grand jury.

So here I am, twenty-three years old and about to be grilled by the senior partners of some of the biggest and most prestigious brokerage firms on Wall Street. That's where Harry came in as a "bonus". Harry knew everybody. More importantly everybody liked Harry. He had a ready smile and a quick wit and both the great and not so great found him gentle and charming.

One of the reasons Harry knew everybody and everybody knew Harry is that he had worked at the NYSE since the 1940's.

Aside from easing my admission and becoming my life long friend, Harry brought me other benefits. Given his decades of experience, he was a fabulous information source. If you wanted to know how the market reacted to some battle in the Korean War or to Eisenhower's heat attacks or the fall of Dien Bien Phu, Harry's memory was precise. Harry helped me found the Exchange Christmas Dinner Fund, which each year provides full Christmas dinners at home for those in need. They do not go to some armory or soup kitchen. They stay in their own home or apartment surrounded by family and love - even as you or I. Harry used to say - "We'll teach folks Scrooge doesn't live on Wall Street". He sure did.

I could go for pages about Harry. His knowledge of arcane facts about baseball and his beloved Brooklyn Dodgers was legendary on the Floor. But it was his graciousness that will be remembered best. In the rough and tumble world of Floor trading things can sometimes get confrontational. But folks would always remark that "if you got mad at Harry Smalls, there was something wrong with you".