History of P.R. Herzig & Co.

 

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by Thomas Herzig

Since its founding in 1957, P.R. Herzig & Co., Inc has evolved as Wall Street has changed.

The Early Years

Originally a retail broker and a member of the New York Stock Exchange with “customer’s men,” the firm flourished in an era of fixed commissions and low volume. By the early 1960s the firm also had an interest in a specialist’s book on the floor of the New York Stock Exchange.

The assassination of John F. Kennedy challenged the firm’s resources. When news of the tragedy emerged, the market sold off sharply and was finally closed early. As the firm's founder, Philip Herzig, later recalled, “We went home broke that night ... half of Wall Street was broke!" Georgia-Pacific was the major stock in the specialist book. Fortunately, the market rallied strongly when the market reopened and P.R. Herzig & Co. continued to flourish.

50 Broadway

P.R. Herzig & Co. maintained its offices at 50 Broadway.  In those early years, the Wall Street community was much smaller and close-knit than it is today. Before the electronic age, firms had to be close enough together so that "runners" could physically deliver securities to settle trades.  Being in close physical proximity also made it easier to exchange ideas.

Recalls Art Cashin, a former partner and now UBS PaineWebber's director of floor operations at the New York Stock Exchange, in his February 23, 2004 Cashin's Comments:  "...Under Phil Herzig, our offices were like one of the fabled Paris salons. There was always someone different dropping by, and each brought a different idea. Many, actually most, would later become legends of Wall Street. But, at the time they were just Wall Streeters dropping by to bounce an idea off Phil Herzig."

Gold

Throughout the 1960s Philip Herzig pursued his interest in gold as an investment vehicle. He had written his senior thesis at Princeton on the role of gold in the international monetary system.

"Phil was ...one of the first people to see incipient inflation and that gold would explode," writes Art Cashin in his June 30, 2003 Cashin's Comments. "How many folks do you know who gave out copies of 'Fiat Money Inflation in France' in the mid-60s?"

As early as 1962 Philip Herzig traveled to South Africa to learn about the gold mining industry about which he became an authority. When asked why he was so interested in South Africa, he responded, “That’s where the gold is!”

As the decade unfolded, gold continued to rise as the inflationary pressures from the Vietnam War and President Lyndon Johnson’s Great Society programs began to debase the U.S. dollar. 

The Golden Years

The 1970s was a period of great prosperity for the firm. The gold price kept climbing and investments in gold mining shares rose with it.  Philip Herzig, previously derided as a “gold bug,” continued to guide clients to profitable investments in mining shares. Yearly trips to Johannesburg, South Africa kept him up to date on developments at the mining companies.

Meanwhile, the stock market crash in 1974-75 made Wall Street a gloomy place. Our holiday party in December 1974 was a disappointing affair. No one showed up. Yet it had been the best year in the firm’s history, for both it and its clients.

For the rest of the 1970s, the firm prospered. I joined the firm in 1976 and spent two years in South Africa in the late 1970s learning about the political and economic issues that faced that country. By 1980, the gold boom had largely run its course. The firm sold its gold mining shares and moved on to new areas of investment.

Time of Transition

The 1980s was a time of transition. President Reagan was elected and his Chairman of the Federal Reserve, Paul Volcker, put the brakes on inflation. By 1982, the stock market was ready to take off on the back of falling inflation and lower interest rates.

At this time, P.R. Herzig & Co made another transition. Harnessing the goodwill of its clients, the firm became an investment advisor, shepherding its clients’ assets into the new bull market. Throughout the 1980s and 1990s, client assets grew. There was little marketing to get new accounts and the firm concentrated on managing Herzig family investments and those of long-time outside clients.

The Bubble Years

Then came the bubble years… Ironically, it was during the boom times of the late 1990s that the firm struggled. Technology, the internet ... such investments did not fit within the conservative, value based investment philosophy that had served the firm so well over the years. The firm refused to get involved in the frenzy and some long-time clients became impatient and closed their accounts. Subsequent events proved the firm correct, as the markets imploded and crashed. Clients who had the patience and fortitude to follow the firm's advice eventually weathered the storm and came out ahead.

The Firm Today

Today, P.R. Herzig & Co. remains a vibrant and growing investment firm. Philip Herzig passed away in February 2004, but his vision and philosophy remains a cornerstone of the firm’s approach to investing. We are iconoclastic, value-driven and independent thinkers. We are performance-driven; we do not chase short-term numbers, but we know if we make the right investments, performance will take care of itself. We value our clients' interest above all. We invest our money alongside that of our clients. If our clients do well, we do well. We value integrity and strive to be responsive and attentive to the needs of our clients at all times.

November 2004