Sheldon Jacobs DHS1948 Announces His New Book
Sheldon Jacobs |
In this book I would like to take you on a journey through my world of investing. It will be fun, and you’ll find it worth your time. But before we get down to the main business of this book--improving your investing skills -- I want to briefly tell you about the town I grew up in since it has a strong bearing on who I am and how I came by the advice I will be dispensing.
How My Journey Began
I grew up in Deadwood, in the Black Hills of South Dakota. If you drove through Deadwood back in those days, you might have thought it was an ordinary small town. But Deadwood was unlike any other small town in America , and everyone living there knew it. Deadwood had been the scene of one of the country’s most notable gold rushes, and the town never lost its frontier spirit.
In the forties, when I grew up there, the town had a population of 4,000. There are many small towns where people live because they can’t make it in the big city. But that wasn’t true of Deadwood. Some of the sharpest people I have ever met lived there. They could have made it anywhere, but they preferred Deadwood because of the breath-taking beauty of the Black Hills , its heritage, its sense of small town intimacy, and its proximity to Mount Rushmore . There was great hunting, fishing, skiing, camping, and mountain climbing, all within an easy drive. For climbing, there was Devil’s Tower, which later on gained fame in the Spielberg movie, Close Encounters of a Third Kind, and Harney Peak , which at 7,242 feet is the highest peak between the Rocky Mountains and the French Pyrenees.
The town had a strong Libertarian bent. Its Main Street , filled with prosperous stores, was the shopping center for 40 miles around. It was home to seven churches and seven bars, and each bar had a room in back for gambling, usually slots, blackjack and crap tables. There had always been gambling in Deadwood, ever since the gold rush days. Technically, it wasn’t legal, but the state never bothered to enforce the law.
In those days (the 1930s and 1940s) Deadwood also had three houses of prostitution. All were on Main Street on second floors, above the bars. And they all had neon signs at street level advertising their presence. The signs read: Ma’s Nifty, the Cozy, and the Shasta.
Everybody in town favored these businesses, including the clergy, because they brought in tourists, which were one of the two lifeblood industries of the town. “Everybody” certainly included my dad, who was born and raised in Deadwood, and was totally accustomed to this environment. He approved of anything that brought in business. The “girls,” as everybody called them, did a lot of shopping in my dad’s ladies ready-to-wear store.
The other lifeblood was gold mining. The fabled Homestake Mine, once owned by George Hearst (William Randolph Hearst’s father) at the time the largest gold mine in the Americas, was located in Deadwood and in nearby Lead, South Dakota. The mine was listed on the New York Stock Exchange in 1879 and continued producing gold for more than 120 years. Homestake became the longest-listed stock in the history of the NYSE and brought millions of dollars of revenue into town.
Deadwood’s liquor laws were loose, to put it mildly. Of course, South Dakota had laws regulating drinking, and I guess they applied to Deadwood, too. But the reality was that liquor was regulated in Deadwood not so much by age as by height. If you were tall enough to stand at the bar and pound it with your fist, it was likely you would be served. You could even drink 3.2 beer legally at age 15.
Another convenient thing about Deadwood, and actually the entire state of South Dakota , was that you didn’t need a driver’s license to drive a car in those days. The sole requirement was to be 15 years old. Consequently, when we all got to be about 14 and a half, we badgered our fathers to teach us how to drive so we could drive on our own as soon as we reached 15.
During my lifetime, things changed radically in Deadwood. In 1947 the state of South Dakota finally decided to enforce the gambling laws, and that had a crippling impact on commerce. The brothels were closed in the late ‘70s in an action that drew national coverage. Then one day right after the last brothel closed, hundreds of people paraded down Main Street holding up banners reading BRING BACK OUR GIRLS!
In 1989, Deadwood got a new lease on life when the state of South Dakota made the town an exception to its gambling laws, just as New Jersey did for Atlantic City .
The new gambling money has spruced up the town. The streets have been repaved, and almost all of the storefronts are new. There are several new hotels and restaurants.
And it was just in time. Two years later, the Homestake mine, its gold finally exhausted, closed for good. If it hadn’t been for the gambling dispensation granted by the state, Deadwood would have become a ghost town. Even with the gambling, the town’s population has dwindled to 1,270 according to 2010 Census. Deadwood will be around for a long time, but it’s not the same town now that it was for my generation.
In 1964, Deadwood became the only city in the United States to be named a National Historic Landmark. In 2004, it received a new measure of fame when HBO launched a western TV series, Deadwood, set there. In 2009, ForbesTraveler.com selected Deadwood as one of the twenty prettiest towns in America .
And now you need a license to drive in the state of South Dakota , including Deadwood.
When gambling closed in Deadwood, many of the town’s gamblers moved to Las Vegas . So the first time I went to Vegas I looked up two of them, Virgil Rakestraw and Eli Gasson.
I found Rakie, a big hulk of a man, dealing at a roulette wheel at the Stardust. When he took a coffee break, we discussed gambling. “Never gamble in Vegas,” he admonished. “It’s different than Deadwood.”
I knew what he meant. In Deadwood, if the casino saw a local man gambling away the rent and food money, they made him stop for the sake of his and his family’s well being. That didn’t happen in impersonal Vegas.
I found Eli working as a pit boss at a small casino. Over coffee, he also warned me not to gamble in Vegas, though he made an exception for poker. I politely accepted his advice, but it was meaningless to me.
I knew Eli was a world-class poker player. According to legend (probably Eli’s), he was the champion poker player of the Pacific fleet during World War II. How he came by this title I never understood, although I believe there was some legitimacy to the claim. If he were around today, I’m pretty sure he would be earning big bucks on TV.
Poker is a game of immense skill, not luck, although in the short run, luck can temporarily overcome skill, just as it can in economic life. I am sorely lacking in the skills needed to win at poker. (I know, because I learned how to play the game at Boy Scout camp—and never won.) In addition, poker, too, is a zero-sum game, and finally, in poker if you lose there is no TARP to bail you out.
For many years I went to Vegas once a year to speak at the Money Show (see Chapter 5). I always heeded Rakie’s and Eli’s advice, although the real reason I don’t gamble is that gambling is a zero-sum game less the house edge, meaning for every winner there’s a loser. Stocks, on the other hand, are a positive-sum game. By that I mean it’s quite possible, and often likely, for all the players to win, since they can participate in earnings growth over time. I don’t like to lose, so I prefer the far better odds of long-term investing.
I have often thought that the world of gambling I had grown up with led me to the world of investing. I bought my first stock, Homestake Mining, when I was still in high school. The money came mostly from summer jobs. I held it for three years and sold it for a small loss. In retrospect, my mistake was confusing familiarity with knowledge. Just because I could see the mine from my house didn’t mean I had sufficient knowledge of the politics and economics of the mining industry. I didn’t even know Homestake’s earnings. And even if I had known Homestake’s earnings, I would not have known how to interpret them.
I left Deadwood to attend college, and I never did go back to live there. Had I, I would have become the third generation of my family to operate the family stores.
During the Korean War, the Army called me up and, in its infinite wisdom, stationed me in Times Square . New York hooked me. I liked the theater, museums, and most of all its restaurants, which were far better than Deadwood’s. Upon discharge, I decided to stay in New York . Much as I liked Deadwood, New York was my kind of town. But even with my parents now gone, I still return to Deadwood for short visits every few years or so.
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4 comments:
Dear Sheldon,
I enjoyed your reminiscence of however I would like to correct your count of the "Cathouses" in Deadwood during the 30's and 40's.
To my recollection there were several that you missed. What about the Pine Rooms and the Annex Rooms, to name a few others.
It was a good summery however. Your Classmate, Jene Melton
I read Sheldon's excellent article- very informative and enjoyable. He writes well and has a great topic. When Sheldon left for NYC, he and I traded places. He'll be happy to note that we both think we got the better of the deal. Your blog just gets better and better. Where do you come up with stuff like that Buddy Red Bow music? My boys used to play that when they were at Central HS, and I know they'll love the link. Ann Stanton's comment has been added by me at Ann's request.
From Kay (Kay & John) Smiley. Interesting article by Sheldon Jacobs. His recollections of Deadwood are right on---aren't they. Thanks for calling our attention to the article. Kay
I too am from Deadwood ...born in 1953....what a unique and safe place to be reared...even tho there was o much illegalactivity going on...had a wonderful childhood and school years...I thoroughly enjoyed this essay...and always loved The New York Store and The Hub...both 'classy'
Thank you Sandra (Smith) Bittner
too far away Valdez Alaska
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