When we think of the movers and shakers of Wall Street, the captains of industry and the titans of finance, we generally visualize formidable men in suits. It's often thought that women have yet to produce a towering figure in Wall Street lore. This idea couldn't be more wrong. We will look at the life of Hetty Green, the richest woman of her era and a pioneering value investor who more often goes by the title the "Witch of Wall Street."
Growing up on the Docks
Hetty Green, born Henrietta Howland Robinson (Nov. 21, 1834), showed an early aptitude for finance. She opened her first bank account at eight and received much of her education reading the financial pages to her near-blind grandfather, discussing each stock and bond in detail. Green's father, Edward Robinson, was believed to have married her mother, the bed-ridden heiress of the Howland fortune, for the seed money needed to build up a whaling business. Robinson was a ruthless businessman and Hetty was his bookkeeper, as well as his companion, as he strolled the docks making deals.
Edward Robinson kept Green from receiving her inheritance upon the death of her mother, so it was not until his death in 1864 that 30-year-old Green received the family fortune of $7.5 million. On his deathbed, Edward Robinson told her that he had been poisoned by conspirators and warned her that they would come for her. Not surprisingly, Green came out of her childhood and early years with a certain amount of eccentricity that later events only reinforced.
Shortly after her father's death, her wealthy aunt died. Green's aunt had agreed to leave her fortune to Hetty, but the will had been changed over the last years that Hetty's aunt spent as an invalid. Hetty fought the will that only gave her a tiny fraction of the inheritance promised, instead spreading the $2 million among caretakers, the doctor and distant cousins. Hetty came forth with another will denouncing the first and was embroiled in legal battles, including accusations of forgery.
Buy Cheap, Sell Dear
Hetty took her money to Wall Street. She had actually been investing for years with the allowance from her father, but her larger capital base opened up new realms of finance. She made full use of compounding, low-risk investments and tax protection (bordering on evasion), combining this formidable trio with incredible frugality. She bought up bonds and real estate at severe discounts in every financial panic. When everyone was running out of the market, Green would buy in. She always kept a large war chest for crashes and panics, both for snapping up investments in fire sales and providing high-interest emergency loans to desperate bankers. When markets recovered, Green would call in the loans, plus interest, and sell off the investments as the markets heated up again.
Her only miscalculation came when she married Ned Green, a successful speculator. Hetty Green's investment character was the exact opposite of her new husband, but she was prudent enough to get Ned to sign a prenuptial agreement keeping their finances separate. The newly-christened Hetty Green hated speculation and margin, preferring to carefully choose each investment. In November 1905, she told the New York Times: "I buy when things are low and nobody wants them. I keep them until they go up and people are anxious to buy."
Hetty Green was thorough, reading everything she could find about various railway stocks and bond offerings before buying. She was not a value investor of the buy and hold type, however, as she stated, "I never buy anything just to hold it. There is a price on everything I have. When that price is offered, I sell." In short, Hetty Green was a disciplined investor.
Hetty Green's frugality and discipline soon clashed with her husband's freewheeling speculation. She had to bail out her husband several times before unofficially separating from him. They had two children, a daughter and a son, and both went to live with their mother. When her son, Edward Green, nicknamed Ned, injured his leg sledding, his mother tried to take him to a charity hospital to get free care. The leg was improperly treated and had to be amputated, as gangrene had set in. Green's relationship with her children was strained and would remain so until her death. Her daughter left after marrying, and her son worked unpaid for years as her clerk - instantly recognizable because of his cork leg.
For most of the 1800s, Green kept a constantly rotating number of houses in different districts to avoid taxes in any single one. In 1885, however, her main bank attempted to seize her assets to cover her husband's trading debts. Green withdrew all her money and went to the Chemical National Bank, opening an account as well as an unofficial office in the back.
The Chemical Bank Magician
Green had an encyclopedic knowledge of the market and her own finances. She constantly updated a list of prices at which she would buy into or sell out of investments, keeping it all in her head for fear of lawyers getting their hands on written documents. Her distaste for lawyers and judges grew over the years, and she was accused of pulling her gun on one over a dispute about a tax assessment. Many of her inheritance troubles were centered around a Chicago judge, so Green bought up all the demand notes for railroads terminating Chicago. She then called all the notes. The railroad treasurers panicked and quickly agreed to Hetty's unique terms - they moved the judge up and out of the district, bringing a more receptive judge in and Green let the notes be.
Green's reputation for hard-nosed business was further solidified when speculators attempted bear raids on her holdings. When these men attempted to short her investments, Hetty Green would use her war chest to buy up all the outstanding stock and corner whole groups, extracting a high price from them before allowing them to close out their positions. She had several famous battles of this type with railroad baron Collis P. Huntington. Green would buy up small but essential railroads and charge a high price for selling them to consolidators like Huntington. Huntington disliked having to pay out to anyone, let alone a woman, and went to Green's office at the Chemical Bank. He threatened to have her son jailed by Texas courts on his payroll. Hetty Green responded by pulling her gun on him and Huntington bolted from the office in fear.
It was in 1907, however, when Green made her most commanding move. Sensing an overvalued market, she called in all her loans and sold off many of her stocks and bonds. When the panic of 1907 broke, Green was among the very few who were absolutely liquid and she went bargain hunting in the aftermath. She picked up pre-bankruptcy stocks and shares and profited from reorganization like vulture funds do today. She also demanded land leases and solid assets as collateral for many of her loans.
Eluding Taxes, but Not ...
Hetty Green, 70 at the time of the panic, continued investing right up until her death. She groomed her son Ned to replace her, but curiously did little for her daughter Sylvia. Hetty died in 1916, with an estimated $100 million in liquid assets, and much more in land and investments that her name didn't necessarily appear on. She had taken a $6 million inheritance and invested it into a fortune worth upwards of $2 billion today, making her by far the richest woman in the world. Her son squandered some of the fortune, but after his death Sylvia still received $100 million. When she died, more than half of the estate was taken by taxes, the rest was left to charity.
The Bottom Line
Carnegie was a man of steel and iron, Vanderbilt was the commodore and figures like Rockefeller and Morgan were so respected that their names became new buzzwords for power and wealth. Yet, Hetty Green, the richest woman and most astute investor of her time - astute as opposed to manipulative - is remembered as the witch of Wall Street. Today, one would like to think we'd see her as at least the grand maven of investing, but the chances are that Hetty Green didn't care a halfpenny either way. Photographs of Hetty Green show an austere woman. Her signature black dress and the tight bun of her hair are secondary to the iron gaze that one can easily imagine intimidating every desperate banker negotiating for float loans. The beauty of Hetty Green is found in the shrewd, and, judged by the standards of the times, upright investing strategy she pioneered. In a very real way, Hetty Green was one of America's first value investors.