The Very, Very Rich and How They Got That Way (7 page)

The Twenties saw Joe grow rich. In 1922 he married Jennie Berman of Brooklyn, who was to bear him four children. In 1924 he quit the Curb to trade in unlisted securities, first in a short-lived partnership and a year later in his own J. H. Hirshhorn and Company. By 1928 Joe Hirshhorn, strictly a broker’s broker, was ringing up profits at a $200,000-a-month clip.

More memorable than the scaling of such heights, however, was Joe’s tiptoeing back from the precipice that lay just ahead. In the glittering spring of 1929, when he was thinking of paying over $500,000 for a seat on the New York Stock Exchange, what impulse pulled him back from the brink? Joe remembers it this way: “When it got to where doctors and dentists were quitting their jobs to speculate, you knew it was all crazy. I could see IT coming. Nothing made sense. The big gamblers took the utility stocks and ran them way up. I got scared. I sold everything I had in August.” He got out with a round four million dollars. To this general triumph he added a couple of final footnotes: After the crash, in December 1929, he started buying again, then in the following March and April sold his holdings, capping this with a swift succession of short sales. Joe recalls, “I was still a kid without much experience – otherwise I would have kept this up and made a mint.”

He discovered a different route to the mint: He discovered Canada. He had been up there to look things over once or twice, and he had been much impressed by what he had heard about Canadian gold. And early in 1933 J. H. Hirshhorn and Company opened its doors, to be one of the few broker’s brokers in Toronto. It was, in fact, exactly the day the banks closed in the U.S. But on Bay Street, Joe’s fun and fortune were just beginning. “MY NAME IS OPPORTUNITY AND I AM PAGING CANADA.” So shouted the black headline across a full-page advertisement in Toronto’s Northern Miner, November 16, 1933. The lusty summons read:

“Canada, your day has come. The world is at your feet, begging you to release your riches cramped in Mother Earth.... Carry on until the pick strikes the hard, firm, yellow metal, until the cry of ‘Gold’ resounds through the virgin forest.... And as for us, we believe in the future of this great country to the extent that we have made investments in gold mining and other industries in the Dominion and shall continue to do so.”

It was not conventional broker’s jargon; it was not poetry. It was pure Hirshhorn – a kind of rousing mating call from a man who had found the financial market of his dreams. “I’m not an investor,” Joe explains. “I’m a speculator. I’m not interested in the blue chips and their dividends – they’re OK for grandma and the kiddies. I’ve always wanted the proposition that costs a dime and pays ten dollars.”

For quite a while, however, Canada was anything but hospitable to Joe. Neither Toronto society nor its stiffly conservative banking fraternity could understand, much less like, the man who worked like an American robot, chattered like a Brooklyn peddler and let his good spirits explode in such phrases as “I feel felonious!” Joe also managed to prove, while trading on his own account, that he had not lost all knack for the occasional big mistake. A flier in Tashota Gold cost him $400,000. It was a bad licking but like the Lackawanna Steel fiasco it had its educational value. The lesson this time read, “The engineering staff wasn’t right. If it isn’t right, you’re in big trouble.”

Joe plunged ahead, this time into Gunnar Gold. The upshot was an exciting profit and considerable notoriety. Joe went into Gunnar gold with the LaBine brothers, Charles and Gilbert, two of Canada’s best-known mine developers. To begin with, Joe owned 598,000 vendor’s shares, which had cost him less than 20 cents apiece. In July 1934, three months after Gunnar Gold was put on the Toronto exchange, its stock had rocketed to $2.50. At about that time Joe began gradually unloading. Near the end of October, as the Toronto securities commissioner reported after a subsequent investigation, Joe “decided to withdraw all support from the market.” The climax came on the morning of October 31, when Gunnar dived in the space of two hours from an opening price of $1.43 to 94 cents.

The commissioner’s report theorized,

“The process of manipulation is by buying and selling to create in the public mind the impression of great activity in the stock.... This Mr. Hirshhorn succeeded in doing with very great skill.... the manipulator can sit in the center of his operations surrounded by telephones and, by using a three- or four-way jitney, as it is called, can buy and sell stocks without brokers who are doing the buying and selling knowing that the manipulation is in process.”

But since it was conspiracy in stock manipulations that the Ontario laws forbade and Joe characteristically had operated alone, the commissioner conceded that Hirshhorn “has not committed any criminal act.” As for Joe’s side of the story, he denies that he ever manipulated Gunnar Gold. “I was in Europe,” he explains. “When I came back, I found the price was down, and I didn’t like what I saw: so I started selling.”

It was in 1936 that there came along what Joe calls “a really big ticket.” It was named Preston East Dome Mines. It established Joe’s fame as a backer of long shots, it proved him more than a match for the sharpest shooters on Bay Street, and it marked his growth and transition from a pure speculator to creative promoter.

Preston East Dome was a gold-mining company formed early in the century in the hopeful shadow of a great gold strike in the Porcupine area of northern Ontario. A fire had swept the area, destroying the company’s installations; Preston East Dome was out of funds, and its stock certificates, selling for less than five cents on the Toronto exchange, were used by their cheerless owners to make change in poker games. Everyone had given up hope of making something of Preston except a geologist named Douglas Wright. Knowing Joe Hirshhorn’s reputation for being fast on his feet, Wright made his way to Joe’s office to tell his story again. Joe liked it and put up $25,000 for a drilling program. Within a few months gold was struck – just 25 feet away from an old shaft.

As Preston stock started climbing upward, the hard-bitten sceptics jeered at reports of the strike, and Bay Street’s “bandits” thought they had spotted an easy target. The stock (they assured themselves) must surely slide again, making it a setup for the short-sale snipers. They sold. Joe kept buying. He kept on buying until he had taken over a large part of Preston’s whole capitalization. Preston’s price kept rising – on past the two-dollar mark. The short sellers were trapped. Their intended victim had given them an expensive and humiliating licking.

The mine, presided over by Joe’s old friend, sharp-witted Toronto lawyer William H. Bouck ... [was] grossing an annual $2,500,000 [by the mid-1950s]. Joe managed judiciously to sell enough of his Preston shares at rising prices to leave himself at one point holding 500,000 shares, which, in effect, had cost him nothing. He sold a number of those at a fat profit, and ... when he threw his remaining Preston holdings into the deal with Rio Tinto, they were valued at $7.55 a share. It was, as Joe says, quite a big ticket.

Thanks to such tickets, Joe, through the Thirties, found himself living in a world ever further removed from the bitter memory of Brooklyn. He now traveled a circuit of two apartments and three homes – the apartments in Toronto and New York, homes in Great Neck, Long Island, Miami and the Poconos. To soften the hours spent poring over corporate balance sheets, he installed a Capehart in every house and bought himself seven pianos. In the Poconos he built a splendid French-provincial house in the 470-acre Huckleberry Hill Farm, with handball courts, swimming pool, Guernsey herds and dormitories big enough to accommodate any 24 school chums his children might like to bring home. “It was built from the heart, that place,” Joe remembers. “But I was the only Jew around for 25 miles. People called us ‘the castle on the hill.’ We were left alone.” Finally in 1947, Joe sold Huckleberry Hill Farm to the Kress family for $100,000 – less than a third of what it had cost him.

Meanwhile, other troubles shook the hand with the golden touch. In 1945 Joe was fined $8,500 by the Canadian government for neglecting to get permits to take money (specifically $15,000) out of the country. “It was a stupid mistake,” Joes admits. It was in 1945, too, that Joe’s marriage ended in divorce. He is clinically honest about this misfortune. “To do what I did, you gotta work, you gotta work like crazy. I’ve always been married to my work. To do what I did, you’ve gotta make sacrifices. I sacrificed my family, my relations with my wife and my kids.” In the emotional turmoil that followed the divorce he found two resources: sustained psychoanalysis and a second marriage (1945), to the modern painter Lily Harmon. Joe believes that the analysis greatly increased his understanding of other people and himself. He stayed married to Lily nine years. Early . . . [in 1956] they were divorced and several months later he was married again, to Brenda Hawley Heide of New York.

Through all those troubled years Joe kept at his steady zigzag run. Some people thought they saw something reprehensible in the zigzags. Mining has notoriously held an irresistible attraction for penny-stock tricksters, the “hit-and-run” boys, the vast and venal array that prompted Mark Twain to describe a gold mine as simply a big hole with a liar at the other end. The fast-talking boy from Brooklyn was in a business in which success itself was often a proof of skulduggery, especially in the sour judgment of those who had failed. Inevitably, many of the chances Joe took with his own and other people’s money – a list of mining gambles with names like Anglo Rouyn, Armistice, Aquarius, Calder Bousquet – fell below high hopes. Yet Joe never had quit on a company. When, for instance, Anglo Rouyn’s gold petered out, Joe switched the company into Saskatchewan copper (Anglo Rouyn was one of the biggest Hirshhorn properties in the Rio Tinto deal).

The verdict on Hirshhorn heard today in the Ontario Securities Commission’s offices is that his financing has been sound, his geological advice the best and his legal counsel responsible and respected. Aside from the penalty for exporting Canadian dollars during the war, Joe has had only one encounter with the law. In 1950 New York State attorney general Nathaniel Goldstein, whom Joe had known back in the Brooklyn days, took to the press to warn the public away from a stock offering by a company called American-Canadian Uranium Company, in which Hirshhorn was involved.... Goldstein submitted the facts to the SEC, but the SEC found no grounds for a hearing.

During the Forties Joe’s happiest venture had involved a U.S. company, Mesabi Iron, owner of substantial taconite properties. “When I bought Mesabi stock,” he says, “no one knew what taconite was – they thought it was a disease or a new product to clear your skin. I knew what it was, and I knew it was going to be big.” Starting his buying at 13⁄8 and moving in and out of the stock over a period of years, he netted in the end $1,550,000. Joe, as this demonstrates, does not have to be on the inside of a company to turn a profit.

Meanwhile, however, he managed to lose over $300,000 in a Philippine gold-mining venture. He found himself tangled in a web of nationalist laws and currency restrictions and learned another lesson: “Be sure you know all the facts before you dip into one of those foreign ventures.”

It was in the late Forties that Joe first acquired his interest in uranium, which was to prove more fascinating than anything he had touched in his life. He had been reading about Canada’s Precambrian shield and the meaning of the chatter of the Geiger counter. In 1949-50, in the Lake Athabaska region of northwestern Saskatchewan, Joe had bought the claims on 470 square miles of uranium-bearing land. It was a tribute to Joe’s financing skill that Rix Athabasca, as this company was called, became Canada’s first producing uranium mine operating on private risk capital. Not long afterward he hired Franc. Joubin to direct his Technical Mine Consultants – his key mine-exploring organization, which was overseeing more than a score of companies that Joe had acquired.

The scholarly Joubin was wrestling with a riddle: What was there beneath Ontario’s bush-shrouded Algoma Basin that gave so mysterious a kick to Geiger counters? It was a heavily explored area. A parade of prospectors and geologists had tramped its game-filled acres. Everyone had seen his Geiger kick excitedly from time to time. All had taken samples for assays from the surface, which was where uranium was supposed to lie, and every assay had shown only negligible amounts of uranium. Everyone had settled for one explanation: The Geiger readings must have come mostly from thorium, for which there was no market. This theory largely satisfied Joubin, but he began reading about the leaching of uranium-bearing land where sulfur is present, and this gave him an idea. One day he decided to test an old Algoma ore sample for thorium itself – and found there was hardly any. He was sure then that he knew the answer: Rain and snow and sulfur in the earth had leached away the radioactivity in surface outcroppings in the basin, and the Geigers had chattered the truth of big uranium-ore bodies
beneath
the surface. He tried to persuade a dozen different mining companies and promoters to make a definitive diamond-drill test. All refused the gamble as senseless waste. So Joubin went to Joe.

When, early in 1952, Hirshhorn listened to Joubin expound his theory, Joe was a man with some knowledge of geology. But, as he says: “I bought on my faith in the man talking to me. That’s what counts with me. I don’t ask my grandmother or a fortune-teller.”

Diamond drilling began on April 6, 1953. Joe put up $30,000. Joubin enjoyed an arrangement that was standard in his dealings with Joe (an option to buy a 10% share of the deal). In this instance Joubin’s 10% was to make him a multimillionaire. The core samples were sent to Vancouver for assaying. One Saturday morning in May a bulky legal-size envelope came back to Joubin’s desk. The report was that out of 56 samples, 50 contained uranium. Grinning, Joubin exclaimed to a friend, “That lucky Joe!”

Beyond this point, however, luck would not suffice. A fast-moving organization was needed to stake more claims, and Joe turned for money and manpower to his success of the Thirties, Preston East Dome, in which his 10% of stock still made him biggest shareholder. Joe sat down with Preston’s president, William Bouck, over a map of the Algoma area. Bouck flashed a pencil line across the map and proposed that everything below that line belong to a newly formed Hirshhorn company, Peach Uranium; the costs and profits of everything above that line would be split 50-50 between Hirshhorn personally and Preston East Dome. Most of the trained men to stake the northern area would be supplied by Preston.