The Desirability of Permanent Capital1
Jim Lynch feared late in 1970 that he would be without a job and at the same time owe Chemical Bank $130,000. Jim's fears were accentuated by his having no assets other than his mortgaged home and no rich relatives who could give or lend him money. Furthermore, a wife and two young children depended upon him for support.
He would have been even more terrified if he had known that the senior partner of his firm had put him more than a hundred thousand dollars deeper into debt.
How could he have allowed himself to get into such a desperate situation? He was neither a gambler nor a womanizer, but, in fact, frugal, as well as a devoted husband and father, and a boring confessor to his priest.
The answer lay in how the partners of Glore Forgan Staats, Inc. behaved in 1968, 1969, and 1970.
In 1968 they acted as if the firm's record profits of that year would go on forever.
They raised virtually everyone's salary -- handsomely.
The firm opened a sumptuous sales office on Park Avenue in New York City, opposite the Waldorf-Astoria.
New, palatial headquarters for the Western region were built in Los Angeles.
Stockbrokers in San Francisco, Chicago, La Jolla, and elsewhere were moved into larger, more splendid quarters. The new Cleveland office was furnished with such rare and expensive antiques that its opening was featured, not in the Cleveland Plain Dealer's financial section, but in its style section.