CHARLES MERRILL: Main Street Broker

CHARLES MERRILL With a fervent belief in the small investor as the foundation of the stock market, Good Time Charlie made America the shareholder nation

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    Can there be any doubt that the democratization of the markets is the single most profound financial trend of the past half-century? The statistics certainly bear this out: by some measures, half of America's households now invest, compared with only 16% in 1945, and mutual funds alone hold more of America's financial assets than banks do. Indeed, a strong argument can be made that the small investor, far more than the professional trader, is the true foundation upon which the modern bull market has been built.

    Look at how fixated we've become with the daily ups and downs of the Dow--how our hearts race when the market is up and how we sag when the market does. Or look at how we've turned mutual-fund managers like Peter Lynch into celebrities. Most of all, look at the extraordinary extent to which we now rely on stocks to fund our retirement, send our kids to college and allow us to lead the kind of comfortable lives we view as middle class. We believe in the market today with something approaching religious faith.

    Which, it turns out, is a pretty fair description of how Merrill always viewed the market. Its ability to create wealth broadly was to him an undeniable proposition. And while this is now a more or less universal truth, it was not always so. During the first part of this century, after all, the Street was largely a rigged game. Insiders manipulated the market from behind the curtains, behavior that, while unseemly, was legal then. Small investors were scorned--or fleeced. Yet Merrill was untouched by the cynicism that pervaded Wall Street. Like so many American visionaries, he was marked by naive and exaggerated optimism that was unshakable, even in the face of the darker reality he saw all around him.

    Did the events of the Roaring Twenties and the Great Depression change Merrill's views? Quite the contrary. The Crash proved that people should have listened to him instead of to those charlatans who encouraged investors to borrow so heavily and to speculate so wildly. And if Americans had soured on the market by the end of the 1930s--and how could they not as the Dow Jones average lost 60% of its value and people came to see how rotten the game had been--Merrill eventually came to the conclusion that someone would have to rekindle the country's faith in the market. He turned to the only man he thought capable of the task: himself.

    In retrospect, Merrill Lynch was really Charlie Merrill's bully pulpit, the platform from which he could preach the virtues of the stock market and show the country that the small investor could get a fair shake on Wall Street. "Demystification had been the key to [my father's] great success," James Merrill later wrote in his memoir. "No more mumbo-jumbo from Harvard men in paneled rooms; let the stock market's workings henceforth be intelligible even to the small investor." To that end, the firm published an endless stream of reports, magazines, pamphlets--11 million pieces in 1955 alone--with titles like How to Invest. Under Merrill the firm gave seminars across the country, with child care provided so that both husband and wife could attend. It set up tents in county fairs. It ran a brokerage on wheels. Once, it even gave away stock in a contest sponsored by Wheaties.

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