There’s no end to the investment opportunities paraded before the buying public, with coins among the more popular in recent years. If the offerings have one thing in common, it is high price markup. Some months ago I reported on a firm selling 5-cent pieces for about 22 cents each. The 440 percent markup caused me to choke a bit. However, a newspaper advertisement just appeared that suggests the nickel peddler was a piker.

The headline reads: “U.S. Government to Abolish the Lincoln Penny . . . FOREVER?” The ad goes on to say “The First Federal Mint announces the limited release to the public bags of old vintage ‘Wheat Back’ Lincoln Cents. These have not been minted for over 45 years. You can acquire them in half-pound bags.” Though it took a bit of analyzing, plus a telephone inquiry to First Federal, I discovered that 61 pennies, in circulation these past many decades, can be purchased for $26.90. This represents a price markup of 4,410 percent, justified by their claim that “Most [the coins] have long disappeared . . . They’re sure to make a treasured gift or legacy.”

It didn’t take much investigation to discover that the “Wheat Back” bronze pennies, minted from 1909 through 1958, were produced in quantities up to 30 million per day. With some of these still included among the more than 130 billion pennies currently in circulation, they’re yours for the plucking at a penny apiece—a zero percent markup. Admittedly, some of them, such as 28 million issued in 1909 and displaying the initials of the designer, Victor D. Brenner, retail at $10 apiece uncirculated—but don’t expect to find any of these included in the bag. What you will find are coins from the late 1930s through the final year of issue in 1958. One prominent coin dealer, American Rare Coin and Collectibles, LLC, of St. Paul, Minnesota, lists their value: “The common date ‘wheat cents’ circulated from the late 1930’s up to 1958 are worth 2 cents per coin. The Lincoln cents dated 1929 and earlier generally trade in the $0.05-$1.00 range, based on date, mintmark, and condition.”

A concluding thought:
There is a rule of thumb I’d like to pass on to you. If a vendor must issue an 8-page color brochure or full page newspaper advertisement describing how wonderful its investment offering is, you may reject it out of hand.

Running a major corporation has always been a challenge and today it’s tougher than ever. As a company grows in size and scope, it becomes more visible, more controversial, and more a target for every group with a gripe. Does Wal-Mart compete too effectively for its competitors? Pass laws to ban their stores from the city. Is a major homebuilder marketing its properties to appreciative buyers that can afford fine homes? Force them to sell some for a song to professional never-do-wells, thereby enhancing diversity. Has an industry enjoyed a particularly profitable period thanks to favorable circumstances? Enact an excess profits tax to strip those rogues of their unconscionable benefits, just to teach everyone a lesson.

To be sure, the large companies invite much of the criticism they incur. There is something about institutional size that brings out the worst in people. With apologies to Nineteenth Century English philosopher Lord Acton, it’s not unreasonable to say that prominence corrupts, and absolute prominence corrupts absolutely. Perhaps it’s analogous to the standard reply to the question: Where does a 900-pount gorilla sleep? Anywhere it wants. Thus, when a pharmaceutical firm holds the exclusive right to produce a drug that means life or death to masses of persons, they will naturally squeeze every dime they can from each desperate user. And why not? It’s only good business. It is this trait of human nature that pits the haves against the have-nots and ferments much of the world’s turmoil.

My personal attitude is that when it comes to business size, small is beautiful. Concentrating your efforts on profitability is preferable to wrestling with organizational regulation, structure, and involvement. Nothing depicts this reality more effectively and humorously than Scott Adams’ daily cartoon Dilbert. With that said, let me offer a testimonial as to how business should—and should not—be conducted. One of my enterprises is making mortgage loans on apartment buildings. My principal competitors are the multibillion-dollar financial organizations that normally take several months to process a loan request. Their procedures require formal application, credit verification, appraisal, loan committee approval, document preparation, and a host of inexplicable convolutions that drag on interminably. My associate and I operate somewhat differently. Should a prospective borrower phone in mid-morning, we normally inspect the property, determine its value, verify a specific loan amount, and commit to 10-day funding later the same day. As a result we generate sound loans that satisfy our borrowers; there’s not a major lender that can compete with us.

A concluding thought:
Inherent in all large organizations is an attitude described as corporate mentality. It’s basic failing was depicted by one causal line in Herman Wouk’s 1951 novel, The Caine Mutiny, describing the U.S Navy—one of the nation’s largest establishments. He remarked that it was an organization designed by geniuses to be run by idiots.

The fallout from our current economic malaise continues as Christopher Cox voluntarily steps down and out as Chairman of the Securities and Exchange Commission (SEC).  It had to be, of course, as he became one of the convenient snowflakes on which to blame the financial blizzard.  The opening salvo on Chairman Cox dates back to September 18, 2008, when then-presidential-nominee John McCain angrily announced: “If I were president today, I would fire him.” Actually, his scheduled term ends officially in June 2009, and the president possesses no authority to fire him—though such reality is usually ignored amidst campaign rhetoric.

It’s fair to assign some culpability to Mr. Cox, now completing a 3½-year tenure in the job.  The SEC is unquestionably a demoralized agency, having failed to foresee the collapse of Bear Stearns and Lehman Brothers or take action to prevent the Bernard Madoff fiasco.   However, might a more aggressive and diligent chairman have made a difference?  Consider for a moment the agency itself.  Established as part of President Franklin Roosevelt’s “New Deal” legislation of 1934 to administer the securities industry, it quickly became immersed in politics and favoritism under its first Chairman, Joseph P. Kennedy, father of President John Kennedy.  Today this ¾-century bureaucracy consists of 4 divisions, 18 offices and a staff of 3,800, scattered through 11 regional offices across the nation.  Its chairman is one of five commissioners who serve 5-year terms, with one commissioner’s term ending June 5 of each year.

I recognize what Chairman Cox faced during his tenure at the helm.  I found myself in a similar position when, as a 29-year-old Navy Civil Engineer Corps lieutenant, I became Public Works Officer of a naval facility in Washington, D.C.  As titular head of a 200-employee department of civil servants, my “subordinates” included many with over twenty years vested interest in their positions and all the rights, privileges, and security which civil service provides.  As an organism, this department functioned as it chose through the terms of a dozen prior Public Works Officers.  My arrival made no difference.  During my three years in charge, I developed a realization of the limitations imposed on the appointed head of any governmental organization.  I’m certain Mr. Cox is now equally aware of these constraints.

Christopher Cox is remarkably talented, graduating magna cum laude from the University of Southern California, recipient of an M.B.A. from Harvard Business School, and J.D. from Harvard Law School.  During 56 years, his record of accomplishment is nearly flawless.  If he can be accused of anything, it was indiscretion in vacating a safe congressional seat after 17 years to assume the mantle of a governmental organization over which he exercised no real authority.  Perhaps that’s justification enough to subject him to the pillory.