Rex Sinquefield, Self Made Millionaire! The Man, his passion.

by Lindsay Haymes

“We’re playing slow chess. We’re allowed five days per move. Yeah, he’s going to get crushed.” These are some of the first words out of the mouth of Missouri’s very own distinguished financier, generous benefactor, chess aficionado and – excuse us for this one – self-made millionaire, Rex Sinquefield, as he looks at his computer screen intently.

Rex, who’s known for his conservative political influence and as the founder of an enormously successful financial institution, is also an avid chess player competitively and is a major financial contributor to the Chess Club and Scholastic Center of Saint Louis. It’s no secret Rex values education. His reach is far and wide, however, and one might wonder if there is a cause or policy issue Rex doesn’t enjoy dabbling in.

“I had good parents,” Rex says with a willingness to start in the very beginning. “My father died when I was five and I ended up going into an orphanage for six years. But it was a good family, a big extended family,” he says. “It was a regimented orphanage. There I developed a sense of responsibility and a work ethic,” he recalls his time at St. Vincent Orphan’s Home in St. Louis, where he now serves as a director.

Rex’s interest in public policy started early. Referencing books like “Up From Liberalism” by William F. Buckley, Jr., and “The Conscience of a Conservative” by Barry Goldwater, Rex admits to challenging the norm in his  mostly Democrat-heavy family. In 1964 Rex went to seminary school. He proudly recalls getting “a couple of busloads to go hear Barry Goldwater speak in St. Louis,” he smiles. His political interests were more than piqued, he was in seminary, but wasn’t settled yet. So he left the seminary and went to St. Louis University. The draft sent him to Fort Riley, Kan., for two years. And then, at last, he landed in a place where his life’s profession was found.

“I went to the University of Chicago for an MBA. There I got my first heavy duty exposure to the notions of the efficient markets, the notion capital markets really do work well. They’re informationally efficient. That influenced quickly what I wanted to do,” he says. Rex’s education led him to the study and research of historical stock market returns and the emergent new academic field of index funds. These theories have influenced the way investing has operated ever since, Rex notes: “I was in a fortunate position to start and operate the world’s first S&P index fund. That was an idea I had in business school. I wasn’t the only one who had that idea. For those of us who were hard core students of financial economics at the time – this is 1970-72 – the idea of building a market portfolio was probably a very good strategy, but was nonexistent in the real world. It was quite a challenge to persuade those on the outside that this model made a lot of sense. It was a battle of ideas,” Rex recalls.

Rex started Dimensional Fund Advisors in 1981 with University of Chicago classmate David G. Booth. The methodology was simple. Their investments were all based on rigorous academic ideas entirely. There was no conventional investing like stock picking or market timing, Rex explains. “Those sports might be fun but they’re not very successful.”

Dimensional Fund Advisors’ board today is comprised of such members as Myron Scholes and Robert C. Merton, both winners of the Nobel Prize in economics. Merton Miller, another Nobel laureate, was also on the board. The company had $160 billion under management in 2009.

After his retirement from Dimensional Fund Advisors in 2005, Rex came back to Missouri with a grand vision. “I want to turn Missouri into a growth state. Right now we’re a mediocre state when it comes to economic performance, and that denies everybody or nearly everyone economic opportunities. The only way to do this is to get a sensible tax policy. And we don’t have one. There are many, many other problems to solve, but that’s No. 1. We have to change the tax structure and we have to find a way to give kids in schools a chance to have an education. The teacher’s unions will do everything to keep the status quo, even if it does destroy opportunities for kids,” Rex says, his voice booming in his small basement office.

And just like that, Rex’s passion becomes tangible. Once back in Missouri, Rex wasted no time in creating the appropriate mediums to both foster fiscally conservative economic thoughts, and fund politicians and interest groups that support those ideals. The former was embodied in the Show-Me Institute, www.showmeinstitute.org, widely referred to as a “free market think tank,” and founded with friends R. Crosby Kemper III, who previously served as the chairman and CEO of UMB Financial Corporation and UMB Bank from 2001-2004, and Michael Podgursky, professor of economics at the University of Missouri-Columbia, where he served as department chair from 1995 to 2005.

“The whole idea was to study the public policy of Missouri and localities therein. So, we’re addressing issues that in many cases have already been addressed in one form or another in academic literature, but we still do a lot of original academic work looking at the issues in Missouri,” Rex explained. “So, we have discussed the merits of eliminating the personal income tax and the corporate income tax, and replacing those with a broad-based retail sales tax. There’s a lot of literature on the relation of taxes and growth.

We’re not creating anything new in the world of ideas, just the specific empirical work for Missouri is new. And of course there are other ideas like eliminating the earnings tax in St. Louis and Kansas City, getting our public schools to function like fully competitive, independent private schools… it’s the only way kids are really going to have a chance. And there our biggest battle is of course the teacher’s unions, they care about the union, they’re not particularly concerned with the children,” Rex states.

So from the desire to research and prove the policy and economic theories he believes would be positive change in Missouri, comes Rex’s activist side, which, of course, is completely separate from the 501(c)3 Show-Me Institute. “A year or two after Show-Me, we were able to build and fund a political army completely separate from Show-Me, that advocates for policies that are good for the state. We do this through political contributions, supporting those who support us, working on the legislatures and trying to get them to do things we think will benefit the state. Two big areas for me are taxes and education,” he notes, simply.

Rex is a firm believer in the free market, there’s no mistake in that. The development of this understanding, he noted, came through the rigorous education he received at the University of Chicago on top of his own external studies. He was able to combine an understanding of public policy with all he was taught about the financial markets in school. Of that junction, he said, “if somebody understands that, they understand why free markets work and why the free price system is so good at allocating resources. I’ve been able, ever since then, to really deal comfortably on the most academic levels of ideas. There’s tons of stuff written in academia in the functioning of markets, how do they work, where do they fail.”

Rex, who says he’s no economist, but he won’t shy away from debating the tough economic questions of our day, comments also on the financial debacle facing our nation. His fiscal conservative values have been ignored by Washington politicians again and again, he notes. “We have massive tax increases coming. The last time we saw this approach to a severe downturn was in the Great Depression. Hoover got Congress to raise tax rates considerably before 1932, after the crash. Things stayed bad and then Roosevelt came in and piled on to what Hoover had done, and unemployment remained high throughout the 30s. I think if they hadn’t done any of those increases, the Depression wouldn’t have lasted so long, but they really prolonged it.

The Obama Administration is doing the same thing with these types of tax increases. What they’re going to prolong specifically is unemployment. Profits are turning around very quickly for corporate America, public and private; and you’re seeing that in the stock markets. The markets are forward looking, and they’re saying profits are improving. When you get this situation of high unemployment, the workers that are left tend to be the best workers. So you have a very good combination of capital to labor. As any business comes back they’re very productive and profitable, but they’re not going to add projects, they’re not going to add workers unless they have new investment projects that are profitable.

The profitability of new investments have been impaired considerably by the imposition of massive new taxes and the expiration of the Bush tax cuts. And now with the taxes of the Health Care bill…” Rex trails off, then exclaims, “This is idiotic. This is Rooseveltian in its stupidity.” “Now there’s some uncertainty,” he concedes. “I’m always an optimist, and I think a lot of this health care (legislation) and the taxes that come due in 2013, I don’t think they’ll occur.

But right now the markets have to assume they will. And if I’m a business person thinking of making investments in plants or equipment, and it’s all private investments, I’m going to wait and see. These projects that I think are going to return 20 percent a year, I can’t take the chance that they’ll return 10 to 15 percent a year, which they will be if these high taxes prevail. So, I wait. The result is I don’t bring back workers and unemployment stays high.”

With his experience in the financial industry, his eye for the markets and understanding of the factors and figures that make the markets tick, you feel compelled to take every word Rex says to the bank.  As hard-lined as he is concerning politics and policy, Rex has an equal enthusiasm for charity. His wife, Dr. Jeanne Sinquefield, and he formed the Sinquefield Charitable Foundation, developed with the intentions to help charities that focus on “education, children, music and the arts,” their home page www.sinquefieldcharitablefoundation.com, says.

Rex’s vision for Missouri is material, and his goals are specific and in action. He makes each move strategically, as he does in his tournament chess matches. His opponents will be crushed, one tends to believe when encountering this powerhouse. Rex is a Missouri man with a strong desire to make his home state superior. As his nonprofit details, Rex wants to improve “the quality of life for all citizens of Missouri by advancing sensible, well-researched solutions to state and local policy issues.”
We think he’s going to do just that.

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Posted by SMiMag.com on Dec 22 2010. Filed under December 2010, Features. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.