Table Of Content

When Benjamin Graham died in 1976 at age 82, he had achieved legendary status on Wall Street. He had laid the foundation of modern security analysis, inspiring legions of disciples and personally mentoring such up-and-comers as Warren Buffett (who went to work for Graham in . 1954). Graham was widely regarded as brilliant, successful, and ethical, a rare trinity of attributes in the rough-and- tumble world of investing. In his later years, Graham wrote a memoir that looked back on the early, seminal decades of his. col- orful life. Twenty years after his death, this work is being published at last. Brimming with details that will captivate investors and history buffs alike, these pages evoke one of the richest and most eventful lives of the century. Graham weaves an eloquent tale of talent and good fortune, viewed against the dynamic backdrop of New York and Wall Street. We first glimpse Graham as young Benjamin Grossbaum, a London-born Jew growing up in turn- of-the-century New York City. His loss at age nine of his father, a rigorous education in the New York City public schools, his labors as a farmhand and factory worker, the near-loss of a desperately needed scholar- ship to Columbia University: these experiences shape the boy who would emerge as the self-made man. Though Graham had the distinction of being invit- ed to teach in three departments (literature, philoso- phy, and mathematics) at Columbia, he instead went to work at a brokerage firm. His portrait of Wall Street in the Roaring '20s, and of his rise within it, offers parallels to more recent heady times. We also relive the devastating Crash of '29, and see how Graham's innovative approaches to valuing stacks (continued on Back flap} #contenued from front flap) helpad:rescue his career, his clients’ fortunes, and the industry itself. Here, too, are splendid sketches of his involvement with such figures as John D. Rockefeller, Winston Churchill, Dwight D. Eisenhower, and Bernard Baruch. Above all, however, this is a memoir of discovery. We watch as Benjamin Graham discovers the work- ings of the financial markets and of his own sup- pressed emotional nature. We are privy to his strengths and his weaknesses, "especially for the fair sex." We share his public triumphs and his private sorrows, observing how ambition and the loss of two sons affected every aspect of Graham's life. Analyzing his life and accomplishments with the _ same clear scrutiny he applied to the financial markets, Benjamin Graham provides rare insights not only into the evolution of Wall Street, but into the intellectual power and emotional sensitivity of a man of profound erudition and culture. His memoirs are full of candor, grace, and deep satisfactions for the fortunate reader. About the Author Benjamin Graham (1894-1976) was a seminal figure on Wall Street. He is considered the father of modern security analysis. Among his many books were’ Security Analysis (coauthored with David Dodd in 1934 and now in its Fifth Edition from McGraw-Hill) and The Intelligent Investor. As the founder of the value school of investing, Graham influenced such subsequent investment legends as Warren Buffett, Mario Gabelli, John Neff, Michael Price, and John Bogle. Benjamin Graham grew up in New York City and was graduated from Columbia University, whose Graduate School of Business has honored him in per- petuity with a professorship known as the Graham/ Dodd Chair. ee Benjamin Graham ‘The Memoirs of the IDean of Wall Street ee mye Edited and with an Introduction by Seymour Chatman McGraw-Hill New York San Francisco Washington, D.C. Auckland Bogota Caracas Lisbon London Madrid Mexico City Milan Montreal New Delhi SanJuan Singapore Sydney Tokyo Toronto Library of Congress Cataloging-in-Publication Data Graham, Benjamin. Benjamin Graham, the memoirs of the dean of Wall Street / edited and with an introduction by Seymour Chatman. . em. Includes bibliographical references and index. ISBN 0-07-024269-0 1. Graham, Benjamin. 2. Capitalists and financiers—United States—Biography. 3. Investment analysis. 4. Securities—United States. I. Chatman, Seymour Benjamin, II. Title. HG172.G68A3 1996 332.6’092—dc20 [B] 96-19261 CIP McGraw-Hill ~ A Division of The McGraw-Hill Companies Copyright ©1996 by the Graham Memoirs Grandchildren’s Trust. All rights reserved. Printed in the United States of America, Except as permitted under the United States Copy- right Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a data base or retrieval system, without the prior written permission of the publisher. 12345678990 DOC/DOC 90109876 ISBN 0-07-024269-0 The sponsoring editor for this book was David Conti, the editing supervisor was Jane Palmieri, the designer was North Market Street Graphics, and the production supervisor was Pamela Pelton. It was set in Century Expanded by Teresa Leaden of McGraw-Hill’s Professional Book Group composition unit. Printed and bound by R. R. Donnelley & Sons Company. All photographs courtesy of the Graham family collection. McGraw-Hill books are available at special quantity discounts to use as premiums and sales promotions, or for use in corporate training programs. For more information, please write to the Director of Special Sales, McGraw-Hill, 11 West 19th Street, New York, NY 10011. Or contact your local bookstore. This book is printed on acid-free paper. ~ Contents Introduction by Seymour Chatman vii 11. 12. . Childhood in New York . Family Tragedies and My Mother’s Perseverance . At Public School . High School Days: Brooklyn and the Bronx . The Farmhand and The Mechanic . The College Student . My Career Begins . Early Years in Wall Street . The Beginnings of Real Success . The Great Bull Market of the 1920s: I Become a Near Millionaire The Northern Pipeline Contest Family and Other Affairs 123 141 163 185 199 217 vi BENJAMIN GRAHAM 18. The Midpoint of Life’s Way: The Deluge Begins 14. The Road Back, 1933-1940 15. My “Career” as a Playwright 16. The Commodity Reserve Currency Plan Epilogue: Benjamin Graham’s Self-Portrait at Sixty-Three and his Eightieth Birthday Speech Chronology 317 Notes 827 Bibliography of Writings by and about Benjamin Graham 337 Index 343 247 267 279 293 309 lntroduction n his sixties and seventies, Benjamin Graham, retired and living variously in Beverly Hills and La Jolla, California, Aix-en-Provence, and Madeira, wrote an account of his life which he called “Things I Remember.” He put down as much as he could remember of his family and business life, and of the sights and sounds of his hometown, New York City. But he puzzled over the capriciousness of memory: why could he remember trivial things even as he forgot important ones? He wrote: How we remember some things and forget others intrigues me, yet few writers of memoirs acknowledge memory gaps. To write honestly “I don’t recall” seems to vitiate the very goal of a memoir; yet psychologists, if no other readers, might arrive at valuable insights into the ‘real character’ of the writer by comparing what he remembers with what he forgets. I wrote a little self-epitaph which turns on this very point: This man remembered what the rest forgot Forgetting much that everyone recalled; He studied long, worked hard, and smiled a lot, By Beauty nourished and by Love enthralled. In some respects, this memoir shows great recall, and asso- ciates have attested to Graham’s astonishing memory for professional details—corporate assets, prices, yields, and the like. Already on his first job he set out to memorize whole tables of bond figures. Later, his lectures, books, and articles were studded with the particulars of corporate history. Still, he confessed to an inability to remember oft-dialed viii BENJAMIN GRAHAM telephone numbers or the names of familiars. He was legendary for his forgetfulness: he once drove two of his children to the Rockefeller Center ice rink, parked the car, took them skating, and then all three went home by subway. A son’s mother-in-law reports that, once when she went to visit him in Aix, he stuck out his hand and introduced himself as if he had never seen her before. Of his “peculiar” memory he wrote: It retains and can reproduce countless historical and literary items that were stored there as long as sixty- five years ago. But it is completely useless in such matters as telephone numbers (looked up a hundred times), the location of friends’ apartments (visited al- most as often), the very names of people I have met frequently—although I may surprise comparative strangers by addressing them properly after a long in- terval. I have often had occasion to rescue myself from embarrassment by the formula of Italo Svevo (author of the great Confessions of Zeno). Not remembering someone he should have known well, he remarked wistfully: “You really must excuse me. There are three things I always forget—names, faces—and—I can’t remember the third.” More than most, Graham’s memory was highly focused and selective: he remembered what was important to him. He did remember a student’s name if he had had an interesting dis- cussion with him. Ideas, perhaps, were more important to him than people, statistics more than telephone numbers, and, from the beginning, but increasingly as he grew older, culture and the life of the mind more than money. Though they cover only the first forty-plus years of his life, these pages are being published as “Memoirs” rather than “Things I Remember” to underline Graham’s consciously literary intentions.’ Obviously, a memoir is not the same as a journal, which strives to keep a record of experiences as they Introduction ix occur. Recollected in tranquility years after the events it nar- rates, the memoir takes a longer view. Perhaps because he was too busy studying the market to keep a personal journal, Graham wrote memoirs in his sixties and seventies as com- pensation. A memoir also subtly differs from an autobiography. Pre- suming to tell the whole, continuous story, the autobiographer pretends, if as a necessary fiction, to complete and accurate recall. The memoir, on the other hand, suggests a more casual and ruminative approach. It frees the author of the shackles of sequence, allows him to introduce flashbacks and flashfor- wards without restraint, to skip between the historical “then” and the compositional “now.” It gives freer rein to meditation, to philosophical weighing of the meanings of raw experience. As Gore Vidal put it recently: A memoir is how one remembers one’s own life, while an autobiography is history, requiring research, dates, facts double-checked. I’ve taken the memoir route on the ground that even an idling memory is apt to get right what matters most.’ Dates, facts, figures, and percentages mattered a great deal professionally to Benjamin Graham; but when he wrote his memoir, “getting it right” clearly mattered more. Graham sought not just a record of his life but an honest assessment. He confided to his memoirs his frankest thoughts—thoughts long meditated and in some cases hard won. They reveal a man for whom truth to himself was the most important objective, even when that meant contradicting received opinion. Just as he had questioned Wall Street lore during his investment career, in the privacy of his memoirs he questioned orthodox attitudes about personal belief and conduct. For example, he tells us how the nine-year-old Benjamin really felt (as opposed to how he should have felt) about the death of his young father: the sky somehow was supposed to fall in, but it didn’t. His x BENJAMIN GRAHAM account of his mother is no less frank: his description of her modest shortcomings makes the tally of her strengths all the more persuasive. The text is full of expressions like “Honesty compels me...” and “A man of mental integrity could only think...” And then there is religion. Jewish readers may be put off by Graham’s early interest in Jesus (as an ethical, not a religious, figure), or his belief that Jews might have been better off being born Gentile, or that their true purpose in life should be to intermarry with other faiths to enrich the common gene pool. Obviously, it would be absurd to interpret these opinions as antisemitic. He was, after all, a prominent figure in Jewish causes, a vital president of the Jewish Guild for the Blind, for example. But Graham was too cosmopolitan to be tied to any- thing like parochial faith. Besides, what he criticized was not Judaism per se, but the shallower, more puritanic attitudes of some of its practitioners, attitudes which, in his view, nar- rowed and inhibited mental growth and cultural breadth. It is true that he came to accept many values inimical to Orthodox Judaism. But in that, he differed little from a goodly number of the offspring of Jewish immigrants, as Irving Howe has so thoroughly documented in World of Our Fathers.’ Unlike Eastern European Jews or the previous generation of German Jews, Graham was born in England. His parents spoke the Queen’s English, not Yiddish, and that doubtless accelerated his assimilation into American culture. Graham came to his convictions after long, searching, and realistic meditations about history, garnered from extensive reading and daily immersion in the intricate values-testing of Wall Street. Emotionally, he envied those able to believe; but reason (backed by serious reading) kept him skeptical. Yet it was a positive skepticism, a skepticism grounded in the Enlightenment, steeped in Classical and Judeo-Christian values. His skepticism fed and was fed by an increasingly justifi- able confidence in his own powers of reasoning, a confidence essential to a professional investor.