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Sunday, 22 March 2009

The Rediscovered Ben Graham

Occasionally this interwebnet thingy throws up a bit of a gem. So I’m delighted to have found The Rediscovered Ben Graham, hidden in the bowels of John Wiley & Sons website. A link has been added to the Links section.

These are a series of lectures given by Graham at the Columbia Business School in 1946. There's a fair amount in here that's not relevant any more - like the appropriate treatment of war profits (although you never know) - but much that is. Here are a few samples ...

Ben Graham lived in not entirely politically correct times (his firm was, even in the fifties, just about the only one on Wall Street that employed Jews - its first non-Jewish employee was some bloke called Warren Buffett). His metaphor for how to regard the stockmarket is both spot on and condescending:
The correct attitude of the security analyst toward the stock market might well be that of a man toward his wife. He shouldn't pay too much attention to what the lady says, but he can't afford to ignore it entirely. That is pretty much the position that most of us find ourselves vis-à-vis the stock market.
He was sound on short-term investor psychology, where nothing much changes:
... it is interesting to see how unpopular companies can become, merely because their immediate prospects are clouded in the speculative mind.
Prescient on index tracking, thirty years ahead of the launch of Vanguard:
Furthermore, there is nothing to prevent the investor from dealing with his own investment problems on a group basis. There is nothing to prevent the investor from actually buying the Dow-Jones Industrial Average, though I never heard of anybody doing it. It seems to me it would make a great deal of sense if he did.
Wryly amusing on the virtues and otherwise of security analysts:
It seems to me that Wall Street analysts show an extraordinary combination of sophistication and naiveté in their attitude toward speculation. They recognize, and properly so, that speculation is an important part of their environment. We all know that if we follow the speculative crowd we are going to lose money in the long run. Yet, somehow or other, we find ourselves very often doing just that. It is extraordinary how frequently security analysts and the crowd are doing the same thing. In fact, I must say I can’t remember any case in which they weren’t. (Laughter.)
And acutely accurate on human nature:
In one important respect we have made practically no progress at all, and that is in human nature. Regardless of all the apparatus and all the improvements in techniques, people still want to make money very fast. They still want to be on the right side of the market. And what is most important and most dangerous, we all want to get more out of Wall Street than we deserve for the work we put in.
Worth a browse.

1 comment:

  1. Have you read The Snowball, the Warren Buffett biography? There's some good tidbits in there about Graham, from the years he worked there.

    You get the impression of a Mad Man (TV series) style Renaissance Man chasing women and beating the market as an intellectual challenge. (Graham, for instance, was happy to see his acolytes follow him into positions, whereas Buffett only really approved of such 'coat-tailing' when it helped him build up a controlling stake in a company).

    Hope you don't mind all these comments by the way. Just seemed a bit perverse that such an excellent blog had 0 comments all over the place (I don't enable comments on my blog, which saves that particular issue... :) )

    In fact, I should have included a link to you in my weekend reading post this week. I'll do the deed next week.

    Keep up the good work!

    ReplyDelete