Benjamin Graham

Benjamin Graham (May 8, 1894 – September 21, 1976) was an influential economist and professional investor. Graham is considered the first proponent of Value Investing. Well known disciples (students and teaching assistants) of Graham include Warren Buffett, William J. Ruane, Irving Kahn, Walter J. Schloss, and Charles Brandes. Buffett, who credits Graham as grounding him with a sound intellectual investment framework, described him as the second most influential person in his life after his own father. In fact, Graham had such an overwhelming influence on his students that two of them, Buffett and Kahn, named their sons, Howard Graham Buffett and Thomas Graham Kahn, after him.

Sourced

Sense of Humour

• Warren Buffett, story from Benjamin Graham: A story that was passed down from Ben Graham illustrates the lemminglike behavior of the crowd: "Let me tell you the story of the oil prospector who met St. Peter at the Pearly Gates. When told his occupation, St. Peter said, “Oh, I’m really sorry. You seem to meet all the tests to get into heaven. But we’ve got a terrible problem. See that pen over there? That’s where we keep the oil prospectors waiting to get into heaven. And it’s filled—we haven’t got room for even one more.” The oil prospector thought for a minute and said, “Would you mind if I just said four words to those folks?” “I can’t see any harm in that,” said St. Pete. So the old-timer cupped his hands and yelled out, “Oil discovered in hell!” Immediately, the oil prospectors wrenched the lock off the door of the pen and out they flew, flapping their wings as hard as they could for the lower regions. “You know, that’s a pretty good trick,” St. Pete said. “Move in. The place is yours. You’ve got plenty of room.” The old fellow scratched his head and said, “No. If you don’t mind, I think I’ll go along with the rest of ’em. There may be some truth to that rumor after all."
  • From Berkshire Hathaway 1985 Annual Report

Storage and Stability (1937)

• The idea of storage as a solution of economic problems at least has the support of common sense.It is diametrically opposed to the topsy-turvy Alice-in-Wonderland reasoning that has marked so much of our depression thinking and policy.
  • Preface, p. vii

• Instead of passing blithely over into that Promised Land, flowing almost literally with milk and honey, it may be our destiny to wander a full 40 years or more in the wilderness of doubt and divided sentiments.
  • Part I, Chapter I, The Changing Role of Surplus Stocks, p. 4

• Even the most conservative must realize that the recent transformation of surplus from an individual to a national disaster implies a scathing indictment of our capitalist system as it has now developed.
  • Part I, Chapter I, The Changing Role of Surplus Stocks, p. 17

• Whether we like it or not, government intervention in the face of surplus is here to stay.
  • Part I, Chapter II, Government and Surplus Stocks, p. 26

The State can always afford to finance what its citizens can soundly produce.

• It is a fact worth pondering that four centuries ago the evil of "an abundance or surplus" arose from its being kept off the market, while today the evil of surplus lies in its being thrown upon the market.
  • Part I, Chapter II, Government and Surplus Stocks, p. 28

• The State can always afford to finance what its citizens can soundly produce.
  • Part I, Chapter III, The Problem of Conserving Surplus, p. 43 (italics as per text)

• The Reservoir system will function not only as an equalizer of business conditions, but also as a national store to meet further emergencies, such as war and drought, and-most important of all-as the concrete means of developing a steadily higher living standard for all.
  • Part II, Chapter IV, A Plan For Conserving Surplus, p. 50

• Why should the cotton growers suffer if there is shortage of wheat?
  • Part II, Chapter V, Reservoir System and Commodities, p. 72

• Price statistics show clearly that instability in raw-material prices is a prime cause of instability of other prices.
  • Part II, Chapter VI, The Question of Price Stability, p. 85

• The existence of such a war chest might go far to strengthen our prestige and frighten off any would be assailant.
  • Part II, Chapter VIII, Ultimate Uses of the Stored Units, p. 97

• Both a priori reasoning and experience teach us that as as these funds grow larger the geometrical rate of growth by compound interest ultimately defeats itself.
  • Part II, Chapter VIII,Ultimate Uses of the Stored Units, p. 103

• The money cost of the reservoir plan literally fades into insignificance when it is compared with the financial burden which the great depression imposed on the nation.
  • Part II, Chapter IX, The Cost of the Reservoir Plan, p. 114

• The utility, or intrinsic value of gold as a commodity is now considerably less than in the past; its monetary status has become extraordinarily ambiguous; and sits future is highly uncertain.
  • Part III, Chapter X, The Status of Gold and Silver, p. 127

• THERE is widespread agreement among economists that abuse of credit constitutes one of the chief unwholesome elements in business booms and is mainly responsible for the ensuing crash and depression.
  • Part III, Chapter XIII, The Reservoir Plan and Credit Control, p. 153

• The volume of credit depends upon three factors: the desire to borrow, the ability to lend and the desire to lend.
  • Part III, Chapter XIII, The Reservoir Plan and Credit Control, p. 154

• There is something paradoxical in the fact that by establishing an export market we subject our entire domestic production to the vagaries of that market.
  • Part IV, Chapter XIV, Farm Problems and Remedies, p. 172

• It must be fundamentally wrong to reduce production of food and fiber while one-third of our population is still ill fed and ill clothed.
  • Part IV, Chapter XVI, Reservoir Plan Versus Crop Control, p. 195

• The Reservoir plan is and engineering mechanism applied to the field of economics, and in its essence it has nothing to do with democracy or any other political philosophy.
  • Part V, Chapter XIX, The Reservoir Plan and Tradition, p. 232

• The people of the United States will not tolerate another deep depression that arises not from any lack of natural resources, productive capacity or man and brain power, but solely from imperfections in the functioning of the system of finance capitalism.
  • Part V, Chapter XIX, The Reservoir Plan and Tradition, p. 234 (See also; Karl Marx, Capital)

World Commodities and World Currencies (1944)

• The world has not learned the technique of balanced expansion without the resultant commercial and financial congestion.
  • Chapter I, The Problem of Raw Materials, p. 5

• Cartels have spread and will spread as long as the world lacks an effective mechanism by which balanced expansion may be achieved without a resulting disruption of prices.
  • Chapter II, The Issue of Cartels, p. 21

• The modern world is not geared properly to the storage of goods.
  • Chapter III, The Paradox of the Stockpile, p. 23

• The story of Joseph in Egypt and of the seven fat and the seven lean years has passed into the homely wisdom of the ages; but our economic thinking seems to have lost contact with so simple and basic approach to prudent management of a nations welfare.
  • Chapter V, Stabilization of Raw Materials, p. 56

• Many progressive economists insist that gold is now in essentially the same position as silver and that the arguments the simon-pure gold advocates use against the white metal can be directed with equal effect against their own fetish.
  • Chapter IX, Commodities, Gold, Credit as Money, p. 100 (See also Karl Marx, Capital Volume I, p. 89)

• It is a misfortune of the times that all of us must needs be amateur economists-including, and perhaps especially, the professionals.
  • Chapter X, Commodity Unit Stabilization, p. 109

• We have introduced the monetary factor not by necessity but by choice. Its advantages are obvious. Self-financed commodity units are not only interest free, but free also from dependence upon credit conditions. They are a step-desirable, it seems to us-in the direction of a goods economy as distinct from a money economy; but this step is taken without violence by merely identifying basic goods with money. It guarantees unfailing purchasing power where it is most needed-among the countless producers of raw commodities.
  • Chapter X, Commodity Unit Stabilization, p. 114

The Intelligent Investor (1973) (Fourth Revised Edition)

• Unusually rapid growth cannot keep up forever; when a company has already registered a brilliant expansion, its very increase in size makes a repetition of its achievement more difficult.
  • Chapter 7, Portfolio Policy: The Positive Side, p. 75

Investment is most intelligent when it is most businesslike.

• Wall Street has a few prudent principles; the trouble is that they are always forgotten when they are most needed.
  • Chapter 16, Convertible Issues and Warrants, p. 225

• Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.
  • Chapter 20, "Margin of Safety": The Central Concept, p. 280

• Investment is most intelligent when it is most businesslike.
  • Chapter 20, "Margin of Safety": The Central Concept, p. 286

• Do not let anyone else run your business,
  • Chapter 20, "Margin of Safety": The Central Concept, p. 286

• To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.
  • Chapter 20, "Margin of Safety": The Central Concept, p. 287

Unsourced Quotes

Management

• “The essence of investment management is the management of risks, not the management of returns. ”

Confidence

• "You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right."

Investing and Emotions

• "Individuals who cannot master their emotions are ill-suited to profit from the investment process."

• "Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble...to give way to hope, fear and greed."