Benjamin Graham…and the horde of value investors…are, in effect, an estranged brood of Austrian–an unwittingly splintered faction.”

“Thus, we can say that Benjamin Graham, considered the father of value investing and security analysis itself, and the horde of value investors who have followed his treatises are, in effect, an estranged brood of Austrians—an unwittingly splintered faction.

After attending Columbia University on scholarship, Graham became a clerk in a bond trading firm, then analyst, a partner, and finally principal of his own firm.

A Keynesian interventionist, particularly regarding the inadequacy of consumption during economic downturns, Graham extolled a commodity-based currency that was very similar to the so-called Ford-Edison money. And, like Keynes, he was blindsided by the great market crash that came at the end of the roaring 20s. (Ludwig von Mises, we recall from Chapter 7, had little company in predicting the Great Depression.) Graham, the “dean of Wall Street,” lost nearly 70 percent of his largely arbitrage portfolio in 1929-1932. This would become a most formative experience for him—likely responsible for much of his value investing principles that would evolve.

Laozi—”Many shall be restored that now are fallen and many shall fall that now are in honor.”—tells the paradoxical story of the monetary-fueled market swings …

One might say that Graham gave the practice of investing a rigor, logic, and entrepreneurial orientation not commonly seen before, and in that he was very Austrian (as Graham famously noted, “Investment is most intelligent when it is most businesslike”).

Perhaps Graham’s greatest insight was to stay out of the shadows of securities markets, ignore the sideshows, and instead focus entirely on the entrepreneurial action itself—the business, the capital.

(His multi-ingredient, quantitative stock portfolio recipe is the stuff of modern-day financial engineers.)”

The Dao of Capital-Austrian Investing in a Distorted World, p. 270-271, Mark Spitznagel

Spitznagel is a follower of Austrian Economics

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Book: The Dao of Capital: Austrian Investing in a Distorted World, by Mark Spitznagel


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