vineri, 27 februarie 2015

O poveste frumoasa, din 1929...

Irving Kahn, the world's oldest investor, dies at 109

The investment veteran, who doubled his money by predicting the 1929 crash, was a disciple of Benjamin Graham. He spoke to the Telegraph last summer about how he picked winners

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Irving Kahn
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Irving Kahn 
4:41PM GMT 26 Feb 2015
Irving Kahn, feted as the world's oldest professional investor, has died aged 109.
Just six months ago he told the Telegraph, in one of his last interviews, how he doubled his money by side-stepping the 1929 Wall Street crash.
Co-founder and chairman of Kahn Brothers Group Inc, Mr Kahn was a disciple and colleague of Benjamin Graham, Columbia Business School professor and arguably the most influential investment expert of the 20th Century.
His death was announced today in a paid notice in the New York Times.
Mr Kahn continued to work three days a week, taking a short taxi ride from his flat in Manhattan to the offices of the Kahn Brothers.
His Wall Street career began before the crash of 1929 and over the intervening decades he saw the Great Depression, the Second World War, the Cold War and the recent financial crash, as well as numerous less-severe crises. Through them all he carried on investing.
He gave what was one of his last interviews on his life of investing to the Telegraph in August.
Telegraph Money asked him to look back over his long career and recount the key events that influenced his strategy as an investor.
"In my early days, the equities market was dominated by speculators looking for tips," Mr Kahn said. "The only serious investing was done by a few large institutions that stuck to bonds and shares in well-established companies."
In the feverish summer of 1929, speculation "had driven up prices to unreasonable levels", he said. So he decided that the way to make money was to "short-sell" a particular share, meaning he would profit from a fall, not a rise, in the price.
Irving Kahn in the Twenties
"One of my clearest memories is of my first trade, a short sale in a mining company, Magma Copper," he remembered. "I borrowed money from an in-law who was certain I would lose it but was still kind enough to lend it. He said only a fool would bet against the bull market." But by the time the Wall Street crash took hold in the autumn, Mr Kahn had nearly doubled his money. "This is a good example of how great enthusiasm in a company or industry is usually a sign of great risk," he said.
The effects of the Wall Street crash were very different from the aftermath of the recent financial crisis, Mr Kahn said. "The 1929 crash was preceded by a real estate bubble like the recent one, but there were also many differences. Many individuals were leveraged [investing with borrowed money] so portfolios were wiped out.
Desperate times: The Wall Street crash of 1929
"There were also no legal protections. We had no securities laws. While everyone knows the system was flawed before the recent crash, at least there were some protections in place. In the Twenties we had nothing. And when the Depression hit, there were bread lines and families homeless in Central Park with nowhere to go."
But after Mr Kahn's early success in the risky business of short-selling, his approach changed to one of finding solid companies that were undervalued by the stock market and then holding on to them. He also turned his back on borrowing money to invest (leverage). "I invested conservatively and tried to avoid leverage. Living a modest lifestyle didn't hurt, either," he said.
The catalyst for the change was his collaboration with Mr Graham, the inventor of "value investing".
Mr Kahn said: "In the Thirties Ben Graham and others developed security analysis and the concept of value investing, which has been the focus of my life ever since. Value investing was the blueprint for analytical investing, as opposed to speculation."
Graham was a lecturer at Columbia University in New York, where his pupils included Warren Buffett, and Mr Kahn was his teaching assistant. "They'd take the subway to Columbia together," said Tom Kahn, Irving Kahn's son, who also works for the family investment firm.
As a value investor Ben Graham believed in trying to calculate the true value of a company and then buying the shares only if the price was substantially lower.
Irving Kahn before he died
Irving Kahn said: "During the Great Depression, I could find stocks trading at tremendous discounts. I learnt from Ben Graham that one could study financial statements to find stocks that were a 'dollar selling for 50 cents'. He called this the 'margin of safety' and it's still the most important concept related to risk."
He continued to use the same approach. "During the recent crash and in other sell-offs, Tom and I looked for good companies selling at a discount, which do surface if you're patient. If the market is overpriced, an investor must be willing to wait."
He added: "There are always good companies that are overpriced. A disciplined investor avoids them. As Warren Buffett has correctly said, a good investor has the opposite temperament to that prevailing in the market. Throughout all the crashes, sticking to value investing helped me to preserve and grow my capital.
"Investors must remember that their first job is to preserve their capital. After they've dealt with that, they can approach the second job, seeking a return on that capital."
Mr Kahn opens New York Stock Exchange trading
What he said about the market last summer
Mr Kahn said he was finding few bargains after the S&P 500 index had hit repeated record highs.
"I try not to pontificate about the market, but I can say that my son and I find very few instances of value when we look at the market today. That is usually a sign of widespread speculation," he said.
"But no one knows when the tide will turn. Those who are leveraged, trade short-term and have bought at a high prices will be exposed to permanent loss of capital. I prefer to be slow and steady. I study companies and think about what they might return over, say, four or five years. If a stock goes down, I have time to weather the storm, maybe buy more at the lower price. If my arguments for the investment haven't changed, then I should like the stock even more when it goes down."
He explained how investment decisions are reached at Kahn Brothers. "Tom runs the firm and my grandson Andrew is one of our analysts. The three of us and our team enjoy debating the merits of companies. Sometimes we have different opinions, which makes it interesting.
"We basically look for value where others have missed it. Our ideas have to be different from the prevailing views of the market. When investors flee, we look for reasonable purchases that will be fruitful over many years. Our goal has always been to seek reasonable returns over a very long period of time. I don't know why anyone would look at a short time horizon. In my life, I invested over decades. Looking for short-term gains doesn't aid this process."
How to live a long and prosperous life
Mr Kahn said: "I would recommend that private investors tune out the prevailing views they hear on the radio, television and the internet. They are not helpful. People say 'buy low, sell high', but you cannot do this if you are following the herd.
"You must have the discipline and temperament to resist your impulses. Human beings have precisely the wrong instincts when it comes to the markets. If you recognise this, you can resist the urge to buy into a rally and sell into a decline. It's also helpful to remember the power of compounding. You don't need to stretch for returns to grow your capital over the course of your life."
Tom Kahn, at the time, added: "Wall Street is a tricky place – with the internet everyone knows everything. But my father has always been extremely analytical. He would come home with a bunch of annual reports and read them at the dinner table. But he would start at the back, where you tend to get the key financial information."
Asked then of the secret of his father's longevity, he said: "I think it's 75pc genetic. He didn't have a good diet; he used to prefer cheeseburgers to salad and ate lots of meat. And he smoked until he was about 50."
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