Three days a week, Irving Kahn (Trades, Portfolio) takes a taxi from his flat in Manhattan for the short ride to the offices of his investment firm, Kahn Brothers.
Nothing surprising about that, you might think. But Mr. Kahn is 108 years old.
His Wall Street career began before the crash of 1929 and over the intervening decades he has seen 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.
Many professional investors stress the importance of a long-term approach, but few are in a position to speak about it with as much authority as Mr. Kahn.
So, in an exclusive interview, Telegraph Money asked him to look back over his long career and recount the key events that have 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 (Trades, Portfolio) 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.
“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 '20s 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 Benjamin Graham, the inventor of “value investing.”
Mr. Kahn said, “In the '30s 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.”
Continue reading: http://www.telegraph.co.uk/finance/personalfinance/investing/11048689/108-year-old-investor-I-doubled-my-money-in-1929-crash-and-Im-still-winning.html
