Source: Smart investors.

Today, major overseas markets continue to panic, with the Japanese and South Korean stock markets triggering circuit breakers.

On Friday night, the US unemployment rate rose continuously for four months, and combined with the economic data's blow, caused concerns about a US recession, leading to a sharp decline in US stocks, among which Intel suffered its biggest decline in more than 40 years, dropping more than 26% in one day, with a market cap falling below $100 billion.

The Nikkei 225 index fell 12.4% at the close on that day, affected by the further appreciation of the Japanese yen. This was the largest single-day drop in the index since Black Monday on Wall Street on October 20, 1987 (plunging 14.9%). During three trading days, it fell nearly 20%, erasing all the gains in the past year.

Equity index futures and Bitcoin futures are also falling sharply. The last time such a global sense of panic was felt was in the first quarter of 2020.

The market is always constantly reminding us in a way that is within reason, yet unexpected, of what is risk and what is cycle.

Recently, rereading the biography of the 'Father of Value Investing,' Benjamin Graham, I have some new feelings about the era's background in which he grew up and formed his philosophy.

In 1914, with the outbreak of World War I, the doors of the New York Stock Exchange were closed for four months.

But just after graduating from college, Graham found a job on Wall Street, earning only $10 a week and also tutoring officers' children part-time to teach foreigners English and earn some extra money.

That year, 20-year-old Graham was not yet an experienced investor. But during his first summer on Wall Street, he also witnessed a global financial panic.

01. Call from academia

In the spring of 1914, with a major in mathematics, but keen on humanities, Graham graduated from Columbia University with the second-best grades in the class and wanted to find a good job for himself.

In the last month of college, Graham was busy with all kinds of dazzling offers.

"First, Professor Woodbridge, the head of the philosophy department, invited me to have lunch with him at the Teacher's Club. He suggested that I stay at Columbia University and become a teacher in the philosophy department."

Graham was not a philosophy major. During his undergraduate period in mathematics, he had taken one or two courses in Woodbridge's department.

"Soon afterwards, Professor Hawkes invited me to join their team on behalf of the Mathematics Department."

"Then, to my surprise, the well-known Professor Acheson also invited me to his office for a chat. He thought I could make a valuable contribution to the English department, and I would find that working at a university is the most satisfying."

Admittedly, university teachers have a somewhat low starting salary and relatively slow promotion speed, but the strong sense of satisfaction it brings is enough to offset these shortcomings."

Capel suggested that he could wait a bit longer. This mentor wanted to send smart college graduates into the business world rather than lock them up in ivory towers.

A few days later, Graham ran into Capel on campus and was told that he had missed an interesting opportunity.

Capel had intended to recommend Graham to be Sir Norman Angell's assistant, who was to depart for Europe that day to participate in a peace parade, but Graham missed Capel's call.

This accident turned out to be lucky for Graham.

If he had received the call at that time, he would have already been in the United Kingdom when World War I broke out two months later. As a British citizen born in London, he might have been called up to go to the Flanders battlefield in France.

02, Entering Wall Street for the First Time

On the eve of graduation, Graham finally received good news from the dean.

Samuel Newburger, the boss of "Newburger, Henderson, and Loeb," a member institution of the New York Stock Exchange, asked Keppel to recommend the best student for bond sales. Keppel strongly recommended Graham, believing that Wall Street could provide great opportunities for university students.

Graham agreed and secured a $12 weekly salary. When he went to see Newburger, he learned that Newburger's brother, Alfred, was the executive and spiritual leader of the company.

Alfred said to the young Graham,

"That's just the compensation level before you earn big money by selling bonds with us. If you are competent, Wall Street has huge business opportunities."

Graham only knew that Wall Street was a place full of drama and excitement in fiction, and he couldn't wait to experience the mysterious atmosphere and major events of Wall Street.

He accepted the offer and, as he was leaving, Alfred held up a hand with a serious expression, raised a finger and said,

"One last piece of advice, young man. Once you get into speculation, you will lose your money. Always remember this."

Alfred's "speculation" referred to high-risk, volatile stock and bond trading. Graham not only followed his boss's advice but also became the opposite of speculation—the father of value investing.

To learn business, Graham spent a few weeks in the background department of the company, starting from scratch as a runner and assistant to understand the business.

Afterward, he went to the bond department to learn how to sell bonds. Wall Street at that time had not achieved specialized production work, so many buys and sells had to be matched every day, and there were also "matching" trades, securities settlements, check authentication and other errands.

He learned a lot in many departments, first in the securities settlement department, then in the trading department, and then in the finance department.

In his first week at work, the cashier gave him a check and asked him to get it cashed at National City Bank.

"I was surprised by the calm way the finance industry handles large sums of money."

He went to the window and without showing any ID, someone handed him a check for about $500,000.

"What was even more surprising was their casual treatment of stock certificates."

When another runner heard he was heading in the direction of the company, he handed him a bundle of stock certificates, hoping he could help with delivery. But Graham was also surprised to find that in such an incredible operating system, there were very few cases of lost checks or securities.

After a month of running errands, he moved to the bond department, where the office was an independent transparent compartment separated from the client room and market board by a narrow aisle.

Graham has two missions: to understand bonds and to contribute to the bond department.

His primary job is to provide a brief description of all the recommended bonds on the recommendation order, which will be pushed to potential clients.

Even in his spare time, he studies bond knowledge very seriously.

He will use a small loose-leaf notebook to record the main information of a bond in a convenient and easy-to-remember way. After many years, Graham still remembers the appearance of the black notebook and some of its contents.

The first page is: Atchison-Topeka-Santa Fe Railroad Company, general obligation bond, 4% coupon, due in 1995, issued for 0.15 billion US dollars.

There must be 100 different bond information in the notebook, and I can remember their scale, coupon, maturity date and repayment priority. These information can be easily obtained from the bond issuance prospectus or my notebook. I can't explain why I have to remember them.

But there is no doubt that my vanity must play a role in it.

After he thought he had made significant progress in learning about bonds, he found that the information of many bonds was mixed up in his mind, so he gave up the "terrible" practice of memorizing bond information.

However, a few months later, he was surprised to find that these pieces of information would unconsciously emerge in his mind, and it seemed that he had become a railroad bond prospectus that could walk.

The global financial crisis of 1914.

It was not until June 28th, 1914 that a catastrophic event shocked the world.

Archduke Franz Ferdinand of the Austro-Hungarian Empire and his wife were assassinated in Sarajevo, the capital of Bosnia, which became the fuse for the outbreak of World War I.

In July, due to a large number of customers losing confidence and requesting withdrawals, Britain was suffering from a banking panic.

According to the London Bullion Market Association (LBMA), Britain was experiencing "the most serious systemic financial crisis in London's history. Not only London, about 50 countries around the world also experienced a financial crisis."

In the last week of July, the United States also began to face a major financial crisis.

European investors began to liquidate their holdings of US securities and prepare to exchange the US dollars obtained from selling securities into gold in the United States and then withdraw them back to their home countries. They instinctively believed that money was safer in their hands than in distant countries during the war.

At that time, the Federal Reserve had not yet opened, and the responsibility of financial assistance fell on the Secretary of the Treasury, William McCord. Fearing that this sale would deplete America's gold reserves and cause the dollar to depreciate.

After several days of selling, McCord closed the New York Stock Exchange on July 31st.

Yes, the exchange was closed, and the transaction suspension lasted until December 12, 1914. According to William Silber, a professor at the Stern School of Business at New York University, the four-month closure of Wall Street in 1914 and today is "unimaginable."

In early August, World War I broke out.

"Will it lead to the disappearance of Western civilization? Is it the result of a lack of excellent leadership or diplomatic skills among the leaders of European countries?" Or, is it merely a continuation of the endless wars between nations, which will ultimately not leave a significant mark in history, but will bring disasters to the belligerents and pass by like smoke for the survivors? Young Graham looked back on the confusion and excitement he and those around him had experienced, which was his first summer on Wall Street.

Or, is it merely a continuation of the endless wars between nations, which will ultimately not leave a significant mark in history, but will bring disasters to the belligerents and pass by like smoke for the survivors?

Young Graham looked back on the confusion and excitement he and those around him had experienced, which was his first summer on Wall Street.

Although the financial crisis in 1914 was one of the most serious global financial crises in history, few knew about it because it was not recorded in many documents. Perhaps because the financial crisis was overshadowed by diplomatic crises and military conflicts. After all, life-threatening struggles are more eye-catching than financial collapses.

Moreover, the United States effectively controlled the crisis, which did not cause sensational losses or incidents like the collapse of Bear Stearns or Lehman Brothers.

But Graham still remembers the terrifying news headlines announcing the declarations of war from various countries at that time.

After the exchange closed, Graham was also worried that his business and job would be affected because most of his income was needed to support his mother's household expenses.

"In fact, Wall Street was not affected much, but all companies kept employees by reducing salaries. I was happy to have a job, even if my weekly salary was only $10."

His boss reduced his salary from $12 to $10 per week.

A few months later, the Stock Exchange was partially restored. Not long after, war material orders began pouring in from France and the United Kingdom, and the economic prospects of the United States quickly turned from pessimistic to optimistic. Trading restrictions were lifted, and the stock market began to rise.

"In the face of the sudden reversal, our biggest problem was manpower shortage because many employees had quit. So I took on multiple jobs alone."

Sometimes Graham had to help post stock quotes. He wore a heavy belt with fractions from 1/8 to 7/8 hanging on it; sometimes he answered the phone switchboard, or helped employees in the backstage department to deliver securities vouchers.

At that time, his salary was restored to $12 a week.

4. The Failed Bond Salesman and the Innate "Statistian".

Soon, Graham returned to the bond department and resumed bond sales. To do a good job related to bonds, he studied the details of the railroad bond reports.

To do a good job related to bonds, he studied the details of the railroad bond reports.

He spent a lot of time reading relevant textbooks, such as "The Principles of Bond Investment" written by Lawrence Chamberlain, which is a dull heavyweight work, but these solid work became his enlightenment for value investment.

"I never thought that one day the textbooks I wrote would replace Chamberlain's books nationwide."

After studying for a period of time, Graham wanted to write an analysis report about the Missouri Pacific Railroad Company. After reading the company's financial reports before June 1914, he believed that the company's management and financial situation were in a precarious state and investors should not hold its bonds.

The analysis report he wrote was handed over to a partner at J.S. Bach Company by a friend. The partner, after reading it, said that he was willing to hire Graham for the company's statistics department.

"At that time, I was very sure that I wanted to be a securities analyst rather than a bond salesman."

The senior management of J.S. Bach Company offered him a weekly salary of $18, and Graham's main job responsibilities were to write reports and answer customer questions.

"It's all great!"

But his old employer did not let him go easily. Graham told Newburgh that he was not suitable for bond sales but was more suited for statistical work. Newburgh's reaction was:

"Great, we were just trying to set up a statistics department. You can join this department."

Graham agreed eagerly and the company also increased his salary to $15 per week.

Graham not only survived the Great Depression, but also thrived in it. As a "statistician," he later tried a series of expansions, including publishing "Security Analysis."

05 - Initial view of securities analysis methods

"If I am fortunate enough to be able to use my talents in the field of financial analysis, then I am equally fortunate to enter Wall Street in a good era."

When Graham began his career on Wall Street, the investment scope of the market was almost entirely limited to bonds, and most common stocks were viewed as speculative tools.

However, later brokers in many OTC markets began trading common stocks, listed companies gradually provided detailed operating and financial information, and financial service institutions presented information on listed companies in a simple manner in handbooks and periodicals.

Regulators also began collecting large amounts of data involving railroads, Henry Hub natural gas and electrical utilities. Moreover, this data was public and available for querying and research.

However, Graham still believed that in the field of stock analysis in 1914, a lot of financial information was severely wasted.

"Although investors did not completely ignore the data, they only did shallow research and had almost no interest in research.

What they valued most were various insider news, some of which were related to business operations, new orders, profit forecasts, and other data, but more news was related to the current behavior and plans of market manipulators."

However, for various reasons, especially World War I, the financial situation of large industrial companies improved after 1914, and the analysis of common stocks also began to focus more on intrinsic value and investment advantages.

"As a newcomer to Wall Street, I was not influenced by distorted traditional doctrines, but accepted various new forces that had begun to enter the financial field."

Graham learned to distinguish between what was important and not important, reliable and unreliable, and even honest and dishonest. He believed that his vision and judgment in this respect were more accurate than that of many predecessors, because the predecessors were constrained by past experiences.

Therefore, Wall Street became a virgin land in Graham's eyes, where he could examine the truly effective and universal securities analysis methods.

"I am destined to spend my entire 42-year career on Wall Street."

He brought core academic views based on self-adjustment according to actual situations to Wall Street. The education he received from his school allowed him to have the ability to search for information, reflect and critique.

"But I want to supplement these two abilities based on these abilities, and academically gifted people usually do not possess these two abilities."

First, the ability to identify key issues and avoid wasting time on unimportant matters;

Second, the ability to solve practical problems, do things well, propose solutions, especially the ability to invent new methods and techniques.

06. Writing at the end.

In his birthday speech at the age of 80 (April 11, 1974), Graham was surprised by the huge difference in his attitude towards life between youth and old age.

When he was young, he often felt pessimistic about the direction of his life, feeling that his life was full of mistakes, disasters, and disappointments. But he was very optimistic about the future of the world and believed that the world would develop rapidly towards peace and greater benefit to everyone.

After experiencing 80 years of age, these two views seem to have completely reversed.

Looking back on his life at the age of 80, he felt that his life was extremely successful and happy, but the direction of the world was not as idealistic as when he was young.

This speech is also included in his autobiography.

He also talked to his children about how to make himself happier:

"At least half of all the happiness I have enjoyed in my life comes from the spiritual world, from good things and culture, especially literature and art.

These things are available to everyone and are almost free: people only need to be interested in them and can appreciate the rich spiritual world displayed in front of us without making too much effort.

Go ahead, show interest in them, and then make sustained efforts. Once you enjoy the fun of spiritual life, don't let it slip away.

At the end of the speech, Graham shared a poem from "Ulysses," which his family loves. Similarly, it also serves as the ending of this article.

Come on! My friends,

Explore a new world, it's not too late now.

Set sail! Sit in a row,

Breaking through the noisy waves,

I am determined to sail towards the setting sun,

Beyond the western constellations, to the point of death.

Perhaps the abyss will swallow us,

Perhaps we will reach the paradise of the Qiongdao Island,

And meet with old friend Achilles.

Although we have achieved so much, there is still much that is unknown,

Although our strength is no longer what it used to be,

Far from the heroic posture of the past,

But we are still ourselves,

Although the hero's heart is worn down by time and weakened by fate,

We still need to strive, explore, and seek,

And not yield.

And the final four words, 'and not to yield', are engraved on Graham's tombstone.

Editor / jayden