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Transcription of interview with Joe Carlen on February 18, 2013.
Douglas Goldstein, CFP®, Financial Planner & Investment Advisor
Joe Carlen is a business consultant and the author of the biography of Benjamin Graham
called the Einstein of Money.
He focuses mainly on market assessments and some valuation work as well.
Douglas Goldstein, financial planner & investment advisor, interviewed Carlen on Arutz Sheva
Radio.
Douglas Goldstein: Why wrote about another book about Ben Graham?
Joe Carlen: There’s really only one other biography of him that was written and that
was written in 1994 which was before his memoirs was released.
He passed away in 1976 and his memoirs were not released until 1996.
It’s a very rich resource not only about his personal life and so forth, but about
some of his investment ideas so I thought it was an opportune time to write a biography
that had access to his memoirs.
Douglas Goldstein: Why did you choose the title The Einstein
of Money?
Joe Carlen: There’s trillions of dollars that are allocated at least partially according
to his principles and not just Berkshire Hathaway but everything from Berkshire Hathaway to
Japanese equity funds and funds all over the world that are using Graham’s principles
to one extent or another and that speaks to the second principle just that he had someone
wrote about investing two classics written in 1934 and 1939 and those principles are
still being applied with just mild amount of modification and there’s no other investment
rather that I think that who stood at the test of time to the same extent.
Lastly, he’s not just an investment guru, he also had some really fascinating ideas
about currency reform but reforming money itself.
For those reasons, I think he revolutionized investment finance and according to some,
his biggest contributions are actually macroeconomic.
Douglas Goldstein: In fact, Benjamin Graham is not his birth name right?
Joe Carlen: His original name was Benjamin Grossbaum and his mother changed the name
ostensibly because of anti-German sentiment because Grossbaum is a Germanic name.
The root is Germanic but it’s likely that it was changed because it was a Jewish name.
His father’s family was more of religious because in his family talks about how they
get French tutors whereas in his mother’s family that was not allowed.
Certainly, I think his family in Britain was more religious.
He was raised in a somewhat religious family.
His father passed when he was only 9 and after that, I think they became somewhat less observant.
Douglas Goldstein: It was amazing that he was able to write about macroeconomic issues
decades ago and a lot of that still applies today.
Why do you think that is?
Joe Carlen: I think he had an unusually broad and deep inlet and part of that was I think
just who he was and he read so extensively and since he was a child, he just read about
everything in multiple languages and that gave him a perspective.
Charles Brandes, one of his disciples, says that he believes that Graham’s knowledge
of history gave him the perspective of eternity which is very important when investing.
He had this very broad historical perspective and he saw that the market was the reflection
of human behavior so that’s why it follows this pattern.
He can always find the patterns but he can tell when people are overreacting with excessive
greed or on the other hand excessive fear and then there’s devise ways
of taking advantage of that.
I was fortunate to interview Mr. Brandes for the book and he still has evident to warmth
when he recall Graham and Graham tutored him personally so he’s a very interesting person
to talk
to about Graham.
Douglas Goldstein: Is
the work that Graham did something that regular investors can use on their own or is it really
only meant for other brilliant Wall Street types?
Joe Carlen: Graham’s second investment classic, the intelligent investor was written specifically
for the lay investor, both described as the dentist in Pocatello, Idaho or the lawyer
in Austin, Texas so sort of the professional who had some disposable income but doesn’t
have all the time in the world to invest.
That book is written specifically for that kind of investor.
Actually even within that book, there are two different levels as what he calls a defensive
investor and the enterprising investor.
The defensive is one with the less time and less risk tolerance.
In that respect, some of his prescriptions are specifically for the lay investor whereas
some of his other works most notably security analysis is definitely geared towards the
more kind of avid investment finance.
That was actually taken from his class, the same class that actually Buffet took in 1950,
I believe.
It really it’s from both in a sense because the essential principles are not particularly
complicated but there are different ways of applying them and also the times on how much
of a purest you want to be in applying them.
Buffet himself is not 100% purest in terms of his application of Graham’s method.
Douglas Goldstein: Did you meet any investors who really follow it
to the T?
Joe Carlen: I think there are different degrees.
I was fortunate to be able to interviewed Warren Buffet, Brandes and Irvin Kahn.
The common thing they have is they described sort of doing a modified Graham approach,
but it seems like some of their emphasis and they do some of smaller cap work that’s
probably a little bit more in line with what Graham did.
I asked about how his approach differs and he says because he is managing such large
sums, he can always fund this relatively small margin which is what Graham did so we have
to sometimes make investments.
It what they called buying a great company at a reasonable price.
Graham did was to buy companies at great prices whether they’re good companies or not so
good companies, but just buy them so discounted that you’re just guaranteed to make money
from it later.
I think Tom Roussou maybe was very interesting.
He applies Graham’s method to the developing world in really interesting ways and he focuses
a lot on the balance sheet.
Douglas Goldstein: How about Graham himself, was he a super wealthy guy because he followed
his own methods?
Joe Carlen: Yes and no.
He, on the one hand, in 1928, he made an equivalent with $7 million today.
He made about $600,000 in personal income which is an enormous sum.
It’s difficult to say because he gave much of his money away but we know that just he’s
taking GEICO alone, he made over 200 times what the investment was and the stories of
his grandson from medical school just from a piece of that GEICO investment.
It’s really hard to track it exactly but all indications was that he made all the money
he want to make and after certain point, he just put his money into miniscule bonds and
just didn’t want to track the market anymore.
He still got back into it later just sort on an intellectual level writing about it.
As Buffet said, he wasn’t thinking about money all the time and as Buffet told me and
as Buffet does and as all the other people Buffet knows too and it was just one of his
interests.
He wanted a financial security and once he did, he was after at the kind of miniscule
bonds and just sort of focuses time on other things.
In a way, he set the intellectual framework for others to use as they choose.
Douglas Goldstein: How can people follow you and your work?
Joe Carlen: They can go to www.knowthymarket.com and to know more about the book, you can go
to www.einsteinofmoney.com.
Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host
of the Goldstein on Gelt radio show (Monday nights at 7:00 PM on www.israelnationalradio.com.
He is a licensed financial professional both in the U.S. and Israel.
Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA,
SIFMA.
Accounts carried by National Financial Services LLC.
Member NYSE/SIPC, a Fidelity Investments company.
His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered
at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.
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