Benny Grossbaum was the embodiment of the American Dream.

Born in London in 1894 during the reign of Queen Victoria, Benny and his family moved to New York City (through Ellis Island) when he was still a baby.

At first the family was well off; his father ran a successful business, and they lived in a posh brownstone on Fifth Avenue in Manhattan.

But Benny was just 9 years old when his father suddenly passed away from pneumonia, and the family lost everything. The rest of his childhood was spent in abject poverty, and he later referred to this time of adversity as “the years that formed my character.”

Living in squalor also lit a fire within Benny to become wealthy; he developed a passion for money... and for study. And from the time he entered kindergarten, Benny’s teachers recognized his strong intellect and work ethic.

Benny Grossbaum flew through school. He was so advanced that he skipped several grades, all while mastering Latin and Greek. And he ultimately graduated from an Ivy League university where he studied mathematics.

This was a time, however, of significant anti-German and anti-Jewish sentiment in America. So the Grossbaum family formally changed its name… and henceforth Benny Grossbaum became known as Benjamin Graham.

You probably know that name well; Graham was a legendary investor who is considered the “father of value investing”. And during his career he taught Warren Buffett, Sir John Templeton, and a host of other prominent investors.

But Graham’s track record was far from flawless.

In 1926 as a young, 30-year old Wall Street hot shot, Graham started his own hedge fund called the Graham Joint Account.

Graham’s fund performed really well for the next few years, returning an average 25.7% per year. Not bad.

But this was the Roaring Twenties-- a period of time in the United States were the economy was red hot and the stock market was booming… thanks in large part to the Federal Reserve’s rapid expansion of the money supply.

The Dow Jones Industrial Average rose 2.5x in a roughly three-year period from 1926-1929, and Graham rode that wave.

But even someone as smart as Graham didn’t see the crash coming. In late October 1929, his fund almost got wiped out when the market had its worst decline in history.

The stock market continued to tumble for the next three years, finally bottoming out in 1932; at that point Graham’s fund was down 70%, and he knew he needed to reassess his strategy.

It was from this reassessment… out of his personal failures of the 1929 crash… that modern value investing was born.