Joseph Kennedy, father of President John F. Kennedy, was a very complex man who rose to his own special heights, including being tabbed by President Franklin Roosevelt to become the first chairman of the Securities Exchange Commission.

Kennedy was born in Boston in September 1888. Young Joe's father was a saloon keeper who was also the political boss of his ward and later became a state senator. At an early age, Joe held a number of jobs, as did most kids back then. He was known as a hustler, in a kind sense, taking jobs selling newspapers, repairing clocks, running errands, raising pigeons, selling candy and, as historian David Fromkin notes, "invariably greeting the gang of children he led with: 'How can we make some money?'"

Kennedy wasn't a good student but he graduated from the best schools. He married the daughter of the mayor of Boston, even though he wasn't the first pick of the father-in-law. And while he was an outsider in the closed world of Boston, State Street finance, he made a fortune in the investment game.

During World War I, Joe Kennedy got a job as accountant and assistant general manager at a Bethlehem Steel plant in Quincy, Mass. It was here that he began to really prove that he was a tough businessman. He earned a large salary for those days, $20,000, plus a bonus. But the shrewd operator also profited from owning the cafeteria where most of the 22,000 workers ate. His shipyards often broke production records, though he sometimes claimed credit where little was due.

Kennedy was drawn to finance and the money he so loved, even as a child. He learned the art of stock speculation while at the brokerage firm of Hayden, Stone in Boston, but in 1923 he set up his own shop, "Joseph P. Kennedy, Banker."

Now he was hardly a banker in the true sense of the word. But as he said himself, Kennedy liked the sound of it. Joe also knew that the only way to amass great wealth was to move to New York.

Joe Kennedy made his mark on Wall Street during the 1920s. In his book, "Freedom From Fear," author David Kennedy describes the Wall Street environment of this era.

"(It) was a strikingly information-starved environment. Many firms whose securities were publicly traded published no regular reports or issued reports whose data were so arbitrarily selected and capriciously audited as to be worse than useless. It was this circumstance that had conferred such awesome power on a handful of investment bankers like J.P. Morgan, because they commanded a virtual monopoly of the information necessary for making sound financial decisions. Especially in the secondary markets, where reliable information was all but impossible for the average investor to come by, opportunities abounded for insider manipulation and wildcat speculation."

It was against this backdrop that Kennedy thrived. He became part of a group of Irish-American speculators; including Charles Mitchell, Mike Meehan, and Bernard Smith.

The Irish had been mostly born into poverty and excluded from the East Coast financial elite, due in large part to their religion. Partly because of this, they seemed determined to take great risks for the purposes of establishing themselves. Author Edward Chancellor, in his book "Devil Take the Hindmost," quotes an 18th century financial writer, Thomas Mortimer, for the purposes of describing the times: "He who values not his neck, because he is conscious it is worth nothing, may take the boldest leap."

And as was alluded to in the above quote from "Freedom From Fear," the 20s were also an era of rampant insider trading. Joe Kennedy became a master at the game and it can be safely assumed that each of his big "scores" had some "inside" knowledge behind it. And often, the information came from those who ran the companies themselves.

Kennedy's first major speculation was in the stock of Yellow Cab Company, an outfit that had been a victim of a bear raid. The company was connected to his father-in-law, the former Boston Mayor "Honeyfitz" Fitzgerald. Kennedy positioned himself in a suite at the Waldorf-Astoria and proceeded to manipulate the share price.

"I woke up one morning, exhausted," Kennedy recalled, "and I remembered that I hadn't been out of that hotel room in 7 weeks. My baby, Pat, had been born and was almost a month old, and I hadn't even seen her." [Source: John Steele Gordon]

Kennedy became part of the infamous "pool operations." Taking advantage of their own inside information, and the public's lack thereof, a pool operator would bribe journalists on various newspapers to plant stories. The stocks would then soar, or fall, based on the objectives of the pool.

"It's easy to make money in this market," said Kennedy, famously, to an associate. "We'd better get in before they pass a law against it." By the mid-1920s, he had a net worth of $2 million; considerable for those times.

In 1928, Kennedy's trading reputation really soared; for it was during this year that he cashed out, well ahead of the Great Crash of 1929. And then, as the market crashed, he vigorously shifted gears, shorting stocks as it fell further. [Supposedly, he cleared at least $1 million playing the other side.]

Next time we will continue the Joseph Kennedy story and detail his ascent to the chairmanship of the SEC.

Brian Trumbore

Sources:
"Freedom From Fear," David M. Kennedy
"The Great Bull Market," Robert Sobel
"The Great Game," John Steele Gordon
"Devil Take the Hindmost," Edward Chancellor
"Wall Street: A History," Charles Geisst
"It Was a Very Good Year," Martin Fridson