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By Root 3380 0

Fred himself needed boxcarloads of headache powder; he was extracting himself from this pulse-pounding marriage. Vanita had thoroughly established herself in tiny Salisbury and remained there to torment him with all her considerable creativity while they battled in the courts. Thus, unlike the rest of the Grahamites, Fred’s interest in the stock market had been temporarily diverted. It was at a time when the market was growing less attractive anyway: Hundreds of millions of dollars had been poured into it by people mindlessly coattailing so-called experts, who themselves had no more than a couple of years’ proven ability to make money. More than fifty new investment funds had come to market, with nearly sixty-five more waiting in the wings.3 For the first time in U.S. history, it became fashionable for a broad group of individuals to own stocks.4 Buffett would describe this phase as resembling “an ever-widening circle of chain letters,” even a “mania,” populated mostly by “the hopeful, credulous, and greedy, grasping for an excuse to believe.”5

In a business that was still transacted through paper trade tickets and physical delivery of stock certificates, trading volume had reached such a level that the market was nearly crushed under the weight of paperwork. Huge numbers of orders were duplicated or never executed, the tickets misplaced or simply thrown in the garbage, while file rooms worth of stock certificates disappeared, presumed stolen, amid rumors that the Mafia had infiltrated the market. All sorts of reforms pushed through in 1967 and 1968 automated and computerized the trading systems in a desperate effort to catch up. One of the most important would shut down the old “under-the-counter” market. The National Association of Securities Dealers announced that it was about to bring online a new system called NASDAQ that would quote prices for smaller stocks.6 Instead of appearing on Pink Sheets that were stale the moment they were printed, the prices of most companies not listed on the stock exchanges would now be posted and updated electronically as they changed. Market makers had to show their hands and stand by the quotes they posted. Any trader who was very knowledgeable, good at haggling, and strong of backbone was not going to like the new system. In the middle of an already difficult market, it was going to make Buffett’s job harder.

To each of the Grahamites coming to La Jolla, Warren sent out instructions. “Please do not bring anything more current than a 1934 edition of Security Analysis along with you,” he wrote.7 Whatever their age, wives, too, would remain at home.

In his letter, Buffett reminded them that they were there to listen to Graham, the Great Man, not one another. Several in the group—Munger, Anderson, Ruane—were inclined to be loquacious. When it came to investing, of course, no one had more of this tendency than Buffett himself. At age thirty-seven, he had finally attained peerage and was able to call his former teacher “Ben,” but sometimes he still slipped and said “Mr. Graham.” So he must have been at least partly reminding himself not to try to take over as the best student in the class.

Thus instructed, the dozen Graham-worshippers convened at the Hotel del Coronado, across the bay from San Diego. Warren had wanted to meet at a much cheaper venue such as a Holiday Inn; he made sure the group knew that the extravagance of this pink-and-white Victorian confection of a resort was Graham’s idea.

By the time the dozen arrived in San Diego, a huge storm with lashing rain and churning seas had hit, but no one cared; they were there to talk about stocks. Buffett was bursting with pride at having engineered a tribute to his teacher and a chance to show off the wisdom of Ben Graham to his new friends. Graham arrived at the Coronado late. Ever the teacher, as soon as he got there, he immediately gave them an exam.

Graham was almost painful to listen to under any circumstances. Every sentence was complex and larded with classical allusions. The exam he gave them was much the same. “They were