When the market crashed in 1929, Joe Kennedy completely avoided it. He sold everything days before markets plummeted. Then, he took his money and bought assets at the lows several months later, increasing his wealth by more than 10X. How did he do it and what’s the real story? In this post, we examine the rise of the Kennedy’s and how the stock market created their real wealth.
Joe Kennedy is the father John F. Kennedy (JFK). While many people today know of JFK and his time as President of the United States or even his brother Robert, the story of their father, Joe, is still misunderstood and rarely discussed. Joe Kennedy is the most important part of the Kennedy story. He’s a man who made hundreds of millions in the stock market and bootlegging alcohol.
Joe was born in 1888. That’s right — a LONG time ago. No smartphones, cars, refrigerators, and electricity, for most people, was a luxury. Joe was born in Boston, Massachusetts to an Irish family. His father at the time strove to be a politician in the city and that’s where Joe learned first hand about deal making, inside information, and all the tactics that come with most politics no matter the day or time.
Joe Kennedy did not go right into politics in his early years. He actually started on Wall Street. At one point, he was said to be the youngest President of a bank as he was just 25 years old. But, this is where the story of Joe gets interesting, because the bank is not where he made most of his money.
Joe eventually got involved in the stock market and that’s what made him rich. Today, most of his tactics for making money in the stock market would be considered insider trading, but at the time, Wall Street was like the wild west with little rules, anything goes attitude, and susceptible people willing to give their money to any scheme. Joe made most of his money in the stock market in the Roaring 1920s.
Was Joe Kennedy responsible for the Great rise and crash of the 1929 stock market? That is still up for debate. At that moment of euphoria, he was at center stage fueling the mania, trading it, and getting involved first-hand. His connections from his time at the bank and days in Boston and Harvard could influence a number of people. Not only did Joe trade stocks and make hundreds of millions during its rise, he famously avoided the Great Depression and stock market crash of 1929. While most people watched their portfolios crash, he sold days prior before it all fell down.
How did he do it? There is a famous anecdote about Joe and while he was trading stocks during the Roaring 20s. Markets were SPIKING. Money was flowing. But, days before the crash, a certain moment lead Joe to sell everything at the highs and hold his cash. In 1996, the writer John Rothchild wrote a piece called “When The Shoeshine Boy Talks” and he says:
“Joe Kennedy exited the stock market in timely fashion after a shoeshine boy gave him some stock tips. He figured that when the shoeshine boys have tips, the market is too popular for its own good.”
The story continues:
“A theory also advanced by Bernard Baruch, another vested interest who described the scene before the big Crash: “Taxi drivers told you what to buy. The shoeshine boy could give you a summary of the day’s financial news as he worked with rag and polish. An old beggar who regularly patrolled the street in front of my office now gave me tips and, I suppose, spent the money I and others gave him in the market. My cook had a brokerage account and followed the ticker closely. Her paper profits were quickly blown away in the gale of 1929.” – Fortune Magazine, When Shoeshine Boys Talk Stocks
Later on, Kennedy spoke more about how he dodged the great crash of 1929 and said it came down to “a passion for facts, a complete lack of sentiment, and a marvelous sense of timing.” While all of this was true, it can’t be ignored that Kennedy was possibly, and according to some sources, running pump-and-dump schemes and manipulating stock prices. He ran in certain circles who had both influence on the media to pump a stock and the ability to crash a stock.
Joe Kennedy made his wealth during in the 1920s as stock prices soared, he preserved his wealth when markets crashed, and then, when things got really ugly, when they were at its worst, he used his preserved cash to invest in real estate and other assets when they were at their most depressed prices. By some estimates, his net worth went from about $30 million during the Roaring 20s to about $4 billion several years after the Great Depression (inflation adjusted). And that’s the great untold story of the Kennedy’s, how they really made the their family fortune.