Joseph Kennedy: Movies, Stocks, and Booze

Joseph P. Kennedy, the patriarch of the Kennedy family, is a figure often associated with wealth, power, and political influence. His financial acumen and strategic investments enabled him to amass a considerable fortune, which laid the foundation for the Kennedy dynasty. Kennedy's success was not merely the result of luck but rather his ability to anticipate market trends and make bold, sometimes controversial, decisions. His ventures spanned various industries, including Hollywood, the stock market, and the liquor business, each contributing significantly to his wealth. This blog post delves into the key areas where Joseph Kennedy made his fortune.

In the late 1920s, Joseph Kennedy saw potential in the burgeoning entertainment industry. Hollywood was in its nascent stages, and the film industry was rapidly evolving with the advent of "talkies" (films with sound). Kennedy recognized an opportunity and invested in several film studios. His most notable acquisition was a controlling interest in the Film Booking Offices of America (FBO).

Kennedy's business strategy in Hollywood was multifaceted. He focused on streamlining operations, cutting costs, and ensuring that the studios produced profitable films. He also leveraged his financial expertise to restructure the companies he acquired, making them more efficient and financially stable. In 1928, he orchestrated a merger between FBO and the Keith-Albee-Orpheum (KAO) theater circuit, forming RKO Pictures, one of the major film studios of the era. Edwin J. Perkins wrote of this:

Founded in 1929 by Wall Street investment bankers, RKO grew out of the sale by Joseph Kennedy (father of U.S. President John F. Kennedy) of his stock in two independent firms to a group of investors headed by RCA and its ambitious top executive, David Sarnoff. The two firms were the Film Booking Office of America (FBO), which possessed both distribution and production facilities, and Keith-Albee-Orpheum, which owned a chain of movie theaters. Their merger created a vertically integrated enterprise with a sizable capital. Later, in January 1931, the firm's growing commitment to the entertainment sector was enhanced through the acquisition of Pathé, another medium sized firm with production and distribution units.

Kennedy's foray into Hollywood was not just about making movies; it was a calculated investment that capitalized on the growing popularity of cinema. By the early 1930s, he had divested his interests in Hollywood at a significant profit, demonstrating his ability to time the market and maximize returns.

Joseph Kennedy's prowess in the stock market is legendary. During the 1920s, he was an active investor, riding the wave of the roaring bull market. He was known for his speculative investments and his ability to leverage information to make profitable trades. However, it was his actions just before the stock market crash of 1929 that cemented his reputation as a financial wizard.

Kennedy was one of the few who foresaw the impending collapse of the stock market. He noticed the irrational exuberance and speculative bubble that had formed. In a shrewd move, he began to short stocks, betting that their prices would fall. This decision was highly controversial at the time but proved to be immensely profitable as the market crashed on October 29, 1929. While perhaps apocryphal, there is a story about his handling of his stocks at that time that involves a shoeshine boy. Robert J. Shiller wrote of this, quoting from a Business Insider article by Jody Chudley:

While sitting in the shoeshine chair, Kennedy Sr. was alarmed to have the shoeshine boy gift him with several tips on which stocks he should own—yes, a shoeshine boy playing the stock market. This unsolicited advice resulted in a life-changing moment for Kennedy Sr. who promptly went back to his office and started unloading his stock portfolio. In fact, he didn’t just get out of the market, he aggressively shorted it—and got filthy rich because of it during the epic crash that soon followed. They don’t ring bells at the top, but apparently when shoeshine boys start giving stock advice it is time to head for the exits.

Shorting the market allowed Kennedy to preserve and even grow his wealth while others faced financial ruin. His ability to anticipate market trends and act decisively was a hallmark of his investment strategy, showcasing his deep understanding of economic cycles and market psychology.

Another significant chapter in Joseph Kennedy's financial journey was his involvement in the liquor business. The 18th Amendment, which established Prohibition in the United States, banned the production, importation, and sale of alcoholic beverages. However, by the early 1930s, it was becoming clear that Prohibition was failing and that its repeal was imminent.

Kennedy, ever the opportunist, prepared for this shift. He secured exclusive contracts to import high-quality Scotch whisky and other alcoholic beverages from Europe. When the 21st Amendment repealed Prohibition in 1933, Kennedy was perfectly positioned to capitalize on the new legal market for alcohol. His company, Somerset Importers, quickly became one of the leading importers of liquor in the United States. There are some who contend that he was already making a great deal of money on liquor during Prohibition, with some even claiming he smuggled booze into the country. There was another Joseph Kennedy of no relation, a Canadian, who was smuggling alcohol in during prohibition, and the American Joseph Kennedy has sometimes been confused with this individual. Nevertheless, there does seem to be some evidence that Kennedy was involved in profiting off the sale of alcohol during this time. Ellen NicKenzie Lawson wrote of this:

Also, in the middle of Prohibition, the Kennedy bank acquired 800 barrels of whiskey stored in the Quincy Cold Storage Warehouse on Boston harbor. While surviving bank records do not mention this whiskey, it is mentioned in a letter written to Joseph Kennedy by a Fitzgerald in-law in 1933. The writer reminds Kennedy of the sale he arranged in 1925; he claimed no one else was able to sell these barrels, undoubtedly because they had been smuggled into Boston. Fitzgerald, an uncle of Kennedy's wife, ran a speakeasy behind a drugstore on Rowe's wharf in Boston harbor until 1925. He would have known about smuggled liquor where others would not.

The end of Prohibition created a massive demand for legal alcoholic beverages, and Kennedy's foresight allowed him to supply this demand profitably. His investments in the liquor business were another testament to his ability to anticipate market changes and act accordingly.

Joseph Kennedy's financial success was not merely the result of being in the right place at the right time. It was his ability to recognize opportunities, assess risks, and make strategic decisions that set him apart. His ventures in Hollywood, the stock market, and the liquor business were all driven by his keen insight into market dynamics and his willingness to take calculated risks.

Kennedy's fortune provided the foundation for the Kennedy family's enduring influence in American politics and society. His sons, John F. Kennedy, Robert F. Kennedy, and Edward M. Kennedy, all became prominent political figures, carrying forward the legacy of ambition and public service.

In conclusion, Joseph Kennedy's journey to wealth was marked by strategic investments and a deep understanding of market trends. His success in Hollywood, the stock market, and the liquor business illustrates the power of foresight and bold decision-making. Kennedy's story is a testament to the impact of entrepreneurial spirit and financial acumen in building a lasting legacy.

Bibliography:

Lawson, Ellen NicKenzie. “Joseph Kennedy and the New York Underworld During Prohibition.” The Gotham Center for New York City History (2020).

https://www.gothamcenter.org/blog/joseph-kennedy-and-the-new-york-underworld-during-prohibition.

Perkins, Edwin J. “Writing the Script for Survival and Resurgence: RKO Studio and the Impact of the Great Depression, 1932-1933.” Southern California Quarterly 93, no. 3 (2011): 289–311. https://doi.org/10.2307/41224083.

Shiller, Robert J. “Stock Market Bubbles.” In Narrative Economics: How Stories Go Viral and Drive Major Economic Events, 228–38. Princeton University Press, 2019. https://doi.org/10.2307/j.ctv10vm1xf.22.