Quote for the Week
It was the publication of E.L. Smith’s little book entitled, Common Stocks as Long-Term Investments. His study showed that, contrary to prevalent beliefs, equities as a whole had proved much better purchases than bonds during the preceding half-century. It is generally held that these findings provided the theoretical and psychological justification for the ensuing bull market of the 1920’s. The Dow Jones Industrial Average (DJIA), which stood at 90 in mid-1924, advanced to 381 by September 1929, from which high estate it collapsed — as I remember only too well — to an ignominious low of 41 in 1932.
On that date the market’s level was the lowest it had registered for more than 30 years. For both General Electric and for the Dow, the high point of 1929 was not to be regained for 25 years.
Here was a striking example of the calamity that can ensue when reasoning that is entirely sound when applied to past conditions is blindly followed long after the relevant conditions have changed. What was true of the attractiveness of equity investments when the Dow stood at 90 was doubtful when the level had advanced to 200 and was completely untrue at 300 or higher. — Ben Graham (source)
From the Archives
- How the Battle Over a Little Railroad Captured the 1929 Market Frenzy
- Fred Schwed, Jr. Recalls the Great Crash
- What Did We Learn From the Last Bull Market? – J. Rekenthaler
- Risk and Returns, Before and After the Fact – Capital Gains
- Risk is What You Don’t See Coming – MicroCapClub
- Share Cannibals – Investment Talk
- Smart Things I’ve Read Lately – M. Housel
- Aswath Damodaran: Making Sense of the Market (podcast) – Invest Like the Best
- Age of Invention: How to Steal Technology – Age of Invention
- In the Nineteenth Century, Scientists Set Out to Solve the “Problem of American Storms” – Humanities