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
Last Call
- Market Indicators – Humble Dollar
- What 125 Years of Data Really Tell Us – Behind the Balance Sheet
- Is the Equity Risk Premium Dead? – A. Roth
- Keep Your Politics Out of Your Investments – Klement on Investing
- Walk on Water: Five Lessons from Jack Schwager – Excess Returns
- Information Timing and Release: The Gaming of Guidance! – Musings on Markets
- Overthinking Hates a Moving Target – High Agency
- The Tax-Free Year: On Denmark, 1969, and System Migrations – WITI
- American Literature, Charted in One Monumental Map – Big Think