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The Intelligent Investor: The Definitive Book On Value part 9

The Intelligent Investor: The Definitive Book On Value part 9. The purpose of this book is to supply, in a form suitable for laymen, guidance in the adoption and execution of an investment policy. Comparatively little will be said here about the technique of analyzing securities; attention will be paid chiefly to investment principles and investors’ attitudes. We shall, however, provide a number of condensed comparisons of specific securities - chiefly in pairs appearing side by side in the New York Stock Exchange list in order to bring home in concrete fashion the important elements involved in specific choices of common stocks | TABLE 3-1 Major Stock-Market Swings Between 1871 and 1971 Cowles-Standard 500 Composite Dow-Jones Industrial Average Year High Low Decline High Low Decline 1871 4.64 1881 6.58 1885 4.24 28 1887 5.90 1893 4.08 31 1897 38.85 1899 77.6 1900 53.5 31 1901 8.50 78.3 1903 6.26 26 43.2 45 1906 10.03 103 1907 6.25 38 53 48 1909 10.30 100.5 1914 7.35 29 53.2 47 1916-18 10.21 110.2 1917 6.80 33 73.4 33 1919 9.51 119.6 1921 6.45 32 63.9 47 1929 31.92 381 1932 4.40 86 41.2 89 1937 18.68 197.4 1938 8.50 55 99 50 1939 13.23 158 1942 7.47 44 92.9 41 1946 19.25 212.5 1949 13.55 30 161.2 24 1952 26.6 292 1952-53 22.7 15 256 13 1956 49.7 521 1957 39.0 24 420 20 1961 76.7 735 1962 54.8 29 536 27 1966-68 108.4 995 1970 69.3 36 631 37 early 1972 100 900 A Century of Stock-Market History 67 known Standard Poor s composite index of 500 stocks. The second is the even more celebrated Dow Jones Industrial Average the DJIA or the Dow which dates back to 1897 it contains 30 companies of which one is American Telephone Telegraph and the other 29 are large industrial enterprises.1 Chart I presented by courtesy of Standard Poor s depicts the market fluctuations of its 425-industrial-stock index from 1900 through 1970. A corresponding chart available for the DJIA will look very much the same. The reader will note three quite distinct patterns each covering about a third of the 70 years. The first runs from 1900 to 1924 and shows for the most part a series of rather similar market cycles lasting from three to five years. The annual advance in this period averaged just about 3 . We move on to the New Era bull market culminating in 1929 with its terrible aftermath of collapse followed by quite irregular fluctuations until 1949. Comparing the average level of 1949 with that of 1924 we find the annual rate of advance to be a mere 1 hence the close of our second period found the public with no enthusiasm at all for common stocks. By the rule of opposites the time was ripe for the beginning of the .