Tuesday, August 21, 2012

Graham and Dodd quote

From Security Analysis, 1940 edition (the new-era bull market is referring to the mid to late 1920's):

“…it is important to note that mass speculation can flourish only in such an atmosphere of illogic and unreality. The self-deception of the mass speculator must, however, have its element of justification. This is usually some generalized statement, sound enough within its proper field, but twisted to fit the speculative mania. In real estate booms, the “reasoning” is usually based upon the inherent permanence and growth of land values. In the new-era bull market, the “rational” basis was the record of long-term improvement shown by diversified common-stock holdings.”