The Case for Long-Term Value Investing: A Guide to the Data and Strategies That Drive Stock Market Success by Jim Cullen

SECTION ONE: THE BATTLE

We begin with The Battle. A history of 100 years
in the stock market.
My reason for starting with this history in
Section One, ahead of the investment strategy to
be found in Section Two, is to help investors
appreciate how consistently volatile and
unpredictable markets are over time.

1. A Brief Market History—The
Last 100 Years
The 1920s
his decade was dubbed the “Roaring 20s” as the stock market
boomed, speculation ran wild, and the NYSE was more a casino
than an exchange. Large investment pools dominated the market
and manipulated stock prices for short-term gains.
Where Are the Customer’s Yachts? was a best-selling book at the time. The
idea for the book came out of a conversation at a Wall Street club where
some members looked out at all the stockbrokers’ yachts in the harbor. At
some point one of them asked innocently: “Where are the customers’
yachts?” This pretty much summed up the decade.
The poster child of the market was RCA, the world’s largest manufacturer
of radios. Early in the decade, virtually no one owned a radio; but soon
enough millions of radios were going to be sold in the US and around the
world. Because of RCA’s phenomenal growth prospects, the stock price
soared from $5 to $120. As predicted, sales were strong, but the stock price
got way ahead of the company’s earnings.
When the market crashed in 1929, RCA collapsed to $5 a share—while the
average stock on the stock exchange dropped 80%. Most investors, large
and small, got wiped out. Legend has it people on Wall Street were jumping
out their windows.
Radio Corporation of America Stock Price (January 1925–December 1935)

The Case for Long-Term Value Investing: A Guide to the Data and Strategies That Drive Stock Market Success by Jim Cullen