Stocks for the Long Run, 6th Edition by Jeremy J. Siegel

I
 VERDICT OF HISTORY

1

The Case for Equity
 Historical Facts and Media Fiction
 The “new-era” doctrine—that “good” stocks (or blue
 chips) were sound investments regardless of how
 high the price paid for them—was at the bottom only
 a means of rationalizing under the title of
 “investment” the well-nigh universal capitulation to
 the gambling fever.
 —Benjamin Graham and David
 Dodd, 1934
 Investing in stocks has become a national hobby and
 a national obsession. To update Marx, it is the religion
 of the masses.
 —Roger Lowenstein, 1996
 Stocks for the Long Run by Siegel? Yeah, all it’s good
 for now is a doorstop.
 —Comment from
 caller on CNBC,
 March 2009, at
 the bottom of the
 worst bear market
 in 80 years

“EVERYBODY OUGHT TO BE RICH”
 In the summer of 1929, a journalist named Samuel Crowther
 interviewed John J. Raskob, a senior financial executive at
 General Motors, about how the typical individual could build
 wealth by investing in stocks. In August of that year,
 Crowther published Raskob’s ideas in a Ladies’ Home
 Journal article with the audacious title “Everybody Ought to
 Be Rich.”
 In the interview, Raskob claimed that America was on the
 verge of a tremendous industrial expansion. He maintained
 that by putting just $15 per month into good common
 stocks, investors could expect their wealth to grow steadily
 to $80,000 over the next 20 years. Such a return—24
 percent per year—was unprecedented, but the prospect of
 effortlessly amassing a great fortune seemed plausible in
 the atmosphere of the 1920s bull market. Stocks excited
 investors, and millions put their savings into the market
 seeking quick profit.
 On September 3, 1929, a few days after Raskob’s advice
 appeared, the Dow Jones Industrial Average hit a historic
 high of 381.17. Seven weeks later, stocks crashed. The next
 34 months saw the most devastating decline in share values
 in US history.
 On July 8, 1932, when the carnage was finally over, the
 Dow Industrials stood at 41.22. The market value of the
 world’s greatest corporations had declined an incredible 89
 percent. Millions of investors’ life savings were wiped out,
 and thousands of investors who had borrowed money to buy
 stocks were forced into bankruptcy. America was mired in
 the deepest economic depression in its history.
 Raskob’s advice was ridiculed and denounced for years
 to come. It was said to represent the insanity of those who
 believed that the market could rise forever and the
 foolishness of those who ignored the tremendous risks in

Stocks for the Long Run, 6th Edition by Jeremy J. Siegel