Standards of Safety# Stock
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一定要看完最后一句话。
The concept of safety can be really useful only if it is based on something
more tangible than the psychology of the purchaser. The safety must be
assured, or at least strongly indicated, by the application of definite and
well-established standards. It was this point which distinguished the bank-
stock buyer of 1912 from the common-stock investor of 1929. The former
purchased at price levels which he considered conservative in the light of
experience; he was satisfied, from his knowledge of the institution’s
resources and earning power, that he was getting his money’s worth in full.
If a strong speculative market resulted in advancing the price to a level
out of line with these standards of value, he sold his shares and waited for
a reasonable price to return before reacquiring them.
Had the same attitude been taken by the purchaser of common stocks in 1928–
1929, the term investment would not have been the tragic misnomer that it
was. But in proudly applying the designation “blue chips” to the high-
priced issues chiefly favored, the public unconsciously revealed the
gambling motive at the heart of its supposed investment selections. These
differed from the old-time bank-stock purchases in the one vital respect
that the buyer did not determine that they were worth the price paid by the
application of firmly established standards of value. The market made up
new standards as it went along, by accepting the current price—however high
—as the sole measure of value. Any idea of safety based on this uncritical
approach was clearly illusory and replete with danger. Carried to its
logical extreme, it meant that no price could possibly be too high for a
good stock, and that such an issue was equally “safe” after it had
advanced to 200 as it had been at 25.
The concept of safety can be really useful only if it is based on something
more tangible than the psychology of the purchaser. The safety must be
assured, or at least strongly indicated, by the application of definite and
well-established standards. It was this point which distinguished the bank-
stock buyer of 1912 from the common-stock investor of 1929. The former
purchased at price levels which he considered conservative in the light of
experience; he was satisfied, from his knowledge of the institution’s
resources and earning power, that he was getting his money’s worth in full.
If a strong speculative market resulted in advancing the price to a level
out of line with these standards of value, he sold his shares and waited for
a reasonable price to return before reacquiring them.
Had the same attitude been taken by the purchaser of common stocks in 1928–
1929, the term investment would not have been the tragic misnomer that it
was. But in proudly applying the designation “blue chips” to the high-
priced issues chiefly favored, the public unconsciously revealed the
gambling motive at the heart of its supposed investment selections. These
differed from the old-time bank-stock purchases in the one vital respect
that the buyer did not determine that they were worth the price paid by the
application of firmly established standards of value. The market made up
new standards as it went along, by accepting the current price—however high
—as the sole measure of value. Any idea of safety based on this uncritical
approach was clearly illusory and replete with danger. Carried to its
logical extreme, it meant that no price could possibly be too high for a
good stock, and that such an issue was equally “safe” after it had
advanced to 200 as it had been at 25.