Mr. Edgar Lawrence Smith, author of Common Stocks as Long Term Investments,[1] relates in his Introduction that his book is the record of a failure—the failure of facts to support a theory. The theory was the one just referred to, that at a time when the buying power of money is rising, that is, when the prices of goods and services are falling, bonds are a better investment than common shares, as they were, in the belief of the theorist, from the close of the American Civil War in 1866 up to 1896, a time when the buying power of the dollar rose steadily.
Mr. Smith subjected this theory to the test of historical investigation, covering the period from 1866 to the end of the century, and found that high grade bonds failed to demonstrate themselves as having been the better investment. So he went on with his tests because he felt that "the facts assembled seemed worthy of further investigation. If they would not prove what we had hoped to have them prove, it seemed desirable to turn them loose and to follow them to whatever end they might lead." So he made a series of tests to see "how it would work out, if our fathers had invested solely in common stocks, not with the thought of immediate speculative gain, a thought
- ↑ Macmillan, New York.
