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A ROAD MAP TO WEALTH FROM THE WORLD’S BEST MONEYMANAGERS
PETER J. TANOUS
FOREWORD BY ANDREW TOBIASPREFACE BY RICHARD C. BREEDEN
NEW YORK INSTITUTE OF FINANCE
NEW YORK # TARORTE © SYDHNEY © TOKYO © SINGAPORE
Prentice Hall DirectLibrary of Congress Cataloging-in-Publication DataTanous, Peter.Investment Gurus / Peter Tanous.p. cm.ISBN 0-7865-8714-81. Investment advisors - United States - Interviews. 2. Stocks. 3. Portfoliomanagement. I. Title.HG4928.5.T36 1997332.6 - de20 96-42939CIP© 1997 by Peter TanousForeword copyright 1997 Andrew TobiasPreface copyright 1997 Richard C. Breeden
All rights reserved. No part of this book may be reproduced in any form orby any means, without permission in writing from the publisher.
This publication is designed to provide accurate and authoritative informationin regard to the subject matter covered. It is sold with the understandingthat the publisher is not engaged in rendering legal, accounting, or otherprofessional service. If legal advice or other expert assistance is required,
the services of a competent professional person should be sought.
From a Declaration of Principles Jointly Adapted by a Committee of theAmerican Bar Association and a Committee of Publishers and Associations
ISBN 0-7865-8713-X
NEW YORK INSTITUTE OF FINANCE
NUE New York, N.Y. 10004-2283
A Simon & Schuster CompanyOn the World Wide Web at http://www. phdirect.com
 
Prentice-Hall International (UK) Limited, LondonPrentice-Hall of Australia Pty. Limited, SydneyPrentice-Hall Canada Inc., TorontoPrentice-Hall Hispanoamericana, S.A., MexicoPrentice-Hall of India Private Limited, New DelhiPrentice-Hall of Japan, Inc., TokyoSimon & Schuster Asia Pte. Ltd., SingaporeEditora Prentice-Hall do Brasil, Ltda., Rio de JaneiroDEDICATION
Most of us recall individuals who influenced our lives earlyon, perhaps in school or in early career stages. | dedicate thisbook to five wise men who influenced me not early, but laterin my personal and professional life. It just proves that you arenever too old to learn.
To: George N. Frem
Joseph J. Jacobs
Charles H. Percy
John H. Sununu
and the late Philip C. HabibABOUT THE AUTHOR
PETER J. TANOUS is President of Lynx Investment Advisory, Inc.of Washington D.C., a registered investment advisor. Lynx providesconsulting services relating to the selection and monitoring of moneymanagers. Its clients include institutions and individuals worldwide.Before founding Lynx, Tanous was Executive Vice President and adirector of Bank Audi (U.S.A.) in New York City.
Prior to joining Bank Audi, he was Chairman of Petra Capital Cor-poration, a New York Stock Exchange member firm, which he co-founded. During his 15 years at Smith Barney, Inc., Tanous served asthe International Director. He was also manager of its Paris office anda Director and member of the Executive Committee of Smith Barney,International. He is currently a director of Cedars Bank in Los Angeles,and a director of Interstate Resources Inc., a paper manufacturingcompany based in Virginia.
Mr. Tanous has written articles on the securities industry whichhave appeared in French and English publications. In addition, hehas authored and co-authored three novels which have been translatedinto several foreign languages.
Mr. Tanous received a Bachelor of Arts degree in economics fromGeorgetown University in 1960. He has served as a member of Boardof Advisors of Georgetown’s College of Arts and Sciences. A longtime resident of New York City prior to moving to Washington D.C.,he served as a trustee of the Browning School, a private school inManhattan.
In 1991, Mr. Tanous was the recipient of the American Task Forcefor Lebanon Philip C. Habib Award for Distinguished Public Servicewhose prior recipients have included Senator George Mitchell, Gov-emor John Sununu, and Senator Bob Dole. He was awarded the EllisIsland Medal of Honor in 1994.
Peter Tanous is married to the former Ann MacConnell. They havethree grown children.PrefaceForewordPart One: The LandscapeIntroductionTools of the TradePart Two: The GurusMichael PriceRichard H. DriehausMario GabelliWilliam F. SharpePeter LynchLaura J. SloateScott Sterling JohnstonEugene FamaBruce ShermanEric RybackMerton MillerFoster FriessVan SchreiberRex SinquefieldJohn BallenRoger F. MurrayRobert B. Gillam
CONTENTS
ix
xii
12293149708099118133149160177191206221231254271288David E. ShawPart Three: The RouteYour Road Map to Wealth
Crafting an Intelligent Personal Investment Plan
306329330349PREFACE
America’s investment markets are the most active and efficient inthe world. These markets provide capital to more than 10,000 com-panies ranging from the tiniest venture-stage company to giantmultinationals. Local, state, and national government agencies anda host of trusts, partnerships, and other special purpose entities alsoseek funds. To a degree strikingly different from most other countriesthat rely nearly exclusively on their banking system, the United Statespublic securities market is the principal avenue for financing thebroader United States economy.
Issuers offer securities ranging from traditional stocks and bondsto highly complex structured instruments and esoteric derivatives.Thousands of different mutual funds offer individual investors bothdiversification and professional management. For investors, this pro-fusion of issuers represents a world of investment opportunity.
Investor choice in the American capital market extends beyond thetype of instrument and the specific issuer to span the spectrum ofrisk. Under our system, investors have the right to take risks accordingto their own risk tolerance and to seek out extraordinary gain evenat the risk of painful loss. With millions of individual decisions eval-uating risk and reward, the market as a whole represents a distillationof economic judgment about risk that is far more accurate than anygovernment body could ever hope to be.
If choice is the dominant characteristic of this extraordinary market,choice also complicates the task facing any particular investor. InInvestment Gurus, Peter Tanous interviews many of the nation’sleading investment managers and some of the academics who havehelped establish the intellectual underpinning for today’s investmentstrategies. These interviews present, in their own words, the strategiesthat some of the best-known professionals have brought to their in-vesting.
These stars of the investment profession express many views onthe relative merits of growth and value stocks and on different theoriesfor producing above-average returns. As we listen to what the suc-cessful managers say, it becomes clear that choosing risk wisely inorder to obtain higher than market returns is in many respects thePETER J. TANOUS
name of the game. The managers that Peter Tanous interviews excelat that game. The level of return they will achieve - and the wealththey will thereby acquire - is dependent not on how well they avoidtisk, but in how sensibly they take risk. The same is true for individualinvestors.
Some of the investment approaches discussed in Investment Gurusinvolve reviewing the available information concerning a company,its industry, and the overall economy and making accurate valuejudgments before the rest of the market figures out the same thing(and prices change accordingly!). Other approaches do not rely spe-cifically on faster reactions to significant news developments, but dorely on high quality financial data to permit careful analysis of in-trinsic value or likely earnings acceleration.
In the end, we discover that achieving consistent profit requires awise understanding of risk and the ability to choose exposure to riskprudently. Any individual seeking greater success in the market mustunderstand at the outset what could go wrong (as well as the theoriesof how to make things go right).
Naturally, both managers and investors tend to focus on the poten-tial for profit through sound investment decisions. It remains a greatand enduring hallmark of the United States equities market that astuteinvestors (or very lucky ones) can realize significant profits fromsuccessful investing.
At present, I am serving as the trustee in bankruptcy of nine relatedcompanies that were the scene of one of history’s largest pyramid or“Ponzi scheme” frauds. In a six-year period, the Bennett FundingGroup and its affiliates sold more than $2.1 billion in unregisteredsecurities. Investors were told these fixed income notes were highlysafe and that they were backed by both leases of office equipment togovernment agencies and private insurance. Unfortunately, many ofthese notes were backed by nothing more than hot air.
Most investors want to protect themselves against excessive risk,yet prove vulnerable to fast-talking sales personnel. Most investorswant to achieve the best return they can get without becoming partof a banquet for con men or vultures. Unfortunately, many peopledo not have the skill needed to determine how much risk a particularinvestment or an entire investment strategy may represent. Up to apoint, selecting a professional investment manager will help meet theneed for understanding and managing risk. (Unfortunately, there have
xXINVESTMENT GURUS
also been cases in recent years of managers becoming involved infrauds as well, so that is not a perfect solution.)
While the role of government efforts to oversee and regulate UnitedStates securities markets did not receive much attention in the inter-views, the pivotal need investors have for reliable financial reportsand other forms of disclosure was apparent. The quality of that in-formation in the market and the mechanisms for maintaining an en-vironment of what the SEC calls “full and fair disclosure” dependssignificantly on government encouragement and “regulation.” Happily,at least at the federal level, the United States regulatory system hasfor the most part seen its job over generations as combating the worstabuses in the market without trying to go too far in the direction oflimiting the market’s ability to offer both low and high risk invest-ment.
Those of us who have been on the regulatory side know that theSEC cannot do everything. We always sought to protect investorsagainst fraud and market manipulation, but we also protect their in-alienable right to lose money in pursuit of profit.
Readers of this book will be moved by a spirit of curiosity, of in-quiry, and also one of skepticism, healthy characteristics to bring tothe investment process. Investment Gurusdemystifies that processwhile exposing investors to the highest level of investment competenceand success.
Richard C. Breeden
xiFOREWORD
I called my broker to short Ascend Communications, one of themany Internet companies I know nothing about. I just knew it wasdivided into 110 million shares, each of which was selling for $38,up from $5 a few months earlier. That gave the whole pie about a $4billion price ($38 a slice times 110 million slices) - which may havebeen cheap for all I knew. Maybe a fair valuation would really havebeen $10 billion. But it seemed like a lot for a young company withmodest sales and earnings that had been priced under $600 millionthe previous year.
The point of all this is not to knock Ascend - believe me, I knewnothing about it. (When it got up to 65, I shorted some more.) Rather,the point is to tell you what my broker said when I asked him histhoughts on the stock.
“T don’t want you to think I’m stupid,” he said - he’s been my brokerand friend for 22 years by now, so, no, I don’t think he’s stupid - “butI don’t look at the same kind of stuff you do.” Like earnings. “I liketo buy stocks when they’re going up and short them when they’regoing down.”
Ascend was going up, so, while he wished me luck, it wasn’t thesort of stock he would short. Indeed, now that I had brought thiscraziness to his attention, I knew he was silently contemplating pur-chase. What kind of nut would buy Ascend at prices like these? Mybroker, for one.
And do you know what? I’d guess he has done at least as well withhis method as J have with mine. I have the self-righteous satisfactionof being “right” about some of these things - for example, I was “right”to short U.S. Surgical at 60 (only to watch it hit $134 before droppingback to $18), because it was overpriced. But he made a lot more moneyon U.S. Surgical than I did. It was going up, so he bought some.
There is more than one way to skin a cat
But most of us don’t want to skin cats at all. It’s nasty, unpleasantwork. The truth is, neither my broker nor I does the kind of highlydisciplined, time-consuming research a prudent man should beforeinvesting large sums of money. And neither do most investors. Instead,we tend to rely on the work of others - smart people interviewed inPETER J. TANOUS
Barron’s, for example, offering the benefit of their research. Why re-invent the wheel?
(Sometimes we rely on the ideas of others we merely assume havedone the work, or who are selling what they are recommending webuy.)
Of course, the sensible thing for almost everyone to do is not pickstocks themselves, but simply to make the basic decisions - how muchto invest in the market at all, how much in U.S. versus foreign markets- and then do the actual investing through low-expense no-loadmutual funds. Just by investing in one of the Vanguard index funds,because their expenses are so low, you are virtually certain over anymeaningful stretch of time to outperform most of your friends andneighbors, most other mutual funds, most bank trust departmentsand pension funds.
Astounding, no? But true. And prudent.
If I weren’t so fascinated by this game - and if, pigeon-like, I werenot occasionally rewarded with an out-size kernel of corn (I bought25,000 shares of a Canadian oil company in 1994 at 87 cents thathas some sort of deal going in Kuwait and today is $7.33 a share;have you any idea how thrilling that is?) - I would stick with mutualfunds myself.
I am, vaguely, a “value” investor, not entirely unlike the first ofmy friend Peter Tanous’s interviewees in this book, Michael Price.Indeed, 20 years ago | invested my IRA in Price’s mutual fund, MutualShares, and have happily watched him and his late mentor, MaxHeine, multiply it several times over.
My broker, by contrast, is more of a “momentum” investor, vaguelyakin to Peter’s second interviewee, Richard Driehaus. I was bemusedto learn from the interview that while I was shorting Ascend, Driehaus- who actually did know a lot about Ascend - was buying it. It ispeople like me who make opportunities for more serious investorslike Driehaus. Why on Earth would someone like me, dabbling at itpart-time, unwilling to spend the big bucks to get “First Call” on hiscomputer screen or to spend all day staring at that screen, do as wellas Driehaus?
“Everyone wants to be rich,” Driehaus tells Peter Tanous, “but fewwant to work for it.”
Peter Lynch, speaking in this book, makes a similar point but witha different twist. People are so persuaded they can’t beat the market
xivINVESTMENT GURUS
that they don’t bother to try. They either do the sensible thing (mutualfunds) or they just play around as if they were in a big casino, placingbets more or less blindly. It would be odd if there were no benefit tobe had in opening your eyes.
That oddness is a basic paradox of investing. Most securities arepriced more or less efficiently. A monkey throwing darts, it has beenproven again and again, will outperform most Wall Street profession-als.*
But not Peter Tanous’s interviewees. Most of them have handilybeaten the monkey, and the explanation isn’t “chance.” It may behard work and skill. It may be access to superior (or even “inside”)information. It may be self-fulfilling prophecy (as a lucky moneymanager becomes known and then followed by others, who bid uphis stocks). It may be the ability to force management to pay greenmailor take some step to realize a higher stock price (when you own amillion shares of a stock, you sometimes have that leverage). It maybe various combinations of the above. But it isn’t random chance.
It’s true that in any given group of a thousand annual coin-tossersyou will have a few “brilliant” ones “able” to toss heads year afteryear. Indeed, one of them, odds are, would toss heads ten years run-ning. But that’s quite different from investors being able to signific-antly outperform their peers year after year. The people Peter inter-viewed, and others like them, have not just flipped heads eight or tentimes in a row. They’ve been engaged in a competition where thereare typically hundreds of tosses - buy/sell/hold decisions - each year.
If you had the same thousand coin-tossers tossing not once a yearbut, say, 500 times a year, guess what? All of them would performalmost identically. All would flip heads almost exactly 50% of thetime. And the ones who did flip 52% heads one year would be abso-lutely no more likely than any of the others to do it again. You’dnever find a coin-flipper hitting 55% or 60% consistently. But youdo find that among a rare few investors.
Why?
The fascination of this book lies largely in trying to figure that out.
The practical benefit of this book is that it will give you a bettersense of what you can and cannot achieve with your own investments,and provoke you to reassess your own strategy (or lack of one).
Chances are, you will conclude as I have that steady periodic invest-ment in two or three no-load, low-expense mutual funds - very pos-
XVPETER J. TANOUS
sibly some of those you'll read about in this book - is your smartestbet. But maybe not. And in any event there’s no law that says youhave to make the smartest bet. If you can afford it, you might wantto have the fun and challenge of calling the shots yourself. At leastone obstacle to do-it-yourself success has largely disappeared in recentyears: with the advent of deep-discount brokers, “transaction costs”are no longer appreciably higher for retail investors like you and methan for the big money.** Indeed, sometimes trading just a few hun-dred shares you can get better prices than if you were trying to buyor unload tens of thousands.
Still, before you jump into the market as an active investor yourself,or choose to remain in, note this from Michael Steinhardt. WhenSteinhardt was running his famous hedge fund, he was asked to revealthe most important thing an average investor could learn from him.His answer: “That I’m their competition.”
Andrew TobiasACKNOWLEDGMENTS
It will come as no surprise when I declare that writing a book is acollaborative effort, particularly in the case of a book like InvestmentGurus which features 18 separate interviews. In addition to the inter-view subjects, a variety of people, many of whom work with theGurus, contributed to the timeliness and success of the effort. | amespecially grateful to Robert H. Buchen, Irene Diakun, Jane Dubin,Nicholas Gianakouros, Peter A. Greenley, Shirley Guptill, Ziad Malek,John F. Reilly, Debbie Shippee, and Diane Wilke for assistance andhelp above and beyond, as they say.
Other friends were helpful in identifying potential Gurus and evenin providing introductions. My gratitude to J. Carter Beese, Jr. ofAlex. Brown & Sons, Tom H. Clark of Smith Barney, Nijad I. Fares,W. Randall Jones of Worth magazine, F. Joseph Hallal M.D., andMarlene Jupiter, whose own book on investing is eagerly awaited.
Robert Dintzer of Dimensional Fund Advisors devoted both his timeand expertise to help customize and prepare many of the charts weuse in the book. David McGrouther of Dean Witter also contributedsome excellent charts.
Several of the interviewees proved invaluable beyond their role asGurus. I am especially grateful to Richard H. Driehaus, Mario J. Ga-belli, Peter Lynch, Michael F. Price, and Rex A. Sinquefield.
My children have reached the age where our roles are reversed. Itis they who encourage and cajole their father, rather than vice versa.That help and encouragement was meaningful and timely. Thanks toChristopher Tanous, Helene Tanous, William Tanous, future son-in-law, Paul Bartilucci and to dearest Amber Olsen.
Special thanks are due to several colleagues at Lynx who helpedin different aspects of this book. They include Candice O. Atherton,whose investment and analytical skills continue to approach perfec-tion; K. Andrew Sprague, who did research for and attended severalinterviews; Lara C. Mongini whose investment and editing talentswere invaluable; and Peter D. Forbes, who first introduced me to theidea of using indexing as a tool and then introduced me to RexSinquefield, which in turn, led to the inclusion of the academics inthe book. Special gratitude is due to a special colleague, Ann Tanous,PETER J. TANOUS
who contributes both work and wisdom in office and personnelmanagement and has the added burden and challenge of going homewith the author at night, as she has for 34 years.
In the end, a book is a collaboration between author and editor.My editor, Ellen Schneid Coleman, could teach the course on editing.Her wisdom, knowledge, patience, and encouragement were morethan meaningful. Above all, her sheer skill and instincts deserve muchof the credit for the value of this work. I hope she writes a book, too.
xviiiPART ONETHE LANDSCAPEINTRODUCTION
I assume this is not the first investment book you ever read. Youmay have read some books about the stock market or even one of therecent bestsellers by Peter Lynch, the legendary fund manager whosuccessfully managed the largest mutual fund in America, FidelityMagellan. Perhaps you were intrigued enough to want to read moreabout phenomenal money managers and glean from their own storieswhat it is that makes them great. Perhaps you want to know if thereare identifiable common traits or methods used by these top managersthat allow them to succeed so brilliantly, and so consistently, whileso many others fail or are destined to mediocrity? Well, if I guessedtight, you won't be disappointed. And I promise you a lot more.
Here’s what I consider it my mission to deliver:
© Informative, revealing, and sometimes passionate discussionswith some of the greatest investment minds today.
© An analysis of the investment skills and attributes of the Gurusas we attempt to zero in on what works in stock market investingand, equally importantly, what doesn’t.
e A timely and revealing look at the latest, state-of-the-arttechniques that we investment consultants use to find and trackinvestment genius and how to use these same techniques in yourown investment program.
e An investment program you can use to either choose stocksyourself or select your own Guru to do it for you. Again, we willfocus on what works.
© One last promise: we will clear the air of some of the annoyingnoise that is often promulgated under the guise of investmentadvice. You don’t have time for that. I don’t either.
This is a mission of financial discovery. We are not only going totalk to great money managers, but also to great academics whosework will help us understand just how investment markets work andwhat we can realistically expect from them. We will ask the managerstough questions about how they do what they do, and we are goingto try to find out not just how, but why they succeed. We will delveinto the different characteristics of these Gurus and try to isolate thoseINVESTMENT GURUS
traits that appear to contribute to their success. We will discover if,in fact, there are traits common to all of them, or simply an assortmentof characteristics and talents that makes this group of people so suc-cessful. In the end, once we identify these special attributes, we willsee if it is possible to emulate them in some way to help us in ourown investment decisions.
Investment Gurus focuses on one type of investing: common stocks.That’s because common stocks are what most of us understand andinvest in because they are the best investment over time. I don’t wantto dazzle you with exotic investment techniques that you will haveno use for in your own investing life. (I confess, I've made one excep-tion just to give you a glimpse into the future of investing.) But, ingeneral I take it for granted that you are too busy to spend a lot oftime reading about techniques you can’t use.
My goal is for you to emerge from the time you spend with me amuch better investor. Therefore, you will not find interviews withhedge fund managers, currency traders, arbitrageurs, derivativesspecialists, and the like. That’s because there is nothing that you andIcan learn from those people that we can apply to our own investmentstrategies. Trust me, you will not learn how to trade currencies likePaul Tudor Jones or do Yen/Deutsche Mark swaps like George Sorosby reading a book, but you can learn something from managers whobuy and sell stocks and do it superbly. That’s not to say that some ofour Gurus don’t use exotic techniques on occasion. A few of themdo, and you will end up understanding most of their practices andwhy they use them.
You may be wondering why I am eager to write this book. As aprofessional investment consultant, I spend most of my waking hoursanalyzing investment manager performance as well as manager traitsand characteristics. Obviously, of the 20,000 or so registered invest-ment advisors only a handful can be truly great, and I was curiousto see what those few were really like. What do they have in common,if anything? What is it about them that propels them to the top oftheir class? And, most importantly, what can we learn from them?
My firm, Lynx Investment Advisory, Inc., unlike other registeredinvestment advisors, does not manage money. We are part of a smallgroup of advisors who are hired as investment consultants by indi-viduals and institutions, to find and monitor the best money managersin the business. Large institutions hire consultants so they don’t have
3PETER J. TANOUS
to listen to hundreds of sales pitches from brokers and money man-agers. Besides, they figure, the really great managers, the Gurus, ifyou will, are not likely to be out hustling new business. They don’tneed to!
Why have I been successful at picking managers and making in-vestment decisions, and why do I think I can help you do it, too?Well, I began my career supervising institutional salesmen as headof the international division of Smith Barney; later, as CEO of a NewYork Stock Exchange investment banking firm, I realized that trueinvestment genius was rare indeed. In starting Lynx, I made it mylife’s work to analyze and identify the true Gurus, those great invest-ment minds that stand apart from the thousands who offer investmentadvice to others. Today, my firm advises dozens of institutions, largeand small, as well as individuals, some of whose names you wouldrecognize, in creating long term investment strategies.
The investment consulting business has become quite sophisticated.Frequently, new tools appear that help make analysis of risk, returns,and how these important factors interact easier. The Nobel committeehas seen fit to recognize these achievements by offering the NobelPrize to economists in investment disciplines. Two of our Gurus areamong the recipients of the Nobel Prize in economics. I want to sharesome of these tools with you so that you may profit from these ad-vances in our business to enhance your own wealth.
Oh, yes, there is something else. After over thirty years in the fin-ancial services business, | have become extremely annoyed at thetype of investment advice that is promulgated to the public. Thereare a number of things that I find difficult to understand and evenmore difficult to accept. For example, why is it that so many booksand articles are intent on misleading investors about the time tested,acknowledged paths to investment success? Why is it that publishersand writers prey on an unsuspecting public by giving them the equi-valent of get-rich-quick schemes for making money in stocks? Yes,I'd love to own “Ten Stocks to Double in Three Years,” or “The HottestGrowth Stocks for the Nineties.” I only wish it were so easy.
How about the books of advice from so-called successful investors?There’s a 17 year old whiz kid who wrote an investment book. Is thatwhere you expect to find great investment wisdom? How about in-vestment advice from a barber or a dancer? They’ve got books oninvesting out there, too. Let me ask you something: if you heard that
4INVESTMENT GURUS
a young kid, or maybe a plumber, had come up with a neat way toperform appendectomies, would you buy his book and give it a try?Or would you stick with a medical doctor? Why is it that when itcomes to investing, anyone who is a bit successful thinks he or shecan tell you how to do it better than the professionals who devotetheir lives to it? Do you really believe that there is some sort of invest-ment voodoo out there that the millions of professionals who havebeen working in the field just happened to overlook? Beats me.
In Investment Gurus, | will expose you to the greatest minds ininvestments today and show you how to get rich the safest way pos-sible: with common stocks. You will hear the voices of these greatmasters and learn from them. I do not want you to fall prey to sillyadvice. I will teach you to distinguish lucky investors from those withtrue investment wisdom. We will clear the air of all this nonsense, Ipromise. I will take you on an excursion to visit the greatest invest-ment minds of the century and then show you how to apply theircollective wisdom to insure your own investment success. You willalso learn some state-of-the-art techniques now being used to analyzerisk and return in stock market investing. At the end, I will offer somespecific investment advice using the techniques we have learned fromthe Gurus.
Common stocks are the single best investment over time in Amer-ican history. Period. The key phrase is “over time.” Since the earlytwenties, no asset class has performed better than common stocks,including the effects of the 1929 crash, the Great Depression, andmore recent calamities like the Crash of 1987.
If you have any doubts about this, take a look at the chart below.Ibbotson Associates calls this chart: “Wealth Indices of Investmentsin the U.S. Capital Markets.” I call it: “The Chart that Hungry Stock-brokers Consider the Greatest Chart in the World.” It tracks the per-formance of Small Company Stocks, Large Company Stocks, LongTerm Government Bonds and Treasury Bills back to 1925. It alsothrows in the Consumer Price Index figure