May 20, 2010

Philip Fisher on faulty investment community appraisals of market conditions

Ridiculous as it may seem to us today, in the period from 1927 to 1929, the majority of the financial community actually believed we were in a "new era." For years earnings of most U.S. companies had been growing with monotonous regularity. Not only had serious business depressions become a thing of the past but a great engineer and businessman, Herbert Hoover, had been elected President. His competence was expected to assure even greater prosperity from then on. In such circumstances it seemed to many that it had become virtually impossible to lose by owning stocks. And many who wanted to cash in as much as possible on this sure thing bought on margin to obtain more shares than they could otherwise afford. We all know what happened when reality shattered this particular appraisal. The agony of the Great Depression and the bear market of 1929 to 1932 will be long remembered.

~Philip Fisher, stock legend, "Still More About the Fourth Dimension", Common Stocks and Uncommon Profits, 1958

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