CHAPTER XIII

FLIGHT FROM BONDS TO STOCKS

A potent reason for the long bull market rising
to the plateau of stock prices of 1923-1930, is that
there has been a material change during this period
in the estimate of the public as to the risk of invest
ing in common stocks. Whether this change is
justified or not, the change has occurred. Only a
few years ago a bond was regarded as far safer than
a stock; a stock, in other words, as far unsafer than
a bond.
Prior to 1923 most investors thought that bonds
were safe. They forgot that the dollar was not
safe, and that the fixed dollar return from bonds
might at any time shrink in purchasing power. In
Germany people had lost 9g per cent of their principal
 and interest on bonds through forgetting that
the mark was not safe under the influence of the
“money illusion.” I have analyzed this illusion in the
preceding chapter. In truth, the “safety” of bonds
proved during the war a delusion and a snare. It is
only since the tragic downfall of stocks in the crash
of 1929 that bonds again afford a contrast on the
side of safety.
Sometimes, when the dollar was steady, bonds
raf