202 The Stock Market Crash—And After 
rate realized on a five per cent bond, running twenty 
years, purchased at par and redeemable at par, will 
be five per cent. But if purchased at 110, the rate 
realized will be 4.3 per cent. While if it is pur- 
chased at go, the rate is 5.9 per cent. The rate of 
yield when the calculations are in terms of dollars 
(uncorrected for variations in purchasing power) 
differs from the rate calculated in the terms of dol- 
lars corrected to a uniform purchasing power, say 
pre-war dollars. 
Speculative Character of Bonds 
If we apply this yield idea to the various tests 
which Mr. Smith has made we find results as fol- 
lows. We see, for instance, that the man who in 
1866, under Test 6, invested in bonds and redeemed 
or sold them in 1885, made 6.8 per cent on his 
money, reckoning in actual dollars, while reckoning 
in pre-wars, he made 11.7 per cent. Again, under 
Test 1, 1901-1922, the bondholder nominally made 
4 per cent, but really only 1.1 per cent. 
This analysis indicates clearly enough that during 
periods of marked fluctuations in the general price 
level, bonds have a speculative character. The series 
of writers on this subject have proved, statistically, 
that bonds are not, as compared with well-selected 
and diversified stocks, what they have been cracked 
up to be; that they are especially deceptive during 
rising prices, and that even when prices are falling 
they are not usually superior to stocks. 
These writings threw a bombshell into the invest-