A Random Walk Down Wall Street

A random walk is one in which future steps or directions cannot be predicted on the basis of past history.

I view investing as a method of purchasing assets to gain profit in the form of reasonably predictable income and/or appreciation over the long term.

The firm-foundation theory argues that each investment instrument has a firm anchor of intrinsic value, which can be determined by careful analysis.

The castle-in-the-air theory of investing concentrates on psychic values.

Greed run amok has been an essential feature of every spectacular boom in history.

The tulip-bulb craze was one of the most spectacular get-rich-quick binges in history.

The psychology of speculation is a veritable theater of the absurd.

History, in this instance, does teach a lesson: Although the castle-in-the-air theory can well explain such speculative binges, outguessing the reactions of a fickle crowd is a most dangerous game.

The combination of government policies and changed lending practices led to an enormous increase in the demand for houses.

The fall in stock prices from 1990 on simply reflected a return to the price-to-book-value relationships that were typical in the early 1980s.