The colossal miscalculation that investors made in the 1920s has recurred in one form or another several times since. The public’s monumental hangover from its stock binge of the 1920s lasted, as we have seen, through 1948. The country was then intrinsically far more valuable than it had been 20 years before; dividend yields were more than double the yield on bonds; and yet stock prices were at less than half their 1929 peak. The conditions that had produced Smith’s wondrous results had reappeared—in spades. But rather than seeing what was in plain sight in the late 1940s, investors were
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