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"The theory ran as follows:

"1. 'The value of a common stock depends on what it can earn in the future.'

"2. 'Good common stocks will prove sound and profitable investments.'

"3. 'Good common stocks are those which have shown a rising trend of earnings.'

"These statements sound innocent and plausible. Yet they concealed two theoretical weaknesses which could and did result in untold mischief. The first of these defects was that they abolished the fundamental distinctions between investment and speculation. The second was that they ignored the price of a stock in determining whether it was a desirable purchase." (SA1, p. 309)

This picture is almost straight out of TMF's 13 Steps to Investing. (Admittedly, the Fool Ratio that examines predictions of earnings growth does take into account a stock's current price.) But the simularity between 1929-era thinking and TMF thinking is striking.

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