Stocks should be bought when they are cheap. By being cheap, we mean that the market price is much less than the intrinsic value. In Chapters X. to XV. we talk about influences that affect the price movements of stocks. By studying these carefully you should be able to decide when stocks generally are cheap. Of course, not all stocks are cheap at the same time, but the majority of listed stocks do go up and down at the same time, as a rule.

At the time of this writing (in the early part of April, 1922) there are a great many stocks listed on the New York Stock Exchange that are selling at prices much less than their intrinsic values, but there are some stocks that should not be bought now, nor at any other time. There are some stocks listed on the New York Stock Exchange now that perhaps have no intrinsic value and never will have any. Nevertheless we consider that right now[1] is one of the times for buying stocks. There are unusual bargains to be had, although keen discrimination is necessary in order to be able to pick out the bargains.

As a usual thing, it is a good time to buy stocks when nearly everybody wants to sell them. When general business conditions are bad, trading on the stock exchanges very light, and everybody you meet appears to be pessimistic, then we advise you to look for bargains in stocks. The last six months of 1921 was an unusually good time for buying stocks.

It is well known that the large interests accumulate stocks at such times. They buy only when the stocks are offered at a low price and try not to buy enough at any one time to give an appearance of activity in the market, but they buy continually when the market is very dull. It seems to be characteristic of human nature to think that business conditions are going to continue just as they are. When business is bad, nearly everybody thinks business will be bad for a long time, and when business is good, nearly everybody thinks business will be good almost indefinitely. As a matter of fact, conditions are always changing. It never is possible for either extremely good times nor for extremely bad times to continue indefinitely.

You can buy stocks cheaper when there is very little demand for them, and you should arrange your affairs so as to be prepared to buy at such times.