The monetary order
From Surgeon Captain T. L. Cleave Sir: I am afraid that I do not consider that Mr Davenport's answer to my letter does anything to affect the argument involved. It does not matter, I submit, how many bull or bear tacks occur in equity prices, or how clever one is, or is not, in anticipating such tacks. The only thing at stake is whether an investor who stays put in equities has a good chance or a bad chance of preserving his capital over, say, a generation. As I said in my original letters, a reference to the stock exchanges in countries which have had a much greater inflation over recent decades than ever we have had, such as France, shows even more clearly than in this country that the investor in generalised, not special, equities has been able to preserve his capital and even to increase it. Thus, if the cost of living rises by, say, 50 per cent between the top of the bull market in 1969 when the FT index was around 500, and the next top, then if that top is 750 or better, the capital will have been preserved. If the index is back to 500 already, with a figure of one million unemployed, who shall say that the figure of 750, or better, will not be seen later on?
I am sorry if I appear halfbaked, but when I see unit trusts appearing to breed like rabbits, with 390 quoted in the Daily Telegraph every day, a large number of which are in equities, it seems to me that the cult of the equity, even if it's more specialised today than it was formerly, is very, very much alive.
T. L. Ceave Redrnarley, Sandringham Road, Catisfield, Fareham, Hants
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