The stock market crash - and after

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Monograph

Identifikator:: 1815583320

URN:: urn:nbn:de:zbw-retromon-204544

Document type:: Monograph

Author:: Fisher, Irving http://d-nb.info/gnd/118533541

Title:: The stock market crash - and after

Place of publication:: New York

Publisher:: Macmillan

Year of publication:: 1930

Scope:: XXVI, 286 S.; graph. Darst

Digitisation:: 2022

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Chapter VI. Changed Ratio of Prices to Earnings

Collection:: Economics Books

90 The Stock Market Crash—And After ing the panic, it would seem that the level of stock prices was constantly at a slower rate of increase than the rate of earnings of corporations. As com- pared with 1928, this ratio had been reduced by careful selection of stocks in the market until the panic brought the entire level of stocks down to a point comparable with the old ten-to-one ratio that prevailed prior to the period of increased “tempo” in business, so thoroughly described in the report on Recent Economic Changes. That is too low a ratio of stock prices to earn- ings. The old static conditions of industry and trade have given way. We are in a dynamic world, where the old conception of any fixed ratio of earnings to prices of stocks as a proper ratio must yield to the demands of shifting scales of industrial effort. THe price-earnings ratio of bonded securities, of course, is relatively fixed for the life of each par- ticular bond. For bonds the term “yield” is synonymous with earnings, while for stocks it is not. Bond yields, the reciprocal of the price-to-cash- earnings ratio, during 1929 ranged from 3.4 per cent for Liberty Bonds and 4.3 per cent for munici- pals, to 4.7 and 4.9 per cent for rails and utility bonds respectively. For industrial bonds it was s.1 per cent. The price earnings ratio for Liberty Bonds, for example, was 33 to 1. Leonard Ayres reports that during the twenty-eight years from 1900 through 1927, the market prices of dividend paying industrial common stocks averaged about sixteen times as much as their dollar dividends; that during the same period the prices of a list of high-

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