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

Changed Ratio of Prices to Earnings 83 prices of a few active stocks; this was the weak link of the chain; some of the supposedly conservative investment trusts were buying certain stocks at in- sanity levels.” Doubtless this accounts largely for the rapid increase in price of certain stocks as com- pared with the increase in their rate of total earnings during the months immediately preceding the break. But it is important to note that during 1929, as compared with 1928, the price earnings ratio fell not only on the average, but for a majority of the individual stocks listed in the Standard Statistics Company’s compilation. The increase in the price earnings ratio for pub- lic utilities during the first nine months of 1929 was due to the greatly enhanced expectation of earn- ings on account of the mergers in this field and ac- companying introduction of sweeping economies in operation. Up to a certain point this increase in the ratio was justified. Also, in the cases of the great majority of stocks, while prices were going up, earnings were rising faster than prices. When dur- ing 1928 people bought on a high price-earnings ratio, expecting the earnings to go up still further, they were justified so far as the next year, 1929, was concerned, and during that year—at least, until the ninety days preceding the panic—the high market seems to be justified on the basis of anticipated earn- ings, which were behaving as expected. It seemed extremely probable that 1930 would show still higher earnings and go on justifying the situation of buyers in 1928 on a rising market.

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