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

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

Collection:: Economics Books

Changed Ratio of Prices to Earmmngs 99 ing public during this period had failed to realize that stocks should go up in price not only at the rate of increase in the level of commodity prices, but still higher; because, according to the equity prin- ciple, common shares became the residuary legatee, so to speak, of the increased earnings which the preferred securities could not absorb. It was only as the public came to realize, largely through the writings of Edgar Lawrence Smith, that stocks were to be preferred to bonds during a period of dollar depreciation, that the bull market began in good earnest to cause a proper valuation of common shares. This movement was overdone, at any rate during the months immediately preceding the panic. As speculation became uncontrolled, stocks rose too fast and the investing public entered rapidly the phase of marginal overextension. This rendered the market subject to apprehension, bear attacks, and panics that produced a period of acute liquidation, bringing the ratio of stock prices to earnings below the proper expectation of future profits. Yet the overextension that produced this violent reaction was not all foolish. It may even be said that the speculation was, chiefly or largely, due to eagerness to profit by the great opportunities for future earnings that were justifiably expected. Peo- ple went into debt to acquire stocks because they had sound reasons for these ‘‘great expectations.” Succeeding chapters will show the distinguishing reasons for the greater expectations of future earn- ings in the increased “tempo” of business and indus- try. This increased rate of activity is manifest in

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