The stock market crash - and after

Bibliographic data

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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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Chapter VIII. Scientific Research and Invention

Collection:: Economics Books

140. The Stock Market Crash—dAnd After growth, not past growth, that gives value. In recent years the stock market has reflected increasingly through the operations of investment counsel and investment trusts, more intelligent calculations of future growth. Effect of Invention on Price-Earnings Ratio The effect of new inventions on the ratio of the price of stocks to earnings is to increase that ratio, because what gives these new stocks their value is the future earnings after the new process will have had time. This necessarily implies that, in the mean- time, the earnings are so small that the price-earn- ings ratio is high. For instance, the public utilities, up to the September and October breaks in the market, showed a ratio of prices to-earnings of more than 20 to 1. That is, the prices of stocks were over twentyfold the earnings. The reason for this high level of prices relative to earnings lay partly in the increased gains to be expected in the spread of application of new inventions through the power group of industries. There has been much careless talk, since the crash, about stock prices having been inflated far above what earnings warrant. But the people who say this so glibly do not specify the particular stocks. When any actual stock is exam- ined with an unusually high price relative to its cur- rent earnings it is almost invariably found that it tepresents a new and very promising invention, and that those who have bought the stock and put its price so high are not so much the ignorant public

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