98 The Stock Market Crash—dAnd After 
In the face of this record, the faults leading to the 
panic cannot be found in the industrial situation, or 
in the high activity of business and industry, or in the 
rate of earnings, or in an unsatisfactory range of 
ratios of stock prices to earnings. 
There was undoubtedly overextension of loans. 
There was a fever of speculation during the months 
immediately preceding the panic, which bid up prices 
to a peak that rose faster, for the time, than earnings 
seemed to warrant, 
But the precipitous fall in the market went too 
far, in the light of the sound reasons justifying the 
long bull market, namely, justifiable expectation of 
great and increasing earnings, the fact that they were 
so generously plowed-back, the warranted expecta- 
tion of safety through diversification of investments, 
and, finally, a consequent lowered basis of discount- 
ing the future as apparently reflected in price 
earnings ratios. 
Was, then, the high price level of stocks during 
1929 completely justified? Or were there also ele- 
ments of unsoundness which explain the final intem- 
perate rise of the bull market? 
As shown in Chapter II, Mr. Carl Snyder of the 
Federal Reserve Bank of New York finds that stocks 
had been seriously undervalued during the period of 
1919 to 1924, as compared with the higher price 
level of commodities. The long rise in the com- 
modity price level had increased the dollar earnings 
of common shares in terms of a 57-cent dollar. 
Bonds and preferred securities were precluded from 
absorbing their share of this increase, and the invest.