88 The Stock Market Crash—And After 
This is borne out by the accompanying Charts 
Nos. 11 and 12, denoting fixed groups of stocks that 
recorded a reduction in the price-earnings ratio 
during the months preceding the panic. 
The averages do not give a complete picture, and 
in that sense we cannot use the price earnings ratio 
as a very reliable comparison unless consideration is 
given to the behavior of the majority of stocks in- 
dividually, because of the variability of the expected 
earnings. There are also difficulties to be faced in 
the choice of stocks that publish only annual 
earnings figures, and in those stocks where there is 
concealment of earnings for tax evasion pur- 
poses. Also, we must consider the various types 
of stocks that might enter into the ratio, seasoned 
and unseasoned. Thus some stocks are just reviv- 
ing from the depression with the prospects of a great 
increase in earnings, but others are of the type of 
standard old-fashioned corporations without any 
such expectations. The price-earnings ratios of the 
old-fashioned type should be perhaps ten times an- 
nual earnings, which is the traditional ratio for a 
fair selling price for stocks during the period prior 
to 1922. But for the new type of rapidly expand- 
ing corporation the price-earnings ratio might be 
anywhere up to 100 to 1, or even literally to infinity 
in the initial stages of investment when earnings are 
not being realized. All corporations pass through 
this initial stage. 
During 1929 stocks were being selected with re- 
spect to their probabilities of future earnings. In