May

31

The question of profits growth versus the GNP and stock growth is an interesting one. How can profits go up more than GNP without it triggering countervailing tendencies? And how can stocks go up in the long run more than profits growth. It would seem to require an increasing p/e. The difference between profits growth and book value growth is also an interesting one. One notes often that a company has enormous gains in profits with a much lower growth in new worth. The difference could not be explained by dividends. Might one possibility for the growth of equities be that they have learned how to gain verisimilitude from Washington, and that this enables them to eke out a return on capital which when put into the p/e hopper enables them to increase their share of the total adjusted for interest rates? Inquiring minds wish to consider it.


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