Book Cover

Democratic
Capitalism,  The Way to a World of Peace and Plenty


CCDC #147

This article describes the price/earnings P/E ratio that is now double the traditional level.  The appropriate question is Why?   The experts however don't usually agree on the reasons but the possibility of another "bubble economy" has to be considered.

Price Earnings Ratio


Traditionally the stock price has been 16 times earnings, a price earnings (P/E) ratio in which one dollar of profit produces a stock price of $16. In mid 2018 the price earnings ratio is about 31, that is, a dollar of earnings produces a stock price of $31. This doubling is based more on attitude than a surge in earnings.

The Federal Reserve Board and Treasury Department are supposed to control currency and credit for the general welfare but they do not prevent asset inflation in either stocks or real estate. They oppose only consumer price inflation and put people out of work to slow the economy and protect the asset value of the privileged.

The value of the worker’s stock is threatened both by this high P/E multiple and by the $800 billion of stock buy-backs described in article # 146. The executive using stock buy-backs to hype the value of stock options can then sell the stock. The worker waits years for pension payments.

 

 

 

Ray CareyRay Carey

Ray Carey learned through managing companies for 33 years how to change the work culture to provide employees with their best opportunities to develop and contribute. This experience began as a 28 year old plant manager and later president of an electric motor company, and concluded with eighteen years as president , chairman, and CEO of ADT, Inc.

See Carey's autobiography of his work career in chapter two of his first book,

Democratic Capitalism, The Way to a World of Peace and Plenty.

For more information about Ray Carey and his advocacy of democratic capitalism, visit the pages of this website.