Security analysis cannot presume to lay down general rules as to the "proper value" of any given common stock. Practically speaking, there is no such thing. The bases of value are too shifting to admit of any formulation that could claim to be even reasonably accurate. The whole idea of basing the value upon "current earnings" seems inherently absurd, since we know that the current earnings are constantly changing. And whether the multiplier should be 10 or 15 or 30 would seem at bottom a matter of purely arbitrary choice.
But the stock market itself has no time for such scientific scruples. It must make its values first and find its reason afterwards. Its position is much like that of a jury in a breach-of-promise suit; there is no way of measuring the values involved, and yet they must be measured somehow and a verdict rendered.
Hence the prices of common stocks are "not carefully thought out computations" but "the resultant of a welter of human reactions."
The stock market is a voting machine rather than a weighing machine.
It responds to factual data "not directly" but only as they "affect the decisions" of buyers and sellers.
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