This has been because stock prices have risen far faster than corporate earnings, and interest rates have also soared. However, it would be foolish to predict dogmatically that the historical soundness of the theory will never hold true again. The spread between the central value and the Dow-Jones corrected itself in 1929, and it may do so again. At any rate, a formula based on the central value is sound in its basic principles, easy to operate, and”in the past”profitable. The First National Bank in Birmingham, Alabama, has used a formula in the management of trust funds for over 15 years, and has over $100 million of funds under formula management. The median is based on a continuing valuation of earning power of common stocks.


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