Note that Figure 1 depicts the growth of current EPS accrued over the past 12 months. In theory, though, stocks should capitalize not current earnings, but future earnings, and not future earnings in the abstract, but future earnings all the way to eternity Benjamin Graham, quoted in Zweig Now, it is true that, due to discounting, the deeper we delve into the future, the lower the capitalized value of any given dollar of earnings.
But since according to the theorists of finance the future is potentially infinite, discounted future dollars add up and eventually overwhelm the magnitude of current ones. So, in principle, current earnings should not really matter for stock prices. But from then on, it trended downward, and by the late s it even turned negative. In other words, during much of the twentieth century, current earnings became decreasingly important and eventually irrelevant for stock prices — exactly as the standard manuals of finance stipulate.
But in the early s the downtrend suddenly reversed. Unlike the previous downtrend, this upward trajectory is inconsistent with the canons of finance.
In our work, we answered the first question by proposing to view the price-EPS correlation as a quantitative proxy for the systemic fear of capitalists Nitzan and Bichler b ; Bichler and Nitzan ; Kliman, Bichler, and Nitzan ; Bichler and Nitzan , ; for a critique, see Baines and Hager Stated briefly, our logic runs as follows. When capitalists are optimistic about the long-term future of their system — i. The result is a low or even negative price-EPS correlation, as witnessed for example during the s and s. By contrast, when capitalists become apprehensive about the long-term prospect of their system — in other words, when they are struck by systemic fear — they grow uncertain about and have difficulty envisioning the future flow of profit.
This deep incertitude forces them to abandon their forward-looking ritual and instead capitalize stocks based on what they can be certain of here and now — that is, on current profit. The result is a high price-EPS correlation, as witnessed for instance since the early s. In this case, where our focus is on the broad power of capitalists relative to workers, a simple power index can be calculated by comparing stock prices to wages.
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And the question is why. Indeed, assuming our labelling of the two series is valid, why should the systemic fear of capitalists oscillate together with their differential power? As far as we know, this question has never been posed before, let alone answered. So our answer here can only be tentative. But then — and this is the crucial qualifier — the more power one possesses, the more one dreads losing it all. The result is an ongoing cycle, with fear stoking a hunger for power, and the amassment of power heightening the very fear that begot that hunger in the first place for example, pp.
The greater the power of capitalists relative to workers i. In this sense, the greater the capitalized power the direr its potential investment consequences. As differential power continues to increase against mounting opposition, there is a growing risk that this power will be openly challenged and scaled back through reform and downward redistribution ; and if despite these counter-developments capitalized power continues to climb, there arises the possibility — remote as it may be — of capitalized power being overthrown altogether revolution.
For capitalists, then, capitalized power and systemic fear go hand in hand: the greater lesser the power, the greater lesser the systemic fear of losing it. Now, the impact of growing fear — and this is a key point — is largely introverted, at least initially: it affects not the level of capitalization, but its temporal basis. When capitalized power is low like it was, for instance, during the s and s , capitalization relies on and reflects forward-looking earnings expectations hence the low or even negative price-EPS correlation.
But as capitalized power grows as it has, for example, since the s , capitalists, apprehensive about mounting systemic risks, gradually shift their gaze from the deep future to the most recent past causing the price-EPS correlation to rise. With this framework in mind, the question of peak earnings becomes crucial. All in all, then, it seems that the road for another major bear market, with roller-coaster consequences for the subjects of global capitalism, is now wide open.
The only thing missing for the hard fall is a reversal of U. For more, see Nitzan and Bichler a: Baines, Joseph, and Sandy Brian Hager. Bichler, Shimshon, and Jonathan Nitzan. Monograph, Jerusalem and Montreal July , pp. Real-World Economic Review 77, December : Real World Economics Review 85, September : Bonbright, James C. Earning Power as a Basis of Corporate Capitalization. The Quarterly Journal of Economics 35 3, May : Hobbes, Thomas. Edited by Aloysius Martinich. Peterborough, Ont. Journal of Critical Globalization Studies 4, April : Nitzan, Jonathan.
Inflation as Restructuring. A Theoretical and Empirical Account of the U. Review of International Political Economy 5 2 : Nitzan, Jonathan, and Shimshon Bichler. Capital as Power. A Study of Order and Creorder. New York and London: Routledge. Zweig, Jason. Be Inversely Emotional, Not Unemotional. Since the last child left a south Florida facility housing unaccompanied immigrant minors on Aug.
An official told Congress the facility was currently staffed to hold 1, children , though there are none housed at the center. The next Bachelor has been announced and fans are very upset. Instagram has had significant trouble adjusting to the increasing impact of influencer marketing on its platform. The company just announced that it would restrict, and in some cases remove, content that promotes weight-loss products or cosmetic procedures.
Users who are known to be under the age of 18 will be restricted from viewing posts that promote the use of certain weight-loss products and cosmetic procedures, or posts that have an incentive for users to buy products or include a price. A spokesperson for Instagram said that the policy change is about reducing the pressure that people can sometimes feel using social media.
Well, a fourth-grader from St. Louis is being praised for employing a genius solution for this universal problem: She decided to fill an empty lip balm tube with slices of sharp cheddar cheese. Valerie Schremp Hahn, a reporter for the St. Louis Post-Dispatch, posted a photo of her daughter's genius creation to Twitter.
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