"15x"

John Jacob Raskob has been both bull and bear. His most bearish moment was on the eve of the bankers' convention (TIME, Oct. 15), when he observed that "security prices have far outrun demonstrated values." His most bullish moment was on the eve of his sailing for Europe last March, when he predicted new records for General Motors, observing that the stock should sell at 15 times its earnings, or $225 a share.

Time graciously justified the Most Bullish Moment. General Motors did set new records, did eventually climb to a tantalizing 224 1/8. But by the time the stock had reached Bull Raskob's figure, earnings had also skyrocketed. Last week, when President Alfred P. Sloan, Jr. announced quarterly profits of $79,266,639, nine months' profits of $240,534,613 (record for any corporation in peace time), investors hastily calculated values. In nine months, General Motors had earned $13.42 a share. Expected earnings for the full year raised the figure close to $18. Bull Raskob's formula of "15x" would set the stock's value at $270, or $49 over last week's closing price.

Investors made yet another calculation. Even more significant than General Motors in the eyes of many a businessman are the reports of the mighty U. S. Steel Corp., now ending its first full year under committee management. As everyone knows, the mantle of the late, great Elbert H. Gary was rent into three parts. The first part fell on John Pierpont Morgan as Chairman of the Board; the second on Myron Charles Taylor as Chairman of the Finance Committee; the third on James Augustine Farrell as President. Last week, this triumvirate of tycoons announced quarterly earnings of $52,148,476, largest in two years and $10,774,645 more than earnings in the third quarter of 1927.

Nine months' earnings of U. S. Steel totaled $140,015,494, or $8.17 a share. Expected earnings for the full year would be about $11. By the Raskob formula, the stock's value should approximate $165. Actually, U. S. Steel closed on the stock exchange, last week, at 160 7/8.

With Steel confirming the "15x" theory, did investors hold General Motors cheap at 222, rush to brokers with orders to buy? Prudent investors consulted prudent stockmarketeers. They learned: 1) that the "15x" formula might justify itself in a strong bull market, but that it could not be maintained in a slump; 2) that many a sound, conservative stock, undisturbed by pools, sells at 10x or 12x; 3) that 5-year earnings are safer guides than 9 months or a year.

Other quarterly reports, cheering stockholders last week, were:

E. I. du Pont de Nemours Co. (just merged with Grasselli Chemical Co.): $19,581,897, as against $12,488,554 for the third quarter of 1927.

Canada Dry Ginger Ale Co.: $954,976 as against $521,252.

Victor Talking Machine Co.: $4,646,617 (9 months) as against $4,069,753.

Pullman, Inc.: $6,192,896, as against $3,777,450 (preceding quarter).

Not so cheering were these:

Childs Co. (reluctant meat-servers): $289,326 (deficit), as against $125,801 (profit).

Madison Square Garden Corp. (prizefights, campaign speeches): $308,448 (deficit), as against $52,848 (profit).