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The markets may not be madly high, merely reflecting the worldwide reduction of risk to capital

By RW Johnson   October 1999

The markets, everyone says, are madly high. The Dow, which in 1980 was below 800, is still well over 11,000. The FTSE 100, which surmounted 2,000 only at the beginning of the decade, is over 6,000 despite its recent fall. Yet no one believes that British production or profits have trebled since 1990-let alone that the production and profits of US industry have multiplied 13 times since 1980. The price/earnings ratio (the ratio of a share’s price to the dividend paid on that share) has just kept on rising. Quite soon, the argument runs, there has to be an almighty…

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