19*
■
Falling stock prices have cut the value of corporate assets
1.75
i
During the 1960s, the booming
stock market valued the invested
i
capital of companies above the
1
cost of replacing it. Stockholders
were optimistic about the earn
1.50
-f-
\ -,W- V IrnMm,
ings that assets could generate
and bid up p/e ratios. This was
a boon to investment. In 1965,
1.25
' f-'y '’&k» -v*> t f' 11 11 fihiffr
every dollar plowed back into
the company was valued by the
" f Tj38St|vjtl
market at $1.50. Since 1973, the
price tag on capital goods has
skyrocketed, while the market
1.00
has taken a jaundiced view of
their future earning power. Now
• «Ta6vw&»s>3U|5a • wt
the market says assets are worth
only 75* on the dollar. This is
why low stock prices hurt invest-
075
I =5
h*&SB5S^
n
1964 66 '68 ’70 j I II III h/TTII III IV
'72 197311974
•Nonfinancial corporations
mem.
Data: James Tobin and John Clccolo
TREASURY MONEY MARKET BORROWING (INCLUDING FOREIGN NONMARKETABIE SECURITIES)
(In billions of dollars]
Calendar year
1970
197!
12 il.
1973
1974.
1975
1976
1st half
Net now
money
Peak in
crease in
borrowing
2d half
Gross new
issues 1
Full year
'let now
money #
Peak in
crease in
borrowing
Gross new
issues ‘
Maturi
ties 3
Gross new
issues 1
Maturi
ties 3
Net new
money
Peak in
crease in
borrowing
M atari- f
ties*
$22.5
$24.1
-$1.5
$4.2
$31.5
$15.2
$16.3
$16.6
$54. 0
$39.3
$14.8
$15.1
27.7
23.9
3.9
4.3
36.6
14.6
22.0
22.0
64.3
33.5
25 9
25.9
12.6
15.2
-2.5
7.0
21.3
7.3
14.0
15.5
33.9
22.5
11.5
13.0
16.9
15.8
1.1
9.6
20.2
15.1
5.1
5.1
37. 1
* 30.9
6.2
6.2
16.8
21.8
-5.0
3.9
32.5
17.8
14.7
K.7
0.3
39.6
9.7
9.7
45.0
17.0
28.0
31.0
48.0
11.0
37.0
37.0
93.0
27.0
65.0
65.0
49.0
23.0
24.0
28.0
» Includes increases in regular bills. * Includes paydowns in regular bills.
NET FUNDS RAISED IN THE CAPITAL MARKETS BY MAJOR SECTOR
[Fiscal years , billions of dollars]
US.
Treasury Federal and
and Financ- sponsored
ing Bank agencies
Total Corporate
Federal State and and
sector local foreign i
Federal Government
sector as sector as
a percent percent
Total of total of total
securities securities securities 1
1954
3.6
1.7
5.3
5.5
3.4
14.2
37.4
76.0
1455 •
1.7
1
1.7
5.4
2.6
9.7
17.4
73.1
1956. ..
1957
-4.3
-3.6
.6
.9
1 1
row
4.6
4.0
3.3
5.7
4.1 ...
7.0 ...
37.1
21.0
18.6
1958
6.3
.8
7.1
5.1
6.9
19.2
63.9
1959
8.0
1.4
9.3
5.7
4.7
19.7
47.5
76.4
1960
.8
2.0
2.3
5.7
3.5
12.1
23.5
70.7
1961
2 0
.1
2.1
4.9
5.0
12.0
17.7
58. 5
1962
8.8
2.4
11.2
6.0
5.5
22.7
49.4
75.6
1963
6.4
1.1
7.6
5.5
5.5
18.6
40.7
70.3
1964
2.7
1.5
4.2
5.2
3.8
13.2
31.8
71.4
1965
3.1
2 2
5.4
6.9
5.2
17.5
30.8
70.4
1966
-1.0
6.7
5 7
7.3
9.2
22.2
25.8
58.9
1967
.6
2.6
3.3
6.0
12.2
21.5
15.2
43. 3
1968.!
\! 18.2
5.5
23.8
7.2
15.1
46.1
51.6
67. 3
1969
-1.9
5.7
3.8
12.0
14.7
30.5
12.4
51.8
1970
6.8
8.1
14.9
9.7
14.8
39.4
37.9
62.4
1971
20.5
2.7
23.2
15.0
23.0
61.3
37.9
62. 4
1972
19.6
8.7
28.2
15.6
15.8
59.7
47.2
73.5
1973
18.5
14.3
32.8
12.6
10.5
55.9
58.6
81.2
1974
2.1
21.3
23.3
16.7
15.6
55.6
41.9
72.0
1975e 1
43.8
10.9
54.7
12.6
26.3
93.6
58.4
71.9
1976e*_.
61.6
12.2
73.8
14.6
22.7
111. 1
66.4
79.6
i Bonds issued by nonfinancial corporations.
» Includes State and local as part of government sector. ...... , AAA AAA AAA . . , 1Q7t -
J Assumes adoption of President's State of the Union program, with budget deficits of $35,000,000,000 in fiscal year 1975
and $50,000,000,000 in fiscal year 1976.
Source: Fiscal year 1954-74 data based on FRB “flow of funds.” Office of the Secretary of the Treasury, Office of Debt
Analysis, Jan. 22, 1975.
Mano De Vincenhs—I