Inthis paper we are not only going to determine how but also by howmuch stock growth has increased over the years. According to theauthor, approximately more than 90% of institutions saw the need totrade volumes on the stock exchange in New York. More so, he addsthat developing companies were sold at the price of higher than 80% of the trade volumes, especially during the in the 60`s era, as itwas the sole objective of most companies that existed. Unexpectedly,the market dwindled in the 70`s, with dire consequences for investorsin the market.
However,a comparison of the total valuation of the new companies to thevaluation of the new businesses over a period of one decade foundthat the new businesses overweighed the total growth of newenterprises in a decade. The 90`s were later to be characterized byan increase in both stock market as well as the real estates in theJapanese market.
Accordingto Malkiel, due to the overrated prices that stockholders received,they anticipated that the stock price will steadily rise sinceinterested buyers would buy and sell at a higher expected value thanthe initial. He discouraged investors as this move only jeopardizedthem hence they should consider the SEC rules and regulationsgoverning the trade. Most of the companies that dealt withelectronics were not discouraged as most of the companies duringthis era even changed their names to sound like electronic companiesso as to enjoy such benefits as speculated.
However,it was a wrong move to make especially back in the 90`s, when mostpeople invested their resources into portfolios through highlyqualified managers and professionals in the relevant investmentfields as institutions that accounted for the total volume of NewYork Stock Exchange were approximately 90 percent. More so, themethod that most companies used so as to merge was insufficient asthey formed Conglomerates to assist a fake growth especially to thosefirms that had no growth.
Theidea of forming a conglomerate was considered as investors bearingmembership would later realize more sales, as well as payments ascompared to individual companies. For instance, Baker Candy Companywould even become wealthier due to the merging of technology as wellas the adaption of the conglomerates. Whenever new results wereattained, they were attributed to the merging ideas and the formulaethey used in achieving such result. Some of the reasons that may haveattributed to the falling of a company included poor managementcontrol, a lot of debt and the fast growth of the companies whichmight have needed more time to stable up before expansion.Furthermore, these companies lacked professional managers to controlcompany operations.
Inconclusion, we can learn that most investors in the market historywould indulge in new business ideas that they had not put to testeven though its evaluation would play a significant role in thepricing of its total securities. More so, Malkiel introduces more"insane" ideas such as employing past results obtained inthe stock market that were achieved approximately 50 years back. Forinstance, back in the 1980`s, there was mass overpricing of foodstock. Even at its negative impact of overpricing towards the market,the method has still yet been practiced over and over again. Peoplein the 50`s to 70`s would anticipate in blue chips but after a periodof approximately a decade, the situation went back to normal.