their physical assets, with the implication that a buyer of those shares would be getting, say, $100 for $80. This overlooked the probability that although plant, charged up perhaps at cost, was carried on the books at a certain value, its actual value had shrunk by virtue of altered economic conditions, and sooner or later the book values would have to be written down to conform therewith.
It is not unprecedented, however, that forced liquidation may cause securities to sell temporarily below equivalent physical value, or that increase in physical value may be temporarily overlooked by the investing public. If such things really happen, buying will soon put up the price for the shares and eventually there will be a restoration of the normal condition of a market price in excess of physical value, the difference representing the intangible assets or wealth of the concern.
On the part of the public, in so far as this principle is understood, there is a strong tendency to refuse to recognize it. Thus, the essence of the thought in instituting a physical valuation of the railways is to see that they, which are under Federal regulation, shall not earn anything in excess of 6 per cent on the capital represented by their physical value. The same notion creates a popular resentment against what are deemed to be the extravagant salaries paid to railway executives. There is a curious inconsistency and perversion of thought about this in the public mind; for while salaries of $50,000 per annum paid to presidents administering great railway systems are viewed unfavorably the payment of a much greater annual stipend to Charles Chaplin is regarded as something quite proper and commendable.
