From the beginning of 1928 the element of unreality, of fantasy indeed, began to grow. As Bagehot put it, 'All people are most credulous when they are most happy.' The number of shares changing hands, a record of 567,990,875 in 1927, went to 920,550,032. Two new and sinister elements emerged: a vast increase in margin-trading and a rash of hastily cobbled-together investment trusts. Traditionally, stocks were valued at about ten times earnings. With high margin-trading, earnings on shares, only 1 or 2 percent, were far less than the 8-12 percent interest on loans used to buy them. This meant that any profits were in capital gains alone. Thus Radio Corporation of America, which had never paid a dividend at all, went form 85 to 420 points in 1928. By 1929 some stocks were selling at fifty times earnings. As one expert put it, the market was 'discounting not merely the future but the hereafter'. A market-boom based on capital gains is merely a form of pyramid-selling. The ...