U.S. Business: Wall Street: A Long Look Upward

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Thomson was recently elected a governor of the New York Stock Exchange. Three afternoons a week, therefore, he walks the two blocks from his office to the Exchange for Board of Governor meetings. In the N.Y.S.E. board room, Merrill Lynch is considered to be a maverick. It is pushing for changes that leave old conservative brokerage houses aghast. By 1975, the number of U.S. shareholders will double, the number of listed shares will double (to 20 billion), and the daily volume of trading will grow by some 60% (to 10 million shares in an ordinary day). To handle all this business, Thomson figures, both the Exchange and the brokerage houses it serves are going to need a lot more modernization. In all, Thomson estimates, Wall Street will need as much as $1 billion in new capital, and there is only one way to get it. That is by allowing N.Y.S.E. member firms to go public, selling stock in their companies to outsiders. This runs contrary to Big Board rules and regulations. And it is with some justice that Merrill Lynch people gibe at the N.Y.S.E.'s promotional slogan—"Own a share in American Business." That, goes the plaint, ought to be expanded by two words: "Except Ours."

Despite disagreements and rivalries, all stockbrokers share the concern about the continuing downward market movement. There is a cliche that brokers don't care whether the market goes up or down; after all, they make their 1% standard commission on both sell and buy orders. No broker can safely adopt that attitude. If the market were to perform so badly that Americans lost faith in shareholding as a viable way of investing, there would be few sales, few purchases and few commissions for brokers. Which, to some extent, is precisely what has been happening this summer as averages fell, investors decided to wait and see, and daily volume dropped.

In Wall Street phraseology, the blue chips have been "leading" the market downturn. By anyone's terms, big investors have been showing the way. In the last nine months, mutual funds sold $73.1 million worth of General Motors stock and $31 million in A.T. & T. At the same time, the mutuals have been buying growth and glamour stocks. They now hold 24.4% of the stock in nine domestic trunk airlines—which, despite the airlines strike, still have great potential. They also own 11.2% of companies in the "office equipment" area—such as SCM and Xerox—and 10.6% of corporations involved in the explosive field of color television.

The individual investor has been following the same pattern. Somehow the blue chips have come to be regarded as the square buy. On the other hand, many a corporation with "on" or "onics" at the end of its name seems to take on an inviting glow. Examples: Textron, up since the February break from 43⅜ to 53⅛ and Transitron up from 13¾ to 18.