WALL STREET: Every Man a Capitalist

(9 of 9)

Nevertheless, so much stock is being salted away for long-term investment that, despite a 212% increase in 25 years in the number of shares listed, there is a growing shortage of stock. Wall Streeters predict that big institutional investors—trust funds, insurance companies, and pension plans—will own $50 billion worth of stock by 1965, or 24% of all stock on the exchange. Assuming that small investors keep buying, the exchange will need a great deal more stock to satisfy the demand. And stock prices, as in any marketplace, are likely to follow demand.

The Cash Flow. As U.S. industry winds up a record-smashing year, economists hold out prospects for still better earnings and dividends to come. The "cashflow' of U.S. industry is enormous-money which does not show up in earnings because it is used for fast tax amortization. General Motors' cash flow in 1954 was $11.72 per share v. $0.08 reported as net profit; U.S. Steel's $8.19 against the net of $6.45. Overall for 1954 cash-flow earnings for the stocks in the Dow-Jones industrial average were more than 50% higher than reported earnings.

Thus, as new plants and facilities are paid off, more and more of industry's cash flow will show up as net profit. Even if business levels off or turns down slightly, dividends may rise. By 1959 economists predict that dividends may well increase by 50% to a total $16 billion annually.

Historically, the stock market has often been out of tune with the rest of the U. S., largely because investors represented a comparatively small part of the population. But as the base of stock ownership has been broadened, the market has

proved itself well able to withstand the shocks of the cold war and the Korean war, just as the economy has continued to grow through all the troubles. Stock Exchange President Funston thinks that the more small investors who buy sto'ck not for speculation, but for the long pull, the stronger the market will be­and the better it will reflect the state of the nation Says he: "Never has a business had a better opportunity to do something good for the country and at the same time for itself. It's a natural."