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Pay Dirt. While the stock of Zenith Radio was jumping from 31½ this year to a high of 70¼, Zenith President Eugene F. McDonald Jr. formed a subsidiary, "Teco," and gave his stockholders the right to buy one share of Teco at $10 for every five shares of Zenith they held. Teco is to handle his Phonevision for televising movies (TIME, May 1) if & when he gets it on a commercial basis. In a few weeks, the price of Teco rights was bid up to $38 on Chicago's over-the-counter market. The rise alarmed McDonald. Last week he flatly called it "unwarranted," and drove the price of the rights down to $22 in one day.
Is the whole TV boom that shaky? Worried Wall Streeters who had thought that the TV bubble might burst and dampen the whole market were changing their minds. Many TV stocks were actually living up to their high speculative hopes. For example, Emerson, though it was still selling around $35, had just turned in first-half profits of $3.47, thus was priced no more than a conservative five times its earnings. "You can call it speculation," said one thoughtful stock-market official last week, "but the figures on the use of television sets seem to lend a firm base to this kind of buying."
Premature Burial. The entire bull market had grown with the help of the same kind of hindsight. Born early in 1948, it was knocked to its knees by fears of war, the Truman election, the business recession and dozens of other minor frights. By June 1949, when the Dow-Jones industrial average had skidded from 193.16 to 161.60, some market experts officially hung a crepe on the bull. But others insisted that stocks were dirt cheap. Enough investors took their advice to start the market moving upward, even though industrial production was still going down.
By fall, it seemed the market had been an accurate barometer; industrial production had also started up with a rush. In the next six months, the Dow industrials climbed 30 points in one of the sharpest rises in the market's history, without once suffering a major break. Some diehard bears still quibbled that the market was not actually as high as the Dow-Jones indexes* indicated, because many stocks not on the indexes had not broken their 1946 highs. But to many analysts this only meant that the bull market was still in its first phase.
Broken Yardstick. The blue chips themselves, even after their long rise, still looked cheap in relation to profits and dividends. For example, the 30 stocks in the Dow-Jones industrial average will earn this year an estimated $25 per share v. 1929's $19.31. Even at their peak of last week, they were still yielding dividends of almost 6% v. 1.9% at the 1929 high of 386 and 3½% at the 1946 high of 212.
Yet the whole U.S. economy has grown so impressively that comparisons with the past rarely told the whole story. In 1939, the U.S. population had total liquid savings (i.e., cash or its equivalent) of $49.6 billion, only $3.1 billion more than the total value of all stocks listed on the New York Stock Exchange. In 1950 the liquid savings stood at $175 billion, more than double the total value of all stocks listed on the Big Board.