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Almost as important has been the attitude of individual investors. They are less interested in dividends than in growth stocks and in profits from lower-taxed capital gains. To most investors the bigger companies appear best able to move ahead with the fast-growing U.S. economy. Thus, they have been concentrating on such giants as Du Pont, selling at about 30 times its earnings (normally, security analysts think a stock is doing well if it sells at ten times its earnings), and I.B.M., a leader in automation, which is selling at almost 40 times earnings. In three months buying for growth has boosted the stocks of chemical companies (exclusive of Du Pont) on Standard & Poor's index up 14% and aluminum companies 32%.
Trouble Ahead? How high will the market go? Last week it was possible to get all shades of opinion on Wall Street. One broker even predicted that the Dow-Jones industrials would hit 1,000. But some brokers lifted warning fingers. Stock prices have been going up so high and so fast that dividend rates have not been keeping pace. Traditionally, brokers start to worry when yields of stocks and bonds get close. They fear that many investors, discouraged by comparatively low stock yields will start shifting from stocks to safer bonds, possibly touching off a major decline in stock prices. Last week yields on industrial stocks were averaging 3.53%, down almost a third of a point in two weeks, while high-grade bond averages were almost steady at 2.96%. But, because so many investors appear to be buying for growth instead of dividends, brokers are beginning to doubt if narrowing yields mean much in the current market. As a further sign of strength, in three out of the last four weeks, bank loans to brokers in New York City for buying on margin have declined. Thus, despite the recent fast rise in the market, the amount of buying on credit has actually declined.
*Anyone who bought one share of G.M. stock, valued at $370, in 1920, and held it, would have had 37½ shares last week valued at $4,800, plus another $2,402 in dividends. The new split would give the holder 112½ shares.