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The rush to buy was so great that trading had to be suspended for 1½ hours. When it was resumed, A.T. & T. sold at $225 a share, up $23. Earlier in the year A.T. & T. had another profound effect on the market. In September, it decided to put $260 million of its pension fund into common stocks. It was a signal that to one of the most conservative investors in the nation, stocks were not only respectable but prudent investments.
The workman who once put aside a few dollars a week towards his retirement, now buys into the market through a mutual fund or the Stock Exchange's Monthly Investment Plan. So does the middle-income white-collar worker who hopes to send his son through college, the matron who saves to give her daughter a bang-up wedding. In Atlanta Mrs. Sara Pfeiffer, a trim, energetic grandmother and freelance writer, has organized three investment clubs, is busy with a fourth. Says a Cleveland commercial artist: "This year I became a capitalist. I went into the market for the first time."
In 1958 the U.S. had so many new capitalists that the number of stockholders passed the 10 million mark. Merrill Lynch alone is adding new accounts at the rate of 950 a week. Mutual funds are growing almost as fast. In 1940 there were only 68 mutual funds with $448 million in assets; today 149 funds hold $12.75 billion in assets, the great bulk of it stocks. Another $12 billion in stocks is held by other institutional buyers such as insurance companies and pension funds. Even such stiff-collared investment bankers as Lehman Bros. and Lazard Frères went into the fund business, unable to resist the clamor for shares. Lehman originally offered shares worth $37.5 million; demand was so great the issue was boosted to $198 million. Lazard also first thought of $37.5 million, sold $127.5 million.
The Great Shortage. Inevitably, the rush to buy—and the reluctance to sell—created a shortage of stocks in 1958. Though the number of shares on the exchange has increased 400% (to 5 billion) since 1929, the number of long-term investors has probably grown 20 times. The year saw the fourth highest turnover in history; yet turnover as a percentage of shares outstanding was lower than in 49 out of the past 58 years. To make matters tighter, the number of new shares coming on the market had been small. The tax advantages of debt financing are so attractive that Only $23.6 billion of the $107.4 billion in new corporate security offerings since World War II were stocks; all the rest were bonds.
No wonder the Bull could flick his tail at recession. The 1958 market kept climbing, not a bit disturbed by threats of war in Lebanon and Quemoy, and bad corporate news that showed a 30.5% drop in six-month earnings. The new investors were looking at other values. As steel dropped to 47.1% of capacity in April, Bethlehem Steel, the No. 2 producer, failed by 8¢ to make its 60¢ first-quarter dividend. But Bethlehem confidently paid the dividend, and the stock climbed 5⅛ points to 41¾