Wall Street: The Lonesome Brokers

Already disappointed by the stock market’s failure to stage its traditional post-Labor Day rally, Wall Streeters had fresh cause for complaint last week. After hanging precariously around the 600 mark for seven weeks, the Dow Jones industrial average plummeted 9.87 points on Friday, Sept. 21, closed the week at 591.78.

The market’s sudden drop echoes the signals given off by the Commerce Department’s economic radar — the 30 “leading indicators” which, though still not completely compiled for August, seemed likely to show a slight downward trend in the economy. In the nation’s brokerage houses, however, another set of figures loomed larger: average daily volume on the New York Stock Exchange so far in September has poked along at a bit over 3,000,000 shares, dishearteningly down from the gilded days of 1961 when daily volume averaged more than 4,000.000 shares. For the brokers, whose commissions depend on the number of shares they handle, this meant slim pickings.

The reason was clear. Small investors, bruised in Wall Street’s Blue Monday crash, were warily staying away from the market. At Reynolds & Co.’s Chicago branch, business was down almost 50% from June, and the same was true for Merrill Lynch, Pierce, Fenner & Smith in Los Angeles. Said James Love, manager of Kidder, Peabody & Co.’s San Francisco branch: “If we were dealing with ten people eight months ago, seven of them have quietly disappeared.”

Rushing to Cut Back. The drought was particularly painful because in the last two years many firms had invested heavily in new electronic equipment and personnel to service a flood of bull-market orders. Now, in an effort to cut swollen overhead, some were driven to drastic economies. In Glore, Forgan & Co.’s Chicago branch, all employees last month took a salary cut of from 5% to 10%. In San Francisco, the monthly take-home pay of some customers’ men had slipped to a bare $150. Even in Manhattan, where the big brokerage houses can count on a steady, bread-and-butter flow of institutional security buying, brokers were canceling plans to buy new cars and working longer hours.

Complaining that “you have to run a brokerage business today like an A. & P. store.” Norris A. Broyles Sr., manager of E. F. Hutton & Co.’s Atlanta office, is trying to take up the slack by trading commodities and pushing municipal bonds and mutual funds. But according to the Investment Company Institute, sales of mutual funds dropped to a scant $154.8 million in August, down 23% from July and 37% below August 1961. Fund managers argued that the drop was largely the result of the recent Wharton School of Finance report which charged that mutual fund management fees are too high and that, overall, the performance record of the funds was no better than that of Standard & Poor’s 500-stock composite index. A more likely explanation was that it was precisely the kind of investor who traditionally buys mutual funds who was now shunning all securities and squirreling his money away in savings accounts instead.

“It Hurts Too Much.” Some brokers argued that it would take no more than a rise in prices to get the public off its hands and back into the market. Hardly anyone, however, expects a pickup before the end of the year. The only consolation seems to be that the slump is forcing brokerage houses to streamline operations, cut out the dead wood and seek new efficiency. Said one stock salesman: “I got into this business during the boom years. Now for the first time I have to get out and hoof it, and, by golly. I’m learning to sell. I hope I’ll be able to say it was the best thing that ever happened to me. But for now, it hurts too much to smile.”