New York — I remember the day clearly. A small Paris radio station had just announced that an agreement had been reached to end the Vietnam war. Although there was no confirmation, the stock market acted like it was the Fourth of July (even though it was the winter of 1973), with stocks skyrocketing and the ticker tape running late. I was writing the daily - actually hourly - account of the stock market's history for United Press International (UPI).
As it turned out, the radio station's pronouncement was later denied, the long talks continued, and the stock market drifted back into a nervous bullishness. That moment of volatility is one of the few things that I can recall that make the stock market of today resemble the market of 10 years ago.
In a decade there have been a lot of changes. Some of the changes are obvious; some are not.
For example, volume has expanded tremendously. Back in 1972-73, daily volume averaged about 15 or 16 million shares. Today, this level of trading can be done in one hour on the New York Stock Exchange. On the few days when trading would spurt to 20 million shares, the clerks and statisticians who had been around since before the great crash of 1929 would just shake their heads. Probably no one then considered that the stock market would eventually have 100 -million-share days.
The nature of the trading has also changed considerably. Ten years ago, the individual investor seemed to play a much larger role in trading. According to the New York Stock Exchange, institutions in 1971 represented nearly 60 percent of all trading, on a dollar-volume basis. Today, the institutions are more active, representing about 70 percent of the trading.
The great bear market of 1973-74 did a lot to sour the individual investor on playing the stock market. I remember writing about the market when it went on a long slide, and it was demoralizing for investors to continuously watch their assets shrink. I used to slip out to a nearby brokerage house and watch the tape roll by and watch the tape watchers watch the tape. As prices shrank, the mood in the brokerage house would sour.
Normally, prices would decline on fairly modest volume. But there was one day during that period when the smell of panic was on the tape. At that point, even the institutions, who had bought what they called ''one decision'' stocks - stocks you only needed to buy, not to sell - were trying to unload them. Thousands of shares of Eastman Kodak, Avon Products, or IBM, some of the one-decision stocks, slipped by almost always at a price lower than the last trade. Volume was heavy. I remember thinking, ''This must have been what 1929 was like.''
After the bear market ended, the individual investor lost a lot of interest in the stock market. I think the growth of the money-market funds was in part responsible for this. They offered safety and high yields. In 1972-73, individual investors could only get passbook savings rates of about 51/2 percent on their cash. To get higher yields meant playing the stock market.
The public's faith in the markets has also been jolted by various scandals and collapses. When Penn Central collapsed in 1970, the investing public was assured everything was fine until the very end. This was also true at Equity Funding, a now-defunct insurance company that told investors the rumors about the company's problems were completely false. As Equity Funding collapsed in 1973, all the insurance stocks plunged as investors lost faith in the entire industry. Although I'm not sure investors have changed that much, the insurance industry as a whole does not seem to have suffered as a result of the lesser problems hurting Baldwin-United, whose insurance subsidiary is having difficulty.
Information has certainly changed the way investors view the stock market. Stock brokers now have access to much more information than they did a decade ago. A modern stock-market machine allows the broker to not only retrieve stock and bond prices, but also to pull up news up to a month old about the company and find out what institutions actually own the stock. In addition, the machine can tell a broker what the government bond markets are doing at any point in time. The old machines only gave stock prices.
In fact, the use of computers in the stock market has been tremendous. At UPI , there were scores of clerks who kept track of information about the market, using pencils and pads. Today, it is mainly done with computer screens. The same is true in the back offices of the brokerage houses and on the floor of the NYSE itself. Functions that used to be done by clerks are now done by machines.
Investors today are also much more active in the options markets. A decade ago, options were unlisted. An investor who wanted to buy one had to look at ads in the back of the Wall Street Journal, where small brokerage houses offered to sell them. At that time, there was very little interest in them.
Today, thousands of people make their living trading options on stocks in New York, Chicago, and Philadelphia. And not only are there options on stocks, there are also futures on the stock market - using various indexes.
In fact, the products offered by the brokerage houses have changed dramatically. A decade ago, most brokers made their money selling stocks. Today, brokers offer limited partnerships, insurance, municipal bonds, commodities, and financial services of all kinds.
Many of the brokerages are owned by large institutions, such as insurance companies. A decade ago, they were owned by partners who often spent their summers in Maine. As a reporter, I hated the summer, since the doldrums would set in as these important investors headed off to Rockport, or other cool retreats. Today, there is no summer hiatus. There is money to be made.