For a decade that would be remembered as Wall Street's "go-go years," the 1960s began in an unpromising way. The Dow Jones Industrial Average, which hit a record high of 685.47 on January 5, 1960, soon slid back below the 600 line.
There was a rally in 1961, but in early 1962 the market gave back all that territory and more. One factor cited was President John F. Kennedy's confrontation with the steel industry over price hikes. Plus, the Securities and Exchange Commission was doing some high-profile investigations, and there was a crisis in some faraway country called Laos.
A joke made the rounds: JFK tries to reassure a businessman about the economy by saying: "Things look great. Why, if I wasn't president, I'd be buying stock myself." The businessman replies: "If you weren't president, so would I."
The Dow fell to 535.76 on June 26, 1962. That would be its low point for the decade. Stocks for the next several years would be in a state of almost constant upward motion. And Wall Street, once seen as stodgy, would take on a euphoric pop-culture cachet, complete with "glamour" stocks, "gunslinger" fund managers and "go-go" funds.
By the end of 1963, the Dow was above 750. A year later, it was close to 900. The market dipped in mid-1965 but then resumed rising. Twice in early 1966, the industrial average crossed the fabled 1,000 line in intraday trading. Rising share prices were accompanied by rapidly growing volume. At the New York Stock Exchange, a busy day in 1960 meant about 4 million shares traded; by 1966, it meant around 10 million shares.
Technology stocks enjoyed a new popularity, with hot money chasing after the likes of Polaroid, Telex, Control Data, Teledyne, Texas Instruments, University Computing and Itek. Having a futuristic-sounding name was a big plus; Xerox had existed since 1906 as the Haloid Company, but investor interest was piqued by the sleek new moniker (which actually derived from ancient Greek words for "dry" and "writing").
Mutual funds were growing fast, with assets under management rising from some $17 billion in 1960 to about $50 billion at the end of the decade, and with dozens of new funds elbowing their way into the field each year. The industry in the 1950s had held a fairly conservative and slightly boring reputation, but its players now were increasingly interested in offering a newly attentive public the prospect of aggressive growth.
Lone GunslingersWhereas the mutual funds of yore often had been managed by staid committees, it became more and more common in the 1960s for the job to be given to individual managers. And in an even more radical departure, some of those individuals were actually becoming famous.
A central figure in this limelight was Gerald Tsai Jr., who first made his name in the early '60s as a portfolio manager at Fidelity. Known for momentum investing and rapid portfolio turnover, Tsai started his own firm in 1965, and his Manhattan Fund brought in a huge amount of investor money. Stocks often moved based on what Tsai was buying, or was thought to be buying, and pros and amateurs alike emulated his in-and-out trading style. Enthusiasm waned when Tsai's portfolios headed south a few years later.
Other fund stars included three guys named Fred. Fred Carr achieved a return of 116 percent for his Enterprise Fund in 1967; it would see big losses in later years. Fred Mates ran the high-flying Mates Investment Fund, but got into trouble when the SEC suspended trading of one of his principal holdings, Omega Equities; later, he ran a singles bar. Not all celebrated managers were flashes in the pan, though. Fred Alger, who started his own company in 1964, established a longstanding presence in the fund industry.
Fund jockeys were not the only ones basking in Wall Street's approval. The captains of conglomerates also took on an outsized aura. James J. Ling built up the Ling-Temco-Vought Corporation, or LTV, with interests ranging from missiles to car rentals to golf equipment. International Telephone & Telegraph, increasingly known just as ITT, was being led by CEO Harold Geneen into hotels, real estate and more. Gulf & Western, under Charles Bluhdorn, was buying up everything from sugar plantations to "Star Trek."
Low interest rates helped fuel the conglomerate craze, since companies could get cheap financing to buy up other companies. The equity market's bull-bear swings late in the decade also encouraged conglomeration, allowing well-timed acquisitions when company stock was undervalued. But by the end of the '60s, Wall Street's affinity for conglomerates was ebbing, amid evidence that the merged behemoths were not better performers than their separate parts.
Miniskirt MarketAs stock prices and hemlines both rose in the 1960s, the idea that there was some kind of connection between the two was hypothesized. In May 1967, the brokerage firm Harris Upham sent out a newsletter stating: "For some time there has been a suspicion in Wall Street that the stock market and the hemlines of women's skirts move in the same direction."
The firm then presented research suggesting that indeed there was a correlation. "From the days of street-sweeping skirts in 1897 to the days of Twiggy in 1967," the market was up 2,100 percent, the newsletter reported, concluding: "Perhaps we should be listening more carefully to the planning in Paris."
There has never been all that much consensus as to how seriously to take this hypothesis. But in any event, hemlines could only go so far up, and in the late '60s that started to look true of equity values as well.
The Dow closed at 995.15 on February 9, 1966. That would be its high point for the 1960s, though the index would take another swing near the four-digit line with a close of 985.21 on December 3, 1968. Investor sentiment was gradually souring, as the nation's political and economic situation became more and more unsettled. The United States was at war in Vietnam. That, plus the Great Society programs touted by President Lyndon B. Johnson, entailed a growing strain on the economy. Inflation was emerging as an issue.
Unrest was growing, in inner cities and on college campuses. In August 1967, some of that turmoil showed up on the New York Stock Exchange visitors' balcony, when Yippies led by Abbie Hoffman and Jerry Rubin used the platform to denounce greed and the Vietnam War, and then throw a bunch of dollar bills down onto the trading floor. (See sidebar "Yippies on Wall Street.")
But Wall Street had its own problems. For one thing, as trading volumes continued to rise, the securities industry faced a growing paperwork crisis. Stock certificates and checks were physically changing hands on an unprecedented scale, and clerical workers in the backrooms were becoming overwhelmed. Trying to dig out from under, exchanges started holding shorter trading hours and even closing on Wednesdays. One brokerage, Pickard & Company, was so swamped with paper it went out of business.
The problem was gradually resolved through the use of automated systems and bookkeeping methods that did not require the physical transfer of certificates. But it was no fun while it lasted.
Not So GroovyAs the go-go market faded, a hangover of legal and regulatory headaches remained. The SEC and the courts were taking a harder line in the traditionally murky area of insider trading. Brokerage commissions and mutual-fund fees were drawing increasingly sharp scrutiny from government officials. Shareholder lawsuits were emerging as a popular pastime.
The market had a run-up for a few months before the 1968 election, and continued rising for several weeks after Richard Nixon won the presidency. This surge was partly attributed to expectations that the Nixon administration would lighten the federal government's touch on securities regulation. And indeed, Nixon did replace Manuel Cohen, the activist chairman of the SEC, with the more conservative Hamer H. Budge.
But the ebullience of the go-go years, by this point, was a spent force. The market moved downward fairly steadily over the course of 1969. As men walked on the moon in late July, the Dow hovered near the 800 line.
That same year saw considerable drama over a deal that never got done. Saul P. Steinberg, head of computer-leasing company Leasco, was diversifying into finance; in 1968, he had used Leasco stock to acquire the old-line company Reliance Insurance. Now he prepared the groundwork for a takeover of an even more prestigious target, Chemical Bank. Chemical, however, fought back hard, pressing other financial institutions to oppose the deal, and pulling political strings in Washington.
Steinberg even got a call from President Nixon, urging him not to pursue the acquisition. Steinberg dropped the effort, famously commenting: "I always knew there was an Establishment. I just used to think I was part of it."
As the 1960s drew to a close, so too did the long sweep of economic growth that had begun early in the decade. Corporate profits were weakening, and the quagmire in Vietnam looked likely to bring yet higher government spending. Inflation, which had stood comfortably below 2 percent at the height of the go-go boom, now moved to the vicinity of 6 percent.
In this environment, stocks no longer looked like such a good investment, and many investors were pulling out of the mutual funds they had snapped up a few years before. A bear market had begun, one that would continue growling into the new decade.
On August 24, 1967, a group of about a dozen young men and women arrived at the New York Stock Exchange. They were Yippies, or members of the Youth International Party. They had called ahead and asked for a tour, but their real purpose was to perform some "political theater," their style of creatively obnoxious protest and confrontation.
The group included Abbie Hoffman and Jerry Rubin, radical activists who would become increasingly well-known as the decade wore on. The guards were wary of the scruffy visitors, but allowed them into the visitors' gallery with a warning that no demonstrations would be allowed.
But the Yippies, once they were overlooking the trading floor, launched into loud speechifying against capitalism and the Vietnam War. There was some applause from down below, by floor traders who were sympathetic or just amused. Then the Yippies, announcing the "death of greed," floated some dollar bills down to the floor. How much money was involved is uncertain, but there was a brief commotion until trading resumed.
According to Vincent J. Cannato in his 2001 book The Ungovernable City, the administration of liberal Republican Mayor John Lindsay was quietly providing subsidies to the Yippies around this time. So it's possible those were taxpayer dollars being dropped to the floor.
The Yippies progressed to other stunts, including "levitating the Pentagon" and rioting at the 1968 Democratic Party convention in Chicago. As it happened, though, they did not maintain their uniformly hostile approach to capitalism. By the 1980s, Rubin had become a businessman and entrepreneur, and he even worked for a while at the brokerage firm of John Muir & Company.
Next month's "Historical Research" will be about the 1970s. Readers with anecdotes or suggestions about that decade are encouraged to write to email@example.com. Correspondents' names will not be used in the article without explicit permission.
Kenneth Silber is a senior editor at Research. His work on science, economics and history has appeared in a variety of publications, including The Wall Street Journal