STREET DOGS

From the June 1962 issue of Life magazine, following the market plunge in May: There is an adage perhaps based on the common sense of the first cave man who threw a stone into the air, that what goes up must come down. By many of the 15-million Americans who own common stocks (or did until a few days ago), by some of their brokers, even by some of the learned and august men who make investments for industry’s pension plans and the funds of the big banks and foundations, the adage was largely ignored from 1949 until the recent past. It is now being restored to its rightful place in the archives of human wisdom.

To the question, what has gone wrong in the stock market?, there can only be one real answer: the market came down because it had gone too high.

It fell precipitously and for some people ruinously because so many stocks had so far to fall before they would reach any firm and solid foundation.

The reason the market went so high and then chose this particular time to stumble gets into some mysteries of human psychology. Every student of the market knows that the price of stocks at any given moment depends more on the mood of the investor than on anything else. Edmund W Tabell, one of the best of the market analysts, has said, “In setting the price of stocks, psychology means much more than earnings or dividends.”

Nobody was more optimistic from 1949 until recently — despite occasional dips in the market such as the time of President Eisenhower’s heart attack in 1955 — than the American investor….

As economist Eliot Janeway, one of the first and most vociferous of the pessimists, said last year in awe and disbelief: “This market is rolling simply because it’s rolling.”