Running Out of Gas

It wasn't just your car that was hit with the energy crisis—the stock market almost sputtered to a halt.

ONLY TWO GROUPS OF STOCKS declined during the stock market collapse precipitated by the energy crisis: those that had something to do with energy and those that did not.

Mickey Mouse and the Avon lady joined hands for a lovers’ leap over the edge of a cliff, and the resulting decline of Walt Disney and Avon Products stock produced what chartists derisively call “the falling anvil formation.” Disney fell from a 1973 high of 123 78 to a low in early December of 40 12. Avon did a swan dive from 140 to 60 12. It’s true that most people drive to Disneyland and Disneyworld, but investors assumed that the Avon lady walked.

Such gutted stocks were, unfortunately, the rule rather than the exception during the stock market’s energy crisis crisis. Some $97 billion in market value in stocks listed on the New York Stock Exchange disappeared during the month of November alone.

Horror stories abound. Hilton Hotels from 27 12 to 11 12. Goodyear Tire from 24 to 13. General Motors from 67 to 45. These stocks are “energy intensive,” which is Wall Street’s new pet phrase that will hopefully make us forget “synergism.” There probably will be fewer automobiles sold and consequently fewer tires sold and fewer hotel rooms occupied. But what about the large percentage declines in the telephone stocks? If people can’t travel as much as they’d like, chances are they will make a lot more long distance telephone calls. And the domestic oil companies, which had enjoyed a few salad days at the outset of the energy crisis, turned south with the herd in November.

It was as if the paddy wagon had been backed up to the door of the saloon and everyone rousted into it, the good girls with the bad. Most brokers can’t remember a decline as fierce as the 200 point collapse in the Dow-Jones spanning just 27 trading sessions last fall. Board room visitors expected at any minute to see the New York Stock Exchange ticker tape flash the dreaded message: “ TAKE NO PRISONERS!”

But 1973 had been a crazy year even before the energy crisis panic last November. The market opened the year with great promise in a strong bull phase, and experts were predicting a high of 1200 on the Dow-Jones Industrial Average. That index did reach 1060 in January before the Watergate blues sent it nosediving to 850 or so in July. Somehow that phase got overdone, and the market turned up to reach 990 again by late October. Then the Arabs turned off the oil. Before brokers could say “margin call,” the market collapsed to 790.

That’s five years worth of action compressed into fewer than 12 months. And since institutions account for some 70 per cent of the volume on the New York Stock Exchange, some felt that the gyrations of 1973 could be laid directly at the feet of institutional money managers, whose hands could make those of the most limp-wristed dandy

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