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A top broker's bullish view; financial planning pedigrees

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Benjamin F. Edwards III says he can see the Dow Jones industrial average going through the 2,000 level during the current bull market.

The president of A. G. Edwards & Sons Inc., the nation's eighth-largest brokerage house, noted in an interview that if this average had kept up with inflation after it crossed the 1,000 market at the end of 1965 and start of 1966 , it would be at 3,000 today.

Mr. Edwards's optimism is based on the events of this year. Six months ago, he said, if someone had said that both inflation and interest rates would be cut in half, and that unions would be taking pay cuts, no one would have thought it possible. But it has happened.

Moreover, he finds the election results heartening. He said he was ''scared to death'' that a Democratic sweep might repudiate the nation's anti-inflation struggle. ''I hope Paul Volcker (chairman of the Federal Reserve Board) continues the tight policy he has had and keeps inflation under control.''

A.G. Edwards is a St. Louis-based retail brokerage house, that is, one largely serving individuals rather than institutional investors such as pension funds. Since the present booming market started in August, the firm's customers have been net sellers. Other major brokerage firms have also noted that individuals tend to be selling in this bull market; institutions are buying.

If the market continues to rise as expected, he admits, these individuals will give up more profit possibilities.

The firm's loans to customers with margin accounts (using borrowed money to buy stocks) have dropped from $200 million before the market boom to $60 million , he notes. That indicates individuals are cautious.

Like other brokerage houses, the high stock trading volume has raised A.G. Edwards's profits. Its own stock, listed on the New York Stock Exchange, has risen in price from $13 in early August to about $31. For seven or eight years Edwards has been the most profitable of the publicly listed brokerage houses in terms of return on capital. The present boom means more commission income for the firm and its salesmen, but lower interest rates are producing reduced returns on loans to margin customers.


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