New Normal?

_ In brokers' offices last week, there were signs that the public, after long apathy, was beginning to get interested in buying stocks again. The volume of trading perked up, and stocks rose for the fifth week in a row. The Dow-Jones industrial averages hit 175.60, the highest mark in two months and 14 points above the bottom of the June tumble.

People seemed to have decided that the U.S. economy was in for another shot of inflation, with the Administration committed to a program of deficit financing. Some Wall Street professionals, on the other hand, were betting against it. In July, the New York Stock Exchange's short interest (i.e., the number of shares sold short by pessimists in expectation of falling prices) hit a 16-year peak of 1,844,313 shares.

Equally impressive evidence was available on the optimistic side. Stocks were undoubtedly getting stronger because many of them were paying their owners bigger returns. The Department of Commerce reported that dividend payments in May were up 14% over 1948; for the half-year, added the New York Stock Exchange, the Big Board companies had paid out 11.2% more than in the 1948 period.

As first-half earnings began to come in, they showed the expected drop, in profits from 1948, when inflated prices were at their peak. But they still looked healthy. The General Electric Co., which had been among the first big companies to cut prices and had already felt the sales slump in household appliances, was possibly a bellwether of how good "normal" might be. G.E.'s President Charles Wilson reported a second-quarter net of $19.8 million, down 32% from the same 1948 period. However, profit was more than 100% above G.E.'s earnings of ten years ago. By such a prewar comparison, the current "recession" looked fairly prosperous.

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