A Nation of Long-Term Investors

On this day in economic and business history...

On May 15, 1951, young car salesman Brady Denton became the 1 millionth unique shareholder of AT&T (NYSE: T  ) . It was the first time in history that any company had achieved such a broad base of ownership, and at a market cap of $12 billion, it meant that the average shareholder possessed a rather modest holding of $12,000 in the telecom monopoly. To commemorate the occasion, AT&T flew Denton, his wife, and two of his three small children (an infant stayed behind with relatives) to New York City for pomp and circumstance befitting such an event. Calls rang in from around the country congratulating Denton, who said with pride, "I hope I never have to cash this certificate number one million."

Retired AT&T vice president Arthur Page delivered a strong speech that day, one which all long-term shareholders like Mr. Denton ought to appreciate. Here are some highlights:

It ought to be a normal thing for every family to own a part of the country in which they live. But in the history of mankind it has not been normal. In this country it is. If you add up those who own houses, farms or all or part of a business, you will have the greater part of the population.

You may define that as capitalism. I think it is more accurate to say that it is the natural result of freedom, for any man who is free to do so tries to accumulate for himself, his family and for good causes in which he is interested. ...

You can't run a business by a committee of a hundred thousand or a million people. They must trust some few to act for them. And those who do act in this capacity have a public trust as sacred as that attached to any governmental public office.

Adding the millionth stockholder does not change the responsibilities of directors, but is does make an appropriate occasion to reaffirm our belief that the trust of millions of people deserves the most meticulous care that men can give it, especially as this trust is the basis of the tremendous effectiveness of American industry which makes the strength of the country both in peace and in war. ...

Big business has to be run with an eye to the long view. The research in material things and in management practice, which makes for better and cheaper products, is a long-term project. The building of management that has good men always coming up and opportunities to encourage good men is a long term project. The creation of confidence in the public mind is a long-term project. ...

We are trustees for your investment and the American method of operating big enterprise, and we shall do our utmost to see that it prospers to your benefit.

The seven shares Denton purchased were originally worth $1,078, or $154 per share. Had he held these seven shares for six decades, he would have wound up with a stake in enough spinoffs to have need of a good tax attorney when he wanted to cash out. Between 1951 and 1984, his seven shares became 84 shares worth roughly $5,500, not counting any reinvested dividends. The 1984 Bell System divestiture gave Denton a stake in seven Baby Bells, which have since been reabsorbed into either AT&T or Verizon. He also holds a stake in Alcatel-Lucent and NCR thanks to the two 1996 spinoffs, as well as a stake in Comcast (NASDAQ: CMCSA  ) thanks to that company's acquisition of AT&T Broadband, which was spun off in 2002. Through it all, AT&T has kept paying out dividends, as have many of its spinoffs and divested Baby Bells.

Investing in the Far East
There are plenty of shareholders in Japanese companies as well, and the Tokyo Stock Exchange serves as a gatekeeper to the markets for most of these investors. Established on May 15, 1878, the TSE lagged its Western peers for decades, as Japan also lagged in terms of industry. During World War II, the TSE and other Japanese exchanges were unified as a wartime corporation; the catastrophic end of the war and Japan's capitulation ended official market trading for years. It was not until 1949 that three modern exchanges, including a renewed TSE, were established in Japan. From this war-ravaged revival, the TSE would gradually build a market such as the world may never see again.

The Nikkei 225 is the TSE's primary index, and it's also the most oft-used barometer of Japanese market health. With 7.5 times as many stocks as the Dow Jones Industrial Average (DJINDICES: ^DJI  ) and a similar share-price weighting system (the Nikkei was actually known as the Nikkei Dow Jones Stock Average from 1975 to 1985), it's almost expected that the Nikkei's value should exceed the Dow's -- and for decades, it did.

From 1957 onward, the Nikkei's value exceeded the Dow's, and the greatest discrepancy occurred in the late 1980s. At the height of its 1989 bubble, the Nikkei reached a value more than 14 times greater than the Dow's, and at this point the TSE accounted for 60% of the entire world's combined stock-market capitalization. At the peak of global market values in 2007, it would have taken $36.5 trillion in market cap on one exchange to equal such a feat. The TSE is a long way away: In the spring of 2013, after decades of decline finally began to reverse, its market cap was approximately $4 trillion.

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