Duncan McIntosh, an Irvine graphic arts consultant, decided Saturday that he has had enough of stocks. Friday's 140.58-point plunge removed his faith in the market, and he plans to sell all of his shares in six stock mutual funds and transfer the money to safer money market funds.
"I'll take what beating I have to," he said, expecting stocks to go down Monday.
On the other hand, Minneapolis money manager Peter L. Mitchelson took Friday's drubbing in stride, although he too was worried about another fall on Monday. Instead of poring over stock lists, he spent a fairly normal Saturday, watching pro football and working on his car.
"We're not going to be doing much on Monday," he said, adding that his firm may start buying stocks if prices fall enough.
Throughout the nation this weekend, money managers and individual investors were plotting different strategies for dealing with Friday's unexpectedly sharp market downturn. Some worried quite a bit, judging by heavier-than-normal calls placed at toll-free mutual fund information lines. Others, however, said they could not do much until Monday anyway.
But one thing they all shared: anxiety that history would repeat itself with a stock free-fall similar to that of Oct. 19, Black Monday, when the Dow Jones industrial average plunged a record 508 points after a 108-point drop the Friday before.
Early indications from money managers, mutual funds and others interviewed by The Times on Saturday were that, although another 500-point collapse is unlikely, a decline is expected, at least at the opening of trading Monday. Confidence, they said, has been shaken badly and many professional short-term traders, individual investors and others may be poised to unload stocks then.
"We expect the market to be down sharply at the opening on Monday," said Roger C. Hamilton, president of Wall, Patterson, Hamilton & Allen, an Atlanta firm with $1.3 billion under management. "I sense a malaise, a disappointment with this type of volatility."
Some selling pressure could come from professional speculators, who had bought stocks heavily last week, partly in response to an announcement of a $4.2-billion takeover of Sterling Drug by a Swiss firm, which raised hopes of a return of megabuck mergers that would drive up stock prices.
Monday Rise Possible
Of course, the market could surprise the pessimists and actually rise on Monday. Many money managers who expect a sell-off on Monday said they are poised to buy shares, hoping to take advantage of lower prices. Some money managers fear that the opening of Monday's trading could be so chaotic that any attempt to sell then would force them to accept fire-sale prices.
"There's not much you can do; you know you're going to get hammered pretty hard on Monday morning, but you can't sell; it would be just insane," said Richard H. Fontaine, a Baltimore money manager with $320 million in his accounts.
"It (Friday's fall) has created an opportunity to buy," said John L. Keller, president of Corinthian Capital, a Denver firm with $100 million under management. He said he spent most of his Saturday putting together a list of stocks to buy on Monday, although he will be careful not to buy all at once if prices turn down sharply.
"We'd be more likely to have buy orders ready (on Monday)," said Greta E. Marshall, investment manager for the $40-billion California Public Employees Retirement System, the nation's largest pension fund. She said the fund has been buying into market declines since Black Monday.
Huge Collapse Held Unlikely
Money managers and other investors said Saturday that a massive collapse like that on Oct. 19 was unlikely because conditions are different now.
Stocks are not as overpriced as they were last fall, when the Dow topped at 2,722.42 in late August. Many investors do not have as high expectations of price rises either.
"Stocks are a much better value today," said Mitchelson, executive vice president of Sit Investment Associates, which manages $2.5 billion in pension funds.
Stock mutual funds, which were pummeled considerably in the October crash, have raised the percentage of their portfolios in cash, giving them less need to unload stocks if shareholders try to withdraw their money. Pension funds also are heavier into cash now.
"In 1988, cash is king," said James P. Owen, managing director of NWQ Investment Management, a Los Angeles firm with $1.1 billion under management that now has only 30% of its assets in stocks, versus 50% before the crash.
Also, the most skittish investors already have left the market, shaken up by the October crash and recent volatility.
Sold Most of Stocks
"I think we're definitely in a bear market," said J. Jay Shapiro, an Encino attorney who said he sold virtually all of his stocks in June and July of last year and has not gotten back into the market since then.
Also boosting confidence was the fact that Friday's drop came on relatively low volume of 197.30 million shares, indicating that there was no panic-type selling, said Maurice Mann, chairman of the Pacific Stock Exchange.
Computerized program trading, in which professional investors trade huge blocks of stocks to profit from price discrepancies between stocks and stock-index futures, accounted for much of the drop, he noted. Also, the East Coast snowstorm kept many potential buyers away Friday.
"I don't think there's blood on the streets this time," Mann said.
Richard Russell, editor and publisher of Dow Theory Letters, a La Jolla newsletter, said he was working on the newsletter over the weekend. "I'm telling people this is still a bear market, that deceptive rallies like the last one are typical of a bear market. It gets everyone excited and then they get clipped."
No Panic Observed
Weekend activity among investors clearly was higher than normal but did not appear to be panicky. Mutual fund officials said calls on Saturday were up but apparently not enough to overload their systems. Operators at four major mutual fund companies--Vanguard, Fidelity, T. Rowe Price and Dreyfus--all answered calls by a Times reporter on the first or second ring and said they were busy but not too busy.
Vanguard's weekend answering service--which takes orders for prospectuses and gives price quotes but does not accept buy and sell orders--was handling about 50% more callers than usual for a Saturday, supervisor Tom Miller said.
Sabiola Jovin, a Bank of New York customer representative who handles orders for Dreyfus mutual funds, said that in seven hours on Saturday only four calls were from clients who wanted to move their money from stock funds into money market funds. No one asked to buy into an equity fund. That marked a shift from the beginning of the week, when people were purchasing equity funds, she said.
'Very Few Transactions'
But the overwhelming majority of calls on Saturday came from customers asking how their funds did Friday, Jovin said. "We are getting a lot more calls . . . (but) mostly what we've had is general information calls, very few transactions."
Some brokerage houses had geared up for higher calling activity over the weekend and Monday, wary of massive phone tie-ups and other problems that gave them a black eye during Black Monday.
Charles Schwab & Co., a major discount brokerage, doubled its number of brokers to 50 from 25 for service this weekend.
A spokesman for Vanguard said the firm was putting in a contingency plan for Monday to use more operators. Fontaine, money manager at the T. Rowe Price mutual fund firm in Baltimore, said he expected that the fund would again use secretaries and even some portfolio managers to help answer an expected deluge of calls on Monday and to "keep shareholders from having nervous breakdowns."
But not all individual investors are bound to break down. Some said Saturday that they are in the market for the long haul and would simply ride out the recent volatility.
'Going to Sit Tight'
"I'm not going to do anything, I'm going to sit tight. . . . I'm not a trader, I'm an investor," said Sam Dulberg, a retired engineer and West Los Angeles investor who is president of the Los Angeles chapter of the American Assn. of Individual Investors.
"I'm going to be watching football," he said Saturday morning. "I like watching football. Sitting down and biting your nails doesn't help one bit."
"I'm not panicking because I'm a long-term investor and some of these dips are good opportunities to buy quality stocks," said James Skaggs, a Riverside heavy-equipment operator. He said he had placed last Wednesday an order to buy an over-the-counter stock as soon as it fell a little further. The stock's price did not drop far enough on Friday for the order to take effect. But Skaggs, convinced that the company has nowhere to go but up, is leaving the order in place and hopes that the price will dip briefly on Monday for him to buy the stock.
Skaggs said he refrained from short-term trading in order to avoid paying frequent stockbroker commissions and income taxes.
"I'm in there for the long run," he said. "That's where the profits are."