State Economy, Personal Finances Stir Optimism


Increasingly confident in the state’s economy, Southern Californians have a surprisingly healthy view of their personal finances, a new Los Angeles Times poll shows.

Moreover, the survey indicates that many Southland residents have substantial investments in the soaring stock market, and that most who invest have high confidence in the market.

Even so, many also express suspicion about stocks’ rapid rise. And while most people, investors and noninvestors alike, strongly believe they will be able to achieve their financial goals, their admitted inability to find extra money to invest suggests that many are underestimating their long-term financial needs.

The poll, believed to be the most detailed of its kind involving Southern Californians, was conducted in conjunction with The Times’ sold-out Investment Strategies Conference that begins Saturday. A total of 1,009 Southland adults were surveyed last weekend on a broad range of issues related to their personal finances.


Asked first to reflect on the health of the state’s economy, 45% of respondents said California is “going in the right direction,” a sharp increase from 27% who felt that way in a 1994 Times poll and 40% in an October 1996 Times poll.

In contrast, 43% said the state is “on the wrong track,” down from 63% in 1994 and 46% last October.

The rise in Southern Californians’ confidence in the economy reflects the state’s emergence over the last two years from recession.

With job growth finally on the upswing in Southern California, 68% of survey respondents describe their finances as either “very secure” or “fairly secure,” while only 14% believe their finances are “very shaky.”


Four out of five survey respondents said they are satisfied with their standard of living, including 56% who said they consider themselves “entirely” or “mostly” satisfied with their standard of living.

Asked to focus on their financial future--and specifically, “their most important family financial goal"--Southland residents most often listed simply having “enough money” to make ends meet. That was followed by “buying a home,” then retirement savings, then savings to fund their children’s education.

As for accumulating a nest egg, the survey showed that the main savings vehicle for most people is a regular savings account at a bank or thrift. Seventy-four percent of respondents have such an account.

But the next most popular investment is stocks. Forty percent of respondents said they own stocks, a figure that nearly matches the 43% of adult Americans nationwide who said they own stocks, as reported in a new Nasdaq stock market investor survey to be released today.

Individuals’ participation in the market has risen dramatically in this decade--from 21% of Americans in 1990--as Wall Street’s long bull run has lured more people into stocks, and as the shift to 401(k)-type corporate savings plans from traditional pension plans has forced investment decision-making on more workers.

The Times poll shows that Southland investors are generally confident about the stock market. Of those who already own stocks, 53% have either a “great deal” or “a lot” of faith in the market over the next 12 months.

“I’m pretty confident,” said poll respondent Natalie Robbins, 29, assistant producer on a TV show, who with her husband has at least $300,000 in the stock market and recently bought a home. “We’re in it for the long haul. Even if it ebbs, it will flow again.”

Indeed, 83% of respondents who said they own stocks insist they are in the market for the long term.


Yet many Southland investors betray suspicions about the market’s phenomenal performance over the last two years, and wonder if stocks are being set up for a crash such as the one that occurred in the fall of 1987--when popular stock indexes plunged 35%.

“The Dow [index] getting up to 7,000 is ridiculous,” said poll respondent Tim Brown, 49, of Sylmar, who has $120,000 invested in some global mutual funds because he thinks it will hedge against the decline he expects in the U.S. stock market this year. “Companies are just overpriced right now. There will be some type of correction.”

In the Times poll, 54% of respondents overall--investors and noninvestors--said they believe there is a “good chance” or “some chance” of a market crash. Of those who own stocks, 65% think there is at least some chance of a crash.

But if investors are worried about a sharp market decline, most profess that they wouldn’t alter their investment portfolios even if a crash occurred.

Only 12% of those who now own stocks said they would sell some of their holdings if the market plunged. Meanwhile, 11% of share owners said they would buy more in that situation. Forty-nine percent said they would do nothing.

One poll respondent, a 27-year-old graduate student at UCLA, has all her savings--$7,500--in stock mutual funds, even though she thinks a market crash is likely.

“I had some money in a bank CD but it wasn’t doing anything,” she said. “This is the only way I can get the returns I need. I’m here for the long haul.”

Of course, many investment professionals are skeptical that so many small investors would in fact stay put if the market declined precipitously. And one of Wall Street’s major worries is that small investors, now a significant force in the market, could exacerbate any market slide if they began to sell while it was falling sharply.


Poll respondent Don Chergy, 26, a minor league baseball player, said he monitors the stock market every day on the radio. He and his wife have their entire nest egg--$12,000--in stocks.

“We need that money to buy a house,” said Chergy, who lives with his wife in El Segundo. “The market just keeps going up and up. Every day I keep thinking I need to get some type of bond or even a CD just to be safe.”

Poll respondents Paula and the Rev. Thomas Lawrence in Riverside know firsthand the damage of a stock market crash. They lost more than $200,000 of retirement savings when the stock market plummeted in 1987, and they now keep all their savings in the bank.

“We don’t trust the stock market anymore,” said Paula Lawrence, 87.

But if most Southland investors are as confident as they say about stocks, one surprise in the poll is that relatively few current investors plan to invest more in the market over the next 12 months.

Of those who already own stocks, only 23% said they will “definitely” or “probably” increase their investment in the market in the next year. Of nonshareholders, only 18% said they will begin investing this year.

The primary reason given by respondents who said they won’t be investing in stocks this year is that they simply “don’t have the extra dollars” needed to do so. Fifty-eight percent cited that reason, while only 18% said they won’t invest because they don’t trust the market.

In another poll finding that may suggest continuing financial problems for many Southland families after the region’s long recession, 38% of respondents said it is either “somewhat difficult” or “very difficult” for them to make payments on installment loans, car loans and other consumer debt. Fifty percent said making those payments is “very easy” or “somewhat easy.”

The apparent difficulty many people face in generating savings would seem to contradict some of the other poll findings--especially respondents’ confidence in their finances, and in meeting long-term family financial goals.

Fully 79% of respondents said they have “a great deal” or “a lot” of confidence in achieving their main family financial goal, such as retirement or college savings. Only 20% said they don’t have much confidence in meeting their goal.

Financial planners say many families’ biggest problem is that they are underestimating the size of the nest egg they will need for the future.

Poll respondent Bill Guevara, 35, would agree with that. He doesn’t think he could ever save enough to put his three young children through college. “I don’t think the majority of people will be able to afford what it costs,” Guevara said. “There’s no way to save for it, but we will make it happen.”

“Most Southern Californians need to know that whatever they’ve got saved, it’s not enough,” said Neta Gagen, a certified financial planner in Garden Grove. “The best advice is to save as much as you can as often as you can--and invest as wisely as you can.”

Saving regularly and saving specifically through stock investments--because of the market’s historically strong returns over the long haul--is the only way to grow real wealth, Gagen said.

“Where else can I get my money to make a decent return?” agreed poll respondent Glenn Daugherty, 40, of Fontana, who is investing in the stock market in part to save for his two young children’s education.

The survey, conducted by Susan Pinkus, acting director of the Times Poll, has a margin of sampling error of plus or minus 3 percentage points.


Healthier Outlook

Southern Californians are upbeat about meeting their financial goals as their confidence in the state economy grows.

Percentage who feel state is on the right track:

1994: 27%

1997: 45%

Source: L.A. Times Poll


Divergent Views

Stocks are Southern Californians’ most common investment after savings accounts, according to a Times poll. Stock owners expressed high confidence in the near term but worry along with non-investors about the market’s vulnerability to a 1987-type crash.

Percentage of people who own:

Savings Accounts: 74%

Stocks: 40%

Bonds: 33%

Money Market Funds: 29%

Bank CDs: 25%


Stock owners’ faith in the market in next 12 months:

Great Deal or a Lot: 53%

Not Much: 31%

None at All: 6%

Don’t Know: 10%


What is the chance of another market crash?*

Good/Some Chance: 54%

Not Much/No Chance: 30%

Don’t Know: 16%

* Asked of investors and non-investors

Source: Los Angeles Times Poll


How the Poll Was Conducted

The Times Poll contacted 1,009 adults by telephone Feb. 14-16. Numbers were chosen from a list of all exchanges in the counties that make up Southern California, and random-digit dialing techniques were used so that listed and non-listed numbers could be contacted. The sample was weighted slightly to conform with census figures for sex, race, age, education and region. The margin of sampling error for all adults is plus or minus 3 percentage points; for certain subgroups the error margin may be somewhat higher. Poll results can also be affected by other factors, such as question wording and the order in which questions are presented.

Poll data is also available on the World Wide Web at