Stock Jitters Mostly Resisted in Southland
Monday’s massive stock market sell-off caused jitters all over the world, but many Southern California investors took the free-fall in prices calmly, reaffirming the buy-on-the-dips attitude that has propelled the market mainly upward for years.
At the Laguna Hills Charles Schwab office, which caters to Leisure World residents and employees of high-tech companies, investors came in Monday afternoon after hearing of the downturn--not to place sell orders, but to open new accounts, said office manager Richard Dunn.
“They had missed the market in terms of the appreciation. Now they’re looking for a chance to buy,” he said.
Similarly, Aliso Viejo resident Bob Block stopped by the Kennedy Cabot brokerage in Newport Beach on Monday to deposit more money so he can buy more stock.
“Buy when it’s down,” Block said. “I’m not worried.”
“It’s going to come back up,” agreed Walter Mackelburg of San Clemente, who does most of his trading online. “We just don’t know how long it’s going to take.”
On the Pacific Stock Exchange floor in Los Angeles, traders cheered in relief at an unprecedented halt in trading half an hour early, which stopped the Dow Jones Industrial Average loss at 554 points, or 7.2%, early Monday afternoon.
Nearby, Norma Lizaso rushed to check her three stocks, punching them up on a computer in a downtown Los Angeles office of Schwab.
“What happened?” wailed Lizaso, 56. “My stocks are all down! But I’m not selling--what comes down must go up.”
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Many financial experts were troubled by the early suspension of trading in the nation’s stock markets. It was the first such artificial suspension under rules adopted after the Oct. 19, 1987, market crash, when the Dow declined 508 points, or 22.6%.
Designed to stop panic selling, the trading suspensions were activated twice during Monday’s selling spree, spooking some traders who called them “unnatural.”
“The problem with trading halts is that if they create a sense of doom or historical uniqueness, they can draw more attention to the situation and make people act in a way they wouldn’t act otherwise,” said Alan F. Skrainka, chief market analyst at Edward D. Jones & Co.
“The thing that’s most scary about today is that we’ve never had these market stoppages,” said Jack McSweeney, an Irvine stock trader with nearly 30 years of experience. “I don’t like to stop trading for any reason.” Doug Hale, a Kennedy Cabot stockbroker in Newport Beach, said big institutional investors like pension and mutual funds were the ones triggering the selling Monday.
The experienced investors who drove his volume of calls up 20% Monday were wondering how newcomers to the market might react, Hale said.
“They can be a little skittish with the market turns, ups and downs,” Hale said. “Tomorrow’s going to be more of an indicator of how people are going to act.”
William R. Johnston, president of the New York Stock Exchange, told reporters in a press conference on the trading floor that the “circuit-breaker” trading halts had worked as designed.
“It gives everybody a chance to think, take some time out and deliberate, ask themselves whether the fundamentals have really changed,” Johnston said.
The last time trading was halted on the NYSE was in 1981, when a power failure caused a 24-minute pause. Before that, trading was halted after the 1981 assassination attempt on President Reagan and the 1963 assassination of President Kennedy, Johnston said.
Volume on the New York Stock Exchange surged after the half-hour break, to about 800,000 shares per minute from less than half that amount.
However, the increase in trading doesn’t prove that there was a selling panic, said Lawrence Harris, finance professor at the USC’s Marshall School of Business.
“Remember, there was 30 minutes with no trading, but orders continued to flow in,” he said. The orders that built up during the trading halt had to be executed along with the ones that arrived after trading resumed, boosting the volume, he said.
Still, the atmosphere in the nation’s stock exchanges was mostly quiet and orderly on Monday.
During the first halt in trading on the Pacific Stock Exchange, many traders took time to order sandwiches, eat lunch, put their feet up and relax for 30 minutes.
But as the market opened again, some traders became more edgy and frantic, and there was some shouting, uncharacteristic for the usually quiet PSE.
“It’s a meltdown, baby,” yelled one PSE trader, as the blinking lights signaling dropping stock prices seemed to fill the electronic screens at his post.
In Orange County, where half the population owns stocks, compared to 43% nationally, most investors and their financial advisors took the downturn more in stride.
James Sadler of Laguna Beach, who owns a variety of oil, high-tech and other stocks, said he had expected the market to go down.
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“I wasn’t buying anything [recently], but I’d take a serious look at it now,” Sadler said.
“It’s been hard to find anything out there [to buy],” Sadler said. “You had all these good companies that were overpriced.”
Roger Palley, president of one of Southern California’s biggest and most conservatively managed stock funds, said he and his clients weren’t panicking.
“I’ve been here before. I remember 10 years ago when it went through the same thing,” said Palley, whose Palley-Needelman Asset Management is Orange County’s biggest independent investment manager.
Palley said he had received no calls from clients, who range from charities and the Orange County Performing Arts Center to Chrysler Corp. and basketball rebel Dennis Rodman.
Palley’s stock portfolio of large, established companies lost 4.5% in value Monday, compared to 7.2% for the Dow Jones Industrial Average. He said he believes that interest rates are too low and the economy too strong for the market to fall as far as the 23% of 1987. “It might be vulnerable another 5% or 6%, but I think that’s it,” he said.
Craig Reynolds, a Van Kasper & Co. broker in Newport Beach, said the downturn hasn’t spooked his clientele of affluent individuals. He said he was telling them it was high time for a major sell-off.
“Trees don’t grow to the moon,” he said. “This is a very normal correction and no one’s upset.”
Indeed, some clients were looking for “buying opportunities, along with a little bit of hand-holding,” Reynolds said.
“A guy I just got off the phone with said: ‘Hey--you’re either a big dog or you’re on the fence. And we be big dogs.”’
Gunter Hagen, a retired physicist in Malibu, is a definite big dog--he’s mulling where to invest some of the $100,000 he has set aside in cash.
“This is a major event, but I don’t think anything has changed in the economy. Everything still looks beautiful,” he said. “My philosophy is basically buy and hold, and I don’t think I’ll change that.”
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The number of calls coming in at mutual fund companies’ call centers jumped anywhere from 10% to 30% on news of the market’s sharp decline. For the most part, the increase in calls wasn’t driven by investor panic but by an interest in buying stocks at a lower price.
“The No. 1 type of transaction we saw were telephone purchases into existing funds,” said Chrissy Snyder, vice president of public relations at the Denver-based Janus Fund.
Investment experts credit mutual fund holders’ calm reaction to the Dow’s drop to a greater level of awareness about the contents of their portfolios.
“People say they are in it for the long term until there’s a big downturn,” said Mark Rastello, an investment specialist at Charles Schwab in Los Angeles. “We’ve had some nervous people in here today.”
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Contributing to this report were Times staff writers Thomas S. Mulligan from New York and Debora Vrana, Karen Kaplan, Jennifer Oldham and Barry Stavro from Los Angeles.
