There's a Will to Buy, but Not Always a Way

By JAMES S. GRANELLI and LESLIE EARNEST

Oct. 29, 1997 12 AM PT

SPECIAL TO THE TIMES

LAGUNA HILLS —

They suffered through the worst point drop in stock market history, but by Tuesday many of America’s investors were ready to go bargain hunting.

“I’ll be buying,” said Jim Kelton of Huntington Beach, who had stopped by the Charles Schwab office in Laguna Hills on Tuesday with a check to buy 300 shares of Monsanto. The price was rising so quickly, though, that Kelton had to write another check for an additional $1,000 to cover the purchase.

In a major vote of confidence in America’s economy and financial markets, Main Street went on a shopping spree Tuesday.

Their purchases and sales were part of a record 1.2 billion shares that changed hands Tuesday as the Dow Jones Industrial Average gained 337.17 points to pull it up from its big slide over the past three days.

But all the activity flooded online computer services and phone lines at brokerages and major mutual funds, frustrating investors across the nation.

At the Schwab office, which opened two hours early, investors lined up before computer screens to search for undervalued stocks to buy. Though they traded quips and tried to stay calm as they sipped coffee, they were obviously unhappy with the delays in getting stock information.

“I couldn’t do anything [by telephone] yesterday, and I couldn’t do anything this morning until I got here,” said an angry Wayne Corey of Laguna Niguel, who took 30 minutes in rush-hour traffic Tuesday to get to the Schwab office. “A half-hour is a very long time in this kind of market.”

Corey figures he lost about $8,000 in gains because of the delays.

To accommodate investors and take pressure off the strained telephone and computer systems, Schwab broker Robert Penn offered investors a 20% discount to do their trading over the reception counter. He explained that all the other trading options were swamped.

“Web, phone, everything,” Penn said. “The volume we’re seeing is tremendous, absolutely tremendous.”

What Corey called the “chaos” at Schwab was repeated throughout the Southland as brokers who were faced with huge numbers of “sell” orders on Monday were backlogged with orders from customers to buy stocks Tuesday.

At the full-service brokerages, it also was tough to keep up with the market. Trading was so fast and furious that brokers couldn’t even rely on the Quotron machine, the computer that gives up-to-the-second stock prices.

“The Quotron service is providing a lot of inaccurate quotes,” one PaineWebber broker said. “The information is so far behind the market, you can’t really rely on the price you’re looking at on the screen.”

Brokers at Schwab’s Laguna Hills office were advising clients that the stock price “may or may not be the price quoted at the time the order is placed,” branch manager Richard Dunn said.

Stock quotation vendors such as Bloomberg and Dow Jones were also reporting delays.

The crush of orders was so large at the Merrill Lynch & Co. office in Newport Beach that brokers had to take orders by hand and wire them directly to the New York exchanges, said Max Hampton, the company’s senior resident vice president.

That method of trading hasn’t been used since Merrill set up its computerized system “five or six years ago,” he said.

At Kennedy Cabot & Co.’s Newport Beach branch, foot traffic more than doubled Tuesday and the telephones rang incessantly. Eager customers waited up to 15 minutes to get to their brokers, broker Doug Hale said.

“There’s just a tremendous amount of volume on the market,” Hale said.

At a Van Kasper & Co. office in Newport Beach, broker Craig Reynolds said the “incredibly” busy morning was likely spurred by buy orders that kicked in when the Dow Jones index hit 6,900.

When the Dow sank to that level, “there was like this great sigh of relief and we all started committing money,” Reynolds said.

Schwab’s four national telephone centers that usually answer close to 80,000 customer calls a day took 260,000 calls Tuesday, spokesman Tom Taggart said. Its automated telephone broker service, which normally handles 250,000 calls a day, had 430,000 calls Tuesday.

But while those investors got through, “others experienced delays not only on our Web site but also on our telephone lines,” Taggart said. He didn’t have the volume of customers using direct-dial software or the company’s Internet Web site, which was slow all day.

But the volume was so great that the company had to pull about 300 licensed brokers from other chores at the company’s San Francisco headquarters to handle customer calls, he said.

“We hate for there to be delays, but it’s been pretty extraordinary the last few days,” Taggart said. “We’ve had some branches open early and stay open later.”

But good intentions didn’t satisfy many Schwab customers in Laguna Hills.

“I came over here because I could not make my trades at home,” investor Corey said. “All the Schwab numbers for every type of trading were busy. Obviously, the heavy volume of trading is more than Schwab and other brokerage firms can deal with.”

Essy Amirhekmat of Dana Point tried to unload some stock by phone, but the lines to Schwab were so busy, he drove to the office. He sat frustrated at a computer screen waiting for the system to give him prices he was checking on.

“Normally, we get these prices right away,” said Gene Duguay, a Mission Viejo resident who was seeking information about Black and Decker. “I know there’s news on it, and I can’t get it.”

Corey praised the Schwab workers for “trying to do everything they can.” But, he said, “they’re dealing with a system that’s inadequate.”

Mutual funds across the nation also reported record volume Tuesday, with double the number of calls.

“We even had people who called in to sell and then called back and reversed their decisions,” said Nancy Fisher, spokesman for Putnam Mutual Funds Corp. in Boston.

The flow of cash into the nation’s mutual funds Tuesday was a reversal from Friday and Monday, when an estimated $1.6 billion was pulled from stock funds, according to Trim Tabs Financial Services Inc., a research group that tracks funds.

Fidelity Investments, the nation’s largest mutual-fund company, acknowledged that its systems were strained by the unprecedented volume of calls from investors. Fidelity has a large discount-brokerage operation and an Internet trading system, which also were affected.

Monday’s volume reached 700,000 calls, an all-time high, spokeswoman Anne Crowley said, and Tuesday’s volume--though not tabulated as of late evening--appeared on track to equal or exceed that record. “Phone volume picked up considerably in the evening Monday when people got home from work--and that may happen again on Tuesday night,” Crowley said.

As buyers rode through Monday’s financial storm on Wall Street without panic, analysts said their return as buyers on Tuesday is a testament to their increasing sophistication and their importance in the nation’s financial markets.

“Individuals buy for the long-term story of a company these days--they don’t panic as much,” said Steve Chanecka, president of Informed Investors, a Sacramento firm that educates investors. “They saw that people who got nervous and sold in 1987 really got creamed. They know that if underlying currents are positive you want to hold on or buy more.”

Also contributing to this report were Times staff writers Debora Vrana, Patrice Apodaca, E. Scott Reckard, Thomas Mulligan and Jennifer Oldham.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

What a Difference a Day Makes

Capping two of the most tumultuous days in Wall Street history, the stock market bounced back Tuesday with a buying frenzy. The Dow soared an unprecedented 337 points in one day as volume records were shattered with 1.1 billion shares changing hands.

2:35 EST: Trading halted for 30 minutes

3:30 EST: Trading closed early for day

CLOSING: 7498.32

Tuesday O.C. Volume Leaders (thousands of shares traded)

1. Western Digital: 3,780

2. PairGain Technology: 3,277

3. Fluor Corp.: 1,424

4. Rockwell International: 1,101

5. ICN Pharmaceuticals: 989

6. FileNet Corp.: 951

7. Varco International: 843

8. Datum Inc.: 828