Local Investors Greet Dow Decline as an Opportunity
When the Dow Jones industrial average plummeted by more than 500 points, Carol Haverty watched about 16% of her total investments wash down the drain.
But the long-term investor did not panic and sell. She took the second-worst point drop in history as a chance to buy stocks at a low price.
The Camarillo resident was not alone in the stock market buying frenzy on Tuesday, when the Dow bounced back by nearly 300 points.
“Having lived through the 1987 crash, I take these things as an opportunity,” said Haverty, who buys stocks in small increments in what is called a “dollar cost averaging” method.
She bought $1,200 in Microsoft stock on Tuesday, one of the major software, computer and telecommunications companies hardest hit by Monday’s 512-point plunge.
“There are always companies that people lust after,” Haverty said. “The companies everyone wants in their portfolio, but are too expensive. This is the time to buy stocks in those companies.
“The tide is low,” she continued. “But just because the tide is low it doesn’t mean the ships are sinking. . . . I’ll invest more this month because I’ll probably get more bang for my buck.”
Other local investors also refrained from the knee-jerk reaction of unloading their stocks during Monday’s decline.
Lois Hanson, a member of the Model Investment Club of Channel Islands, said she has not calculated how much she lost as a result of the point drop, but she knows she’s down substantially.
Still, she also saw the market dive as an investment opportunity.
“If it goes down again, we’ll probably buy some more,” said Hanson, who lives in Goleta. “We buy for the long term. You buy when you see a stock price that’s nice. And there were some nice ones yesterday.”
Not all investors were so sanguine.
Bill Ott, who manages the brokerage firm A.G. Edwards & Sons in Oxnard, spent the better part of his day talking to panicked clients.
His telephone has barely stopped ringing since Monday’s plunge.
Although many distraught clients have wanted to dump their stocks, Ott has mostly advised against it.
“The sky is not falling,” Ott said. “People need to take a couple of aspirin, take a couple of Tums and take a good look at some of the solid companies that have been knocked down in price. . . . The best time to buy stocks is when it’s emotionally the toughest.”
Ott has tried to quell his clients’ fears in what he calls emotional “hand-holding.”
“Let’s focus on reality,” Ott said. “Is our economy having problems? Are our inflation rates going up? Are our interest rates going up? No. The U.S. economy is on stable ground. There’s no reason to panic.”
Joe McClure, an officer at Economic Development Collaborate of Ventura County, explained it this way:
“Picture a girl in an elevator playing with a yo-yo,” McClure said in his Camarillo office. “Everyone is focusing on the yo-yo, which is going up and down, up and down. But people need to step back and look at the girl, who is still going up.”
The wildly fluctuating market can be detrimental for short-term investors who want to make a fast buck, he said.
“If you’re in it for the long haul, don’t panic,” McClure said. “But if you’re in it for the short haul, get out now or you’ll lose your shirt.”
Although people panicked when the points began to drop, the plunge was not unexpected, said Mark Schniepp, director of the UCSB Economic Forecast Project, which includes analysis of Ventura County.
Stocks had been rising for nearly four consecutive years and the Dow hit a historic high six weeks ago, but a decline followed.
“The market has been declining in general with Monday being the coup de grace, or certainly the icing on the cake,” Schniepp said. “The correction was expected and in general welcome. It had to happen at some point, and some people thought, let’s just get it out of the way.”
Schniepp said the economy may be affected if investors who do not appear wealthy on paper stop spending money on luxury items such as new cars, boats or appliances.
“Their perception of wealth isn’t as high,” Schniepp said. “Even if it’s just on paper, they don’t feel as wealthy anymore. Their spending could be curtailed.”
That’s not the case with investor Nancy Jaeger of Camarillo. Although she had lost about $5,000 by Tuesday, she’s not changing a thing about her lifestyle.
“I watched the value of my portfolio drop, and today it came back up more than half,” Jaeger said Tuesday. “I’ve seen this all before. We have these drops. But the historical trend is the stock market over the long term is up.”
* MAIN STORY: A1
