Wall Street High
The midday report from Wall Street was mixed, an electronic hieroglyph of ambiguous numbers and anxious voices. Had the late, lamented bull market suddenly roared back to life? Or was the bear just taking a breather before slouching back in search of fresh meat?
Joseph Shaposhnik, as usual, was unperturbed. Amid the scuffling of Nikes and the crunch of Doritos, the Chatsworth High School senior hastened to reassure his fellow stock club investors that the sky wasn’t falling. Not yet, anyhow. Not so long as the Fed kept lowering interest rates and the anti-tax-cut herd in Congress didn’t do anything dumb.
“We [need] positive news on the earnings front,” Shaposhnik, 17, the club’s founder and president, intoned in calm, CEO-esque cadences to the dozen students clustered in Room E-29 for their weekly powwow. “We also need to see an end of out-flows in mutual funds. And we’d like to see a more aggressive Fed.”
As free-market battle cries go, it wasn’t exactly Gordon Gekko’s “greed is good.” But Shaposhnik’s up-tempo PowerPoint presentation was music to his peers. While politicians quiver and pundits stammer over Wall Street’s swoon, one group of investors seems to be taking the gloomy fiscal news rather well: young people, at least in certain sanguine pockets of Southern California.
For Chatsworth’s student stock club--several of whose members hail from totalitarian regimes where entrepreneurship is a four-letter word--the market’s recent downward spiral wasn’t really discouraging. Or so they claimed. Yeah, like most red-blooded Americans they’d prefer to see their investments go up.
But their eyes are fixed on the long-term prize: college tuition, first car payments, a comfortable future lifestyle. Knowing they’re in the market for the long haul, not the short gain, they project themselves into prosperity. “I knew nothing about stocks, and to me it’s the only way to become a millionaire,” said Kim Nguyen, 17, when asked why she’d joined the stock club.
Shaposhnik, a witty and self-possessed young man, says he gradually has parlayed $3,000 in bar mitzvah gifts into investments worth roughly four times that much--even though the amount has shrunk lately as stocks have fallen. Not all high school students are so lucky. Yet, cushioned by youthful optimism, many young investors perceive Wall Street’s current troubles only as a distant rumble. Unlike their baby boomer parents, obsessed with the minute fibrillations of an economy that grows younger and faster every week, kid investors may be less subject to impulse trading and market envy. Time, they believe, is still on their side.
“I don’t really worry, because it seems like [the stock market] fluctuates all the time,” says Evan Abrams, 17, a senior at private Campbell Hall School in North Hollywood, who has kept a stock portfolio since receiving shares of Disney and other blue-chip commodities for his bar mitzvah.
Abrams’ experience isn’t unusual: Nearly one-third of U.S. children ages 12 to 18 now own stocks, bonds or mutual funds, according to one recent survey. “These kids are much more sophisticated than what I was like when I was a senior,” says Jennifer Tabbush, a former investment banker who taught a course on the stock market at Campbell Hall last year. “I remember being insulated from what was going on in the world. I think the media gets to these kids earlier. They know about the stocks, they know about the brands, they have cell phones, they have pagers.”
Jackie Stein, 18, one of Tabbush’s former students and now a USC freshman, says what’s been happening lately on Wall Street is “scary.” But she believes this is no time for hysterics. “The one thing that people need to understand is that they can’t panic, and the problem with Americans is that they panic.”
Not everyone agrees that panic is inappropriate. Polls show many U.S. adults are downcast about the economy, especially those watching their Nasdaq nest eggs shrivel with every CNBC business update. Robert Butterworth, a Los Angeles child psychologist and media commentator, fears the emotional fallout may land heaviest on children and adolescents raised in the fat years of the Bush-Clinton era.
“Because young people have a very short memory and history in their life, this sense of ‘irrational exuberance’ was more an experience of their current reality,” Butterworth says. “Kids growing up, especially younger ones, have a tendency to trust adults and to think adults know what they’re doing. I don’t think Paine Webber had a little disclaimer. At least cigarette packets have a warning label.”
While Joe the Camel and Bill the Software Tycoon may share a certain iconic appeal to impressionable minds, few members of Chatsworth High’s stock club appear gullibility-prone. Gary Wiessner, the club’s faculty advisor and a former Standard Oil executive, concedes that a handful of his students have been “freaked out” by the Dow’s sudden downturn. “I would always [tell] them that it was a risk. And they said, ‘No, Mr. Wiessner, this is a sure thing.’ They’re in an age group where they’re invincible, they can’t get hurt, they can drive 100 miles an hour on the freeway. Same thing with the stock market.”
But the club’s metier is cool-headed analysis, not exuberance, rational or otherwise. This is partly because its activities are mostly hypothetical: The club runs a virtual stock competition in which members pick stocks and compare how they fare but don’t invest real money. “I won last semester,” says student Craig Simon. “I was promised a prize. I was promised Mr. Wiessner’s watch.”
Another factor may be the club’s ethno-political profile. Among its stalwarts are recent immigrants from Russia, Afghanistan, Korea, Vietnam and Cuba--serious, pragmatic souls toughened by past hardships. What’s a little Fortune 500 meltdown when your family has weathered Soviet Communism or Castro’s workers’ paradise? In its 3-year existence, Chatsworth’s club--which has quintupled its membership from five original students--has survived not only the Nasdaq nose-dive but a fire that gutted part of the school and temporarily forced the club into gypsy mode. It would take more than a dramatic sell-off to shake this crew’s stout capitalist credo.
“If you came to this club to hear a bunch of panicked teenagers, you came to the wrong place,” says Shaposhnik, whose Russian Jewish parents fled their crumbling homeland two decades ago. Today their honors-student son, Mr. Advanced Placement Everything, gets treated like a juvenile Adam Smith, jawing about stocks on news radio station KNX-AM (1070) and being pestered for tips by classmates and sometimes even teachers.
“Joseph thoroughly enjoys the process. He’s into the process rather than just being focused on the outcome,” says advisor Wiessner. Like several of his clubmates, Shaposhnik believes that being a first-generation American “gives you a different perspective on money” and the need to prepare for the future. “My grandparents survived the war in Europe and Russia, so you always need to plan for the bad times,” he says.
Cuban American Chatsworth senior Mike Gomez, 17, believes one reason to invest in stocks is there probably won’t be any Social Security left when his generation retires. “Nothing in this life is guaranteed for us,” he says, “so you have to look out for yourself.”
Probably no generation in history has been indoctrinated in the positive-growth gospel, the national catechism of buy low/sell high, more than the current crop of high schoolers. Last century’s market run-up saw a profusion of “educational” Web sites and no-load mutual fund plans targeted at these first-time investors. Helping your kid build a stock portfolio became a new middle-class parental imperative, like attending soccer matches.
“Some parents think investing is rated R, for adults only, but really it’s rated PG-13. [Kids] can understand a lot if they get some guidance from you,” says Janet Bodnar, a.k.a. Dr. Tightwad, columnist and author of “Dollars & Sense for Kids” (Kiplinger Books, 1999).
Gradually, some high schools got in on the act, offering classes in investing and economics. Newspapers and business journals ran laudatory stories about school stock clubs that had alchemized a few hundred dollars scraped together from bake sales and car washes into tens of thousands in returns.
In California and most other states, kids are restricted from owning stock directly until they reach maturity. But custodial accounts with low minimum-deposit requirements, abetted by the ease and anonymity of Internet investor Web sites, have allowed youngsters not old enough to drink, drive or vote to become Wall Street players. While the goal of these programs and services is, of course, to help under-age investors make money, they’re also touted as educational tools that show kids the Victorian virtues of thrift, patience and deferred gratification.
“We emphasize the long-term approach in all our literature,” says Jeffrey D. Fox, director of educational development for the National Association of Investor Clubs, a nonprofit, largely volunteer organization based in suburban Detroit. “It’s sexier trying to hit home runs, [but] the probability of that is so small.”
Fox says investing in stocks teaches kids valuable life lessons that some adults don’t learn until it’s too late. “They need to know [that] putting a little money away when you’re 15 or 20 can compound into a lot by the time you’re 60. A lot of people think you have to be rich to do it, and you don’t, especially with a club.”
Chatsworth’s Wiessner agrees that it’s good for kids to develop their inner Ben Franklins by penny-saving and penny-earning their way toward a semester of college, a first mortgage payment or a European backpacking trip. But he sounds a cautionary note. “Stockbrokers are salespeople,” he says. “They’re trying to sell stock.”
Where the market heads next is about as easy to predict as the winner of next year’s NCAA hoops tournament. Psychologist Butterworth says he’s already seeing the trickle-down effects from the current slump in canceled family vacations and concerns over how to fund Junior’s freshman year at Stanford. “My 15-year-old asked me how much I’d lost,” Butterworth says with some chagrin. Last fall, the glamorized image of teen financial wizardry took a hit when federal authorities charged a 15-year-old New Jersey boy with stock manipulation.
Stock club guru Shaposhnik admits “there’s always discouragement when you see the market go down, especially the significant drop we’ve seen.” But he expects to recover his losses and be riding higher than ever. “Things will pick up soon,” he predicts, hesitating slightly. “Maybe not soon.”
Hmm, could this be a rare glimmer of doubt?
“It’s tough being in one of your first declines, because you hear people talking about it and it’s people you respect,” he says. “And a lot of what was being said and being done was really unbelievable. They were pumping up stocks. That’s probably a key thing--keeping your emotions out of it. A lot of it is turning off the television.”
