TOPICS > Economy

Coping With the Markets

July 30, 2002 at 12:00 AM EDT
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JIM LEHRER: The ongoing ups and downs of the stock market is having a tremendous effect on Main Street, as well as Wall Street– so reports our business correspondent, Paul Solman of WGBH-Boston. He talked recently with some individual small investors at the University of Denver’s Daniels School of Business.

PAUL SOLMAN: We’re gathered in Denver with a group of non- professional investors, all of whom have lost money in the stock market. So, in a sense, welcome to you all, but, I guess, thanks for being here. Andy Ades, you’re a homebuilder, right?

ANDY ADES: Right.

PAUL SOLMAN: How much money have you lost?

ANDY ADES: Uh, I would say in the past… over the last two years, a couple hundred thousand.

PAUL SOLMAN: Sal Seinberg?

SUSAN ALBRIGHT: SEINBERG: About $35,000.

PAUL SOLMAN: Pat Wood?

PAT WOOD: I imagine my portfolio is down maybe $35,000. I expect it to turn around, so I’m not worried.

PAUL SOLMAN: Paige Phelps, you work for A… one of, actually, the Dow Jones Industrials. How about you? How much have you lost?

PAT WOOD: About a third of what I had in my 401(k) at its peak.

PAUL SOLMAN: George Seno, you’re the final person here. Media consultant.

GEORGE SENO: Approximately $80,000. And when I say that, I don’t mean I had a principal amount that I put in in the late ’80s and early ’90s, and rode the thing up and rode it back down, I say that I invested heavily January, February… first quarter of 2000, and rode the thing all the way down.

PAUL SOLMAN: So you’re almost a perfect example, if you’ll pardon this statement, of market timing, in the worst sense of the phrase.

GEORGE SENO: Correct.

PAUL SOLMAN: Well, how do you feel about it? I mean, what…

GEORGE SENO: I feel about the same way I did the morning that I was standing next to the Christmas tree and my parents told me, “you know what, there’s no such thing as Santa Claus.” You know, I’m a deer in headlights. I don’t know what to think about the whole market. I tried to do my due diligence when I… when I started buying stocks, and educate myself and watch the Nightly Business News Report and MSNBC.

And I just had several friends, and family, and business associates, that would tell me, “George, you’re too conservative, you’re losing money sitting on the sidelines. Look at the market, the NASDAQ, the Dow, they’re jumping 100, 200 points every day.” And after hearing that and seeing the market climb so much, I finally decided, well, maybe it is time for me to grow up and start playing with the big boys, so to speak. And like you said, it was just, it was just horrible timing. And at this point, I’m just not sure what my next step is going to be.

PAUL SOLMAN: Paige Phelps, you also… you traded on your own account. Did you start getting into this sort of fervor about the market that George is talking about?

PAIGE PHELPS: Well, not really. Actually, until probably two or three years ago, I never even changed my funds within my 401(k). Outside of my 401(k), I’ve been investing for just, oh, probably about three years.

PAUL SOLMAN: By invested, you actually invested online, right?

PAIGE PHELPS: I did. I’ve done all my trading online. I’ve never used a broker except within a… an investment club that I was in for awhile. Otherwise, I’ve done all my trading online. And I’ve done fairly well. I have within my own account lost about $25,000, but I still have some money in there. And I haven’t sold anything. In fact, I’ve looked at it sort of as a buying opportunity. I have probably made three or four trades in the last several weeks.

PAUL SOLMAN: Buying?

PAIGE PHELPS: Buying.

PAUL SOLMAN: So, were you shocked by what happened, or just, “hey, it goes up, it goes down, this is the down?”

PAIGE PHELPS: I wasn’t shocked, but certainly it caught my eye, and I pay attention to it every night. I’m online every day after work checking everything.

PAUL SOLMAN: Were you shocked, Andy?

ANDY ANDES: No, I’m not… well, I think I was shocked for a while as it started to come down. And now it’s something that I see as just part of the whole cycle. No matter how well you research things, I believe if you’re in the stock market, you’re gambling to a certain extent.

PAUL SOLMAN: So, you weren’t shocked by this downturn either?

SAL SEINBERG: I’ve been involved with the stock market for quite a while, but went through the early ’70s, and that wasn’t very pretty. And we had a glimpse of it in the early ’90s again. So no, if you believe in the system, if you study it, and you read the history and literature, it was a question of time.

PAUL SOLMAN: Have any of you actually been dramatically affected in your personal lives by this? Spending less? Are you spending a lot less, Paige Phelps?

PAIGE PHELPS: Well, I’m not. And actually, just this spring, I bought a ski boat, and remodeled my kitchen. So, I’m helping the economy. (Laughs)

PAUL SOLMAN: And we’re proud of you, right?

PAIGE PHELPS: Thank you, yeah. So, I’m grateful that I have a good income, and that I work for a good company that I feel is stable; and feel confident in.

PAUL SOLMAN: You know, there’s a big debate within economics about the so-called wealth effect. That is, does your spending reflect what you think your wealth is? And, of course, if the total wealth of America, or Americans, has gone down by trillions of dollars now, Americans will stop spending, that will send the economy into a tailspin, and so forth. You bucked that trend, I see. What about you? You were the guy who lost, well, everything that he put into the market.

GEORGE SENO: I’ve cut back my spending quite a bit. And before… before the market, both markets, really started to tank hard, I went out and bought a new car, and I took a couple of trips, and I was playing golf a couple days a week with my dad. Well, I’m not doing that right now. (Laughs) Well, yes, I’ve curtailed my spending quite a bit.

PAUL SOLMAN: You, Andy?

ANDY ADES: I am focusing on my business to a much more highly intensive degree than I was in previous years.

PAUL SOLMAN: Are you spending less? Saving more? Saving more for…

ANDY ADES: Yeah, yeah, yeah, definitely. Looking down the road and saying, “I’m not sure where everything is going.” So certainly, there’s more of a sense of caution, now, than there was at our household.

SAL SEINBERG: Well, I haven’t changed. And I have a measure called “the mall effect” that I used in ’87 after the crash. Go the local malls where I was living…

PAUL SOLMAN: Uh-huh.

SAL SEINBERG: …You couldn’t get a parking space. The malls here look about the same as they did two or three years ago.

PAUL SOLMAN: And let’s remind people that the ’87… in ’87, if you looked at the Dow, it went from 2200 to 1700 in a day.

SAL SEINBERG: Yeah, pretty much, right.

PAUL SOLMAN: So, Pat Wood.

PAT WOOD: I’m the senior here, I’m the one that’s retired. I have a fixed income. However, I’m very fortunate. Even though my portfolio is down, I have not needed to withdraw from my portfolio. So, there’s a big difference. You know, I’m very fortunate right now.

PAUL SOLMAN: Compared to other people who are retired.

PAT WOOD: And needed to draw funds out from what they considered their retirement.

PAUL SOLMAN: Who’s to blame for the market’s near collapse, or its certainly dramatic downturn? Who do you blame? Do you blame government deregulation? Do you blame crooked CEO’s? Do you blame investment banks that have, you know, stock analysts who give people bad advice because they’re… they’re incentivized to do so?

PAIGE PHELPS: Well, I just have to say that I do think that the Enron’s and WorldCom’s and the situations that we’ve seen over the last month don’t help. And they certainly don’t help for people like me, who aren’t completely market savvy. And they definitely shake your confidence.

PAUL SOLMAN: To what extent would you blame yourself? Do you say, “gee I just… I got carried away, I shouldn’t have done it, it’s partly my fault?”

PAIGE PHELPS: Well, I’m a single lady, and I’m in my mid-30s. And right now, I realize that I am the only person contributing to my retirement. I don’t really blame the investor. I know that we talk about greed, and we’ve talked a little bit about greed, I don’t necessarily see it as greed. I look at someone like me who is, you know, looking out for myself when I’m 55 and 65 and 75, and right now, I’m the only one looking out for myself. So…

PAUL SOLMAN: So you had to do it?

PAIGE PHELPS; Exactly. I have to do it.

PAUL SOLMAN: George Seno, do you blame yourself?

GEORGE SENO: The reason I blame myself, partially, is because guys like me, um, drove the market… the fundamentals didn’t drive the market up. Guys like me, who were sitting in front of a glorified video game, maybe what appeared to be an online gambling game, drove the thing up. Now, with that said, you know, two or three years down the road, if we get into this cycle again, you know, personally, I feel like I would never invest in a stock that’s not a tangible product. If a company doesn’t make widgets, I’m not going to invest in it. I say that now, but we have short memories, and we’re greedy, and I’m no different than anyone else, and I may be eating my words, and I may find myself buying a company that puts broad, dark fiber into the ground.

You know, there may be a company that in… has their name on a baseball stadium, like Enron Field, or Adelphia Stadium, or you drive past downtown Denver and you see these big blue neon signs that says Qwest. Well, a company that can afford that type of advertising, or that type of office space, no, they could never, they could never go bankrupt, they could never go belly-up. You know, we hope that we learn these lessons, but they may be easily forgotten in a few years.

ANDY ADES: Generally, my thought is, I’m not comfortable with the market right now, even though there are some things that are priced really low, because I believe when I get up in the morning, and I go out to get my newspaper, and I open up the “Wall Street Journal,” I think there is going to bad news in there, I think there’s going to be… something else uncovered, somebody else indicted, something else going wrong. And I think that is more typical of what’s going on in society now. So, people sense that that’s what’s happening, that there’s bad news out there, it’s going to continue to drive it… drive the market down.

PAT WOOD: I keep telling myself, and I do believe it, these are very, very few compared to the many thousands of companies that are out there. So I think the people that haven’t studied the market, I think, perhaps, they are more shaky than I am. I think that this is not going to change overnight. But I still believe that we’ll come back. And I will probably become greedy again.

PAUL SOLMAN: Thank you all very much, I appreciate it.

ALL: Thank you.