Strategies Diverge
Danny Hakim New York Times Service
Wednesday, May 9, 2001
GREENDALE, Wisconsin The Reverend Douglas Schroeder
still believes in technology stocks. His father, the Reverend Paul
Schroeder, has lost his faith.
On Palm Sunday, after presiding over two services, they debated
over lunch in the suburbs of Milwaukee.
A couple of weeks earlier, the elder Mr. Schroeder, 67, sold all of
his technology stocks. He had experienced steep losses in the likes
of EMC Corp., the data storage company, and Cisco Systems
Inc., the networking titan, and used his credit card to pay off loans
from his broker that he had used to multiply his bets. He had
flourished in a bull market, but had struggled in a bear market.
"How many times do you have to be hit in the head?" he asked.
The younger Mr. Schroeder, 38, has also taken his hits. His
Ameritrade Inc. account is invested entirely in technology stocks.
He lost about half his initial investment, and his account has fallen
much further from its peak. He has an equally besieged retirement
account, heavy with technology-sector funds.
"Diversify?" the younger Mr. Schroeder mulled the question. "No,
I'm going to still stay all tech." After more than a year of market
hemorrhaging, two types of individual investors are emerging from
the wreckage. Some, like the elder Mr. Schroeder, are fleeing into
shelters ignored during the bull market, like bonds and money
market funds. He shuffled all his technology investments into
old-economy stocks, like Cooper Tire Rubber Co. and K-Mart
Corp. For a while, at least.
Others, like his son, never contemplated capitulation, and their
numbers are surprising. The movement out of stock mutual funds
has been relatively slim compared with previous market droughts.
And at the first sign of a rally in April, investors piled back into
growth funds, and technology stocks surged despite continually
gloomy earnings reports. The forgiving mood of investors indicates
there is still a disconnection between investor behavior and reality.
So what keeps the fire burning bright?
For answers, we turned to two men who spend their lives
preaching about faith, but who also embraced the great American
pastime of the last decade, the stock market. They share the pulpit
of Our Shepherd Lutheran Church in Greendale, Wisconsin.
The pastors, in some ways, are peas in a pod. Both agree that the
church's money should be mostly in bonds, contribute amply to
their church and brim with self-confidence.
In some ways, though, they are opposites, with their investing
styles the least of their differences. There is the younger Mr.
Schroeder, the lanky exercise enthusiast, and his father, the
curmudgeon.
The elder Mr. Schroeder explained his investing philosophy. His
first stock pick was Brunswick Corp., a bowling equipment
maker, in 1958. He has dabbled in real estate, options and
commodities, forays that twice pushed him near bankruptcy.
He said he intended to expire in the pulpit, but he trades as if he is
trying to make a bit more before he folds up the tent. His stack of
trading records from last year is about two inches (five
centimeters) high.
He said he changes his mind with some frequency. In mid-March,
he proclaimed he was holding on to Cisco, Tellabs Inc. and his
other technology holdings. And, he was still using the maximum
amount of leverage, or borrowed money, from Fidelity
Investments, his broker.
"I have an extremely high risk level," he said. "I've been extremely
close to death six times."
But by the end of March, he said, he had been chilled by yet
another steep one-day market drop and by a CNBC report on
Cisco.
The elder Mr. Schroeder decided to sit on the sidelines and keep
his money in cash for a while. And he did.
For a week.
Then he bought Cooper Tire, Allete, a Minnesota utility, and
Christopher Banks Corp., a clothing retailer.
"I don't find it difficult to risk a lot," the elder Mr. Schroeder said.
"I believe everything belongs to God. What He gives you, we are
stewards of that."
The next day, Monday, April 10, the two prepared for the Easter
week.
The day started out bullish on Wall Street. The Nasdaq was up.
The younger Mr. Schroeder trades less than his father, and when
he does, it is in increments. He rejects diversification and believes
that an investor his age will profit by holding on. "I have a feeling
tech isn't going to go away," he said. Today, he is pointing to the
ticker symbol JDSU, an entry in a bookkeeping program on his
Macintosh computer. Doug has lost 85 percent of his investment in
the company, JDS Uniphase Corp. He scans the damaged goods
in his Ameritrade account: LSI Logic Corp., Flextronics
International, Qualcomm Inc. From its peak, he has lost about half
of his investment.
Still, he believes.
His father, the new convert to skepticism, came into the office, and
his son began to needle him.
"The news on Pepsi this morning isn't good," the son said. He
would never buy an old-fashioned stock like Pepsi Inc., but he
knew his father held a large stake in a retirement fund. "Maybe
you should sell?" the younger Mr. Schroeder said. His father's
thick eyebrows were knit into tight angles. "Pepsi," he said, "is a
good company." The elder Mr. Schroeder also has a Macintosh,
but he only uses it to keep track of the church's membership.
Instead, he interacts with the market the old-fashioned way:
Barron's. Worth. Business Week.
The next week, in mid-April, the younger Mr. Schroeder's tech
stocks were rising again and his father could resist his trading urge
no longer. He dumped all his old-economy stocks and piled into
Nasdaq 100 shares.
"When I saw the Dow holding over 10,000, I thought if it held, we
could go further," he said, referring to the market's broad early
April rally. At worst, the market was near its bottom, he figured. |
