THOM CALANDRA'S STOCKWATCH: Portfolio pain spreads on Main Street
Commentary: Investors favoring independent voices
By Thom Calandra, CBS.MarketWatch.com
Last Update: 10:58 AM ET June 25, 2002
SAN FRANCISCO (CBS.MW) -- Anecdotal signs are growing that the American investing public is near a breaking point on the stock market.
Saddling retirement account losses of 50 percent and more since the March 2000 peak, U.S. investors are slowly acknowledging their portfolio pain.
"We're starting to see individuals accept the bad news about their market returns, and that's a first step," said Richard Gotterer, senior vice president of investment strategy at Gibraltar Bank Wealth Management. "They're lowering their expectations."
The share of U.S. mutual fund assets held in retirement accounts amounts to about a third, according to the Investment Company Institute, the fund industry's trade group. With four of every five mutual funds in the red this year, that's more than just nail-biting for those who retire in 15 years or less.
"We are now in a very prolonged bear market, and I see no short-term relief in sight, or long-term relief for that matter," says Kerry Carmichael, an Arizona lottery winner whose investing strategies are profiled in "How America Made a Fortune and Lost Its Shirt," newly published book by CBS.MarketWatch.com.
Main Street investors are looking away from Wall Street and toward independent researchers to decipher what will almost surely be a third-straight losing year for stocks.
"Richard Russell (editor of the Dow Theory Letters) thinks we are in the second or third inning of this bear market, and that the decline in the indexes has much further to run," says Michael J.Walker, a certified financial planner. "He also thinks that it may take several more years to reach the end of this bear. If he is right, it will be the story of the decade. The amount of financial damage to small investors would be unimaginable."
By some accounts, stock-market investors this year alone have seen more than $1.5 trillion erased from their portfolios.
Russell, the newsletter editor and a big believer in gold, earlier this month catalogued the performance in each of the 20 most widely stocks in Merrill Lynch accounts. Many were down severely, led by AOL Time Warner (AOL: news, chart, profile), AT&T (T: news, chart, profile) and AT&T Wireless Services (AWE: news, chart, profile), which have lost as much as 55 percent since January.
"Somewhere ahead, as night follows day, the public will turn bearish," writes Russell. "I don't know what will turn them bearish. Crushing losses have not turned stockholders bearish. Terrorism has not turned them bearish. Talk of a bear market, which few people seem to believe, has not turned them bearish."
Indeed, many individuals recognize the sky is falling but prefer to believe the stock market will stage a rebound in coming (pick one) weeks, months, years. (See our Top 10 Wall Street Myths.)
"The recent past hasn't been a happy time for a lot of investors. We've all been hurt to some degree by the recent turn of events in the stock market, and while I continue to believe in the stock market's ability to help me plan for my retirement and continue to dollar-cost average even during the worst of times, there are a lot of really scared people out here that feel as though money invested in something as bland and sturdy as an S&P 500 fund (SPY: news, chart, profile) will eventually all just go away, evaporate -- never to be seen again," says investor Ray Carlson.
Investor Jim Rose says pragmatic investors are waiting, rightly, for the floor to fall from the stock market. "You won't have to ask anyone when the real bottom takes place, it will be obvious," Rose says.
How America Lost Its Shirt
"How America Made a Fortune and Lost Its Shirt" examines the portfolio pain of ordinary Americans, and the fading hope Main Street investors hold for a stock market recovery. Steve Gelsi is the author. Thom Calandra is the editor. See more about the book.
Thom Calandra's StockWatch appears each trading day.
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