Portfolio pain spreads on Main Street
Commentary: Investors favoring independent voices
By Thom Calandra, CBS.MarketWatch.com
Last Update: 10:58 AM ET Jun 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), ATandT
(T) and ATandT Wireless Services (AWE), 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 SandP 500 fund (SPY) will
eventually all just go away, evaporate -- never to be seen again," says
investor Ray Carlson.
Some of us are wondering just what will color skies dark. "Even amongst those
of us who are absolutely sure the stock market is going down quite a bit from
here, there is wild divergence on what sort of economic climate is likely to
follow: inflation, deflation, stagflation or a Japanese scenario of mild but
persistent deflation with continual recessions," says investor Steve Rudek.
Investor Jim Rose says all of us will know when the stock market's floor gives
way. "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.
Thom Calandra's StockWatch appears each trading day. |
