from this link nytimes.com polls show it is not nukes, middle east, terrorism that is the number one worry of investors <<With returns like these, it is perhaps not surprising that the number of investors who say that now is a good time to invest has dropped to levels not recorded since September 2001, according to the investor optimism poll conducted monthly by UBS and Gallup.
The results of the May poll also indicate where investors think the market is most vulnerable. Their largest concern is dubious accounting practices: 84 percent feel that this issue is punishing stock prices, ranking it ahead of conflict in the Middle East and terrorism. Almost two-thirds of those polled say conflicts of interest between brokerage firms' research departments and investment banking activities are hurting the investment climate.
The poll results also show how much damage the Enron eruption has done to investor confidence. Nearly three-quarters of investors surveyed — 71 percent — said they believe questionable accounting practices are widespread in business, up from 62 percent in February.
As a result, 40 percent of the 1,002 investors responding to the poll say they are less likely to invest in stocks or mutual funds. That figure was 34 percent in February.
It appears unlikely that investor confidence will jump anytime soon. Jason Trennert, managing director and investment strategist at the I.S.I. Group, a brokerage firm in New York, said regulatory investigations into the business practices of brokerage firms were a cloud over the industry that was not going away.
"You're going to continue to see things coming out every day that question how Wall Street does business, and that is not helpful for investor confidence," he said. "Longer term, reforms will be positive to the extent that it will make investors more confident, but the investigations will be a heavy headwind for investor confidence."
Judging from the e-mail messages he has received recently from investors, David M. Blitzer, chief investment strategist at Standard & Poor's, said investors appeared deeply frustrated today.
"In the scandals of the last year, a few people have gotten rich and most investors have gotten poorer," Mr. Blitzer said. "I think they want a sense that it is a fair game and that everybody has an equal chance to win or lose. People seem to feel that for the matter to be settled, somebody is going to have to go to jail."
Mr. Blitzer said he is amazed at the number of investors who have stayed in the market throughout the crashing fall of the Internet and telecommunications stocks and, now, almost daily reports of fresh accounting fiascos at big public companies. He fears that if significant changes are not made to restore investor confidence, many will drift away from stocks.
Volume figures show that this drift has begun, at least among individual investors. While trading volume is still high on the New York Stock Exchange, average daily trades at Charles Schwab in April came in at 192,900, down from 235,000 a year earlier. In March 2000, when the market peaked, Schwab clients conducted 420,100 trades daily.
Mitchell H. Caplan, president of the E*Trade Group, characterized many of his firm's customers — particularly those with more than $100,000 in investable assets — as frozen. "People are trying to figure out what to do and more often than not they are going to cash," he said.
James B. Stack, president of InvesTech Research in Whitefish, Mont., recently returned from the Las Vegas Money Show, a four-day conference where purveyors of investment information make presentations to individual investors. Mr. Stack met hundreds of investors at the show and has concluded that most of them are only now beginning to realize that the $5 trillion they have lost in stocks is not coming back anytime soon, if ever.
"What was lost in paper wealth was real money," Mr. Stack said. "It may not have been booked profits in investor portfolios, but it was perceived as retirement funds. The pain of today is going to evolve into anger; unfortunately, along the way comes mistrust. They're asking: `Who's telling us the truth? Who's giving us the real numbers?' "
One measure of wealth noted by Moody's Investors Service shows how much poorer consumers are today than they were just two years ago. In the first quarter of this year, real liquid financial assets per worker were down an estimated 24 percent from the high of early 2000. Americans are still 36 percent wealthier than they were from 1991 through 1995, but the recent decline is troubling nonetheless.
"Real wealth might seem ample compared to its historical trend," said John Lonski, chief economist at Moody's. "But an extended slide by equity prices could be damaging. Consumer confidence would suffer, and businesses would be less inclined to pursue expansion amid slumping equities. Declining share prices would curb both capital spending and hiring activity."
Perhaps reflecting their fears about investment prospects, consumers are less confident about the possibilities for income growth than they have been in recent years. In a recent confidence report cited by Moody's, tracking the first five months of 2002, only 21 percent of respondents expect higher incomes in six months. That is below the 25.7 percent average from 1996 to 2000 and below the 23.9 percent of a year ago.
The trouble with the current market malaise may come down to this: While nobody wants a frightened investor class, few think that its suspicions or frustrations are irrational. "As the average investor learns more about the shenanigans that went on, he is going to get mad and he has every right to be mad," Mr. Stack said. "You hate to see it because the small investor is paying the steepest price, not because they lost the most but because they lost the greatest amount of what they could not afford to lose.">> quote taken from this feature article
What If Investors Won't Join the Party?
By GRETCHEN MORGENSON
p.s. Last minutes of Kings/Lakers---come on Kings, do it!!!
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