At Cape Cod Barber Shop, Slumping Stocks Clip Buzz
By ROBERT TOMSHO
Staff Reporter of THE WALL STREET JOURNAL
DENNIS, Mass. -- Having bet his own future on the stock market, William Flynn still keeps the television in his barbershop tuned to business news channels. These days, though, he believes almost nothing of what he hears.
"All they ever say is, 'Buy, buy, buy,' all the way down from $100 a share to bankruptcy," the burly 63-year-old barber said while giving a local teenager a close crop one muggy July afternoon. "Now, they give a stock tip and I stay as far away from it as I can. Nobody trusts anyone any more."
Located in a clapboard building beside a busy state highway in this bustling Cape Cod tourist town, Bill's Barber Shop used to be a place where local businessmen gathered to get an $11 trim and swap tips about hot technology stocks. But with the market in a slump and the corporate world awash in one scandal after another, few among the old crowd have the stomach to talk stocks with Mr. Flynn, whose retirement dreams have been crushed as the market's turmoil has sent his portfolio down 87%.
Given what Mr. Flynn has been through, he rarely gets excited -- and even is a bit cynical -- on rare days when the market goes up sharply, as it did in holiday-shortened trading Friday. "I'm glad the market closed at one o'clock so that it didn't get a chance to drop down to even for the day," he says.
"I feel bad for Bill," says Rick Capobianco, the local Maytag dealer, who has cut back deeply on his own stock purchases and tucked his 16-year-old son's college tuition money safely away in a bank account. "He still has the CNBC on, but we don't sit around and talk about the stocks too much any more."
Mr. Flynn's shop was a far different place when it was first profiled in The Wall Street Journal, in a page one article March 13, 2000, just days after the Nasdaq Stock Market peaked. Back then, it seemed as if no market bet could go south for long, and many friends and customers moved their money based on advice from Mr. Flynn. For his part, the mustachioed barber had visions of becoming a stock-market millionaire and retiring. He almost made it, amassing high-tech stocks that topped out at $834,000 in mid-September 2000.
Even after the high-tech bubble burst, Mr. Flynn continued investing in the market, believing a turnaround just had to be in the wings. But month after month, his hopes were dashed. Amid mounting losses in his portfolio, in February 2001, he had to sell $75,000 of stock to cover a margin call to pay off money he borrowed from his brokerage firm to buy stock, and his portfolio's value sank to about $250,000.
Everything he's done has soured: Not a single of the 20 stocks now in his portfolio is valued at more than he paid for it. He has invested in eight initial public offerings, but five of the related companies have gone bankrupt. Mr. Flynn still owns 5,000 shares of EMC Corp., the data-storage concern that he follows like a religion, but it is trading at around $7, down from well over $100 a share in September 2000.
He has lost money even on nontech stocks in his portfolio, such as Wal-Mart Stores Inc. and Independent Bank Corp. And the only purchase he has made recently -- 300 shares of American Science & Engineering Inc., a maker of X-ray detection equipment for airports, several weeks ago -- already is down 16%.
Bottom line: When Mr. Flynn sat down at his back-office computer last week to check his portfolio, its value had dwindled to $103,000 -- roughly $50,000 less than the barber has invested in the market since 1991. "It means that I'm looking at another 10 years of work instead of being retired," says Mr. Flynn, who lately has been taking longer walks in the evening with his wife, Jean.
"We're going to be working longer, so we have to get ourselves in better shape," adds Mrs. Flynn, a secretary at a local insurance firm who doesn't expect Wall Street to recover within her lifetime.
Markets rise and markets fall, of course. And, being an investor who returned to stocks after having a $50,000 portfolio wiped out in the 1987 crash, Mr. Flynn is still convinced that pent-up demand for new computers and other high-tech equipment will spark a market rebound within three years. But even if that happens, Mr. Flynn says investing will never be the same because of what he has seen unfolding on the screen of his shop's television in recent months.
Brokerage firms investigated for suspect analysis. Big accounting firms shredding documents. Chief executives accused of cooking the books. "It's sickening, absolutely sickening," says Mr. Flynn, who adds that he has been badly shaken by the stories of employees and retirees who have lost their life savings amid the tumult surround companies like Enron Corp., Arthur Andersen LLP and Tyco International Ltd. "The greed out there among these CEOs is overwhelming," he notes. "I can't really describe my feelings about these guys."
Indeed, while Wall Street watchers are still trying to determine the long-term effects of corporate corruption on the market, it has already had an impact on the outlooks of Mr. Flynn and his investor friends.
Mr. Capobianco, the Maytag dealer, used to make about $4,500 a month in stock trades. Now, he largely avoids the market and, instead, has bought the building that houses one of his two appliance stores. The trouble at companies such as WorldCom Inc. is a major reason for the change in investment strategy. "When people like that are lying, it's pretty scary," the 51-year-old explains.
Michael McDonald, another Bill's regular, hasn't sold any of the stock he has accumulated over the years in such companies as EMC, AOL Time Warner Inc. and Cisco Systems Inc. Still, having seen the value of his portfolio plummet to about $20,000, from around $60,000 two years ago, the 31-year-old father of four isn't planning to put any new money into a market. "Everybody got greedy and all of a sudden we're back to reality," says Mr. McDonald, a salesman for Anheuser-Busch Cos. "I'd be leery right now of buying anything."
Rick Smithson, who owns a local Shell service station, is one of the few fortunate investors in the crowd that relied on Mr. Flynn's advice when he purchased EMC and other stocks in the late 1990s. After quadrupling his money, he cashed out of the market in 1999 to buy a new home on the Cape, where property values are soaring. Mr. Smithson has toyed with the idea of getting back into stocks and even set up a Charles Schwab trading account a few months ago. But, shaken by corporate corruption, he recently closed the account without making a single trade and is planning to buy more land. "With real estate," he says, "I can see it, touch it and feel it."
Back at the barbershop, Mr. Flynn fields occasional calls from distant investors who have read about his stock picks. Meanwhile, vacationing executives from EMC, which is based in Hopkinton, Mass. -- and is still, far and away, his sentimental favorite -- sometimes stop in for haircuts and Mr. Flynn recently went to the company's annual meeting. Even so, the barber vows not to buy another share of the company's slumping stock until it hits $5 a share -- which he wagers is as low as it can go.
Indeed, while mostly avoiding investments in more stocks, Mr. Flynn has been driving to a casino in nearby Connecticut every Monday to play blackjack and poker. "I do better there that I do in the market," notes Mr. Flynn.
As for a retirement date, the stock-picking barber won't even hazard a guess. "My only hope now is to go public and have Arthur Andersen do my books," he quips, while brushing a clump of freshly cut hair from a customer's shoulders. "Maybe they'd come up with some creative bookkeeping."
Write to Robert Tomsho at rob.tomsho@wsj.com
Updated July 8, 2002 6:41 p.m. EDT |
