Some long-term investors holding, buying
The reaction to three days of consecutive stock market declines is being met with relative calm by some local investors.
Carson City investment adviser Clifton Maclin said Tuesday that investors’ attitudes this week have been typical of the United States in large-magnitude crises.
Now, he says, barring a continued decline, historical averages indicate a rebound is forthcoming.
But unlike the day traders and nervous investors he says sparked the initial sell-off, Maclin considers the ailing condition of the market to be an opportunity to buy on the low end.
“That is what I call scared money,” Maclin said, referring to the sell-off.
“Insurance; airlines; transportation companies; resorts. They are going to have some severe problems. That will last until the government comes up with definitive solutions to security issues. But I don’t doubt that will happen.”
Maclin said for the stock market portions of his customers’ portfolios, he is compiling a list of 40 companies which show a year-in, year-out history of double digit returns and low debt.
“The people selling are uninformed,” he said. “When there is a scare, people throw out the baby with the bath water.”
His advice to clients is to stay in the market if already invested, and to stay out until the end of October with new investments.
Maclin said the cyclical uncertainty of October – fueled by the fiscal year endings of some mutual funds and the drop-off in agriculture-related business – makes it a bad month in which to invest.
Adviser Bill Creekbaum, a Carson City resident working in Reno, shares Maclin’s principle of staying away from the nervous selling that has been a hallmark of recent stock market activity and concentrating instead on long-term portfolio planning.
He said by tracking 18 different crises since the fall of France in the 1940s, initial drops in the market averaged 8.9 percent before a short-term rebound.
“I didn’t sell anything today,” Creekbaum said at the close of business Monday. That day the Dow fell more than 7 percent, placing Monday among the worst sell-offs in history.
In the ensuing days he has had some clients redistribute portfolio assets, but no panicked selling.
Instead, Creekbaum’s clients have been in a buying mood, confident that while in sub-9,000-point terrain there is long-term money to be made in the Dow.
“We add assets at times that seem strategically proper; this is one of those times,” Creekbaum said. “High-single to low-double digit returns is very realistic given what we’ve been handed and historically what the market has returned.”
But Creekbaum has apprehensions about the speed of recovery of today’s market. He said the way that stocks reacted this week indicate real market problems.
“Everybody blames the short-sellers, but they represent such a small percentage on the big board,” he said. With that in mind, “overwhelmingly, the customers are staying the course.”
In addition to cyclical volatility, Maclin’s decision to wait out the month is also tendered by the possibility of developments on the international front. He said there is a real possibility that last week’s terrorist attacks are not isolated incidents.
“If the Taliban turns Osama bin Laden over to the United Nations, that could get an emotional response (by investors), and that’s not necessarily a good thing,” he said. “The problem with terrorism is that it is not going to go away that fast.
“They might be packing a second punch.”