What local advisers are telling investors
10/6/2008
"This is obviously nothing we've seen before," he said. "We're in new territory. ... The entire screen is red."
After last week's federal bailout, Kirby continued, he was anticipating some further deterioration, "but this seems like a global sell-off."
Kirby is pleased with the work of Treasury Secretary Henry Paulson, who put together the bailout package after a long struggle with Congress.
"Hank has done as good a job as anybody could possibly do," Kirby said. "I don't know the right formula, but at least they're out in front of this now. Something had to be done — they had to stop the bleeding."
Isaac Lucero, a Los Alamos-based financial adviser, has also been listening to clients' concerns.
"It takes a lot of courage to be investing right now," he said. "The only thing that really protects people from this market downturn is how diversified they were among asset classes."
Lucero added: "People who invest need to know the stock market is irrational. There's just no way of saying when the market is going to turn around."
The Dow Jones Industrial Average on Monday was off at one point as much as 800.06 before recovering and closing at 9,955.50, a decline of 369.88. It was the first time since Oct. 26, 2004, that the Dow closed below 10,000.
The Nasdaq closed at 1,862, down 84.43, while the S&P 500 finished at 1,056.89, off 42.34. International markets also dropped sharply.
Los Alamos residents, many of whom work at or have retired from Los Alamos National Laboratory, often have major investments in the stock market, Kirby said.
"On the other hand, most of them are older and have been around" for market fluctuations, even substantial ones, Kirby said. "They seem to be more comfortable with fluctuations in the marketplace."
What surprises Kirby is that even strong companies with steady earnings, such as Johnson & Johnson, took hits Monday.
Another surprise was the perceived vulnerability in recent days of money-market mutual funds, which have long been considered safe havens by prudent investors, Kirby said. "We always thought money-market mutual funds were the safe place to be."
As for younger investors, "I'm telling them to keep putting money in their 401(k) accounts," Kirby said. With dollar-cost averaging (putting money in stocks or mutual funds both when the market is up and when it's down), "they'll have more money when the market comes back."
Kirby is not a fan of gold because, like oil, it bounces around in a way that can't be predicted or understood. "You have to wonder if traders aren't pushing it around," he said. "At one point we were hearing about $200 oil. Has supply and demand changed that much?"
Oil closed at $87.81 Monday, down $6.07. Gold was up $33, closing at $866.20.
Lucero considers the fall in stock prices a chance to buy quality stocks at a discount price. At these low prices for many shares, "it's a true test of what your risk tolerance really is," he said. "For younger investors, without a lot of money, it's really an opportunity to buy shares at a cheap price."
Lucero also advises that both young and old investors should invest on principles, not on predictions about where the market is headed or what the economy will do.
"In other words, in things they can control," he said.
Contact Bob Quick at 986-3011 or bobquick@sfnewmexican.com.