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Fri, Jul 12, 2002 - Page 12 News List

Investors flee US equities

BLOOMBERG , NEW YORK

A trader on the floor of the New York Stock Exchange reacts to the late numbers in New York on Wednesday. Stocks fell sharply for a third-straight day.

PHOTO: AFP

The Baldwin County, Alabama, investment club was formed in 1994 as the bull market for US stocks took off. The club folded last month.

"When the market started to go down, interest was waning, so we said let's just disband," said Maurice Johnson, one of the group's founders. The 69-year-old retired engineer from Elberta, Alabama, said he has lost US$800,000 in the past two years.

Started as a way for retirees to swap stock picks over cookies and coffee in church parishes, Baldwin County club members have little to show for their efforts after a two-year slump in shares. The group's average annual return since 1994 has been just over 1 percent.

With US stocks having shed about US$6.9 trillion since benchmark indexes peaked in March 2000, investors say the fear of losses and the anger over accounting abuses is prompting many to withdraw from the market. A speech by President George W. Bush on Tuesday, aimed at curbing corporate malfeasance, failed to re-instill confidence, they said.

"There is no quick fix," said Leo Grohowski, who oversees US$450 billion as chief investment officer at Deutsche Bank AG's US money-management operation. "For any investor hoping for a quick recovery, you are not going to find it. What ails investors in terms of psychology is not going to be quick to go away."

The pessimism showed yesterday in the biggest one-day rout in the Standard & Poor's 500 Index since the first day of trading after the Sept. 11 attacks. The S&P 500 slid 32.36, or 3.4 percent, to 920.47, its lowest since Nov. 13, 1997.

The Dow Jones Industrial Average declined 282.59 to 8,813.50, its first close below 9,000 this year. The NASDAQ Composite Index dropped to its lowest since May 1997.

The S&P 500, down 19.8 percent this year, is headed for its first three-year losing streak since 1941. The NASDAQ, loaded with computer and telecommunications stocks that plunged when the Internet bubble deflated, has dropped 73 percent from its high.

"I'm the type that stays fully invested no matter what the hell happens out there, but I'm concerned," said Bobbie Rooker, a 66-year-old housewife from Gulf Shores, Alabama.

Some investors have found ways to profit.

Michael Parness, the author of Rule the freakin' markets: how to profit in any market, Bull or Bear, said he made US$125,000 Wednesday by shorting stocks and stock indexes for his hedge fund, the US$3 million Play to Win Fund

"Most people got slaughtered, but since we're picking our shots it doesn't matter. By definition, a market means you can make money both ways."

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