Investors dump stocks with ease Brokerages are better equipped than in '87 crash for big sell-off

'Ready for anything'

Computerized trading processes sales, frees staff to handle calls


October 28, 1997|By Mark Guidera | Mark Guidera,SUN STAFF

If yesterday's historic 554-point drop in the Dow Jones industrial average has you debating about dumping your investments or buying new ones, you will be happy to know that even small investors should be able to get through on the telephone to their broker or investment house for guidance, experts say.

The reason: Today's rapid, computerized trading has freed brokers, analysts and others to answer investor questions.

T. Rowe Price and Farris Baker Watts, two of Baltimore's largest investment houses, had no trouble handling yesterday's unusually high volume of calls.

The ubiquitous computer also has made making redemptions from a mutual fund, or transferring money from one fund to another, quick and easy.

That was not the case immediately after the 1987 stock market crash when many investors got busy signals or were placed interminably on hold when they phoned their brokers.

One of the biggest complaints from investors after the 1987 crash was that they couldn't get through to brokers to execute trade orders.

That's because many mutual fund houses didn't have enough staff to handle a sudden, large volume of phone calls. Also, brokers were on the phone trying to get through to traders on the floor.

A telecommunications bottleneck swamped the system, say experts.

"The difference between then and now is the difference between a telephone-dependent market and an electronic-dependent market," said Reid Walker, a spokesman for the National Association for Securities Dealers in Washington. "The majority of transactions, whether they are from institutional or small investors, are handled electronically today."

Steven Norwitz, a spokesman for T. Rowe Price Associates Inc., the mutual fund giant, agreed: "Computers have freed up a lot of people down the line."

That means investors in Price funds should have no problems getting through to representatives today, said Norwitz.

The company has about 25 percent more telephone representatives in its mutual fund operations than it did in 1987.

Despite an unusually heavy volume of telephone calls from mutual fund investors yesterday, the investment house did not experience any backlogs, said Norwitz.

"We are much better prepared [than in 1987]," he said.

Also, large reputable firms like T. Rowe Price, which has more than $125 billion under management, are well-capitalized with reserve funds for protection in case there is a large flow of cash out of their funds.

Robin Oegerle, senior vice president at Ferris, Baker Watts Inc., said the brokerage also is prepared to handle a sudden onslaught of calls from jittery investors today.

"We're a full-service brokerage. Every investor will be able to talk to a human being when they call," said the executive.

George Ferris, chairman of the brokerage, said: "I've been in the business 47 years and there is never a worse time to sell than in a panic market, which is exactly what we had [yesterday]."

The institution intends to have brokers on the phone with its analysts early today to get a grip on what happened yesterday and how the slump may effect the day's trading.

The firm, which has $4.7 billion under management, also intends to have investment executives take time today to contact clients to discuss how yesterday's events may have an effect on their portfolios and what changes might be wise.

Meanwhile, despite the Dow's 554-point drop, small investors appear to be as interested in buying as selling, investment experts said.

Norwitz said T. Rowe Price mutual funds experienced heavy volume on the buy and sell side yesterday. "There are plenty of investors who see this as a buying opportunity. Certainly, many of our fund managers do," he said.

Ferris, Baker Watts views yesterday's plunge as a well-needed correction to bring down overpriced stocks, making them attractive to the conservative investor, which his firm caters to, Ferris said.

But, he warned, "No one can predict the stock market.

"The main reason is you have an intrinsic value and an emotional value. The intrinsic value is pretty easy to get a handle on, but the emotional value of investors is wildly unpredictable. We're ready for anything."

Pub Date: 10/28/97

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