More people are exposed in this roaring bull market

November 08, 1999|By Robert Reno

NEW YORK More than 48 percent of American households now own stocks, up from only 19 percent in 1983.

This glorious news comes from a survey of 4,843 households conducted by the Securities Industries Association and the Investment Company Institute and may well represent one of the most spectacular expansions of the stock-holding class in recorded history.

But it also tells us a lot of other things, among them that more than half of households don't own a dime in stocks, still haven't even a pauper's share in the greatest bull market in history.

A typical American household is more likely to own a home (66 percent), a VCR (88 percent) or a cordless phone (now pushing 63 percent). Owning stock is even less like baking an apple pie when you consider that many individual stock portfolios represent marginal holdings in mutual funds and retirement accounts and that the great majority of all stock is held by the richest 10 percent of the population.

These are the people most likely to make large campaign contributions, which explains, oddly enough, why there is so much support in Congress for giving capital gains even more favorable tax treatment than they already enjoy.

I don't mean to disparage results of a survey that the securities industry has gone to so much trouble to bring us and of which it is so justifiably proud. It has great significance but not all of it positive for the economy and the consumer. Because more people are naked in this bull market, more people are exposed to its caprice.

Ponzi schemes and other frauds designed to separate investors from their capital have multiplied. The level of sophistication of some of the defrauded suggests that among the more innocent population the aged, the uninformed, the trusting the pickings have become irresistibly ripe and bountiful.

Federal agents recently busted a $314 million scheme in Fort Lauderdale, Fla., that they say included many professional athletes and their supposedly vigilant financial advisers as clients.

Of equal concern is the presence in today's stock market of so many new investors who wouldn't know a bear market if it lived in the woods and ate porridge.

About 46 percent of the people now in the market never owned a stock before 1990. They have no experience with the jitters suffered by investors in the debacle of 1929. They never bit their nails through the 17-year doldrums that persisted from 1965, when the Dow Jones industrial average stood at just over 900, to 1982, when it was still wallowing just below 900.

They haven't even experienced the crash of 1987. What all these investors will do in the next major market "correction," and whether they will intensify the panic factor or mitigate it, is a question that represents some of the reefs, icebergs and unlit hazards that inhabit the uncharted seas in which this market sails so blithely.

Robert Reno is a Newsday columnist.

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