No sign of panic as Dow falls 439

Quiet: Not a single panicky client calls as a local broker watches the Dow plummet before rebounding.

July 16, 2002|By Julie Bell | Julie Bell,SUN STAFF

Investment manager Jim Hartman's computer terminal was blinking red as the stock market plunged into a searing nose dive early yesterday afternoon.

As it did, it trimmed millions from his clients' assets and threatened to push down his own income - largely fees figured as a percentage of their portfolios.

But Hartman, a first vice president of investments in Legg Mason Wood Walker's private client group, was the picture of composure. He had yet to get a single call from a client. His cuff links were still neatly in place. His green tie was firmly knotted at the throat. His disposition appeared as sunny as the downtown Baltimore day visible outside his 19th floor window.

"This bear market's 27 months old," he said. "At this point, 99 percent of my clients have accepted where we are and ... don't want to sell at these prices."

That a man who makes his living overseeing about $120 million in assets for 4,000 individuals - about 3,500 of them in 401(k)s - could have a calm day amid yesterday's market turbulence shows how traditional brokerages such as Legg Mason have changed in recent years.

With low-commission brokers such as E*Trade and Charles Schwab offering a cheap way for individuals to buy and sell stock, Legg Mason has turned increasingly to fee-based retirement advice and asset management.

That means Hartman, who still handles some trades, largely dispenses advice and leaves the actual buying and selling of assets to other traders, including mutual fund managers.

Hartman said yesterday's sell-off appeared largely to be the work of computerized program trading, short-selling (investors looking to profit by falling stock prices) and mutual fund managers looking for stocks to redeem as some investors threw in the towel.

The retreat pushed the Dow down as low as 8,244.87 - a decline of 439 points - before buyers came in at day's end to bid it back up to 8,639.19, down 45.34 points for the day.

The quiet in Hartman's office was a far cry from the days early in the bear market. Then his phone jangled with concerned customers clamoring for answers as to when the carnage would stop.

Hartman, who left the accounting profession to join Legg Mason in 1993 - well after the last serious market downturn in the early 1970s - considers the last 2 1/2 years the most stressful of his 35 years.

"As advisers, many of us lost a lot of sleep saying, `What could I have done differently?'" Hartman said. But now, "it's almost like I have forgiven myself for not being personally responsible for the market downturn."

No one could have predicted Sept. 11 ... then Enron ... then WorldCom, he thinks.

It also helps that Hartman believes the end of the bear market is near, an impression yesterday's intra-day market comeback helped solidify in his mind. As the Dow traded down more than 300 points just before 2 p.m., he busied himself preparing a presentation for new 401(k) clients at a Manhattan-based seller of online education materials. Just after 3 p.m., he took time out to call a client to touch base.

"Did you get your June statement?" he asked the woman, who along with her husband is retired. "What did you think?"

Hartman then launched into a litany of reasons why the woman should stay put, especially after recently shifting some of her assets on his advice. He quoted from recent data from Ned Davis Research Inc., telling her that 90 percent of New York Stock Exchange shares were below their 10-week moving average, but he suggested, based on the research, that it was no cause for panic. Stocks have always traded higher afterward, the research showed.

During the conversation, he depressed the phone's mute button so the woman couldn't hear and looked up: "This market's coming back," he said excitedly. "It's only down 263."

After hanging up, Hartman said his client seemed to be composed, in no hurry to sell. Forty-five minutes later, he couldn't believe his eyes. "Look at that!" he said. "The Nasdaq closed up. ... The Dow is off 45."

As he sat under a framed poster of bulls running down bears on Wall Street, Hartman dared to wonder. Maybe, just maybe, yesterday's recovery is the beginning of this bear's end.

"To me, the down-cline is in some way relieving," he said. "A lot of us know you need events like this" before sustained buying can begin.

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