Fear and holding on Wall Street

July 22, 2002

WHEN THE BARONS of business churn a fearsome turbulence of self-dealing and uncertainty, where does Wall Street turn for stability?

To reform and re-regulation, but also to Joe Six-pack and America's legion of small investors. Partly because the little guy has no choice, he or she stays the course, holding up the discredited board rooms in the process.

The recent sell-off would have been even worse save for the expanding universe of 401(k) stalwarts and others.

One Baltimore broker didn't get a single panicky call last Monday as the Dow dived nearly 500 points.

It's not a new thing, this resiliency. The mutual fund industry, which includes much of the 401(k) retirement accounts, chalked up $504 billion in net new cash last year, offsetting the decline in stock prices after Sept. 11.

Nor is it patriotism born of a horrific moment. In none of the major stock market slides over the last 50 years or so have stock fund owners liquidated shares in large numbers. They've bought the orthodox approach: Buy and hold. Prosper over the long haul. These true believers watch the Dow drop like a stone. And they hold. They read about -- and feel -- a loss of faith in the market driven by corporate chicanery. But they hold.

Yes, some failed to get out when they should have, when they were close to retirement and had no time to recover from a big dip. Hindsight is all too clear.

And, yes, many are trapped. They can't get out of what they're holding without casting paper losses into concrete. But they could cut their losses, saying, `This far down and no farther." Instead, until recently at least, they've held. They've kept faith.

They've had it even as the reports of questionable corporate dealings arrive almost daily from the board room -- or the Oval Office. If the mantra of the people is "Buy and hold," it's more remarkable when the big guys are chanting something like ... "Bail and fail." The CEO or the board member sells a bundle and watches in safety when, mere weeks later, his company's stock swoons.

Asked about his wonderful foresight, he takes the Fifth. Or the president, whose own stock-selling has been called into question, says something about being "vetted." When Mr. Bush spoke of an investor "binge" it sounded a little like blaming the victim -- though Americans are willing to shoulder their share of the blame.

It's just a question of who can shoulder it best and how: The little guy may hyperventilate a bit, but he knows what he has to do: He's got to hold.

But he's not completely without recourse. He's probably not happy about the privileges accorded to the wealthy at his expense -- and he doesn't have to hold his vote.

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