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To Many Americans, Wall Street Is Just Another Roll Of the Dice

May 15, 1988

NEW YORK (AP) _ Lawrence Weiss was about to book an order for 100 shares of Chrysler Corp. and 100 shares of Black & Decker Corp. this past Wednesday when his customer happened to ask how the market was doing.

Weiss mentioned that the Dow Jones average of 30 industrials was off 35 points - and the customer promptly canceled his order.

That is the kind of experience that drives brokers crazy. Retail business in stocks is off 30 percent or more on Wall Street because the October crash and the subsequent gyrations have shaken the confidence of individual investors.

″They’re frightened,″ said Weiss, president of Odd Lot Securities Ltd., who said his own discount brokerage’s business is off 50 percent.

To many Americans, Wall Street is just another roll of the dice, especially in light of the 508-point drop in the Dow Jones industrials on Oct. 19. That came across in a sampling of opinion around the country this past week.

″I think it depends on your personality more than anything else. Some people like to gamble,″ said Thomas H. Egan, traffic and purchasing manager for General Latex & Chemical Corp. in Cambridge, Mass.

″It’s a little bit like the race track. ... Influence controls it as much as anything,″ said Marshall Webb, who manages the tool and die shop at Lacy Tool Co. in Novi, Mich.

″I favor other investments that are more dependent on my own ability to judge investment potential, like real estate,″ said Gary Studdard, general manager of John B. LaGarde, a concrete company in Anniston, Ala.

Small investors accounted for only 23 percent of shares traded on the New York Stock Exchange in January and February, down from 29 percent just before the crash, according to the Securities Industry Association.

Many investors are turning to safer havens such as certificates of deposit and Treasury bonds, whose value is up sharply since the crash in spite of some recent weakness.

″People are starting to invest based on their nocturnal habits. Will this investment keep me staring at the ceiling at night?″ said Philip Waxelbaum, national sales manager for Prudential-Bache Securities Inc.

Computerized program trading has emerged as a villain in the public’s mind, and even brokerage firms that say program trading is not to blame for upsetting the markets are curbing the practice anyway.

This past week five major brokerage houses said they would stop conducting a form of program trading known as index arbitrage for their own accounts. They were Bear, Stearns & Co., Morgan Stanley & Co., Salomon Brothers Inc., PaineWebber Inc. and Kidder Peabody Inc.

Merrill Lynch & Co., among others, had curbed the practice earlier, to the relief of many of its brokers.

″I’m frankly thankful. It took me off the hook with clients,″ said Gene Foster, a broker in the Rochester, N.Y., office of Merrill Lynch.

Scott Bowles, a 78-year-old retiree from Procter & Gamble Co. who lives in Wyoming, Ohio, said he is keeping half his net worth in stocks even though ″like everybody, I got whacked on Meltdown Monday.″

But he said his confidence is being sapped by inexplicable moves in the market. ″The standard perceptions of value are way the hell off. It’s unnerving.″

Alice Tarailo, a secretary in Watsonville, Calif., said she was ready to buy stock in H&R Block Inc. in January but was worried the market had not stabilized. She is glad she held off: After a brief run-up, the stock is off about $4 from its January level.

″I think the stock market boom is over,″ she said.

To some Americans, trouble in the stock market is part of a broader crisis.

″I have seen the time when I felt safe anywhere I was,″ said Webb, the Michigan tool and die man, who is a 60-year-old ex-Marine. ″It’s not that way anymore. Whether you’re talking money, or safety of anything.″

But there are still optimists in places such as Spanish Fork, Utah. Vaughn Erickson said program trading and the possibility of a bear market do not greatly concern him because he has more than 20 years before retirement and is holding for the long term.

″There’s a lot of room for growth in the United States, and the stock market is the best place to take advantage of it,″ said Erickson, vice president for finance at Nature’s Sunshine Products Inc.

John Vogel of Lexington, Ky., said he and his wife, Gail, have about a third of the money in their retirement plan devoted to stocks. At age 33, he feels he can afford at least that much risk.

″I consider it more or less a sense of gambling,″ Vogel said. ″But the greater the risk, the more potential you have to gain.″

Most investors who owned stocks haven’t given up on them entirely. Rather, they are letting their cash build up so stocks become a smaller percentage of their overall portfolio, said John Markese, vice president and research director for the 90,000-member American Association of Individual Investors.

Markese said a survey in March found 80 percent of the group’s members favored restrictions on program trading. Sixty-three percent favored coordination betwen agencies regulating the stock markets and futures markets.

″I’m surprised and I think a lot of people are surprised at how little has been done″ so far to fix things, he said.

In other business and economic news the past week:

-Major banks raised their prime lending rates for the first time since the stock market crash, pushing the key rate to 9 percent and heralding a period of more expensive borrowing.

-The steepest energy price gain in 15 months pushed wholesale costs up 0.4 percent in April, the government said. Food prices were modestly higher. In other reports, business sales shot up 1.9 percent in March, the biggest advance in more than a year, while business inventories rose 0.3 percent.

-Retail sales fell 0.6 percent in April, the first setback in six months. The decline was blamed on an early Easter, bad weather and a bigger federal tax bite for some people. A private study said consumer confidence rebounded in April, suggesting spending will be strong in coming months.

-The Agriculture Department said farmers soon will be harvesting a winter wheat crop estimated at 1.62 billion bushels, up 4 percent from last year’s production.

-Los Angeles businessman Burt Sugarman raised his tender offer for Media General Inc. to about $2 billion or $70 per share. The battle is expected to come to a head at a shareholders’ meeting May 20.

-Gulf & Western Inc. and Western Publishing Group Inc. ended talks about a possible takeover of Western Publishing, a children’s book publisher and commercial printer. Gulf & Western later announced its third stock buyback program in five years.

-Lorimar Telepictures Corp. agreed to be acquired by Warner Communications Inc. in a $1.18 billion stock-swap deal. Investor Marvin Davis later renewed his bid for Lorimar.

-USG Corp. claimed victory in a proxy battle, saying shareholders had voted for a management-backed directors slate over one supporting Desert Partners’ $2.2 billion hostile takeover bid.

-Local union members narrowly ratified a United Auto Workers contract covering 66,000 Chrysler Corp. employees despite objections from skilled- trades workers.

-Pan Am Corp. Chairman Thomas Plaskett told shareholders the airline was in dismal financial condition and must get concessions from its labor unions.

-A report from a private consultant hired by Union Carbide Corp. said sabotage by a disgruntled employee, not negligence, caused a deadly gas leak at the company’s Bhopal, India, plant four years ago.

-The Federal Reserve Board issued rules requiring banks, savings institutions and credit unions to meet strict check-clearing deadlines. On another matter, Fed Chairman Alan Greenspan urged the House to follow the Senate’s lead and pass legislation to give banks new securities underwriting powers.

-A deal between entertainer Merv Griffin and investor Donald Trump to divide up Resorts International Inc. collapsed, renewing the millionaires’ battle for ownership of the hotel-casino company.

-American Medical International Inc. said it would sell 37 hospitals in 10 states to an employee group in a transaction valued at $910 million.

-Irving Bank Corp. said it set up a committee of independent directors to hold talks with its two suitors, Bank of New York Co. and Banca Commerciale Italiana SpA.

-The Federal Aviation Administration said 15 of the nation’s airlines face fines totaling nearly $6.5 million for a variety of alleged safety and security breaches.

-The Federal Communications Commission proposed a new method of regulating interstate telephone rates that could save consumers $1.6 billion over the next four years.

End Adv Weekend Editions May 14-15

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