"We're also seeing a lot of people forced into early retirement by the Houston economy who're looking for investments that'll provide them with regular income. One widow lady called me the other day. She was retired from Sears. She asked if we could put her into something low risk, kind of like a CD (a fixed-term certificate of deposit). She said she was losing so much ground because of the interest rates she couldn't sleep nights. We went the whole route with her and put her in things like Ginnie Maes (Government National Mortgage Assn. securities)."
Some Signs of Change
Latest statistics from the Securities Industry Assn. show that institutions dominate the market, doing 65% to 70% of the trading. But there also are signs that more small investors are buying and selling.
Subscriptions to the Value Line Investment Survey, offering advice to investors, have climbed by more than 8,000 since September, the start of the bull market's more than 450-point rise. Some software companies offering computerized programs allowing investors to track progress of their portfolios also report greater business.
"Recently, there have been a number of people who had no interest in the market who suddenly know everything. Suddenly they are taking subscriptions to investment magazines, market research letters and also taking courses and seminars," says Schuyler Rector, a stockbroker with Atlanta's Robinson-Humphrey Co., a division of Shearson-Lehman Bros. "These people think they are becoming suddenly knowledgeable, which is dangerous because they have suffered no pain from the past. It's a whole new breed of investors with no memories."
In these days before the deadline for acquiring IRAs, some brokers say they have been swamped.
"I'm opening more accounts than ever in my life," said William Belanger, a broker for Merrill Lynch Pierce Fenner & Smith Inc., in Louisville, Ky. "A lot of them are IRA people. . . . We're overwhelmed with mutual fund investors."
Says Business Is Up 75%
"They're wacky. Their running around like mad people. People are walking in off the streets," said Leslie C. Quick Jr., chairman of the board and chief executive officer of Quick & Reilly Inc., discount brokers. Quick estimates his business is up 75% since September. "We have a lot of people who filed applications for accounts. We are pulling out applications filed five years ago."
" . . . There is no inflation. There is the decline in oil prices and the decline in interest rates. I get people who ask me, where do you put the money?"
Where is Quick putting his own money these days? "I'm not in the market myself," he answers. "I'm more inclined toward tax exempts."
"We're getting calls to the point where we're almost running out of space on the phone," says Earl Fisher of Stern, Fisher & Atkinson, a Los Angeles brokerage firm. "There are complaints from people saying they have difficulty getting through to buy or sell securities. . . . It's the big IRA season. People are calling me up who I haven't talked to for years, wanting me to do something for them. People rolling over Treasury bills who do not like the 6% yields are asking to be in stocks and bonds."
Turnabouts Can Frighten
But many new, small investors find it frightening that the bull market can turn bearish within minutes, and paper profits can evaporate like puddles on a hot summer's day because of computerized program trading by institutions.
Program traders buy and sell millions of dollars worth of stocks and make profits by playing the spread between stock prices and stock index futures. In the torrent of buy and sell orders that program trading sets off, the Dow Jones average can soar and plummet, leaving small investors feeling like corks on the seas of an economic hurricane.
Such volatility tends to remind people of the great boom that came before the great bust of 1929--which adds further apprehension to talk of paper profits. But economic historians disagree about how relevant 1929 is today.
"There are a lot of similarities," said John Kenneth Galbraith, Warburg Professor of Economics at Harvard, and an expert on the period. "There was then a Latin American debt problem and then a heavy rush into imaginative new structures like the investment trust and holding company craze, and all of these have their parallels. . . .
"The important thing to recognize in any stock market development is you have two phases. There is adjustment to the new reality--this time the lower interest rates in a stronger economy, as many people see it. The second phase is when people get into the market to take advantage of the increase and get out before the next slump.
'Nobody Should Be Trusted'
"The question arises whether that sort of attitude isn't developing now. Nobody should be trusted for his or her predictions of the stock market. The stock market, you must remember, is populated by professionals who don't know and amateurs who don't know. There is even less security when the amateurs come in."