Duncan McIntosh, an Irvine graphic arts consultant, decided Saturday that he has had enough of stocks. Friday's 140.58-point plunge removed his faith in the market, and he plans to sell all of his shares in six stock mutual funds and transfer the money to safer money market funds.
"I'll take what beating I have to," he said, expecting stocks to go down Monday.
On the other hand, Minneapolis money manager Peter L. Mitchelson took Friday's drubbing in stride, although he too was worried about another fall on Monday. Instead of poring over stock lists, he spent a fairly normal Saturday, watching pro football and working on his car.
"We're not going to be doing much on Monday," he said, adding that his firm may start buying stocks if prices fall enough.
Throughout the nation this weekend, money managers and individual investors were plotting different strategies for dealing with Friday's unexpectedly sharp market downturn. Some worried quite a bit, judging by heavier-than-normal calls placed at toll-free mutual fund information lines. Others, however, said they could not do much until Monday anyway.
But one thing they all shared: anxiety that history would repeat itself with a stock free-fall similar to that of Oct. 19, Black Monday, when the Dow Jones industrial average plunged a record 508 points after a 108-point drop the Friday before.
Early indications from money managers, mutual funds and others interviewed by The Times on Saturday were that, although another 500-point collapse is unlikely, a decline is expected, at least at the opening of trading Monday. Confidence, they said, has been shaken badly and many professional short-term traders, individual investors and others may be poised to unload stocks then.
"We expect the market to be down sharply at the opening on Monday," said Roger C. Hamilton, president of Wall, Patterson, Hamilton & Allen, an Atlanta firm with $1.3 billion under management. "I sense a malaise, a disappointment with this type of volatility."
Some selling pressure could come from professional speculators, who had bought stocks heavily last week, partly in response to an announcement of a $4.2-billion takeover of Sterling Drug by a Swiss firm, which raised hopes of a return of megabuck mergers that would drive up stock prices.
Monday Rise Possible
Of course, the market could surprise the pessimists and actually rise on Monday. Many money managers who expect a sell-off on Monday said they are poised to buy shares, hoping to take advantage of lower prices. Some money managers fear that the opening of Monday's trading could be so chaotic that any attempt to sell then would force them to accept fire-sale prices.
"There's not much you can do; you know you're going to get hammered pretty hard on Monday morning, but you can't sell; it would be just insane," said Richard H. Fontaine, a Baltimore money manager with $320 million in his accounts.
"It (Friday's fall) has created an opportunity to buy," said John L. Keller, president of Corinthian Capital, a Denver firm with $100 million under management. He said he spent most of his Saturday putting together a list of stocks to buy on Monday, although he will be careful not to buy all at once if prices turn down sharply.
"We'd be more likely to have buy orders ready (on Monday)," said Greta E. Marshall, investment manager for the $40-billion California Public Employees Retirement System, the nation's largest pension fund. She said the fund has been buying into market declines since Black Monday.
Huge Collapse Held Unlikely
Money managers and other investors said Saturday that a massive collapse like that on Oct. 19 was unlikely because conditions are different now.
Stocks are not as overpriced as they were last fall, when the Dow topped at 2,722.42 in late August. Many investors do not have as high expectations of price rises either.
"Stocks are a much better value today," said Mitchelson, executive vice president of Sit Investment Associates, which manages $2.5 billion in pension funds.
Stock mutual funds, which were pummeled considerably in the October crash, have raised the percentage of their portfolios in cash, giving them less need to unload stocks if shareholders try to withdraw their money. Pension funds also are heavier into cash now.
"In 1988, cash is king," said James P. Owen, managing director of NWQ Investment Management, a Los Angeles firm with $1.1 billion under management that now has only 30% of its assets in stocks, versus 50% before the crash.
Also, the most skittish investors already have left the market, shaken up by the October crash and recent volatility.
Sold Most of Stocks
"I think we're definitely in a bear market," said J. Jay Shapiro, an Encino attorney who said he sold virtually all of his stocks in June and July of last year and has not gotten back into the market since then.