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Depleted Investors Also Losing Nerve

Wall Street: The market drop has damaged psyches as '90s riches have largely vanished.

July 29, 2002|MARTIN MILLER | TIMES STAFF WRITER

Screenwriter Jason Squire is rewriting his script. So is the American investor.

For Squire, on the faculty at USC's School of Cinema-Television, the fixes were relatively simple. After a recent week of triple-digit losses for the Dow Jones industrial average, Squire and his writing partner changed a major character in their action-adventure yarn from a hotshot trader to an unemployed victim of corporate America.

"In movies you have to reflect the sensibility of the times," Squire said.

For American investors, however, altering their financial script hasn't been as easy. Their story, spun from the stratospheric returns of the late 1990s, was supposed to have a happy ending. Early retirement. Travel. An estate, perhaps, to leave their children.

Instead, the tale has turned bitter and painful for many investors as they struggle with a new plot twist of quickly diminishing riches. A recession, terrorist attacks, and most recently a series of corporate scandals have ravaged the market highs of 2000. In fewer than three years, the Dow has lost more than a quarter of its peak value, while the Nasdaq has plunged by more than two-thirds.

On a superficial level, the reversal of fortune has recast everything from cocktail party conversation to future investment strategies. But on a deeper psychological plane, the stress on some investors has been so great that it has generated an unprecedented wealth of blame, recriminations and denial in their personal and professional lives.

"In the last two weeks, I've gotten more new clients than I would normally get in two or three months," said James W. Gottfurcht, president of Psychology Money Consultants, a Los Angeles-based psychotherapy and executive coaching firm. "And it's all due to the stock market."

When the going got tough in recent weeks, about a fifth of investors got going on sticking their heads in the sand, according to financial experts. Some investors believe that with a properly diversified portfolio, a wait-it-out approach is a legitimate investment plan. But others admit they weren't looking at their bottom lines because they just couldn't bear to look upon the financial ruins.

Jenny Verhines of Marina del Rey, who deliberately avoids market news on the Internet, newspapers and television, won't even open her quarterly statements. "It's so depressing," said the 40-year-old accountant. "Why would I want to open them up? It's all bad. Just bad."

Those brave enough to track their investments often wish they hadn't. After ignoring her last batch of quarterly statements, Leanne Barney, a legal secretary who works in downtown Los Angeles, steeled her nerve to see her bottom line--it's about $20,000 lower than it used to be.

"I'll never be able to retire now," said the 45-year-old San Gabriel Valley resident, only half-jokingly. "At least, not when I was planning to."

Despite a one-day upswing Wednesday, the market shakeup has diminished the nation's passion for stock crawl--the constant stream of updated stock quotes across the television screen. Financial news network CNBC has seen its peak ratings in March 2000 of 418,000 viewers a day plummet to a little more than 225,000 in April, May and June of this year.

'It Felt Like Gambling'

It was only a few years ago that private investor Kim Brizzolara was a crawl-watcher, among other things, as she pored over Internet and television news of her considerable holdings. Although she held mostly traditional stocks such as General Electric, she finally succumbed to tech fever near the market peak and bought such high-fliers as Global Crossing, Lucent Technologies and JDS Uniphase.

"I was obsessed," recalled Brizzolara, who serves on the board of directors for the Hamptons International Film Festival in New York. "I remember I was staying with my boyfriend's parents in Nantucket one weekend and I watched CNBC for hours. It was insane.

"It felt like gambling, like you had some control over this, and you were winning," said the Manhattan resident.

Brizzolara estimates she lost "hundreds of thousands of dollars" and her once constant stock watch habits fell faster than shares of WorldCom Inc. "I check my stocks once a day at most now and if there's been a bad day, I won't look at the gain or loss column," she said.

Avoidance of relentlessly grim news isn't surprising, according to Maury Elvekrog, a psychologist and investment manager in Bloomfield Hills, Mich. "People tend to conclude their experience is reality," said Elvekrog, a market investor for 47 years. "If you buy a stock at a certain price, that makes it seem like that's what the stock is worth, especially if you paid a lot of money for it. So when the price comes down, you think, 'This can't be. This isn't reality. I'll close my eyes and things will come back to normal.' "

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