April 5, 2000

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Patience, local market players told

By Max Showalter, Journal and Courier

While the stock market was reacting like a roller coaster in a record day of volatility Tuesday, Jon Fridlin was relaying some advice to his clients.

"Be patient and look more than two minutes into the future," said Fridlin, senior vice president at brokerage Hilliard Lyons in Lafayette.

"The knee-jerk reaction we saw -- the catalyst was Microsoft. That kind of led the markets ... which continued their freefall of the last few days. That and a combination of margin calls and the liquidation of mutual funds. That's where a lot of the pressure came from," Fridlin said.

Pressure might have been an understatement.

The Nasdaq composite index and Dow Jones industrials each dropped more than 500 points by midday Tuesday before the stampede reversed and helped the key market indicators recover much of their losses.

The Dow ended the day down 57.09 at 11,164.84 after fluctuating more than 700 points, a record one-day point swing. The Nasdaq closed down 74.79 points at 4,148.89.

P. Raghavendra Rau, a finance professor at Purdue University's Krannert School of Management, notes that just about everyone who owns a mutual fund or has a retirement plan is an owner in Microsoft -- whether it's just a few or several thousand shares.

But Rau said the antitrust ruling delivered against Bill Gates' company by U.S. District Judge Thomas Penfield Jackson after the stock market closed Monday should have been viewed as nearly a non-news event.

"The only bit of news was on Friday when (mediator Richard Posner) resigned from the arbitration, saying the two sides are too far apart. The market doesn't seem to have reacted efficiently," Rau said.

From Rau's viewpoint, technology stocks -- which form the foundation of the Nasdaq index -- have been overvalued the past 18 months but that investors are afraid of staying out of the market.

Fridlin, however, said Tuesday was a good day for some of his clients to purchase some stocks.

"We've actually been doing some select buying in here of things that have moved down 10 to 20 to 25 percent," he said. "The fundamentals of these companies have not changed. If you like that particular investment, it's probably an opportune time to go in and make that investment."

Individual investor Rich Johansen of Lafayette agrees the Microsoft court decision shouldn't be viewed as the cause of Tuesday's market volatility.

"The catalyst was probably margin calls on people leveraged in some of the high-tech stocks that were overvalued," Johansen said. "I don't see the Microsoft thing as being a problem. If you have what you think are good investments, you're probably all right."

Individual investors and brokers might not find that out until the markets reopen today, however.

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