Area brokers anticipate panic selling

By CYNTHIA VINARSKY
and DON SHILLING
VINDICATOR BUSINESS STAFF
YOUNGSTOWN -- Local stock brokers and financial advisers say they expect to see the stock market plummet in reaction to Tuesday's terrorist acts in New York and Washington D.C., but they'll be advising their clients not to join in the panic.
All U.S. exchanges and markets closed after a terrorist attack leveled the World Trade Center's twin towers Tuesday morning, and officials from the New York Stock Exchange, Nasdaq Stock Market and American Stock Exchange said they would likely remain shuttered today.
"When the markets reopen, we'll probably see the markets tumble at first," said Bruce Joseph, a financial planner, accountant and partner in Joseph & amp; McCullough Financial Advisors on Market Street.
Precedent: He said panic selling forced stock prices down after every major historical tragedy, such as the assassination of President John Kennedy and the bombing of Pearl Harbor.
"We're in uncharted waters here. Anything's possible. But based on what we've seen historically, the significant downturn may continue for a while."
Joseph said he received only a few calls from anxious investors Tuesday, but he intends to be proactive about contacting all his clients by phone and by letter to advise them that selling out of fear "would not be prudent."
"Despite how horrific this is, we will get beyond it, and I'll be advising my clients that wholesale selling of stocks and bonds is not in their long-term interest," he said. "Some shrewd investors will actually see those undervalued stocks as a buying opportunity."
Delay will help: Ralph Fajack, a vice president at McDonald Investments in Canfield, is just as certain that stock prices will fall when the markets reopen.
"The longer they delay opening the markets, the better it will be for the marketplace, because then we'll have the emotion out of it," he said.
Fajack said the companies whose business is stock transactions will be pressuring the markets to reopen because the closings are costing them money.
Stock prices fall when more people are selling than buying, and Fajack said institutional investors, with their trillions of dollars to spend, are most likely to jump on the low stock prices if the market follows the usual historical pattern.
"What I try to stress is that we, as stock brokers, experience the same pain that our clients experience. We have the 401(K)s and the kids' college money. We feel the same nervousness," he said. "But we try to remember that, historically, the market always comes back to higher highs. It just takes time."
Concerns: David Bennett, senior vice president of Butler Wick in Youngstown, said the Youngstown-based firm was fielding some calls from concerned investors, but most were more concerned about the human losses. "These kinds of things tend to pull people together," he said.
Bennett said the stock exchanges were closed, not only for security reasons but also because of the impact that rumors can have on stock costs.
It doesn't happen often, he said, but the stock markets also closed in 1981 when a would-be assassin shot President Ronald Reagan.
"Rumor mills are part of the business, but when there's a disaster like this commodity prices can go up and down based on rumors," he said.
Bennett wouldn't speculate on how long the markets will be closed. "I think they'll open when we can be reasonably confident that the bulk of the news on the events are out and trading can be restored in an orderly manner," he said.
Money supply: Area residents can be confident that the money supply is adequate, said Steve Lewis, president of First Place Bank in Warren.
He said bank officials talked Tuesday with Federal Reserve officials in Cleveland, who said they have plenty of cash on hand and there has been no extraordinary demand for money. First Place receives its money from that office.
The Federal Reserve issued a statement that said it would remain open and was ready to provide additional money to banks if needed.
Lewis said First Place converted some of its investments to cash after the tragedy began. That move, plus some earlier unrelated liquidation of investments, left the bank with plenty of cash should customers be asking for it, he said.
People were content to leave their money in the bank, however, he said.
"People have been very, very calm locally," he said.
First Place branches had only a couple inquiries from customers, he said.
Doug McKay, chairman of the parent company of Home Savings and Loan Co. in Youngstown, said a few customers were concerned about their money, but branch officials explained there was no reason for panic.
"We're just being a calming presence in all of this," he said.
One problem customers had Tuesday was transferring money by wire, said Gary Roberts, president of Metropolitan National Bank. The Federal Reserve suspended wire transfers between accounts and between banks, he said.
Customers still were able to transfer money by using checks, but that takes longer, he said.
vinarsky@vindy.com and shilling@vindy.com