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Local calls soar over investments

Wall Street woes hit county
By: Bruce Warren Journal Staff Writer
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The phones at local financial service companies in Placer County have been ringing all week long as worried residents ask about their investments. On the heels of a 500-point dip in the Dow Jones Monday, the bancrupcy filing of Lehman Brothers, and a government bailout of insurance giant American International Group, investment worries continued Thursday as Washington Mutual hit the auction block, the latest banking casualty affected by the slumping housing and mortgage markets. Richard Barber, a stockbroker with Barber-Kenes Capital Management Group of Wachovia Securities in Auburn, has already received calls from a third of his 200 clients, mostly in Placer County with some in Nevada County. “(They’re asking) Is there anything I should be doing? Is my money safe?” Barber said. Despite the recent fall of Lehman Brothers, the fourth largest American investment bank, and AIG’s financial woes, Barber has not heard from anyone yet with catastrophic losses in stock holdings. “I had one client who had a deposit with Indy Mac, and he’s already received his deposit back,” Barber said. “Indy Mac did have a large percentage of mortgage loans. I don’t have any clients with investments in any of the affected institutions, although many mutual funds hold securities of those troubled companies.” The Dow Jones Industrial Average actually ended 410.03 points higher Thursday, after making swings over a 567-point range between gains and losses. Still the Dow is down 17 percent over last year. Area residents have reacted differently to Wall Street’s woes. Cool’s Laurie Carman, vice president of Citizens Bank in Auburn, made an investment switch. “I actually took my stocks and mutual funds and put them into IRAs and CD products,” Carman said. Mickey Bennett of Mickey’s Boots on Lincoln Way has mutual funds but is not selling them. “If I had money, I’d invest because it’s on sale and it will go back up,” Bennett said. When asked to comment on the government’s bail out of failed lending institutions, Bennett does not think it’s fair. “If the government would bail me out, it would be OK, but they’re being selective,” Bennett said. While residents ponder the fate of their investments, the stock market went up and down all week. The 504-point loss in the Dow Monday was the largest decline since its dip after the terrorist attacks on September 11. On Wednesday, the Dow plunged 450 points. Linda Duessel, an equity market strategist at Federated Investors, had grim news. “The seriousness and the size of this fallout has been underestimated from the beginning,” Duessel said in an Associated Press report. “It’s most disconcerting what’s going on in the credit market.” Auburn’s Barber has more than 22 years of investing experience and sees fear as the current driving force on Wall Street. “We’ve already seen a ripple effect and there’s so much fear in the market right now,” Barber said. “Short term the market is driven by fear, emotion and greed. Long term the market is driven by corporate profits and the economy.” When asked what the local Placer County investor can do about the current situation, Barber recommends diversity investment. “Diversification is what will give you the most protection and help you reduce risk,” Barber said. “In a year like this with the market down 20 percent, you still may be down 10 or 11 percent, but at least your portfolio will be holding up better than the overall market.” On the New York Mercantile Exchange Thursday, gold rose $50.20 to $900.70 an ounce and the sale of 3-month Treasury bills soared, as investors seek safer havens for their money, rather than stocks or mutual funds. But there’s also the opportunity for investors to get in on some bargains, after the market stabilizes. “Eventually when this market turns, there will be some great buys, especially in the financial area,” Barber said. Despite the doom and gloom news on Wall Street now, Barber remembers hard times in the banking industry not so long ago. “We forget about 1988 and 1989 when 1,500 banks and savings and loans were on the federal watch list,” Barber said. “We survived that, and we’ll survive this.” The Journal’s Bruce Warren can be reached at brucew@goldcountrymedia.com.