Stick with
market, say
isle advisers

Recent volatility should
not worry long-term
investors, they say

By Russ Lynch
Star-Bulletin

The recent volatility of the stock market, which today saw the Dow Jones industrial average plunge more than 250 points before rebounding somewhat, provides good evidence of the value of taking a long-term approach to investing, said Honolulu financial advisers.

"The odds still favor longer-term investors," said John MacGregor, financial consultant in the private client group at the local Merrill Lynch office. Noting that the Dow ended the day up 7 percent for the year to date, MacGregor said his office puts a lot of effort into educating clients about the realities of the market.

"People's expectations have gotten way out of line," he said. They shouldn't expect unreasonable gains and if their investment is placed carefully enough they shouldn't be worried by short-term market shifts, he said.

MacGregor said that education effort probably was why the firm gets only a few calls from clients when the market does what it did today, when the Dow finally closed down 112 points.

"When we had that 500-point drop in October last year, I had only two calls. One was from a client thinking about moving his portfolio and the other was from my father wondering about me maybe jumping out of a window," MacGregor said.

Paul Loo, senior vice president and head of the Hawaii branch of Morgan Stanley Dean Witter, said his office is getting calls asking, "how far is this going to go," and expects more of those.

But today's market shift was an expected reaction to some prices going too high, he said.

"Some kind of adjustment would not be out of the ordinary" after the climbs of the last year or so, Loo said.

Analysts within his company generally share the view that the market was a bit over-valued going into the summer, he said. "I would like to see a calming down period here and let earnings catch up."

He noted that stocks of Hawaii's two biggest financial companies -- Bank of Hawaii parent Pacific Century Financial Co. and First Hawaiian Bank parent First Hawaiian Inc. -- were down today but so were financial stocks across the country.

Pacific Century closed down $1.121/2 at $17.871/2 and First Hawaiian closed down $1.31 at $29.75. Both closed at 52-week lows. They were probably affected by worries about Asian involvement, although First Hawaiian has less exposure than Pacific Century, Loo said.

The Asian crisis has really been around for a year or more and caused a couple of major thumps in the market, "but the market overcame it and came back," he said.

Anyone who thinks Asia should be written off should go and take a look at the rapid advancement there, Loo said.

Ted Jung, managing director of Smith Barney Inc. in Hawaii, said his advice is to "buy stocks that are going to show an increase in earnings" because that's what, in the end, decides the price of a stock.

Financial markets weren't all bad news today, Jung said. Bonds did well, for example.

Like the other advisers, Jung favors diversity in investment and not reacting too fast to occasional shifts in the market.