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WALL STREET RECOVERING FROM HANGOVER

Sally J. Taylor

After nursing a whopper of a hangover on Monday following a wild Wall Street party earlier this year, investors on Tuesday climbed back into the stock market game.

The Dow rose 288.36 to 7,827.43 in its second-biggest point gain ever, cutting into Monday’s 512-point loss.

Even with the gain, the Dow remains 81 points below the starting point for the year and 16.2 percent below the record 9,337.97 set on July 17.

Stocks of local interest such as casinos and ski resorts are along for the same ride.

Tim Buscher of First Allied Securities compared the local impact of Wall Street’s ups and downs to powerful tidal surges.

“When selling hits, it’s taking everything with it. Like when the tide goes out it takes everything with it,” said Buscher, who has watched the Wall Street tides for about 13 years. “When it comes back in, expect (local stocks) to come in with it.”

Buscher “completely disagrees” with predictions of the arrival of a bear market, the term applied to a prolonged downturn in stock prices.

“A lot of individual stocks have already gone through their own bear markets,” he said. “If anything, they are at or near the end of most of their bear markets.”

A correction is defined as stocks going down 20 percent. The recent declines carried stocks 19.62 percent lower than the all-time high.

“Trading almost one billion shares in one day and having a meltdown the last four days is not just a minor correction,” Jeff Seidel of Seidel Securities and Insurance Agency said. “It’s a major chink in the armor.”

On the other hand, Seidel’s not ready to cry “bear” either.

“If Japan, South Korea and Russia can resolve their economic problems, we’re in a correction,” Seidel said. “If not, we’ll have a bear market.”

Other signs to look for, he said, include whether or not the Federal Reserve lowers interest rates, which he considers a good omen but is not sure whether it will eventually happen.

That would put “interest rates at a 40-year low,” said Seidel, a 15-years investment advisor.

Buscher agrees that a cut in interest rates would be a good sign, and he considers it a real possibility.

By next week, Buscher feels professional money managers will come back into the market to take advantage of bargains. While not recommending that the average investor go bargain hunting, Buscher’s company is slowly investing to take advantage of low prices – at least for clients emotionally and financially able to handle the uncertainty.

“There are very good companies at very good values once again,” Buscher said.

Seidel is suggesting a more cautious approach to current events, although he still considers the stock market a good investment.

“If you’re going to buy, don’t use your mortgage money,” he said. “Go very cautiously.

“I’m not advising people to sell either,” he said, noting that his own clients who needed to sell already had done so.

For others, Seidel recommends investors “hold tight.”

Bear or correction, this week could temper the wild Wall Street parties of recent months.

“There’s a generation of investors who think 20 percent on a return is normal,” Seidel said. “They need to realize 9.86 percent (based on research of the market since 1929) is more reasonable.

“Get used to it folks. This is the way it is.”

Tahoe Daily Tribune E-mail: tribune@tahoe.com

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