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Market Tumult Spurs Fear — and Hope, Too


Market Tumult Spurs Fear — and Hope, Too

Some Investors Say 
Time to Get Out; 
Others See a Chance

The latest grim dispatch from Wall Street is spreading a pall over Main Street.

Jonathan Kelly, 40, the senior vice president of a Los Angeles toy company, skipped work Monday morning and went with his wife, Sigal, to their Merrill Lynch branch in Beverly Hills. They closed two accounts totaling $200,000 that they had held for their children’s college education.

“When the Fed didn’t bail out Lehman, we knew it was time to get out,” says Mr. Kelly. He says the troubles of Lehman Brothers Holdings Inc. and Bear Stearns Cos. spurred him and his wife to move their money to banks that were not involved in “the real estate and mortgage mess.”

They are opening new accounts at Bank Leumi, an Israeli bank nearby. “It’s about trying to feel safe today,” says Mr. Kelly, whose wife is from Israel.

In Kalamazoo, Mich., 64-year-old Shirley Larkins says she is too nervous to check on her retirement account, much of it in mutual funds. “I tend to not even look at my statements anymore,” she says. The current bank crisis has shaken her: “It’s scary. You can’t anticipate what’s coming next.”

She and her husband, Darrell, who is 66, and retired as a salesman from General Motors Corp., are worried about their spending. They have put off travel plans and a new-car purchase. They won’t put any more into the stock market for now. Ms. Larkins, who retired from a bank in June, recently decided not to roll her 401(k) over into mutual funds. She’ll keep it in cash and gradually re-enter the market when her confidence returns. “This is as deep a trough [as] we’ve seen in many, many years,” she says.


Steve Gelsi with The Wall Street Journal Digital Network reports from the New York Stock Exchange, where traders and other members of the financial sector react to the current market shake-up.

For people like the Larkins, it is hard to keep track of business failures from one day to the next, much less all the reasons why. But the sheer volume and seemingly unrelenting pace of the financial meltdown makes them and others feel under siege.

Shoeshine man Neil Massie is feeling the heat. Business has fallen over the past few weeks at his shop in the U.S. Steel Tower in Pittsburgh, where he charges $3 for a 10-minute shine. “Everybody is struggling out there,” says Mr. Massie, 37. “Now they don’t have time for a shine.”

The most recent bad news is more unnerving because respected and established Wall Street firms are toppling. Don Phillips, a managing director at Morningstar Inc., the Chicago investment-research firm, predicts the collapse of bedrock financial firms “will hit the psyche of investors.”

“It’s the stuff that was thought to be conservative that’s blowing up left and right,” he says, adding, “It makes you wonder who you can trust.” Small investors, he says, are watching the savviest investors, people actually running financial firms, hit colossal bumps and thinking “If they can’t succeed, how in the world can I hope to.”


Street as Lehman Brothers files for bankruptcy, AIG seeks a government bailout and Bank of America buys Merrill Lynch.

Elsewhere around the country the reaction was mixed, with some people changing their investments, others maintaining the course. Some people felt the meltdowns were needed and would ultimately bring stability.

“This day of reckoning is long overdue,” said Tom Bonnel, 52, who runs a commercial heating-and-air-conditioning business in the Chicago suburb of Schaumburg. “There’s a certain sense of what goes around comes around.”

Others remain relatively confident, putting the string of bad news out of Wall Street in perspective with previous meltdowns and disasters.

“We haven’t hit the crash of 1929,” says Dan Ariens, of Brillion, Wis. He is fourth-generation owner of the privately held Ariens Co., which makes lawnmowers and employs 1,300 people. His company hasn’t had problems getting loans. “If you have real property and assets and a good brand and sell products around the world, you’re in a pretty good position,” he says.

All the bad news is making him cautious, but not frightened. Moreover, he sees opportunity. “These are the times when personally I’m an investor,” he says. “You have to find the right places where the valuations are so low; now is the good time for investment.”

Other investors are scared, but not enough to change their investments or spending. “The Lehman thing, the Merrill thing, it’s spooky, but what’s spooky is that it starts a trend that everybody falls into a trap that all the financial markets are going to collapse, and I just don’t believe that,” says Arnie Harris, 47, owner of a Chicago law firm specializing in debt collection. Mr. Harris said he hasn’t changed his personal portfolio, which is invested 80% in equities. As the owner of a business that employs 250 people, he said, “I’m confident that if we hang in there, we’ll get through this.”

In New York, subdued Merrill Lynch employees showed up to the offices at their normal hours Monday morning and gathered for a town-hall meeting at 11 a.m., some in a third-floor conference room and others watching via a telecast. Merrill Lynch Chief Executive John Thain, who received several rounds of applause, spoke about the future of Merrill, the uncertainty of the market and the unprecedented times of financial turmoil.

During the meeting, top employees chattered about the deal, saying they were “absolutely shocked and disappointed,” one employee said. Others were convinced the deal was the only option: “Without it, we would have been the next Lehman,” said another employee.

The sunny skies sent employees spilling onto park benches and into sidewalk watering holes. One 24-year-old who works in Merrill’s investment-banking division stood among the groups of smokers, who gathered in the sun outside the offices. “I don’t even smoke,” he said as he puffed a cigarette.

—Shira Ovide, Kris Maher, Bryan Gruley, Roger Thurow, Kelly Evans, Jim Browning, Stephanie Chen, Shirley Wang and Vanessa Fuhrmans contributed to this article.Write to Jennifer Levitz at [email protected] and Emily Steel at [email protected]

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