Nasdaq investors live with fear and caution

Six days after turning over some money to his day-trader son, he had the bike — and expectations that more easy money was ahead. But today only $10,000 of Mohrmann’s original $100,000 investment remains.

"I got kind of greedy," admits the 58-year-old retired New York City police officer who now lives in Cape Coral, Fla. "Anybody could win. It was almost a sure thing. You could throw a dart at the stocks and win."

His attitude was widespread. Overlooking steep stock prices and earnings that in many cases were nonexistent, investors propelled the Nasdaq composite index to a record close of 5,048.62 on March 10, 2000.

Twelve months later, the index has dropped 57 percent, hovering near a low not seen in more than two years. Put another way, the Nasdaq Stock Market, home of some of the biggest high-tech names, is worth about $3 trillion less than a year ago.

Like a lot of other investors, Mohrmann wants to know: When will the Nasdaq bounce back?

That’s the trillion-dollar question on Wall Street. Many analysts think the Nasdaq is testing a low around 2,000 — it closed yesterday at 2,168.73 -but there’s less certainty about when it will rebound.

The Federal Reserve Board is expected to keep cutting interest rates to stimulate economic growth. But that could take a while, and there are plenty of lousy earnings reports still to come.

"No one knows when the bottom is going to hit. We won’t know until after it happens," said Charles G. Crane, strategist for Spears, Benzak, Salomon & Farrell, a division of Key Asset Management.

Regardless of how long it takes before the rebound, however, many market observers are convinced that technology will continue to drive stock prices, economic growth and investors’ feelings about how rich or poor they are.

"As goes the Nasdaq, so goes investors’ sentiment and as goes investors’ sentiment, so goes the economy," said John Edmunds, a finance professor at Babson College in Wellesley, Mass. "People look at their 401(k) statements to decide whether they can afford this big ticket item they are considering. They don’t look at their paychecks."

Fear and caution have replaced the euphoria that ruled the market a year ago — reflecting a weaker economy and consumers with less money to spend. Consumer confidence has plunged to levels not seen since the summer of 1996, while the litany of companies that have cut jobs, reduced profit forecasts or shut down has further depressed Wall Street.

"The stock market is the economy," said Ricky Harrington, a technical analyst for Wachovia Securities. And the Nasdaq "represents the hot money, what the public has been paying attention to. They have been paying attention to Amazon and Cisco and Intel and not Minnesota Mining & Manufacturing and DuPont."

While tech stocks might be getting the most notice — from Wall Street to the subway and from pubs to the golf course — investors are putting their money elsewhere in safer investments. This year investors have been bidding up safer blue chips, like drug stocks, which has helped keep the Dow Jones industrial average strong. The benchmark index is off only about 7 percent from its record high of 11,722.98, recorded on Jan. 17, 2000.

Even as tech stocks have crumbled during the past 12 months, many Dow stocks have advanced, including Philip Morris Cos., up 167 percent, and Johnson & Johnson, up 38 percent.

"It has been a big eye-opener," said Steve Prater, a general contractor in Lexington, Ky. of the past year. "I have definitely gotten back to reality in terms of where I am putting my money."

But he’s not out of the game entirely. He’s still compiling a list of tech stocks he wants to buy at steeply discounted prices, which analysts say is a smart move.

Mohrmann, who manages to enjoy his motorcycle, isn’t so sure. He plans to stick with safer bets such as Exxon Mobil Corp. from now on.

"I should have just stopped at the Harley."

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