Posted on: Friday, November 9, 2001

Execs: Jittery investors will return

By Marcy Gordon
Associated Press

BOCA RATON, Fla. — Investors unnerved by terrorism and the slumping economy are on the market's sidelines but will return soon, the heads of the two biggest stock exchanges are predicting.

"Markets are nervous. Investors are on the sidelines," Hardwick Simmons, chairman and chief executive of the Nasdaq Stock Market, told members of the Securities Industry Association Thursday at its annual meeting.

Still, public confidence in the Bush administration's anti-terrorism campaign and the Federal Reserve's handling of interest rate policy should reassure investors, Simmons suggested.

Of the absent investors, he said, "I think those people will be back."

Several brokerage and investment firms that are members of the Wall Street trade group lost employees in the Sept. 11 attack on the World Trade Center. At the hardest-hit firm, Cantor Fitzgerald, 657 of the 1,000 or so employees were killed.

The market was shut for four trading days, the longest closure since the 1930s.

Security was beefed up and attendance was down at the association's gathering at a tony Florida resort.

The group was hearing Friday the first speech to a Wall Street audience by Harvey Pitt, chairman of the U.S. Securities and Exchange Commission.

Pitt, a prominent securities lawyer who was President Bush's nominee as SEC chairman, was confirmed by the Senate in August and a few weeks later plunged into the crisis that gripped Wall Street, meeting nearly round the clock with the heads of Nasdaq and the New York Stock Exchange and securities industry leaders. The SEC invoked its emergency powers for the first time ever to ease restrictions on companies' purchases of their own shares, as a way to shore up prices and bring stability.

Late last month, the SEC under Pitt laid out a new policy that gives companies credit for coming forward to report misconduct such as improper accounting, which could possibly accord them more lenient treatment in return. Pitt himself promised a gentler relationship with accountants, turning from the adversarial stance of his predecessor, Clinton appointee Arthur Levitt.

Pitt also has said he believes securities laws must be reviewed because many are obsolete and impose an unfair burden on Wall Street and other market participants.

Because the SEC had to deal with the disruption of trading caused by the terror attacks, work on that issue and others — such as reducing stock analysts' conflicts of interest — has been delayed.

Richard Grasso, the NYSE's chairman and chief executive, acknowledged Thursday in remarks to the group beamed by satellite that the near-term economic picture "will not be pretty."

But he cited the market's recovery in recent weeks, saying it reflected investors' positive judgment for the longer term.

A "new enthusiasm" has entered the market, Grasso said.

Nonetheless, nearly half of investors have become more conservative and cautious because of the market's decline that started last year, and have been diversifying their portfolios, according to a new survey by the securities association.

Investor optimism has fallen, with 28 percent of those polled expecting next year to be very good or good for investments, compared with 41 percent in the 2000 survey.

The poll of 1,646 investors was taken from Aug. 23 to Sept. 25, and additional interviews were done after the Sept. 11 attacks.