Brokers Seize Opportunities in Carnage of Dow Plunge

The crash of the stock market 10 days ago had a silver lining for 23-year-old stock broker Scott M. Ehrlich. The Dow Jones industrial average may have lost 508 points that Monday, but Ehrlich gained an important client.

“I was broker of the day,” Ehrlich explained at his desk in the Universal City office of E. F. Hutton. “That means I take calls from people who can’t get through to their broker or don’t have one. I got one woman who had called her regular office at another company and they were rude. So I gave her compassion, which was all she wanted, and she ended up becoming my client--my biggest client, in fact.”

The financial and emotional fallout from Black Monday, 1987, is far from over. Like a ball bouncing downstairs, stock prices continue their pattern of partial recovery followed by deeper plunges.

It has been a frantic, uncertain time for brokers in the San Fernando Valley. Volume on the exchanges remains high, and people in the business report working 10- to 16-hour days to return clients’ calls, complete paper work and turn a plunging market to their advantage.

“I haven’t seen my girlfriend very much,” Ehrlich said. “When I do see her it’s been tough, because I’m tired at the end of the day. I still try to go to the gym and work out because I need to get rid of the stress. I’ll drop a lot of other things before I drop that.”

Scott Shagrin, a broker at the Encino office of Shearson Lehman Brothers, said he usually plays racquetball and visits his health club four or five times a week, “but last week the only thing I did was get one massage.

“Luckily my wife works for a large investor and she’s very understanding.” Shagrin said. “She knows I have to put in the long hours.”

Valley brokers also reported a grim side to their work--trying to reassure panicked or despairing investors who have suffered major losses.

“People whose life savings got wiped out in a matter of days, it’s hard to take,” said R. Alan Lavery, manager of the 25-broker E. F. Hutton branch in Universal City. “We’ve had people literally blubbering like babies on the phone. Part of my job is to hold their hand.”

Investors, and the continuing commissions generated by their trades, are the backbone of a broker’s livelihood. During Wall Street’s recent frantic action, some had trouble reaching their broker. Others believe their buy or sell orders were executed too slowly, and still others are unhappy with the investment advice that played a part in their losses.

Some brokers hope to fatten their list of clients with these disaffected investors. Ehrlich is one. He said he has begun “prospecting” for them by phone. Another is William Sabol, president of Cowles Sabol & Co. of Encino.

“In the past week we’ve had more inquiries for new accounts than in many six-month periods,” said Sabol, whose company is a discount brokerage. “I think they are people who have been in the market in the past and either missed this bull market,” he said of the last three years, “or sold out early. Now they see a chance to get back in.”

No Guilt

Sabol said that, because discount houses stick to handling orders and do not urge clients to buy particular stocks, his six brokers are largely immune to the psychological problems brought about by a collapse in prices. The problems include guilt for offering advice that cost clients money and a reluctance to answer calls from clients or make calls to generate business.

“I wouldn’t want to convince John Q. Public that now is the time to jump in and buy stocks,” Sabol said.

Officials at brokerage houses in New York, Los Angeles and elsewhere said in newspaper accounts last week that a few brokers--especially newcomers, who knew only a bull market--were psychologically immobilized by the severe financial losses of clients and, perhaps, themselves.

Alan Ravenscroft of the Woodland Hills office of Bateman Eichler Hill Richards has been a stock broker 25 years. He came to the defense of newer colleagues.

“This stuff about young brokers freezing is nonsense,” he said. “Some guys do bury their heads in the sand and don’t take calls and pretend it isn’t happening, but it doesn’t have anything to do with how old they are.

“The thing that made it bad was the very high volume,” Ravenscroft said of Black Monday, when a record 604.4 million shares traded, almost twice the previous record. “You can only talk to one person at a time. The number of calls was just enormous.”

No brokers interviewed said they are considering a change of career after the market’s financial carnage. But Lavery, head of E. F. Hutton’s Universal City office, said an extended shake-out in the market will mean an extended shake-out among brokers.

“Even in ‘73-’74, the brokerage community shrank considerably,” he said of the recession in the last decade.

‘Wimps’ in Market

Lavery holds the view that brokers and the public had better know the risks before they take jobs or invest in the market. The heaviest losers have been people who expected too great a return, he maintains, and invested without an intelligent plan.

He has no sympathy for the investor who loses money in a stock and then blames the broker who recommended it.

“Some people have become wimps,” Lavery said. “It’s part of the philosophy that you don’t have to be responsible for your decisions. If they traveled west with Kit Carson, they’d end up suing him because there were Indians and the wagon axle broke. They’d say, ‘Hell, no one ever told me it would be like this, and someone’s going to pay.’ ”

E. F. Hutton broker Boris A. Naydichev said he has had clients criticize him for his recommendation to buy stocks in the weeks before the market crashed.

“I tell them that a thing like this, nobody could have predicted,” he said. “I tell them it is scary, but things go on in a bear market. It’s not the end of life.”

Ravenscroft, of Bateman Eichler, said his 25 years as a broker have taught him two important lessons. One has to do with investing, and the other with emotional survival.

“First, buy quality and hold onto it,” he said. “You’ll come out ahead. Second, don’t let the craziness of markets like this carry over into your home life. Sometimes it’s hard, very hard, but don’t take the office home with you.”