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Broker Offers Advice To Investors

MICHELE NORRIS, host:

From NPR News, this is All Things Considered. I'm Michele Norris.

ROBERT SIEGEL, host:

And I'm Robert Siegel. How are small investors reacting to the turbulent financial news of the day? Well, this morning President Bush tried to build confidence, contrasting short-term difficulties with long-term strengths.

President GEORGE W. BUSH: As policymakers, we're focused on the health of the financial system as a whole. In the short run, adjustments in the financial markets can be painful, both for the people concerned about their investments and for the employees of the affected firms. In the long run, I'm confident that our capital markets are flexible and resilient and can deal with these adjustments.

SIEGEL: We're going to hear now what people are telling Juli Niemann who works in St. Louis as an analyst for Smith, Moore and Company. Welcome back to the program, Juli Niemann.

Ms. JULI NIEMANN (Analyst, Smith, Moore and Company): Thank you.

SIEGEL: And first question, are you getting more calls there from clients these days than you do normally?

Ms. NIEMANN: Absolutely. Every time we get one more shoe dropping on Wall Street - and this tends to be a centipede, so it's one shoe after another - the calls start coming in. How much further is it going?

SIEGEL: Is that the question this morning, how much further is it going?

Ms. NIEMANN: That's right. Everybody wants to or thinks that they're going to hear a thud, you know, when Wall Street basically hits bottom. Unfortunately, these things take time to play out. That's what we're seeing now. We have not hit what technology experts in the markets would say capitulation. That hasn't happened yet. Capitulation is typically when fear gets so palpable that people just basically, get me out at any cost, jettison the portfolios, start screaming. And that's exactly what happened in 2002, 2003.

SIEGEL: And this week, were you starting to hear that at all this morning?

Ms. NIEMANN: I'm beginning to hear somewhat of it. People for the most part have been willing to hang on, not only that, but want to do some bargain buying, especially in the financials. And basically what you have to do is tell them to sit down, keep a cool head, it's not over by a long shot. And just discouraging the bargain buying was a tough thing. And now it's going to be discouraging all the panic selling.

SIEGEL: And this to you is not yet a go-to-cash moment.

Ms. NIEMANN: No, it's not. We're way past that. At this point, we're heading into probably a whole bottoming portion of the market here. The market always recovers before the economy does. How deep this recession is going to be, how much of a global recession it's going to be, is still a ways to play out here. But the market will anticipate recovery by about six months, perhaps even a little bit longer, when the recovery will start. We're not in that mode yet, but it's way too late to abandon ship.

SIEGEL: You work for a brokerage?

Ms. NIEMANN: Yes, I do.

SIEGEL: Probably the most famous brokerage name in the country, Merrill Lynch, was bought over the weekend by Bank of America. And I've heard people talk about the notion of consolidation, that the financial sector is just bloated. The president of bank of America says half of the banks in this country will probably fold in the next year or two. Does that make sense to you that however many shrewd people and wise people may be in financial services, there are too many companies trying to make money off of what is a more limited sector than all that?

Ms. NIEMANN: Well, at one point everybody was talking about we're going to have one-stop financial shopping. That was at Citicorp, and they were going to be all things to all people. We have insurance, we have investments, we have banking. Sears was even going to get into the one-stop financial services at one point. So there was going to be a huge consolidation throughout the industry. Then we had the second wave when that didn't work of it's going to be only big banks, and they will have every single opening, no matter where you are. It's the death of the little bank.

The amazing thing about this is they've done studies over the years about consolidation within industries and the bigger you are, the more difficult it is to make money and to respond to market conditions. And then you start the process of getting smaller again. Smaller and medium size companies actually do have a capability of making good money long term simply because they can react to financial conditions as it occurs rather than reacting to top corporate management who is always the last to know what's going on.

SIEGEL: So this actually is a great time to be working for a relatively small brokerage and to be able to point to the foibles of these names that everybody's known of for decades.

Ms. NIEMANN: Well, there's thin consolation in saying "nyah nyah" to the big boys, simply because what happens to them falls out throughout the entire economy and to all the rest of us. It's a black eye for everybody.

SIEGEL: Well, Juli Niemann, thanks a lot for talking with us today.

Ms. NIEMANN: Thank you.

SIEGEL: Analyst Juli Niemann who works for Smith, Moore and Company brokerage in St. Louis. Transcript provided by NPR, Copyright NPR.

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