Gen Y gets its first taste of a meltdown
By Victoria Laurie and Anthony Klan
January 23, 2008 02:00am
Article from: The Australian
WHILE Gen Y investors flooded sharemarket chat sites begging for advice on what to do, 32-year-old broker Ben Polkinghorne spent much of yesterday telling his clients to "hold tight" during the biggest market bloodbath in decades.
It was a different story in cyberspace, where the internet generation was reacting to its first taste of market meltdown. On sites such as HotCopper and Aussie Stock Forum, young bloggers who were losing big money by the minute were panicking.
"For f%%$$K's sake, a bounce must be coming? Maybe it is the end of the world," wrote one blogger on HotCopper, which claims to be Australia's largest stock market internet forum. Fellow HotCopper blogger "Rogues Trade" jokingly offered to hire a bus and drive it off Melbourne's West Gate bridge, offering "25 seats" to fellow distraught young investors.
"Oh what a terrible day, time for a Valium or something stronger," wrote another.
On Aussie Stock Forums, young investors were asking for the advice many baby boomer parents had been dishing out for years. "This is my first experience of having open trades during a crash, I missed the August 07 one (a minor correction) by one week," wrote korrupt1.
"I was wondering what lessons have people/traders learned over the last few crashes ... (and) what tips can experienced ex-market crash traders provide.
"Watching my investments' value decline is painful so I guess one way is to unplug the system and ignore it for a few days, hoping when I come back in a week (or a month), it will be allbetter."
Back on the trading floor, Mr Polkinghorne, whose 11-hour working days at Patersons Securities in Sydney are followed by nights tracking the US share market's tumble via cable TV, admits it's been a tough few days.
He said the hardest part was calling clients who borrowed money to invest in the market through margin calling and were now being forced by lenders to top up plummeting values with extra cash or more equity.
Market analysts said much of the gloom was due to high numbers of leveraged investors needing to quickly sell stocks to meet such financial obligations.
"It's a matter of advising the client of the amount of the margin call," Mr Polkinghorne said. "They've got until two o'clock the next business day to either sell stock, pay cash or lodge additional security.
"It's not great having to call a client and tell them."
It's a new experience for the broker, who yesterday found clients he personally advised are now suffering.
Knowing that he counselled people to buy conservatively across diverse stocks is little comfort when even blue chip stocks have taken a hit.
Mr Polkinghorne's day is spent on the phone reassuring investor clients "to stick with our longer-term view and goals".
Some are feeling jittery, but he's not advising them to buy until the market stabilises. "To try now (to buy) would be like trying to catch a falling knife. It's been a harsh selldown, and it's a matter of staying on the phone and keeping clients up to date."
Demographer and KPMG partner Bernard Salt said many baby boomer parents who had been warning their cocky offspring - who had never experienced a market crash - of the pitfalls of investing would see the downturn as retribution.
"The baby boomers have been predicting, almost willing, an Armageddon on the stock market to prove to Generation Y the good times are never permanent," Mr Salt said.
"This slump would be quite confronting for a 28-, 29- or 30-year-old Generation Y who's only ever seen the stock market go in one direction."
Online personal share trading platform CommSec collapsed under the weight of frantic activity yesterday, underscoring the proliferation of private investors in the market since the downturns of 1987 and 1990.
Mr Salt said the proliferation of online share trading - especially among tech-savy generation Ys -- and margin loans where banks had lent individuals money with which to invest in shares, meant the impact of yesterday's correction would be widespread. He said this correction extended pain well beyond just "the rich individuals and corporations that copped it in 1987".
"The actual crash (in 1987) was a day of reckoning for just a select group," he said. "That group is far more widely based now."