Denver money manager Paul Dickey couldn’t believe the stock quotes he was seeing Thursday afternoon — he thought they were all wrong.
Dickey, who runs INS Capital Management, had expected a stock-market correction and had cash on hand to buy but couldn’t profit as he wanted when panic set in.
“The market became illiquid; it came to a standstill for a short period of time,” he said.
The Dow Jones industrial average, already down more than 300 points, fell 600 points, or nearly 6 percent, in a matter of five minutes, raising comparisons to the crash of Oct. 19, 1987, when the Dow lost 22.6 percent.
Unlike then, markets rebounded Thursday as furiously as they went down, although the major indexes finished off more than 3 percent on the day.
The sharp whipsaw left money managers stunned and debating whether problems in Greece had finally pierced the long-running bull market or whether computer errors were to blame.
For the past six months, the markets have fretted about Greece’s debt problems but kept marching higher on stronger corporate earnings and signs of economic recovery.
Dominick Paoloni, a portfolio manager with Investment Protection Services in Lakewood, said he doesn’t understand how a country with the population of Alabama could crash the global economy.
Regardless, the situation today is much different than the fall of 2008, when the credit crisis was sucking the oxygen out of the economy, threatening a global collapse, he said.
“I recommend staying the course with the caveat of understanding what your risk is,” Paoloni said.
Michael Willis, lead portfolio manager for Giant 5 Funds in Colorado Springs, said a correction of 10 percent or more would not be unexpected and might prove healthy for a continued upward run in stocks.
What worries him is the extreme volatility automated trading systems are creating.
“You have the hyper-trading and the machines and their ability to move faster than humans,” he said. “That is an issue that needs to be addressed.”
Willis said he is sticking to his approach, which is based on the premise that emerging economies will fuel global growth and inflation.
He recommends holding commodities, real estate, bonds and a smattering of the biggest corporate names.
But a stumble in emerging-market stocks, market leaders since early 2009, along with a surge in bullish sentiment have made Dickey more conservative.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
