My finance view

SUNSET HILLS — Steve Carani popped on his headset. This would not be a pleasant phone call. He had to tell a client that the value of her $10,000 Lehman Brothers bond had deteriorated after the investment bank’s massive bankruptcy on Monday. For now, it might be worth pennies on the dollar.

"Nobody’s going to have the exact answer as to what happened for some time," Carani told the client Friday. "I’m sorry it happened."

At the end of one of the craziest and scariest weeks on Wall Street in recent memory, financial pros are taking stock and trying to regroup, facing a suddenly changed financial services industry. For Carani, a financial advisor with 16 years at Edward Jones, that means reassuring clients that this is no time to panic.

This is one of the most volatile markets some professionals have ever seen. Stocks plummeted Monday and again Wednesday as many credit markets around the world stopped functioning normally and investors ran for cover. "This financial crisis might be the worst we’ve had in 70 years," Ron Kruszewski, chairman and CEO of St. Louis-based Stifel Financial Corp., said Monday, after the Dow Jones industrials dropped more than 500 points.

On Thursday and Friday, the market picked itself up off the floor; big rallies underscored that investors had craved: the federal government’s interventions on behalf of stumbling mega-insurer AIG and firms holding degrading mortgage-backed securities.

"The way the market responded (Thursday and Friday) points out how extreme the fear was," said Al Goldman, chief market strategist at Wachovia Securities. "Investors were thinking we were facing financial Armageddon."

On Monday, Carani had to call dozens of clients to tell them that Lehman — with an investment-grade credit rating just weeks ago — was bankrupt, threatening their bond investments. It may have been the toughest day in his career and "by far" the roughest patch this week, he said.

Brokers and analysts fretted that fear, angst and uncertainty had become the primary factors in pricing securities this week, superseding fundamentals like valuation and future prospects. Safety seemed elusive. Destructive chain reactions seemed possible. "You’re looking at a range of emotion that is occurring in a short amount of time, which can be emotionally exhausting," said Richard Cripps, chief investment officer at Stifel Nicolaus.

At 7:00 Tuesday morning, a client called Carani’s office and left a message. "Tell Steve to sell everything. I want out."

In a 20-minute phone call, Carani was able to talk the client back from the brink. His mantra: prudence, diversification, patience — the old bedrocks of conservative investing.

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"Getting (investors) to hang on and stay intact — sometimes that’s the best strategy," said Carani, who oversees 70 brokerage offices.

Great opportunities open up for investors during times of crisis, said Goldman paydayloans.com. Unfortunately, he said, most people can’t bring themselves to buy stocks when the market is in a downturn and stocks can be had for a bargain.

"I’ve been doing this for 48 years, and two days ago, I thought I was going to lose my lunch," Goldman said Friday. "When my stomach acid rises to the point where I’m thinking I might lose my lunch, I know that’s when to buy stocks."

Experts stressed that the market could handle the strain, advising investors to keep an even keel and not to overreact either by dumping solid investments or piling into unsteady ones. For all of its travails, the market closed at the same level on Friday as it stood a week before. The Dow Jones industrial average is basically flat for the month. "The reality is, we’re not going to spontaneously combust," said Cripps.

Things had calmed down by Friday afternoon at Carani’s brokerage, tucked in a building near a coffee shop and sub cafe. Carani, dressed in a yellow tie festooned with small bulls — optimism? — said he would be on an anniversary trip most of next week. He might not even bring his laptop.

A 74-year-old client came in to discuss her investments in Fannie Mae, Freddie Mac and Anheuser-Busch. "I’m not really getting panicky" about the market, she said. "If you panic and start selling, that’s when you’ll really get in the hole. You know, last week when things were down, I thought, ‘I wish I had some extra money so I could buy some of this low-priced stock!’"

jmcwilliams@post-dispatch.com

314-340-8372

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