The Crash, One Year Later : It Was the Worst of Times

THEY BARELY KNEW WHAT HIT THEM. Al Frank, publisher of the Santa Monica-based newsletter The Prudent Speculator ($200 a year), admits that he was “clobbered” by the crash and its aftermath. He regrets failing to warn his readers, saying, “We had a lot of new clients who had signed up at the top of the market. Their stocks did not do well. It was very sad for me.” Frank, 58, lost $750,000 of his own money, and his subscriber list has dwindled from 5,700 a year ago to 2,500 now.

Georgia’s Robert Prechter, 39, had become the hottest stock guru in 1986 and ’87 because of the bullish predictions in his newsletter The Elliott Wave Theorist ($233 a year). He based his forecasts on a mix of esoteric formulas and offbeat indicators like hemlines: the return of the miniskirt, he said, was a sign of a peak in the market. Prechter issued a warning on Oct. 5, advising his subscribers to sell their stocks. But he did not predict the downturn’s severity, which disappointed some followers. “New business has virtually disappeared,” Prechter concedes, but he is philosophical: “Going through the valley is something I’ve done before.”

TAKE THIS JOB AND SHOVE IT. Richard Dennis, 39, known in Chicago as the Prince of the Pit, was one of the most successful commodities traders in the world. He launched bold invasions into markets ranging from Treasury bonds to precious metals. But he took a bath in financial futures after the crash and in grain during last summer’s drought. His two public commodities funds lost an estimated $50 million in the past year, or nearly 50% of their value. Dennis decided last month to pack up his diminished fortune, estimated at $200 million, and move on to another pursuit: politics. He aims to invest in causes and candidates that reflect a philosophy he describes as “an idiosyncratic mix of economic free markets and liberal social policies.”

NOBODY KNOWS THE TROUBLE THEY’VE SEEN. Retail stock brokerages are suffering because small investors, a primary source of commissions, are staying out of the market. Nearly 16,000 securities-industry workers have lost their jobs, while profits have plunged at such firms as Merrill Lynch and Paine Webber. The largest investment houses have survived the down cycle, with one exception: E.F. Hutton, already suffering from a check-kiting scandal before the crash, nearly collapsed afterward and was absorbed last December by Shearson Lehman.

Suburban Chicago’s Oberweis Securities, a fast-growing small firm before the crash, abruptly halted its expansion plans this year. James Oberweis, the company chairman, decided to diversify by selling 50.1% of his brokerage to another firm and expanding his family’s dairy company by buying a chain of ice-cream shops. Says Oberweis: “The ice-cream business is a lot better than the brokerage business these days.”

AM I IMAGINING THINGS, OR IS HE SERVING CHEAPER CHAMPAGNE? Many losers of the last year have escaped embarrassment by refusing to admit their setbacks. Robert Fomon, 62, who resigned as chairman of E.F. Hutton in May 1987, claims that “it is very fashionable to lie about ((the crash)). Now everyone says that he wasn’t in the market.” Several snipers contend that Donald Trump, the developer and casino kingpin, was bitten hard by the bear, even though he bragged late last October that he was smart enough to get out just in time.

OOPS! BAD TIME TO GO OUT ON A LIMB. Robert Holmes a Court, 51, Australia’s first billionaire, was heading for a fall last year when he bought huge blocks of stock, including a 10% stake in Texaco. The crash cut his personal fortune from an estimated $1.1 billion in mid-1987 to $400 million now. Lately, instead of stalking giant corporations on several continents, the Perth-based investor has been making far more modest acquisitions, such as sheep ranches, land for an industrial park and paintings for his private collection.

BUY A HOUSE FOR HALF A MILLION AND GET A GARAGE-DOOR EAGLE FOR FREE. While sales of many luxury goods have remained strong, the market has gone notably soft in some metropolitan areas for houses in the $400,000-to-$600,000 price range. Those were the yuppie domiciles that brokers, traders and investment bankers in their thirtysomethings could well afford during bull-market days. Prices have not fallen drastically yet, but hardly anyone is buying, especially in Wall Street’s primary bedroom, Connecticut, and favorite resort, Long Island’s Hamptons.

WILL THE LAST PERSON TO LEAVE THE PITS PLEASE TURN OUT THE LIGHTS? Trading volume at the Chicago Board Options Exchange has plunged 43% in the first eight months of 1988, compared with the same period the previous year. During the bull market, the exchange had boomed partly because stock investors had hedged their Wall Street bets by buying options contracts. But now business is so slow that 150 of the exchange’s 1,200 employees have been given severance packages. One of the most renowned traders on the exchange, Jack Keller, 45, has moved his family back to Las Vegas and temporarily resumed his previous career as a professional poker player. “If the market picks up, I’ll go back,” says Keller. “But very few people are making money down at the exchange, from what I hear. I just hear moaning and groaning.”