(4 of 4)
Such was the case for Tom Padgett, a lab technician at a subsidiary of energy-trader Enron. As Enron's high-flying stock dived from $90 to less than $1, his account balance fell from $650,000 to $11,000. Last week two Democratic Senators, Barbara Boxer of California and Jon Corzine of New Jersey, introduced a bill to limit 401(k) assets to no more than 20% in a single stock. Many plans have more than 50% in one stock; some, more than 80%. Workers everywhere are on notice that the risks are great for anyone with one large holding.
The business cycle lives
Technology was supposed to make companies more productive and smooth the economic cycle, in part by instantly matching inventories with demand. No more boom, no more bust. But the very technology that was supposed to achieve all those advances had its own boom and bust and greatly exaggerated the up and down legs of the broader economic cycle.
Overbuilding, even of must-have products, can throw the economy into recession as surely as overbuilding of cars or offices. It all comes down to what the consumer will pay for. And in the Internet boom, "there was a false belief that businesses could continue to buy productivity-enhancing devices and invent consumption," says Joe Battipaglia, market strategist at Gruntal. A prominent bull even through the bear market, Battipaglia has learned how dramatically things can change. So should we all, so that in the next recession we can make different mistakes.
--With reporting by Cathy Booth Thomas/Dallas, Unmesh Kher/New York, Laura A. Locke/San Francisco and Siobhan Morrissey/Miami