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Many portfolio managers who became stars during the bull market emerged from the crash notably tarnished. George Soros, 57, who until Black Monday was regarded as one of the canniest investors in Wall Street history, saw his Quantum Fund drop some 36%, to $1.67 billion. Other stars emerged overnight. Elaine Garzarelli, 36, a research analyst and fund manager for Shearson Lehman Bros., had emphatically predicted a collapse exactly one week before Black Monday in an interview on Cable News Network. Her stock fund, the Sector Analysis Portfolio, reportedly gained 5% during the week of the crash because Garzarelli had moved the fund out of stocks and into cash and Treasury bills. Result: Garzarelli, who bases her prognostications on an elaborate computer model, now sends visible tremors through the market with her predictions, which remain bearish at the moment.
Many stockbrokers are nervous for another reason: the wrath of their clients. "I want to strangle my broker," says Manhattan Insurance Agent Matthew Costa. "I wanted to sell everything on the Friday before the crash, but she told me I had good stocks and should hold on. Now she keeps giving me excuses why she can't meet me for a few days." While Costa's threat was figurative, customer anger seemed all too real last week after an investor who lost nearly his entire multimillion-dollar portfolio walked into a Merrill Lynch outlet in Miami with a .357 magnum in his briefcase and killed the branch manager, seriously wounded a broker and then committed suicide. The customer, Arthur Kane, 53, later turned out to be a disbarred Kansas City lawyer and convicted con man who was living in Florida under a witness protection program. Despite the incident's odd circumstances, it crystallized brokers' fears; in one Queens, N.Y., office, brokers reportedly donned buttons that read, I AM NOT THE BRANCH MANAGER.
Most of the harm that brokers may face, however, is financial. An estimated 24,000 of the securities industry's 300,000 workers are expected to lose their jobs in the market slowdown. Many more may forfeit their six-figure bonuses. The economic ripple effects will be felt most strongly on the Eastern Seaboard, especially in New York City, where sales of luxury cars, expensive homes, jewelry and other trappings of Wall Street success are already starting to suffer. The city could also be hurt by a falloff in tax revenue from the financial industry, which last year amounted to $150 million, or 12% of the tax base. Anticipating a drop, Mayor Edward Koch last week put a freeze on plans to hire 5,200 new workers, including 1,948 police officers.
Signs are increasing that the crash is discouraging consumers across the U.S. as well. While polls immediately afterward showed only a modest amount of alarm, later surveys indicated that the Wall Street shock was starting to register. According to a Wall Street Journal/NBC News poll of 2,394 Americans last week, nearly two out of three (64%) say a major economic downturn is very or somewhat likely in the next twelve months. "Since about 19% of total retail sales occur during November and December, the plunge could not have come at a more inopportune time," says Robert Chandross, chief economist of Lloyds Bank in Manhattan.