Georgia investors warming again to Wall Street

By J. Scott Trubey
The Atlanta Journal-Constitution, December 3, 2010

Like a lot of Americans, Grady Houston of Carrollton pulled back from the stock market and went to bonds and CDs when the economy tanked and losses grew in his portfolio.

Diana Thorne, of Roswell, switched to almost all cash.

But the mild thaw in the economy's deep freeze – along with low interest rates that show no sign of rising – has Houston, Thorne and lots of other Georgians warming again to Wall Street.

Money managers for the ultra-wealthy and the Main Street Joe alike say their clients, tired of earning little from low-risk, low-reward investments, are putting more of their cash back to work when they're able.

For the rich, worries about tax changes remain, but have been somewhat muted by return to power of Republicans in the House and a narrowing of the gap in the Senate.

Many remain cautious, perhaps permanently so. But small signs of economic life – from improved consumer spending and manufacturing activity – as well as a desire to recoup losses and keep retirement and other plans on track are bringing more Georgians back into the investing game.

Houston, a retired Army veteran, said the rebound of the Dow Jones Industrial Average – up more than 70 percent from its March 2009 low – has helped buoy his confidence.

“I feel more confident now because actually it's been down so much … so it can't stay down forever,” Houston said.

Though savings rates have grown, yields on bank accounts dropped to 0.70 percent in October, according to Market Rates Insight. That amounts to $70 in annual interest for a $10,000 deposit.

“There's a much better appetite for securities and investments, and much less of an appetite for not earning yields,” said Rob Burts, senior vice president of Synovus Securities in Alpharetta.

Bank deposits grew $3 billion in Georgia over the past three years to $181 billion, according to Market Rates Insight, and that number is expected to climb as consumers buildready cash and pay down debt.

Georgia manufacturers were more bullish about the economy, according to a November index published by Kennesaw State University. Consumer spending grew, too, in November at better than expected rates.

Glenn Williams, president of Primerica Inc., the Duluth-based financial and insurance services company to the middle market, said confidence is starting to grow.

Sales of financial products for Primerica were up 14 percent in third quarter over the same period last year, following 26 percent growth in second quarter.

Primerica's clients typically earn $30,000 to $100,000 per year. Unemployment and drops in home values and other assets have taken their toll.

“We're seeing strength in our investing business, but in reality the middle market is still struggling financially,” Williams said. The middle class is still paying down debt and grappling with reduced home and other asset values.

But, he said, the middle class feeling “an increased sense of urgency” to rebuild their retirement nest eggs from what was lost.

“Overall, we're seeing a little bit of confidence returning in life in general,” Williams said.

Houston, 82, said some of his prior stock holdings dropped as much as 40 percent when the economy crashed. But the Korean War veteran said he's gained back most of what was lost.

“Stocks and bonds are a bit of a gamble,” he said. But Houston said returning at least cautiously to quality stocks were the best way to recoup what he lost.

Thorne, a real estate agent with Keller Williams, said she panicked when the market bottomed in March 2009, pulling out of an “aggressive” mutual fund and going nearly straight cash.

“Sometimes we overreact,” Thorne said. “I pulled out at the worst time when it was at the very bottom.”

Thorne started back with a more conservative mutual late last year, and have pushed more dollars into the account as it has grown. She's also seen a pickup in home sales.

“It's been a good year for us,” she said.

Fred O'Neal, a financial advisor with Edward Jones in Carrollton, said he's seen a shift where clients want more education. But they're starting to get more comfortable.

“I think investors today are much more cautious, but far more resilient,” he said.

Ross Singletary, managing partner with Arcus Capital Partners in Buckhead, who serves millionaire clients, saidinvestors still worry about the value of the dollar and are hedging their bets with gold and even foreign currencies.

“I think the real economy is showing meaningful signs of a turnaround, although by historical standards it's been a sluggish recovery,” he said.

There are many economic issues to contend with, from high unemployment and high deficit spending by the U.S. government to about debt issues from European nations such as Ireland.

Emily Sanders, president and CEO of Sanders Financial Management, said her clients – mostly small business owners and professionals – fear tax levels will rise to help shrink the nation's deficit, and that could curtail hiring and business investments.

“It's something that's overhanging a lot of successful processionals and business owners,” she said.