SAN FRANCISCO -- Remember the last time we were in a bear market? The answer, for many traders, is probably,
"Uh ... no."
The historians and market technicians may disagree, but the signs are ominous that we are in the midst of a bear market. And after last week when the
Dow Jones Industrial Average
fell 411.43 points in heavy volume, finding people who have experienced down markets is not a trivial pursuit.
Look around some of the
trading pits and you'll notice an increasing number of traders who were probably still pimply teenagers when the market dropped sharply in 1987. (You'll be really hard-pressed to find anyone who was trading during the last true bear market of 1973 to '74.)
Take Jason Perdue, a market maker for
, who, at 29, says "I'm probably one of the oldest ones in this pit."
Some of his counterparts, like Ross Berman, are only 24. Berman has traded for less than a year but proudly notes, like most twentysomething traders, that he was there last Oct. 27, when the Dow tumbled 554.26 points and forced several exchanges to close early. The Dow lost 512.61 points to end Monday at 7539.07 before rising Tuesday to end 288.36 points higher.
"This wasn't as bad as the one in October," Berman says. "That one was shocking." Particularly because at the time of the Oct. 27 slide, Berman had only been trading for about a month.
"That was one day," notes a 40-year-old trader for
Salomon Smith Barney
in Chicago, who says it's people like Perdue and Berman who make some of the older folks who have lived through the 1987 drop shudder. "They weren't around 10 years ago. They have no reference, no background. For them, it's only been an up market. It's like being in a world that's always sunny and then it turns, and they don't know how to handle it."
Another veteran trader, at
, puts some of the blame on inexperienced media for market confusion. "Some of the journalists are young, like the ones on
," he says. "How old are they? Surely they don't remember '87."
A trader for a commodities and stock house in Chicago, who is a relative veteran at the ripe age of 33, says the young guys are "too excitable" and "exacerbate the situation."
"When you call to put in orders, half the guys are too busy to talk to you or they hang up," the trader said. "You end up missing the market, so when you call back, you are more panicked. And instead of being there to provide more liquidity, there are more gaps."
Not true, cries Perdue. Young traders are not afraid to step up and make markets amid violent swings. "As an options trader, I don't care whether the market is going up or down," Perdue says. "We make money on volatility."
In fact, many young traders say they love the volatility. "With the technology we have, we can enter orders and be in and out of the markets quickly and take advantage of high-volatility days," says Andy Friis, a 26-year-old day-trader at
in Boca Raton, Fla., who actively trades stocks -- particularly Nasdaq stocks -- electronically.
But are the young traders the ones creating the volatility? Not necessarily, Friis says. "Maybe we have made the markets more volatile at times, but we also add liquidity to the marketplace by providing a stock price at every level."
Blame inexperienced investors, like those who trade online, for causing violent market gyrations. "Some of those people have no idea what they're talking about," says Purdue. "I was chatting
online with a guy last night who was talking about trying to pick a top in the volatility index
Chicago Board Options Exchange
because it was at 25-year highs. He wanted to buy the option as an OEX
play, and I was trying to explain to him that you don't want to buy the option when volatility is at 25-year highs because that means the option's expensive."
At least these traders trade online. "They're not as bad as some of these retirees who have nothing better to do than hang out at the local
and watch the ticker tape all day," says one fortysomething trader. "They make the local Schwab look like an off-track-betting parlor."
But at least they know where to find the best deals. The old ones will use Schwab's
machine and then run off to do their trades somewhere cheaper, she says.