- September 08, 2005 07:49 PM EDT

SECTION: Style; C02

LENGTH: 1085 words

HEADLINE: A Ruff Road;
With masses of bassets (and gluts of mutts), today's pet parades will give you paws.

BYLINE: Carol Vinzant, Special to The Washington Post

BODY:

"Where the hell are the basset hounds? I better see some bassets soon."

Debbie Palocin muttered each time she was subjected to yet another comedian or Lions Club president. Palocin is one of the dogless dog lovers who make a big fan base for parades like this one, the annual Doo Dah Parade/BoardWaddle in Ocean City, N.J. She had traveled five hours from Hoboken to see a herd of hundreds of bassets bringing up the rear of the procession. Though honored guests like Soupy Sales or Larry Storch of "F Troop" could amuse her, they could not appease her.

Finally there was a sign. Celebrity basset Mr. Jeffries rode by on the back seat of a red convertible. (Mr. Jeffries, grandson of the most famous basset of all time, the official Hush Puppies mascot, is himself now enshrined in the Guinness Book of World Records with the longest pair of dog ears: 11.5 inches.) His handler proudly flashed his immense ears and the crowd went wild.

Soon, small packs of bassets were passing by. Or, more often, not passing by but stopping to get admired and receive a pat or two. Bassets dove into crowds of delighted kids with the same instinct, enthusiasm and trust that punk singers must use to dive into mosh pits.

Some were dressed up: There were Hawaiian hounds, ballerina bassets and a dog showcasing his bulky build in a Philadelphia Eagles linebacker uniform. At its peak, hundreds of bassets were loping, lumbering and lingering down this beach town's main street and boardwalk.

The 2004 Waddle season has begun.

Pet gatherings are as old as, well, pets. Probably the first hounds to move in with the cave dwellers got together for a romp in the park the next weekend. But basset waddles, along with mob scenes of beagles, golden retrievers, mutts and other breeds, are part of the super-sizing of pet parades. Unlike dog shows, agility trails and organized hunts, these mass gatherings require no discipline or skill, just a critical mass of dogs and the people who love them. Sometimes they are fundraisers for breed rescue groups or local humane societies -- sometimes they are just for the spectacle of it all.

Hard-core fans travel hundreds, even thousands, of miles to attend these shows. But you don't have to: There are several in the region to enjoy in the coming season, from a Basset Ramble in Williamsport, Md., and a Virginia wine-tasting party for golden retrievers (and their owners) in May, to a Beaglefest in Chantilly in October.

Waddles, in particular, were invented by Jo Anne Smith, an officer of Michigan Basset Rescue, who in 1993 had the epiphany of putting the bassets in a local festival, Celebrate Birmingham. It's become a yearly tradition, with this year's event drawing more than 650 dogs from 45 states; dogs often march wearing a banner of their home state.

Other breeds have their own variation on festivities. The closely related and equally affable beagles have Beaglefests around the country, including two a year in Virginia. The older beagles sit on lawn chairs, but inevitably a chase starts among the younger dogs, says Laura Charles Johnson, director of Beagle Rescue and Education and Welfare.

Bassets are not that frenetic a breed. They are much more a plop-down-in-the-street-and-refuse-to-budge kind of dog. And it's this sloth attitude that makes the basset waddle the best form of dogs en masse art.

Here owners trot out the one breed best suited, or perhaps charmingly ill-suited, to parade marching. Bassets quickly divert off the route to greet their adoring public. Or they lie down in passive resistance to the burdensome task of walking several blocks straight. And finally they need to be scooped up in their owners' toy wagons or hauled out on a flatbed that serves as a "Pooped Puppy Patrol."

The next waddle in the region is the beach-themed annual Basset Ramble, in Williamsport. (Picture more than 150 bassets in aloha wear lumbering three miles up the C&O Canal towpath in this river town just south of Hagerstown.) The Williamsport event stands alone, as does the boisterous annual Walk-and-Wag, a pledge-raising promenade and pet festival June 12 open to all breeds in Frederick. Other events leash themselves to bigger happenings, like the basset waddle that brings up the rear of the Holiday Parade in Charleston, S.C.

Even at events that are breed-specific, security is notably lax and plenty of other breeds join the march. But if you would still rather be with a basset at a basset event, Basset Rescue of Old Dominion has a rent-a-basset service. For $20 (and your driver's license) you get the companionship of a basset (usually one of the potential adoptees). You're free to enter all the contests with your new pal, says BROOD's president, Melinda Brown.

Dogs at the Tri-State Basset Hound rescue in Ocean City, N.J., in April treated the parade like a leisurely social victory lap around town before they got to the party at the end.

Here, they had other chances for glory: trick and photo contests and even a chance to snatch Mr. Jeffries' World's Longest Ears title. (A local dog, Otis Sagen of Belmar, beat Mr. Jeffries by a full inch, but sadly a German dog, Jack vomForsterWald, has since taken the crown and, unless he's surpassed, will be in the next Guinness Book.)

Waddles often have kings and queens. In the Michigan waddle, royalty rides in a horse-drawn carriage. Knowing how eagerly stage-mother dog owners seek such waddle prestige, Michigan organizers now auction off their top honors. The gambit may be shameless, but it brings in about $3,500 per dog crown. If they can't afford stature, dog lovers can at least buy what is affectionately referred to as "basset crap." Such "slobber shops" are a feature of most gatherings, where shirts, hats, basset statuary, basset stationery, basset, well, you know, crap.

BROOD has a resplendent store, both online and at its Williamsport waddle: basset fabric, zip pulls, signs that say "CAUTION You are entering Basset Hound drool zone!"

For BROOD, the ramble makes up about 25 percent of the group's annual budget. Each year it takes in 130 to 150 bassets from Maryland, Virginia, West Virginia, Delaware, Washington, southern Pennsylvania and the Outer Banks. It spends an average of $500 and a month of volunteer time preparing the dogs for adoption.

As for the bassets, they tend to cap their long waddles with long naps -- often on the drives home.

However bewildered they are by these events, they understand this much: Every dog has its day and these are theirs.

LOAD-DATE: May 19, 2004

SECTION: HEALTH; Pg. F01

LENGTH: 1862 words

HEADLINE: Suicide Mission;
Teens Are Screened for Many Conditions, but Rarely for a Real Killer

BYLINE: Carol Vinzant, Special to The Washington Post

BODY:

By the time they reach high school, most American students have been screened, probed and protected from a wide range of ailments: amblyopia and hearing problems, scoliosis and tuberculosis, mumps and head lice, flat feet and language delays, measles and myopia.

But these programs very rarely screen for one of the most deadly and devastating threats teenagers face: the desire to kill themselves.

"We'd like to see screening" for depression and risk of suicide "become more commonplace, a routine part" of high schools' student health programs, says David Shaffer, director of the division of child and adolescent psychiatry at Columbia University in New York. "We want it to become part of the culture."

Shaffer is developer of the Columbia TeenScreen Program, a sequence of tests and interviews designed to sift through a large group of teens and identify the few kids at high risk for depression and suicide. Along with the mental health advocacy group Positive Action for Teen Health (PATH), TeenScreen has launched an ambitious plan to screen -- and, as required, direct to treatment -- every teen in America.

Each year, around 8 percent of teens report an attempt to commit suicide in the past year, and about 1,600 succeed, according to the U.S. Centers for Disease Control and Prevention. For ages 10 to 24, suicide is the third-leading cause of death, following auto accidents and homicides.

TeenScreen's approach to the problem is different from most other suicide prevention techniques in that it does not seek to educate, destigmatize or provide hot lines for troubled kids, arguing that these methods have been proven ineffective or even harmful. TeenScreen seeks only to identify the youth at highest risk and get them the treatment they need, leaving the others as undisturbed as possible.

While the screen-and-treat approach is gaining support and momentum in the field, it remains controversial. John Kalafat, a professor of psychology at Rutgers University and president of the American Association of Suicidology, has researched in-school educational and awareness programs and determined that many of them do indeed succeed in getting at-risk teens counseling or medical care. And he sees shortcomings in screening programs, including the fact that exams' need to be conducted regularly to be fully effective and a research record not significantly better than other programs'.

TeenScreen "is a good program," Kalafat says, "but why present it as, 'We do this because the others aren't good'?"

Laurie Flynn, PATH's national director and former executive director of NAMI, a national mental health advocacy group, is well aware of how devastating teen depression can be for families. Her teenage daughter attempted suicide 16 years ago but was able to get help and is okay today, she says. "Since we know we can identify [kids at risk for suicide] and we know we can help, how can we turn away from this?" she asks. "We're talking about saving lives here. And reducing disability. And reducing suffering."

As part of its campaign to spread the screening program nationally, Columbia and PATH conducted a survey on teen depression and suicide in December of parents in Washington, New York, Florida and Ohio. A large majority of parents, the survey found, thought other parents would miss the warning signs -- but that they themselves would be able to see them. Nearly nine out of 10 thought themselves able to do so.

This conflicts sharply with Shaffer's research into completed suicides. After conducting investigations into 120 teenage suicides over a two-year period, he and his colleagues discovered that 90 percent had a diagnosable mental disorder that had gone undetected. More than half had significant symptoms for more than two years. This does not necessarily mean the parents were inattentive; it's partly the nature of the teenage beast.

"Teenagers go to great pains to hide emotional distress from their parents," Shaffer says.

Shaffer's research found that the risk factors for suicide included a mood disorder (usually depression); past suicide attempts; and alcohol and drug abuse. Family conflict and stress at home were less important factors.

Of the various factors, mental illness, particularly depression, is key, Shaffer says. "Suicide only happens to people with a mental illness," he says.

The TeenScreen system consists of four parts: After receiving parental permission, all kids in a class or group take a simple, 10- to 15-minute written questionnaire asking if they've thought about or attempted suicide, feel depressed or use drugs or alcohol.

A sample question: "In the past month, how much of a problem have you had with feeling unhappy or sad?" Responses range from "1, No Problem," to "5, Very Bad Problem."

One question asks if the teen has ever considered killing himself or herself. Many who respond "yes" later report that they had simply never been asked this before.

Between 40 and 50 percent of the whole group is usually directed to go to the next stage, a 45-minute computerized test designed to further distinguish those at risk from typically moody teens. The computer interrogator -- it speaks in a voice, through headphones -- provokes more honest reporting from kids than an adult questioner would, TeenScreen says. About 20 to 25 percent of those who take this test are flagged for in-person interviews with a mental health professional, who can distinguish teens who are suffering from appropriate situational distress (their parent's divorce, say) from those with more serious underlying psychological disorders. Those who are so diagnosed are sent on for counseling or therapy, with the coordination efforts of PATH.

So far, more than 10,000 students have gone through the program; 10 to 15 percent have been referred for treatment. Pilot programs are running in 66 communities, and the group is offering to expand its efforts to 400 more communities. Columbia provides training and software free, but communities and schools need to provide staff and commit to screening at least 500 kids.

The screenings have uncovered a wide swath of mental suffering that had gone undetected by parents and undeterred by all the well-meaning programs they had put in place. Less than one-third of those suffering from major depression, about one-quarter of those contemplating suicide and only half of those who had made a previous suicide attempt were under professional care (again belying the survey data showing parents believe they can detect mental illness in their children).

For decades parents and professionals have grappled with the rising rate of teen suicide and developed a variety of strategies. Since the 1980s communities responded by starting suicide hot lines and offering suicide awareness and education programs at high schools. While begun with good intentions, Shaffer says, they were not all backed by substantial research. Not only have many not been proven effective, Shaffer says, some may actually hurt.

The National Institute of Mental Health essentially concurs. In a 2000 report, it wrote: "Many of these programs are designed to reduce the stigma of talking about suicide and encourage distressed youth to seek help. Of the programs that were evaluated, none has proven to be effective. In fact, some programs have had unintended negative effects by making at-risk youth more distressed and less likely to seek help. By describing suicide and its risk factors, some curricula may have the unintended effect of suggesting that suicide is an option for many young people who have some of the risk factors and in that sense 'normalize' it -- just the opposite message intended."

Kalafat has gathered and published research in professional journals that shows some educational programs' effectiveness, though he acknowledges that differences in program quality are problematic. He says there is no evidence that clearly shows screening results in fewer suicides than educational interventions.

"It's the same old argument, that somehow kids are more likely to commit suicide because we talk openly about it," he says. Similar arguments are used against introducing drug and sex education in the schools.

People who work in suicide intervention programs described as ineffective by screening activists report they can see the results themselves.

"We're out here on the front lines," says Fred Davis, president and executive director of Parents Against Teen Suicide Inc., which conducts educational programs and interventions mainly in North Carolina. He says his group has helped get 25,000 people into the mental health care system and has gone out to intervene in 2,000 potential suicides, only one of which resulted in a death. "You can't tell me this doesn't work."

Both camps agree that program quality varies widely, and that more research is needed to determine what works best. All parties seem to agree that, aside from the question of how suicide prevention is handled, teens need better education about mental health, especially depression. Getting high-risk kids into treatment -- medication, along with family counseling or therapy to reshape their destructive thinking patterns -- can help with a range of concerns, including social and learning problems. The screens can help identify other psychiatric conditions, ranging from drug and alcohol abuse to eating disorders, all of which require or benefit from therapeutic intervention.

Meanwhile, to support the national effort, PATH is doing what advocates do in Washington: lining up legislation (Rep. Rosa DeLauro (D-Conn.) last year introduced the Children's Mental Health Screening and Prevention Act of 2002, which would create 10 federally funded demonstration screening projects); briefing congressional staff; working the executive branch (to get on the radar screen of the President's New Freedom Commission on Mental Health, created last year to study the nation's mental health delivery system); and pushing their survey to gain media visibility.

There are also efforts to get school systems onboard with screening, partly by convincing them that undiagnosed depression and other psychological conditions can "get in the way of their learning objectives," Shaffer said. The group last year began working on a strategy with Rep. Patrick Kennedy (D-R.I.) based on the idea that early intervention in psychological problems can reduce special education costs later on.

TeenScreen leaders find that resistance still comes from some parents, who object to having their child interviewed on such personal topics. Parents usually have to sign a consent form to permit their child to take the test, and often only 50 to 70 percent do (sometimes it's far lower). Sometimes PATH will add incentives like movie rental coupons for those who return screening forms. Another tactic is to require action from parents -- a denial-of-permission slip -- to forbid the testing. When this is done, only about 10 percent actively object.

"When most parents figure out this is all about helping their children," says Flynn, "they are fine with it." *

Carol Vinzant, a New York writer, is a frequent contributor to The Post.

LOAD-DATE: February 25, 2003

SECTION: STYLE; Pg. C02

LENGTH: 1042 words

HEADLINE: Sex on the Beach;
For the next few weeks, thousands of horseshoe crabs will mate around the Delaware Bay. Wanna watch?

BYLINE: Carol Vinzant, Special to The Washington Post

BODY:

At first I had several eager partners for my little horseshoe crab adventure. When I proposed driving to see the annual spectacle of masses of the prehistoric critters mating on the beaches of Delaware Bay, a few friends were enthusiastic. After all, anyone with an old pair of shoes and a flashlight is invited to come out and play biologist for a night at a ritual that a National Geographic guidebook has dubbed "one of the great marine spectacles on the planet." The bay's population of horseshoe crabs -- which have been around in some form for hundreds of millions of years -- has plummeted by perhaps 90 percent in the past decade. Worried scientists are out counting crabs on many nights of this late spring mating frenzy, and they're looking for help.

But as the event got closer and the realities involved sank in -- particularly driving to a remote beach in Delaware around midnight in possibly stormy weather -- excuses were made.

Hangovers, weekend work, medical dramas -- I heard it all. And so I set out on a recent Sunday night, alone and dubious. Anyone who has ever tried to make an appointment to see wildlife knows that it is notorious for standing people up, and I was pretty sure I was on a fool's errand. The moon was new (dark) and therefore perfect for horseshoe crab love. But the forecast called for severe storms, which neither the crabs nor the scientists care for. Nor I, for that matter.

So I imagined driving for hours to find myself alone on a beach with two or three amorous crabs. I was heading out early in the late spring mating season to a supposedly mediocre beach to join a crew led by Bill Hall, a marine education specialist at the University of Delaware, whom some volunteers call the god of horseshoe crabs.

Sure enough, as soon as I crossed into Delaware, the lightning began. I drove on. Finally I saw the tiny sign for South Bowers Beach. To get there I had to suppress everything I had learned from horror movies about driving solo on stormy rural roads at night. I thought of the "X-Files" drinking game that requires a shot each time Agent Scully pushes on into a dark place by herself. This drive, during which deer materialized in front of my car out of the mist and which took me miles past an ominous "NO OUTLET" sign, would have required many drinks.

But when I arrived, volunteer Bret Ritchie was there to greet me. "Did you see them yet?" the 28-year-old asked, with the kind of ebullience people get from seeing a freakish natural wonder. "There are thousands."

If you had managed, however improbably, to stumble upon this scene by accident, you would never imagine horseshoe crabs were in any danger. It seemed more like they were invading the beach. An arthropod orgy stretched as far as I could see by flashlight. From the high tide line down into the shallows, thousands and thousands of crabs were enmeshed in every conceivable angle and position. Some seemed to form a conga line. Tails spiked out of the water. The overzealous overturned, a potential death sentence.

The male crabs are always the first on the scene, Hall explained when I caught up to him. They lurk in the dark, waiting for an opportunity to spray their sperm on the thousands of tiny green eggs the females bury. Some males will even attach themselves to a female as early as the fall, waiting for her to lay her eggs.

"His anatomy is designed so that he can just clasp onto her and just ride," said David Smith, a biological statistician with the U.S. Geological Survey who has been running the horseshoe crab study the past several years. "He's got a long wait, kind of a typical freeloading male."

We got to work. Since the crabs line up for roughly 30 miles along the Delaware shore, an actual count is out of the question. Instead, volunteers "sample" the population by counting how many males and females lie within a one-square-meter frame placed every 10 meters along the beach, then extrapolate the total. The highest count on South Bowers was 18 males and five females -- in a space the size of a welcome mat!

At our beach, Hall performed the counting, calling out the numbers to Ritchie's brother, Andrew, an aspiring biologist who had trekked from West Virginia to see the phenomenon.

This is the 12th year volunteers have counted crabs. The survey was prompted by suspicions that conch and eel fishermen were catching more and more horseshoe crabs to use as bait.

The concern is not just for the horseshoe crab itself but also for what it supplies to other species. Migrating red knots, turnstones, sanderlings and sandpipers depend on the eggs as road food. Atlantic loggerhead turtles -- a threatened species -- eat adult horseshoe crabs. Researchers also use an extract of horseshoe crab blood to test for bacterial toxins in prescription drugs.

So far, the surveys show that the crab population has declined but that the decline has leveled off. To track the trend, researchers need lots of data, from lots of volunteers. Anyone can sign up (see box), but because it takes a night of training, Hall particularly wants people who can come out for more than one night.

If you want to see the crabs without counting over the next several weeks, you don't necessarily have to go out in the middle of the night. (But it's much more spectacular if you do. They like the full and new moons.) For the less ambitious watcher, horseshoe crabs also show up at high tide during the day.

But midnight it was as we walked along the beach. I spent most of my time turning upended crabs back over. Hall directed some back toward the water. "C'mon, lady of the night, you'll find your way," he coached them. "When you see them try to right themselves, you wonder how they survived 300 million years."

Horseshoe crabs are the same phylum, arthropoda, as the true crabs, but they belong to a different subphylum and are actually more related to spiders, scorpions and mites. As militaristic as they look in their spiked armor, the crabs are no risk to handle. They don't bite or pinch. About the only way you could get hurt by a horseshoe crab is if someone threw one at you.

In fact, I realized as I got ready for my drive back along that dark road, the horseshoe crab is the least scary thing out here.

LOAD-DATE: May 22, 2002

SECTION: FINANCIAL; HEARSAY THE LAWYER'S COLUMN; Pg. E06

LENGTH: 1621 words

HEADLINE: An Arab American Charitable Connection That Might Be Too Close for Comfort

BYLINE: James V. Grimaldi, Washington Post Staff Writer

BODY:

When President Bush accused the Holy Land Foundation for Relief and Development of fundraising for Hamas terrorists, there was one man in Washington squirming.

His name is George Salem of Akin, Gump, Strauss, Hauer & Feld. Salem is a lawyer who represents the Holy Land Foundation. Certainly, there is nothing wrong with that. In a democracy, even those accused of awful crimes deserve a vigorous and competent defense. And Salem provided that. Salem, a former Labor Department solicitor, is chairman of the Middle East practice group at Akin Gump.

There's just one thing, however: He also is closely associated with Bush. Very close. Three million dollars close. That's how much money Arab Americans donated to the Bush campaign last year and much of the credit goes to Salem, who chaired Arab Americans for Bush-Cheney 2000. Salem is an active Republican, too. According to federal election records, he has given $ 72,000 to primarily Republican causes and candidates since 1988 and he and his wife each gave $ 1,000 to the Bush-Cheney effort.

Salem is, not surprisingly, tight with Bush and the White House and after Sept. 11, he has been a close adviser on Muslim and Arab American matters, providing important advice in light of the recent war on terrorism. Salem also has been over to the Justice Department, where Attorney General John Ashcroft invited him to an Oct. 16 discussion about attacks on Arab Americans as part of his role as co-founder of the Arab American Institute and his board membership on the American-Arab Anti-Discrimination Committee.

But Salem paid another visit to the Justice Department lately, this one on behalf of his client the Holy Land Foundation. And this is where the situation gets particularly dicey for Salem. Along with his Akin Gump colleagues Mark J. MacDougall, C. Fairley Spillman and Stephanie Agli Gallagher, Salem tried to persuade the Justice Department to agree that a key portion of the Antiterrorism Act of 1992 was unconstitutional and to say so in a federal appeals court.

The matter stems from a lawsuit filed by Joyce and Stanley Boim of New York, whose son, David, was killed by Hamas terrorists in the Middle East in 1996. The Boims, represented by Nathan Lewin and his daughter, Alyza Lewin of the District firm Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, are suing the Holy Land Foundation and the Quranic Literacy Institute alleging that these groups fund Hamas.

The Antiterrorism Act of 1992 contains a provision, authored by Sen. Charles Grassley (R-Iowa), that permits torts from terrorist activity to be actionable even if they occurred in a foreign country. Put another way, if your son is killed overseas by a terrorist, you could sue the perpetrators or people who aided and abetted the killers for compensation for your loss.

Salem and his colleagues argue that this is guilt by association and that the First Amendment permits the right of free association. On that and other grounds, they asked a judge in Chicago to dismiss the case, but the motion was denied. The decision has been appealed.

"Holy Land Foundation is a charitable organization that provides funds for development and relief to victims of poverty, natural disaster and political strife in the Middle East, southwestern Europe and from time to time the United States," Salem and his colleagues argued in a filing with 7th Circuit Court of Appeals in Chicago.

The appeals court panel then asked the Justice Department to file a friend-of-the-court brief to provide the federal government's view of the matter. That's why Salem went to the Justice Department to see appellate litigation counsel Douglas Letter just weeks before the Treasury Department moved to seize Holy Land Foundation assets. On Nov. 14, however, the Justice Department soundly rejected Salem's arguments.

"There can be no serious constitutional question about imposing liability," Letter wrote. "Neither the First Amendment nor any other part of the Constitution guarantees a right to fund a foreign terrorist organization when it is a natural consequence that the money donated will be used to commit terrorist acts such as murder."

Notably, the amicus brief also was signed by Patrick J. Fitzgerald, the U.S. attorney in Chicago and a key prosecutor in the first World Trade Center terrorism case and the 1998 bombings of two U.S. embassies in Africa.

This put Salem, a key ally of the Bush administration and seen consulting with the Ashcroft Justice Department, directly at odds with leaders of his political party. Don't forget what Bush and Ashcroft said about his client, the Holy Land Foundation at a particularly difficult time.

"The facts are clear, the terrorists benefit from the Holy Land Foundation, and we're not going to allow it," Bush said. The United States, Ashcroft said, "will not be used as a staging ground for the financing of those groups that violently oppose peace as a solution to the Israeli-Palestinian conflict."

Holy Land Foundation denies that it funds terrorist activities by the Palestinian terrorist group.

This week, Salem stood his ground and defended the Holy Land position before the appeals court. "If this case were allowed to its logical conclusion, legitimate U.S.A. charities could be held liable for unrelated acts by individuals not connected to their charities," Salem said Friday.

Salem pointed out that such theory could mean, for example, that if the Israeli military killed a Palestinian, the family could sue the United Jewish Appeal.

Despite Salem's strong feelings about the case, he and Akin, Gump have decided to abandon their client in the seizure of Holy Land Foundation funds. The group is about to secure new lawyers.

Why did Salem decline to represent the Holy Land Foundation? Was it pressure from the administration? Was the firm worried about losing clients? Did helping fight what Salem believes is a constitutionally significant case lose out over U.S. patriotism? Or did Salem's political connections win out over his personal convictions?

We'll never know.

"We don't comment on the reasons we accept or decline to undertake representation," Salem said.

What a strange news conference last week when the elusive former chief financial officer for Enron Corp. Andrew Fastow arrived with his new attorney, David Boies, in an crowded conference room in New York. The display was not to so much to answer substantive questions, but to assure the world that Fastow had not disappeared to Tegucigalpa or someplace else.

And Boies, the New York superlawyer of Boies, Schiller & Flexner, wanted to assure the authorities -- and there are lots of them investigating the implosion of Enron -- that Fastow was ready, willing and eager to cooperate. Trouble is, Fastow is likely a target as much as he is a witness for the various U.S. attorneys vying to snatch the case. Boies said that Fastow was available to talk with the Securities and Exchange Commission given reasonable notice, not just 48 hour notice.

He is probably not as eager to talk to Milberg Weiss Bershad Hynes & Lerach, which is suing Fastow and other Enron executives, saying they illegally made more than $ 1 billion by selling shares of Enron before the company short-circuited.

At the news conference, Boies originally told his client not to say anything, that he would answer all the questions. Fastow was just a visual for the cameras, according Carol Vinzant, The Washington Post's special correspondent on Wall Street.

When a reporter, bemused by the situation, asked if Fastow could just say hello, Boies relented, but only slightly. "As long as we can have an understanding that as long as he says hello you'll be satisfied," Boies said.

Fastow smiled. Boies then suggested that Fastow could say hello and offer holiday greetings and Fastow, as if a hostage, said, "Hello. I wish you a happy holiday season. Thank you for coming."

Happy Holidays to you, too, Mr. Fastow. Sure hope Santa doesn't stick an arrest warrant in your stocking.

Over at the Supreme Court last week, the Association of Jewish Lawyers and Jurists gave their eighth annual Pursuit of Justice Award to Seth Waxman, the former solicitor general.

At the reception, Waxman did the honors of lighting the Hanukah candles and saying the blessing, as a crowd that included Justice Ruth Bader Ginsberg and current Solicitor General Ted Olson, watched.

Then, past winner and past president of the group, Nathan Lewin, offered remarks -- in song. Holding a smiling electronic menorah, Lewin sang an ode to Waxman to the tune of Maoz Tzur, the song traditionally sung after the lighting of the menorah.

May God save this honorable court,

From oral advocates of every sort.

Some huff and puff and snarl and sort,

Others are silenced by Justice Scalia's retort.

But if you want the advocate that's best,

Whose performance will top all the rest.

(Refrain)

If it's life or death,

Don't waste your breath,

Be sure you are represented by Seth.

(Repeat refrain)

After months of seemingly repeated legal missteps and public relations blunders, Rep. Gary Condit (D-Calif.), who is running for re-election, has decided to hire a new lawyer to handle matters involving missing federal intern Chandra Levy. Abbe David Lowell of Manatt Phelps is out and Mark Geragos of Geragos & Geragos in Los Angeles is in. Geragos was Roger Clinton's attorney in his drunken-driving case and is now representing actress Wynona Ryder on charges of shoplifting hair accessories and clothing. . . . Drinker, Biddle & Reath has acquired San Francisco's Preuss Shanagher Zvoleff and Zimmer.

Hearsay decks the halls every other week in Washington Business. Send your season's greetings to hearsay@washpost.com

LOAD-DATE: December 17, 2001

SECTION: FINANCIAL; Pg. E01

LENGTH: 1179 words

HEADLINE: Auditor Hints of 'Illegal Acts' at Enron;
Arthur Andersen CEO Also Says His Firm Made Judgment Error

BYLINE: David S. Hilzenrath, Washington Post Staff Writer

BODY:

Enron Corp.'s outside auditor said yesterday that "illegal acts" may have been committed at the energy-trading company before it sought bankruptcy protection last week.

The chief executive of Arthur Andersen, the big accounting firm that approved years of financial statements that overstated Enron's profits and understated its debts, also said Andersen made "an error in judgment" that accounted for $ 103 million in overstated profits.

While Joseph F. Berardino testified yesterday on Capitol Hill, giving Andersen's first substantive explanation of why it certified Enron's reports, top Enron officers detailed a reorganization strategy for creditors at a meeting in New York. And former Enron chief financial officer Andrew Fastow, after failing to honor a Securities and Exchange Commission subpoena, surfaced at a news conference to dispel speculation that he had fled the country.

In addition to Congress and the SEC, the Justice and Labor departments are investigating Enron's collapse. More congressional hearings are expected next month.

Enron shifted hundreds of millions of dollars in debts and losses from some business ventures off its books to partnerships run by Fastow. After the extent of the partnership's troubles became known in late October, the company quickly lost the financing and customers needed to keep its massive energy-trading operations going.

That prompted Dynegy Inc. to walk away from a $ 23 billion merger deal and forced Enron to make the largest bankruptcy filing in history on Dec. 2. Billions of dollars in shareholder value disappeared, and thousands of employees lost their jobs and much of their retirement savings, which were heavily invested in Enron stock.

Accounting rules say a company can keep enterprises such as the Enron partnerships off its balance sheet as long as unrelated parties provide at least 3 percent of their value. But it appears that Arthur Andersen "was not provided critical information" about one of those arrangements, Berardino said at a joint hearing of two subcommittees of the House Committee on Financial Services.

In 1997, when Andersen examined Enron's relationship with a partnership called Chewco, the auditors were informed that $ 11.4 million of Chewco's funding had come from a large financial institution unrelated to Enron, which satisfied the 3 percent test, Berardino said.

But Andersen recently learned that Enron had agreed to an arrangement that cut in half the amount of money the institution actually put at risk, Berardino said. That meant the partnership had so little outside money that its finances should have been disclosed in Enron's statements. Chewco accounted for about 80 percent of the profit overstatements related to the partnerships, Berardino said.

Why that information wasn't given to the auditors isn't clear, Berardino said. "We don't know if that was willful or not," he said.

Berardino said that withholding information from an auditor is illegal. On Nov. 2, he said, Andersen notified the audit committee of the Enron board of directors "of possible illegal acts within the company."

That was after the Securities and Exchange Commission began looking into Enron's finances.

In a response issued yesterday, Enron said "it was the company's management, not Andersen, that discovered the arrangement and its relevance and reported it to Andersen within 24 hours." Enron said it referred the matter to a special investigative committee of the board that is working with separate lawyers and accountants.

"It has always been Enron's policy to be open with its accountant," CEO Kenneth Lay said in a statement.

Questioned after the hearing, Berardino would not say how Andersen learned the truth about Chewco. "I don't think that's something we want to get into right now," he said.

Rep. Richard H. Baker (R-La.), who presided over the hearing as chairman of one of the subcommittees, said it appears that high-level people at Enron "did not provide the disclosures that are required perhaps by law but certainly by good moral judgment."

Lay turned down an invitation to appear before the committee, citing a conflict with the creditors meeting in New York.

At that meeting, Enron Chief Financial Officer Jeff McMahon said the firm is considering selling much of the business activity that helped define it in recent years in order to settle debts of more than $ 31 billion.

Sources said Citigroup and UBS Warburg, two of Enron's largest creditors, are in the final stages of preparing a bid for a controlling interest in Enron's Houston-based energy-trading business, which until recently handled one-fourth of all U.S. electricity and natural gas trading. The bid would be put before the bankruptcy court, and others could then submit competing bids. J.P. Morgan Chase & Co., another major creditor, is also considering putting a bid in, but sources say the firm doesn't want to be the first to make an offer.

McMahon said Enron also wants to sell its water and foreign power assets to raise as much as $ 6 billion. That would leave the company with its energy development, generation and exploration divisions, refashioning it into a firm of tangible assets -- the very kind of you-can-kick-the-tire items that Enron's top brass scoffed at in recent years in favor of more esoteric, less-tangible assets such as financial contracts.

Details of the plan would have to be accepted by the 15-member creditors' committee that was named yesterday and then approved by U.S. Bankruptcy Court Judge Arthur Gonzalez.

Fastow, meanwhile, appeared in New York yesterday with one of his attorneys, David Boies. Fastow will meet with SEC investigators in the future, Boies said, but had not had time to prepare his testimony yesterday. Fastow faces a civil fraud investigation by the SEC and a federal criminal probe, according to an SEC affidavit.

Boies would not allow Fastow to speak, other than to let him tell reporters: "Hello. I wish you a happy holiday season. Thank you for coming."

Enron's collapse has focused new attention on weaknesses in the nation's financial system and the track record of Arthur Andersen, on whose watch regulators allege glaring accounting problems festered at companies such as Sunbeam and Waste Management.

"There is a crisis of confidence in my profession," Berardino told lawmakers, adding that "real change will be required to regain the public's trust." The system for regulating and disciplining accountants "will have to be improved," he said.

Berardino vowed that Andersen "will take the steps necessary to reassure you . . . that our backbone is firm and our judgment clear."

Rep. Paul E. Kanjorski (D-Pa.) said he thought he could rely on the decency and honesty of professionals, but the Enron debacle offered a strong argument for government action. "The business interests in this country seem to be making the most compelling case in the world that we need heavy regulation," Kanjorski said.

Staff writers Kathleen Day and Peter Behr and special correspondent Carol Vinzant contributed to this report.

LOAD-DATE: December 13, 2001

SECTION: FINANCIAL; Pg. H01

LENGTH: 1313 words

HEADLINE: Small Players, Exotic Strategies;
'Market-Neutral' Funds Aim to Make Money Whether Stocks Go Up or Down

BYLINE: Carol Vinzant, Special to The Washington Post

BODY:

Most small investors -- like most big investors -- don't know whether the market is turning up or turning down or sliding sideways. And for the past few years there has been a different kind of investment vehicle that attempts to hedge a small investor's bets.

Hedge. That's what the big boys do, right? And hedge funds are only for those with a net worth in the millions, true?

Not since April 1997, when the National Securities Markets Improvement Act of 1996 went into effect. After that, mutual funds started to come into being that did more than just bet that the stock market, or a particular sector of it, would go up. Instead, these "market-neutral" funds try to make money no matter which way the market moves.

Market-neutral is a safe-sounding term, but these funds stray into some mighty exotic investment territory, trying to turn the mutual fund, the middle-class workhorse, into a hedge fund, the rich man's racehorse. Some of the funds do hedge -- that is, in their buying they bet on which stocks will go up and which stocks will go down and attempt to carefully balance their "long" and "short" positions in those stocks to deliver a steady yield over time.

Other market-neutral funds put their investors' money into real estate properties or convertible bonds, the kind that can be exchanged for the company's common stock at a predetermined price. Still others play the highly specialized arbitrage game, betting on which merger and acquisition deals will go through.

And all of these racy-sounding opportunities are available with bite-size initial investments of as little as $ 2,000, a far cry from the specialized funds that require ponying up $ 100,000 or more.

While any one of these market-neutral strategies would be a risky way for the average person to invest all of his savings, having a little bit of money in one of these alternative asset classes may make sense for some people, a number of investment experts suggest.

"This is a very sensible thing to do as part of a portfolio," said Yale economics professor Robert J. Shiller, the author of "Irrational Exuberance." He argues that today's investors are overly confident, wrongly basing their outlook on market performance during the past century.

"People think the market always goes up," Shiller said. "If you had to predict the 21st century, you would say it's going to be like the 20th century, but who knows?"

Alternative investments come in all shapes and sizes, but the one thing they have in common is that they do not depend on the stock market going up.

"We don't want to think about where stock prices are going," said John Orrico, portfolio manager of the $ 2.5 million Arbitrage Fund, begun in September 2000 and one of at least two mutual funds that try to profit from mergers and acquisitions. "We don't want to think about what some investment strategist at Morgan Stanley is going to say about asset allocation. Our interest is only in seeing that a particular transaction is going to close."

In the years after the crash of 1929, that kind of rarefied investing was deemed too rich for most people's blood. That's when securities regulators set up tight rules to govern mutual funds but decided that rich, and therefore supposedly sophisticated, investors did not need such protection. The rich were allowed to invest in hedge funds, which were allowed to play the investment game however they wanted.

Hedge funds traditionally did just that -- hedge -- but now the term "hedge fund" applies to funds employing all kinds of strategies. Such investments may seem even riskier than the stock market -- especially those that employ the chancy strategy of short selling, which is in essence selling borrowed stock at the current price and betting the price will have dropped by the time the borrower has to pay for it, allowing him to pocket the difference. And there have been some notable hedge-fund blow-ups, such as Long-Term Capital Management, when smart investors taking fairly safe bets on the relative movements of financial instruments nearly took down the entire financial system with their losses.

Over the years, however, hedging and other complicated strategies have proved a bit more stable than everyone first thought.

Charles Gradante, chief investment strategist at the Hennessee Group of New York, which advises clients on big-time hedge-fund investing, said he now tracks 15 mutual funds that offer "long-short" strategies.

"The word is getting out that much of what is written in the past about hedge funds were isolated situations that were overdramatized," Gradante said. "A conservative portfolio of hedge funds should outperform the market in a three-to-five-year time frame."

The Arbitrage Fund's Orrico argues that his fund is safer than the stock market. When a merger deal is announced, Orrico evaluates it. If he likes the deal, he buys shares of the company that is being bought and sells shares of the acquirer. That's because the acquiring firm usually offers stockholders in the other company a premium over what their stock is worth at that moment. Orrico's fund locks in the spread between the two positions and profits as long as the deal is consummated.

Orrico's analysis kept him away from the Enron-Dynegy deal, and it "hasn't been a great year for mergers and acquisitions," Orrico points out. Nonetheless, the Arbitrage Fund has still managed to return more than 7 percent so far this year, compared with a 12 percent loss for the Standard & Poor's 500-stock index to date.

Russ Kinnell, a senior analyst at Chicago-based Morningstar Inc., the mutual fund tracker, has two favorites in the market-neutral category, the Merger Fund, which has a 10-year track record of 11.5 percent returns, and the Calamos Market Neutral Fund, which hedges purchases of convertible bonds with short sales of the underlying stock.

"One of the differences between Calamos and Merger [and other market-neutral funds] is that they are doing arbitrage," Kinnell said, "whereas the other ones are going long and short [in] different stocks, trying to figure out which stocks will outperform."

Instead, if the announced deal goes through, Merger will make a profit. For its earnings, Calamos relies on "what they believe to be a mispriced convertible," Kinnell said. Those funds have consistently gained roughly 7 percent to 11 percent a year, figures that would have been considered anemic a few years ago but look fantastic now.

Most market-neutral funds are small -- maybe $ 25 million in assets. But in a sign that individual investors are catching on to their supposed agility, Calamos closed its fund, at least temporarily, to new investment two weeks ago. It had been flooded with $ 303 million in new investment since the beginning of the year -- a 471 percent increase.

Mutual funds are still prohibited from one hedge-fund tool: They may not charge their investors for incentive fees for good performance by the fund manager. Investors are charged a flat expense ratio, instead of the 20 percent cut of profits common to the big hedge funds.

The bad news is that the lower fees may not be enough to cover the high expenses of an exotic strategy or to attract the sharpest talent. Just weeks ago, the Buy Write Fund, run by Glen Rauch Securities, a New York investment adviser, announced it would have to liquidate because expenses were too high. The fund employed the conservative though tricky strategy of selling options on the stocks in its portfolio. If the stock went up, the fund would be forced to sell the stock at a set price, but if it did not, the fund would pocket the price of the options contract.

The more exotic the strategy, the more caution an investor needs to use.

Even though they have all these complicated strategies, "a lot of these market-neutral funds would just go down in every market," Kinnell warned.

LOAD-DATE: December 9, 2001

SECTION: FINANCIAL; Pg. H01

LENGTH: 895 words

HEADLINE: Poor Earnings Didn't Derail Market Bounce;
Analysts of Three Minds On Indications for 2002

BYLINE: Carol Vinzant, Special to The Washington Post

BODY:

Terrorist attack be damned: The market is on a roll.

Since Sept. 21, the Nasdaq composite index has roared back 34 percent and the Dow Jones industrial average is up 20 percent, nearly to 10,000, where it had not been since August.

Is the market anticipating an economic rally next year? Is the country more confident because of military success in Afghanistan? Can this stock market recovery last?

The different answers come from three camps: bull, bear and a third group that wonders why the questions are being asked at all.

Since the Sept. 11 attacks made the whole world, including the stock market, riskier, some think that valuing stocks at their pre-attack levels is unjustified.

"For now, the market has moved too far, too fast," said Alan Ackerman, chief investment strategist at Fahnestock and Co. "A contraction in the market now would be neither unexpected nor unhealthy."

Market fundamentals keep hopes down.

"My hesitancy about this market is that absolute valuations are still absurdly high, whether you look at price-to-book ratios, price-to-earnings. . . . They're all off the chart," said Jim Paulsen, chief investment officer at Wells Capital Management.

By the most basic measure -- the relationship between stock prices and earnings -- the market is high-priced. In the past two months, the price-to-earnings ratio of the S&P 500 has increased to 46 from less than 30 as stock prices surged and earnings continued to weaken.

Normally those ratios reach their lows -- usually around 10 or 12 -- as optimism is drained from the market before a recovery starts, according to Comstock Partners. Analysts who pay attention to fundamental ratios view the current elevated price-to-earnings ratios as a sure sign of trouble ahead.

"It's hard for me to get used to the idea we could be at the start of a brand-new bull market from record-high valuations," Paulsen said.

The reason the ratios are so out of whack is that while stock prices have risen this quarter, earnings have not. Analysts at one time held out hope that the fourth quarter would show improvement over last year's anemic final three months, if only because those numbers wouldn't be very hard to beat.

Now even those low expectations have been lowered. According to First Call/Thomson Financial, the Boston-based investment research firm that tracks earnings reports, analysts at the beginning of October expected fourth-quarter earnings for S&P companies to drop 8.2 percent from last year. Now they expect a 17.4 percent decrease.

Many market observers contend that the stock market recovers six months before the general economy does, meaning that the current market is hinting at a recovery.

Overall, analysts do expect an earnings recovery next year. The consensus is for S&P 500 earnings to go up 14.9 percent, compared with a 15.5 percent decrease this year, First Call said.

Last week UBS Warburg strategist Ed Kerschner raised his earnings estimates for the fourth quarter and for next year. Kerschner lowered his expectations after the Sept. 11 attacks, but a third-quarter productivity gain of 2.7 percent, among several factors, turned him around.

"Most important, the war on terrorism is going far better than expected, which has very positive implications for consumer, business and investor confidence," Kerschner wrote in his most recent report.

Others, such as Jim Bianco, president of Bianco Research, an investment research firm based in Barrington, Ill., said recent economic data converted him from a bear to a bull.

"I'm a bull. I'm a believer," he said. "I used to be on the dark side and now I'm not anymore."

The current market reminds him of the 1974 and 1982 recoveries, which happened faster than anyone anticipated. Declining oil prices and interest rates, coupled with higher commodity prices, have Bianco smelling a recovery.

"If you were to ask me how the markets would have behaved pointing to a recovery, it's exactly what it's done," Bianco said.

The factors many people say they worry about -- primarily employment and earnings growth -- typically recover last in an economic upswing, Bianco said. The factors that lead the rest of the economy, such as car sales, are improving.

Last week the Conference Board said its index of 10 leading economic indicators increased by 0.3 percent in October. In September the index fell by 0.5 percent and the consensus was for a flat October.

There is a camp that does not see the market's fall and recovery as meaningful indicators of where it is going. That group views the market events of the last month as simply an overwhelmed nation's reaction to a devastating terror attack.

Charles Minter, a portfolio manager at Comstock Partners who is so pessimistic that he considers this bear market still a cub, is surprised that economists and strategists are even trying to interpret the dip and bounce-back.

"It seemed obvious to us that there would be some statistical bounce as consumers and business returned to some sense of normalcy after the virtual economic shutdown following the September 11th terrorist attacks," Minter said.

Optimistic market strategists have faith that the rising market predicts higher earnings next year. If earnings go up, the market rise will be justified. If the earnings recovery takes much longer, however, this rally will prove to have been a farce.

LOAD-DATE: November 25, 2001

SECTION: HEALTH; Pg. F01

LENGTH: 1550 words

HEADLINE: Scar Search;
Amid Smallpox Fear, Many Seek Signs of Childhood Shots

BYLINE: Carol Vinzant, Special to The Washington Post

BODY:

Matthew Newman, a 33-year-old from Bethesda, first checked his upper arm to see if he had received the smallpox vaccine as a child. Then, just to be sure the indentation he saw was really a scar from the vaccine, he looked at his childhood medical records.

"I remember when I was little [that] on my shoulder I had a couple little indentations," he said. "That's what I thought it was." The scar, typically on the left arm, looks like a cluster of little craters, similar to an acne scar, Newman said.

Amy Bonawitz, a 24-year-old Potomac native, wishes health officials had not decided to stop giving out smallpox vaccines five years before she was born, and hopes they start again soon. "I'm more scared about smallpox than I am about anthrax," she said. "Everything you see on the news [says] this is contagious and can't be treated."

In New Jersey, Maria Atanasov, 29, already knew she was not inoculated because her parents had long ago explained why her older brother had a spot on his arm and she didn't.

"I was thrilled [at the time] because I hated shots. And I didn't have that ugly spot on my arm," said Atanasov. "That said, I am a bit disconcerted that if in fact smallpox does become a biological weapon, there is only a limited amount of the vaccine," she said. "I think all havoc will break loose at clinics and hospitals as people fight over who gets the shot."

These are some shades of the latest medical parlor game: Did You Ever Get a Smallpox Vaccine and, if So, When? Grab a mirror, roll up your sleeve or try hunting down your childhood health records, and you can play, too.

As people try to nail down their status, medical experts are still wrestling with a bigger question: Will long-ago vaccinations do them any good? Until a few weeks ago, the issue of how long the vaccine offered protection against smallpox was largely theoretical. The new era of bioterrorism, ushered in by the transmission of deadly anthrax spores through the U.S. mail, has suddenly made the issue more pressing. If anthrax is here, public health officials have worried aloud, can smallpox be far behind?

The planet had officially stopped worrying about smallpox in 1980, when the World Health Organization declared the disease eradicated. Relief was short-lived. In the mid-1990s fears were renewed by news that research samples of the virus may have strayed into the wrong hands from its Russian vault, the only repository outside the United States. This fall's terrorist attacks intensified anxiety about bioterrorism and especially smallpox.

Smallpox is even more awful than anthrax because it is contagious and considered untreatable. The disease, which first produces fatigue and fevers and goes on to torment the victim with pustules on the skin, especially the face, is estimated to kill about 30 percent of those who get it. Those who survive are often left disfigured and blind.

The United States got its last routine smallpox vaccines in 1972. But who exactly got the vaccine is often unclear because patients got it at different ages -- anywhere from infancy through age 3 for the first innoculation (actually, more like a scraping than an injection), as recommended by national guidelines, then a booster at grammar school age. In practice the age of vaccination varied widely, said Meg Fisher, a member of the committee on infectious diseases of the American Academy of Pediatrics.

Because boosters used to be recommended five to 10 years after the vaccine, health officials initially regarded as unprotected anyone who had not been vaccinated within the preceding 10 years. However, because actually contracting the disease confers lifetime immunity on survivors, researchers became intrigued by studies that had shown much longer immunity from the vaccine.

In the early 1990s Francis Ennis, a professor of medicine at the University of Massachusetts and director of the university's Center for Infectious Diseases and Vaccine Research, found some patients retained immunity decades after innoculation -- one as much as 50 years later. Ennis, studying the immune reactions of blood cells from HIV-infected people, tested the cells' response to vaccinia, the smallpox virus. He found that the T-cells of patients who had been vaccinated long ago still recognized and killed the smallpox virus. The finding would present an obstacle to those hoping to use the smallpox vaccine as a vehicle for an HIV vaccine, but it shed some light on how long the body remembers a smallpox vaccine.

However, neither Ennis's research nor other studies involved enough patients to show exactly how long some degree of smallpox immunity could be expected to last or how complete that immunity is.

"If a person got a smallpox vaccine as a child, the evidence would suggest they are likely to be protected," Ennis said. "As they get older and farther away from the infection, that immunity might be reduced, but it would still be significantly better than not having the vaccination."

The Centers for Disease Control and Prevention (CDC) now acknowledges that some immunity may indeed be retained by those who got the vaccine even a long time ago. How much immunity, and how long ago, the CDC can't be certain.

The fact that the vaccine might do some good, however, had led to people's asking each other about their smallpox vaccine status: How many "shots" did you get? How long ago was your vaccination? Were you one of the rare people who got the vaccination for travel, work or an offbeat medical treatment? The answers to all these questions figure into any individual's immunity. However, year of birth is still the main factor that defines the various gradations of maybe. About half the country, those too young to get the vaccine in 1972, has no immunity.

Trying to estimate one's personal likelihood of immunity is an exercise in mathematics, probability and futility. For instance, people who received both an initial vaccine and a booster may be the safest -- but their inoculations usually occurred the longest ago, making them presumably less protected. Those born from roughly 1962 to 1972 probably have had just one shot, with no booster. But those born between 1968 and 1972 likely received the most recent vaccinations -- or no vaccinations at all.

Having had any vaccination might make the disease less likely or less severe. Controlled exposure to the smallpox virus itself -- presumably as a result of some terrorist act -- might act like a vaccine booster, conferring additional immunity. "Probably it won't be complete protection, but there may be partial protection," Fisher said. "But we just don't know."

When the vaccine and boosters were still being given, doctors noticed that while the first vaccination usually caused a blister, the second caused only a lump, hinting that the first dose apparently was still working to some degree, Ennis said.

Some people still got vaccinated after 1972, including travelers to developing countries, some soldiers and lab workers who handled related animal diseases.

An unknown number of Americans fall into a special category of higher immunity that they are unlikely to brag about -- patients with herpes and genital warts. For decades, some doctors treated such patients by giving them smallpox vaccines on the sly in hopes of boosting their immunity. As late as 1981, California revoked a doctor's license for giving a smallpox vaccination to treat the cold sores of a 53-year-old leukemia patient.

But why not wipe away all the ambiguity and just start a mass smallpox inoculation program right now?

For one thing, there is currently not enough vaccine. The United States only has about 15 million doses, and they've been in storage for many years. Last year the government ordered up tests to see if it could stretch them out fivefold or tenfold through dilution. Tests of the diluted vaccine, for which many people have enthusiastically volunteered, are currently underway. Meanwhile, Secretary of Health and Human Services Tommy Thompson plans to spend about $ 500 million -- about $ 1.25 per dose -- to acquire 300 million doses of modernized vaccine. By the end of next year, he hopes to make all worries about the varying levels of immunity disappear by having a smallpox vaccine "with your name on it," as he has put it.

Another and no lesser concern is that the vaccine itself could kill as many as one in a million patients -- the equivalent of the deaths from a large plane crash. Those most at risk are people who have a compromised immune system or suffer from eczema.

A massive inoculation program is being contemplated, though the government has not yet decided whether to give everyone vaccinations or wait for an outbreak. Vaccination is effective up to four days after exposure to the virus -- about a week before symptoms first show up. If there were an outbreak, the government would use both inoculation and quarantines to curb the spread of the disease.

In Potomac, Amy Bonawitz, still rueful about the absence of a vaccine scar on her arm, is eagerly awaiting the arrival of new vaccine. However it's used, she is glad at least that the government has thought to order it up. "That makes me feel better," she says.

Carol Vinzant is a New York-based writer and frequent contributor to The Post.

LOAD-DATE: November 20, 2001

SECTION: FINANCIAL; Pg. H01

LENGTH: 795 words

HEADLINE: Don't Give Up on Index Funds;
They're Behind in the Bear Market, but They Have Long-Term Advantages

BYLINE: Carol Vinzant, Special to The Washington Post

DATELINE: NEW YORK

BODY:

During the 1990s bull market, index investing was an easy choice.

Index funds use a computer to buy and hold all the stocks in a particular index, and the most popular -- those that track the Standard & Poor's 500 -- easily trounced most mutual funds run by humans, despite all the energy the humans spent examining balance sheets, interviewing executives or looking at charts to pick stocks they thought would outperform the averages.

Bear markets, however, test the faith of broad-market index investors.

So far this year, 45 percent of actively managed funds have beaten the overall market, according to Morningstar, the Chicago fund-tracking firm.

It's enough to make some long-term index-fund investors question themselves and flee to active managers, who can dedicate more of their money to cash and pull out of individual stocks, or the market in general, if they see disaster looming.

But in doing that, those investors forget the proven long-term advantages of index funds. Few fund managers outperform the S&P 500 for more than a few years in a row because, no matter their specific investment strategy, they all depend to some degree on getting in and out of stocks at the right time -- which few do consistently well.

Believing that active managers can stem losses during a bear market is "the biggest urban myth since the alligators in the sewers of New York City," said John Woerth, a spokesman for Vanguard, the mutual fund giant that over the past three decades transformed index funds from an obscure institutional investment vehicle to the most popular type of fund in America. The Vanguard S&P 500 Index Fund, the largest index fund, held $ 77.8 billion at the end of October.

Turning to active management during a downturn is not merely based on superstition. Managed funds have, in fact, performed slightly better than the Wilshire 5000 broad-market index in three of the last five bear markets.

Jim Paulsen, chief investment officer of Wells Capital Management, noted that during a down market, more individual stocks will outperform the market index than during a rising market. So, he reasons, managers have a better chance of being able to pluck out a winner.

Will Goetzmann is a professor at the Yale School of Management who has studied investors' moves in and out of index funds. He says that in a climate when a terrorist attack could come at any moment, some investors have a reasonable desire to know that a human being is at the helm of their fund.

Credible as those reasons may be, there are more proven reasons that index funds still beat most actively managed funds over the long run -- certainly over the amount of time a retirement investor is saving and often even in the short run.

Active managers may be able to shift their money around, but there is no proof they will be able to predict which stocks will be safer. More important, managers as a group have not proved their ability to gauge when a market recovery is starting. Mutual fund managers tend to have the most cash at the bottom of the market and the least at the top, said Gus Sauter, managing director at Vanguard.

So when the market begins to recover, index funds, which are always fully invested, will have an advantage.

"There's talk of how managers will be nimble enough to either put more money in cash or defensive stocks," Sauter said. "It sounds kind of appealing, but there's really no basis to it."

Index funds have two permanent advantages. First, with investment performance being equal, they start with about a 2 percent return advantage -- the difference in expenses between running a computer and maintaining an office full of people. Second, active funds are based on the premise that certain managers have the skill, talent or perseverance to beat the market. Most do not.

Over a short time period, some actively managed funds can look pretty good. During the Internet stock craze, some funds heavily invested in technology had several times the annual returns of the S&P 500. The Janus Venture Fund, for example, returned 140 percent in 1999. But in 2000 it lost 45.8 percent and so far this year it has lost another 23.4 percent. Its share price has fallen from a peak of $ 161 to its current value of $ 37.83.

While about half of actively managed funds are beating the index this year, for 10 years the average drops to 25 percent, according to Morningstar. For the decade that ended Oct. 31, actively managed funds averaged a 10.9 percent annualized return, Morningstar said, but the S&P 500 returned 12.8 percent.

"Think of the long term," advises Wayne Wagner, co-author of "Millionaire: The Best Explanation of How an Index Fund Can Turn Your Lunch Money Into a Fortune." "Don't spend a lot of time thinking about volatility."

LOAD-DATE: November 11, 2001

SECTION: HEALTH; Pg. F03

LENGTH: 496 words

HEADLINE: Cipromania Continues: Now, the Collectibles

BODY:

People anxious about anthrax may have a hard time wheedling a Cipro prescription from a doctor, but they will have no problem picking up promotional memorabilia online for Bayer's coveted antibiotic.

"I want to be the first kid on my block with a Cipro pin," said Jodi Perper of Land O' Lakes, Fla., who has spent $ 1,500 buying terror-attack-related collectibles on eBay, the online auction site.

Her collection includes Cipro pens, Cipro writing pads, a Cipro switchblade key chain and Cipro hand lotion and lip balm. (No, the ointments don't contain the drug.) She lost out on a Cipro luggage tag.

Others Cipro items offered in more than 70 auctions to date include sweatshirts, a clock and even a "Cipro Drug Rep Promo Collectors Set," (complete w/ playing cards, a set of highlighters, hand gel and a pen), which went for $ 31.

The goods date back to a time, impossibly long ago, before Cipro was a household name, when pharmaceutical company sales reps needed to woo doctors with trinkets so they would remember the brand. EBay sellers got their hands on the Cipro goods either by working in doctor's offices or having relatives who do.

Bayer did not return a request for comment, but industry sources say the wide line of Cipro products is nothing out of the ordinary in the pharmaceutical industry. David Ores, a Manhattan physician, says drug companies track prescriptions that each doctor writes and hand out goodies when they pitch alternatives or quiz the doctor on patient reactions.

"It's like a giant, organized, global marketing campaign dressed up as a cuddly-wuddly sweatshirt," Ores said.

Cipro goody buyers and sellers alike say they're not worried about looking ghoulish, especially since the proceeds for some items are earmarked for the victims' families through eBay's Auction for America program. "I guess it's how I soothe my soul," Perper said.

Eight eBay buyers started a bidding war over a metal Cipro pen and sent the price up to $ 52, the most expensive Cipro-themed item to date. An apothecary jar went for $ 33.50. An empty Cipro bottle fetched $ 5.50 for someone who also sells empty Viagra bottles.

Richard Briones-Colman, an Albuquerque public defender, drew 451 window shoppers to a Cipro tote bag that was originally given to his partner, a doctor. But no one bid til Perper came along, charmed by his promotional copy: "Good luck amulet? Fashion accessory? You decide! How much cooler could you look strutting about with your important papers or your lunch in this safe safe bag? . . . Go shopping fearlessly with your Cipro Sack."

Briones-Colman said that before its debut on eBay, his Cipro bag was just lying around the house. "I looked at it one morning and thought, 'Ka-ching!' " he said.

The biggest threat to the continued marketability of Cipro goods is the growing use of other anthrax treatments such as generic doxycycline. But so far no promotional materials for that drug have surfaced online.

-- Carol Vinzant

LOAD-DATE: November 6, 2001

SECTION: FINANCIAL; Pg. E03

LENGTH: 753 words

HEADLINE: Stocks Fall Again;
Dow Off 148 Points;
Investors Confused by Contradictions In Reports on Consumer Confidence

BYLINE: Jerry Knight and Carol Vinzant, Washington Post Staff Writer

BODY:

Wall Street's own uncertainty about the economy was reinforced yesterday by conflicting surveys of consumer attitudes, which sharply drove down stock prices for the second day in a row.

The Conference Board reported that consumer confidence plummeted to its lowest level in more than seven years, undercut by anthrax scares, growing unemployment and uncertain forecasts for the economy. That survey contradicted the University of Michigan survey of consumer sentiment released last week, which found that attitudes had stabilized and even improved since September.

Despite their divergence this month, the two measures have both fallen significantly during the past year. And many economists worry that consumer spending will fall as unemployment rises in coming months.

Meanwhile, companies continued to report falling profits and deepening losses yesterday. CVS, Philip Morris and Verizon Communications all reported weaker third-quarter results. US Airways reported a $ 766 million third-quarter loss -- worse than analysts were expecting.

The Dow Jones industrial average fell 147.52, to 9121.98. The Nasdaq composite index fell 32.11, to 1667.41, and the Standard & Poor's 500-stock index fell 18.51, to 1059.79.

On top of Monday's even bigger losses, yesterday's declines gave Wall Street its worst two-day drop since Sept. 20-21, after which the markets began to recover from the sell-off that followed the Sept. 11 attacks on the World Trade Center and the Pentagon.

Down more 100 points in the past two days, the Nasdaq has fallen back below where it closed Sept. 10, on the eve of the attacks. The S&P dropped below its Sept. 10 level on Monday and is off more than 60 points this week. The Dow never did climb back to its pre-attack level and has lost more than 400 points in the past two days.

But the sharp two-day fall in stock prices probably doesn't signal a turning point in the market, analysts said. Brian Belski, fundamental market strategist at U.S. Bancorp Piper Jaffray, noted that trading in the past two days has been too light to discern any major market trend.

Several analysts said the market is reacting not only to economic developments but also to emotional events -- including the latest warning that more terrorist attacks could be coming.

"The announcement doesn't give you a lot of conviction to be a buyer," said Richard Cripps, chief equity strategist at Legg Mason in Baltimore, and that may be more damaging to investors than the economic data. "With all these government statistics, find me anyone, whatever cave they're in, who doesn't realize we're in a recession and that all the numbers are going to be bad."

Worries about the war in Afghanistan also weigh on investors' psyches, said Alan Ackerman, market strategist for Fahnestock & Co. "Americans appear to be able to live with anything but failure," Ackerman said. "It's not quite clear we have failed in Afghanistan, but the longer it takes, the more fragile confidence becomes."

In such an uncertain market, investors are going to take quick profits when they can get them rather than hang on for long-term gains, said Al Goldman, chief market strategist at A.G. Edwards.

"We are subject to some normal profit-taking, be there good news, bad news or no news," Goldman said. "We're not going to leap off the surgical bed and do a jitterbug. The market is going to be in a trading range for the next couple months."

* The New York Stock Exchange composite index fell 9.11, to 546.74; the American Stock Exchange index fell 10.32, to 826.89; and the Russell index of 2,000 small stocks fell 6.58, to 422.83.

* Declining issues outnumbered advancing ones by more than 2 to 1 on the NYSE, where trading volume rose to 1.29 billion shares, from 1.12 billion on Monday. On the Nasdaq, advancers outnumbered decliners by more than 9 to 5 and volume totaled 1.75 billion, up from 1.62 billion.

* The price of the Treasury's 10-year note rose $ 5.94 per $ 1,000 invested, and its yield fell to 4.41 percent, from 4.48 percent late Monday.

* The dollar rose against the Japanese yen and the euro. In late New York trading, a dollar bought 122.08 yen, up from 121.97 late Monday, and a euro bought 90.46 cents, down from 90.53.

* Light, sweet crude oil for December delivery settled at $ 21.87 a barrel, down 28 cents, on the New York Mercantile Exchange.

* Gold for current delivery rose slightly, to $ 280.60 a troy ounce, up from $ 279.10 per ounce on Monday, on the New York Mercantile Exchange's Commodity Exchange.

LOAD-DATE: October 31, 2001

SECTION: FINANCIAL; Pg. E01

LENGTH: 706 words

HEADLINE: Stocks Slide As Wall St. Rethinks Prospects

BYLINE: Jerry Knight and Carol Vinzant, Washington Post Staff Writers

BODY:

Wall Street woke up yesterday and decided that a prolonged war in Afghanistan, the never-ending anthrax scare and the prospects of a slow recovery for the U.S. economy weren't so good for stock prices after all.

After that reality check, the Dow Jones industrial average and the Standard & Poor's 500-stock index suffered their worst losses in more than five weeks as investors reassessed the market's astonishing recovery from the losses suffered after the Sept. 11 terrorist attacks.

The Dow fell 275.67, or 2.9 percent, to 9269.50. The Nasdaq composite index fell 69.44, to 1699.52, and the S&P 500 fell 26.31, to 1078.30.

The losses pushed the S&P 500 back below where it closed on Sept. 10, the day before the disaster, and left the Nasdaq less than 5 points above its pre-attack level. The Dow, the only one of the three indicators that hadn't made a complete recovery, is down more than 336 points since Sept. 10.

There were no new facts to justify today's market reversal, but there was a lot of fresh spin from Wall Street's market watchers, who last week were insisting that stock buyers were doing the right thing by ignoring warning flags on the war and economy fronts.

Traders may have realized over the weekend that optimism had pushed the market up too much over the past several weeks, suggested Art Hogan, chief market strategist at Jefferies, an institutional brokerage.

"I don't think there are any new themes. We don't have that one catalyst you can point to and say this is why we're selling today," Hogan said. "The market is having a bad hair day for no apparent reason."

Dick Dickson, technical analyst at Louisville's Hilliard Lyons, said that last week people ignored the bad news about durable-goods orders and the housing market, but this week reality is catching up.

"We had some pretty bad economic news last week and the market appeared to shake it off," Dickson said. "I think over the weekend people thought of it a little more."

They may also have thought about how the market is likely to react tomorrow, Thursday and Friday, when three key economic numbers will be reported.

The government's report on the the third-quarter gross domestic product, coming out first, is expected to show that the economy contracted during the summer. The purchasing managers' index of business conditions, being released Thursday, and the unemployment rate, coming out Friday, also are expected to document an economic downturn that looks to many economists like a recession.

Fane Lozman, chairman of Scanshift.com, a Chicago-based market analytics firm, said that the market is simply realizing that -- despite a lot of bullish punditry -- the country's economic and political troubles are enduring.

"The current reality is something we have to face, and the current reality is lousy," Lozman said. "There's no rule that says we have to get out of this in 2002."

Lozman likened the market since Sept. 11 to a bicyclist who runs out of energy while pedaling up a mountainside and begins to slide back downhill.

"If this accelerates it will scare people," he said. "Since the spring of 2000, every time you bought on a dip you've gotten burned."

* The New York Stock Exchange composite index fell 10.73, to 555.85; the American Stock Exchange index was unchanged at 837.21; and the Russell index of 2,000 small stocks fell 9.24, to 429.41.

* Declining issues outnumbered advancing ones by 2 to 1 on the NYSE, where trading volume fell to 1.12 billion shares, from 1.26 billion on Friday. On the Nasdaq, decliners outnumbered advancers by nearly 2 to 1 and volume totaled 1.62 billion, down from 1.94 billion.

* The price of the Treasury's 10-year note rose $ 3.44 per $ 1,000 invested, and its yield fell to 4.48 percent, from 4.52 percent late Monday.

* The dollar fell against the Japanese yen and the euro. In late New York trading, a dollar bought 121.97 yen, down from 122.70 late Friday, and a euro bought 90.53 cents, up from 89.32.

* Light, sweet crude oil for December delivery settled at $ 22.15 a barrel, up 10 cents, on the New York Mercantile Exchange.

* Gold for current delivery rose to $ 279.10 a troy ounce, from $ 277.90 on Friday, on the New York Mercantile Exchange's Commodity Exchange.

LOAD-DATE: October 30, 2001

SECTION: FINANCIAL; Pg. H01

LENGTH: 2079 words

HEADLINE: Some Are Hit Hard;
For Others, It's Time to Spend

BYLINE: Dina ElBoghdady and Carol Vinzant, Washington Post Staff Writers

BODY:

So the stock market tanked, but you got a $ 600 refund from Uncle Sam, interest-free financing on your new Chevrolet and an ultra-cheap airfare to Vegas.

You got laid off from your job -- twice this year -- but Macy's is trying to lure you to the mall with discount coupons, Pepco plans to hand you a $ 75 credit next month, and some creditors are promising to forgive some of your debt if you hand over a chunk of cash immediately.

It's enough to confuse the savviest of consumers. Today's topsy-turvy economy presents both risk and opportunity. And Joe Average's spending habits seem driven just as much by emotion, even guilt, as they are by his checkbook register, arguably making his spending decisions as skewed as the economy itself.

"The huge number of layoffs makes people cut to the bone," said Scott Kays, a certified financial planner in Atlanta.

Except, that is, for those who are out there this very minute buying luxury items. Those folks have decided that the layoffs and other negative signs are counterbalanced by lower mortgage rates and the deep discounts available.

Clearly there are items that can't be forgone, whatever they cost: health-care insurance, heating fuel, gasoline, supermarket staples. And those necessities, plus state and local taxes, are taking a bigger chunk of workers' paychecks, said Brent Neiser, director of collaborative programs at the National Endowment for Financial Education.

But then there's everything else. And that's where retailers and car dealers and restaurateurs and hoteliers and airlines find themselves in a complicated dance with consumers who are redefining the essential and the discretionary.

Both the economy and the emotional state of the country pushed Shyam Jha to give up his boyhood dream: a 2002 Porsche Carrera convertible. Seal Grey Metallic. Leather seats. The works.

Jha placed his order in March. The 42-year-old planned to dip into the family savings to pay for it. Then came the Sept. 11 terrorist attacks, which Jha watched unfold on a television screen at Dulles Airport as he waited for a flight that was ultimately grounded.

"I canceled my order that week," the Ellicott City resident said. "Given the current circumstances, it doesn't seem right to be splurging. That day was a day to reevaluate priorities, and clearly a brand-new Porsche is not a priority."

But Jha, who is about to start a new job with a venture capital firm, did purchase a Pentium 4 computer with the most speed money can buy. He couldn't resist the discounts, which he said saved him about a third of the retail cost.

And the family vacation to Bermuda is still on for December.

"Hey, my 11-year-old is really looking forward to it," Jha said. "I didn't want to disappoint him."

But Joseph Nickens plans to stay put this holiday season.

The Christmas trip to North Carolina to visit his 12-year-old daughter, Kienesha? Canceled. The trip to visit his mother in Los Angeles in January? Canceled.

"Forget discounts and sales," Nickens said. "The best we can do is keep a roof over our heads."

Before Sept. 11, the 45-year-old courier would take home about $ 150 a day, mostly from commissions. Now, he'd be lucky to get half that, he said.

"Nobody is sending any [deliveries] because they know nobody is opening anything," Nickens said.

For now, Nickens can cover the $ 450 monthly rent for the one-bedroom Southeast Washington apartment he shares with his fiancee, Drucilla Howard. He's keeping the cell phone, but the cable TV service may have to go, Howard said.

Howard cleans houses for a living. But she hasn't gotten a job in a while. "People are cleaning their own homes," she said.

The maid -- and the nanny -- were the first expenses Sarah and Mark Gandarias cut when Sarah lost her job at a Web design firm on Sept. 7, a month after she returned to work from maternity leave.

The layoff came days before the terrorist attacks crippled the airline industry, threatening Mark Gandarias's job as a commercial pilot.

"I'm usually an optimistic person, but the market is pretty scary right now as far as jobs go," said Sarah Gandarias, 33.

By doing without the maid and the nanny, the Fairfax couple save about $ 700 a month.

Earlier this year, they sold their minivan to save on insurance and gasoline. They no longer eat out four times a week, if at all. And they've dropped the usual weekend getaways with their two boys, 5 years and 5 months old.

Maybe the Gandariases sold that minivan too soon. During September a gallon of gasoline cost an average of $ 1.52 at the pump, according to the Energy Information Administration, a statistical agency of the U.S. Department of Energy. Last week the national average was $ 1.25 a gallon.

The savings on gasoline will be a small windfall that drivers will spend elsewhere, said Kays, the Atlanta financial planner.

The slowdown in the economy will give consumers a break in the price of other energy as well. Consumers will pay about one-third less to heat their houses this year than they did last year, according to the EIA. Consumer prices for natural gas are down 29 percent, heating oil is down 13 percent, and propane prices are off 17 percent. And locally, because of profit from the sale of its major generating plants, Potomac Electric Power Co. is giving rebates to its customers.

As for eating out, "we'll always be eating, but will we be eating the same sorts of foods? I don't know," said Robert O. Weagley, an associate professor of consumer and family economics at the University of Missouri at Columbia, who expects luxury spending of all kinds to drop.

Food is the largest controllable item in any budget, said Ken King, executive director of Consumer Credit Counseling Services in Sheboygan, Wis. Families of four spend an average of $ 500 to $ 600 on food a month, and that doesn't vary much unless they are very poor or very rich, he said.

Layoffs are affecting some workers more than others. Take Sean George, for example.

The 30-year-old software developer has been laid off twice this year. In March, a software firm let him go just nine months after hiring him and six weeks before he married his wife, Suzanne. Though he landed at a telecommunications start-up in no time at all, that firm laid him off in early September.

Now he's back to job hunting. Plans to buy a new house have been put on hold at least for another year.

That may not be a bad thing. Low mortgage rates have encouraged many people to consider only the monthly cost of homeownership, instead of the price of the house, according to Jim Paulsen, chief investment officer at Wells Capital.

Now those owners may start to feel the pinch. Those who bought the biggest house possible, especially in the past year, may soon be worrying that the house isn't worth what they paid for it, Paulsen said. Plus, they'll have less cash than if they had chosen a modest home.

"Even though you can use the drop in interest rates in the short term to give yourself greater buying abilities, you still cut off your ability to buy more goods later on," Paulsen said.

For now, Sean George's unemployment check -- $ 268 a week -- covers the rent for their one-bedroom apartment in Arlington. Suzanne George, a meeting planner for a small association, handles the rest of their expenses.

For the past month and a half, the couple have broken even. But the holiday season may break the bank.

"If I don't have a job, I won't be giving out gifts to everyone and their mother," Sean George said.

But if job security is no issue, plenty of Washington area residents said this is the season to buy, especially if you're debt-free.

"There are opportunities here for people like us," said James Finkelstein, senior associate dean at George Mason University's School of Public Policy.

Finkelstein, 49, has no children and no debt, except for the mortgage on the house he and his wife own in Northwest Washington. His stock portfolio has taken a beating, but he never relied on it to cover day-to-day expenses anyway.

Intrigued by some of the attractive auto-financing deals, Finkelstein figures he may buy a new car. He may even splurge on one luxury, a fountain pen he's been eyeing for his collection.

The limited-edition pen normally retails for $ 1,600. But a pen dealer eager to move inventory has offered to sell it to Finkelstein for half that price.

"Now, that's an opportunity that doesn't normally present itself," Finkelstein said.

Roy Joseph is finding similar bargains at area furniture stores. The urologic surgeon and his wife, Kimberly, bought their dream house in Bethesda last year. Now, he said, is the perfect time to furnish every empty room.

"We're buying everything," Joseph said. "We feel we have the upper hand."

Already-reduced furniture prices are cut further just for the asking, he said. A dining-room set listed for $ 6,500 has been slashed to $ 4,100, and there's still room to haggle, he added.

Sharieff Omar hasn't been looking for deals. But they've been finding him.

The 27-year-old support representative for Xerox Corp. was so worried about his finances that he opened up his own business on the side, booking bands at clubs. But as people have cut back spending on entertainment, Omar said, his business is suffering and he's had a tough time covering expenses.

He put $ 600 worth of office supplies on his Staples credit card alone. But, he said, one of his creditors called the other day with a deal. The creditor agreed to accept a $ 300 payment and to forgive the rest if he could pay cash upfront, Omar said.

"My creditors are putting bargains on the table," said the Forestville resident. "I don't know if it's good for the credit card companies. But it's good for me."

Janelle Humes, a 34-year-old single mother in Crofton, said she's getting similar overtures.

When she paid only part of her monthly $ 380 car payment recently, Honda's financing department sent a letter offering to work out an arrangement, if needed, in light of the tough economic environment faced by so many of its customers, said Humes, an extended-day-care assistant.

"These offers take a little bit of the pressure off," Humes said. But because she wasn't directly affected by the attacks, she said she felt "a little bit guilty taking advantage of it."

She passed on Honda's offer.

These overtures aside, credit card companies aren't offering many other breaks, even though their own borrowing costs are lower.

Since the beginning of the year, the average credit card interest rate fell from 16.8 percent to 14.8 percent, according to Robert B. McKinley, chief executive of CardWeb.com, a Frederick, Md., firm that that tracks credit-card data for industry and consumers.

"So credit cards are only delivering about half of the rate cuts this year," McKinley said.

Credit counselors such as King report that consumers are now agonizing over debt loads.

Good thing: According to CardWeb.com, the average household debt load was $ 8,285 as of June. Before the credit-card binge of the 1990s, the average load was less than $ 3,000.

Shirley Simon, 82, says it's the cost of medical insurance that weighs heavily. Her health insurance picks up the cost of her blood-pressure medication, and she picks up the tab for her vitamins.

"But if something were to go wrong medically, then I'd feel pretty vulnerable," said Simon, who lives in a retirement home in Northwest Washington and collects about $ 11,000 a year from her government pension plan and Social Security. "My insurance rates are going up, but my income isn't."

The self-insured saw rates jump 9.5 percent over the past year, and those who work at small businesses suffered a 12.5 percent rate increase. Rates for employee-sponsored health insurance jumped 12 percent, the biggest increase since 1992, according to the Kaiser Family Foundation.

Expensive prescription drugs, and the shift from HMOs to plans that allow patients to choose their doctors, are responsible for the rate increases, Kaiser said.

It's not insurance but cash flow that's worrying to Diane Willis, a 43-year-old hairdresser in downtown Washington.

Since the Sept. 11 attacks, customers have stayed away from the salon where Willis works, a few blocks from the White House. As a result, her tips have suffered. She's not sure what she can afford to buy for her three children, ages 11 to 23, this Christmas.

"But I do notice that people who come in are acting much nicer," Willis said.

LOAD-DATE: October 28, 2001

SECTION: A SECTION; Pg. A15

LENGTH: 1032 words

HEADLINE: Mail-Security Strategies Slow Down Business;
Delivery Delays Proving Costly as Companies Employ Anthrax-Protection Procedures

BYLINE: Neil Irwin, Washington Post Staff Writer

BODY:

Businesses in the Washington area and nationwide are starting to protect themselves from the threat of bioterrorism by mail. Some are instituting elaborate procedures for opening and distributing mail internally, including providing masks and gloves to mailroom workers. Others are grappling with disruptions to their cash flow as payment checks go undelivered and awareness of a new unpredictability in postal service sweeps corporate America.

Potomac Electric Power Co. has not received mail -- including utility checks from its 700,000 customers -- for the past two days. A spokesman said Pepco would be patient and work with customers whose checks are stuck in transit.

The U.S. Postal Service has not picked up or delivered mail for two days to the D.C. offices of real estate brokerage Julien J. Studley Inc. The company knows of one large commission check from a landlord that was due to arrive but has not. If the disruptions continue, they could strain the firm's finances. Studley is encouraging workers to mail items from their homes.

New corporate procedures for scrutinizing incoming mail and centralizing its distribution internally are also adding to a general slowdown. Software giant Microsoft Corp., which had an anthrax scare at a Nevada office, now opens all incoming mail on its Redmond, Wash., campus at a central location. It then delivers it to workers and prohibits the sending or receiving of personal mail, according to a Microsoft employee. A company spokesman declined to comment on security details.

The disrupted mail delivery in D.C. may continue at least through today. Parts of downtown and Georgetown in the 20004, 20005, and 20007 Zip codes received no mail yesterday, and a Postal Service official said it was unclear whether delivery would resume today. Many delivery vehicles won't be available today because they are being sanitized, the official said.

"We're in uncharted waters here," said Neal Denton, executive director of the Alliance of Nonprofit Mailers in Washington, which represents groups that solicit funds through bulk mail.

"The big issue is continuity of business," said Lawrence A. White, an executive vice president at Versar Inc. in Springfield, which provides security services. "For some companies, mail is their lifeblood. Without it, they're out of business."

Dozens of businesses contacted yesterday said they are watching more carefully than in the past for strange packages but have not changed procedures for mail distribution.

White said his firm has helped 15 Fortune 500 companies manage anthrax-related mail concerns in recent weeks, with the business accelerating with each new scare.

The heightened security has meant mailroom employees now walk around in surgical masks and rubber gloves at the Fairfax headquarters of real estate brokerage Long & Foster. The workers all keep a change of clothes in a secure container in the office. The business impact of those sorts of measures are subtle but real, say company officials.

"It's time-consuming to scrutinize every bit of mail," said Carl Scott, Long & Foster's mailroom supervisor.

The Mortgage Bankers Association of America in downtown Washington normally receives its mail through a courier from the now-closed Brentwood mail-processing facility. The group didn't receive mail yesterday. National Public Radio, which also receives its mail through Brentwood, has not received mail for the past two days. A spokeswoman for the public broadcaster said five NPR employees have been tested for exposure to anthrax spores. Results are not yet available.

At Covad Communications Co., a California Internet service provider with operations in Washington, the biggest effect on mail delivery was on outgoing mail. The company's government affairs office sends documents by courier to the Federal Communications Commission daily. The trip, which used to cost $ 10 to deliver filings on FCC rulings, now costs $ 50 because the FCC has diverted mail to a facility in Capitol Heights, according to a company spokesman.

Ann Bruno owns a freight-forwarding business, Olimpex International Inc., that gets its mail at a box inside a postal facility at Baltimore-Washington International Airport, now closed after a worker who travels between there and Brentwood tested positive for anthrax infection.

Bruno said she understands that mail already inside the facility has to be examined to ensure safety but said delays in having new mail rerouted are costing her. Postal Service officials have said it could take a day or a week to send the mail elsewhere, she said.

"I can't wait a week," Bruno said. "A lot of the documents I need come through the mail, and so do the checks. . . . It's totally disrupted my cash flow."

The disruptions have made alternatives to mail more desirable to some firms.

Officials at several companies say they are encouraging employees to use e-mail more often. AOL Time Warner Inc. reports that e-mail traffic on its AOL service has risen from 150 million e-mail messages a day this time last year to 280 million now, though a spokesman attributed the rise more to a general increase in business than the anthrax threat.

Package delivery services such as Federal Express and United Parcel Service have been able to operate without disruption. Both companies say they are evaluating their security to avoid similar attacks but declined to provide details; the only real problem a Federal Express spokesman mentioned is delays making deliveries at buildings because of greater security.

A UPS spokesman suggested one reason package-delivery services such as his might be less likely to be a conduit for bioterrorism: Senders of packages are generally required to give their name and contact information, unlike the Postal Service, which offers anonymity.

Staff writers Peter Behr, Bill Brubaker, Terence Chea, Albert B. Crenshaw, Daniela Deane, Sandra Fleishman, Sara Kehaulani Goo, Michael Greenspon, Martha McNeil Hamilton, Carrie Johnson, Sabrina Jones, Alec Klein, Jonathan Krim, Michael Laris, J.J. McCoy, Ellen Nakashima, Greg Schneider, Christopher Stern, Frank Swoboda, Carol Vinzant and Nicole Wong contributed to this report.

LOAD-DATE: October 24, 2001

SECTION: FINANCIAL; Pg. H02

LENGTH: 845 words

HEADLINE: Cashing In and Missing Out?;
Pulling Out of Stocks in Slump Could Cost Future Retirees

BYLINE: Carol Vinzant, Washington Post Staff Writer

DATELINE: NEW YORK

BODY:

Individual investors are starting to yield once again to one of their worst habits: shifting in and out of stocks in anticipation of where the market is headed.

This week, Lipper, a mutual fund information company owned by Reuters, tallied up how fund investors reacted to the shocks of last month. While the results did not show a full-scale panic, they were not reassuring.

Fund investors pulled $ 32 billion out of stock funds in September, Lipper found. That's the highest dollar total ever withdrawn in a month, though not the largest percentage of total stock-fund investments. Predictably, the cash went into money markets and bond funds, which took in $ 57 billion last month.

The numbers suggest that some investors seem to be reverting to their expensive practice of selling low and buying high, said Don Cassidy, senior research analyst at Lipper.

"Comfort is always backwards," he said. "The comfort now is 'Get me into cash.' Comfort 18 months ago was 'Get me into tech stocks, and how about leverage?' "

Avoiding the enticement of bonds when the market looks scary is especially important for the growing numbers of investors who are saving for retirement. Retirement accounts made up 36 percent of fund assets in 1999, the latest year for which data are available, up from 25 percent in 1991, according to the Investment Company Institute, the fund industry trade group.

Since investors will one day need to live off their retirement savings, they naturally think of it as money they cannot afford to lose. But if they invest too conservatively -- that is, too heavily in bonds and money-market accounts when they will not need the money for many years -- they will not be able to afford to retire.

According to Ibbotson Associates, a Chicago research firm, between 1926 and 1999 large company stocks delivered an average 11.3 percent annual return, while long-term bonds returned 5.3 percent.

The Lipper survey suggests that most investors have learned to stay the course with their investments.

During the bear market of the early 1970s, many investors panicked and gave up on the market, withdrawing 44 percent of their mutual fund holdings over six years.

Immediately after the 1987 market crash, 5 percent of stock funds' assets, or $ 10 billion, was whisked out of equity funds.

Compared with those periods, the net redemption of 1 percent of equity-fund assets in September and 1.7 percent over the past three months seems relatively modest.

Still, Cassidy notes that the last time investors pulled as much out of their mutual funds in a three-month period was the third quarter of 1990.

"Guess what," Cassidy said. "That was the bottom."

"People tend to put their new investments where they wish they had put their previous investments," said Terry Odean, an assistant professor at the Haas School of Business at the University of California, who has studied how investors harm their returns by trading too much. "My general advice to investors is that they try to avoid shifting their money back and forth based on where they think the market is going to go."

Is there any way to break the market-timing habit?

Just one: adopting an investing discipline.

The first step is figuring out how much of your investment stake should be in stocks, bonds and cash. The second is sticking to the stock-bond ratio as closely as you would follow an old family recipe.

Generally speaking, the longer the time horizon for an investment, the more money should be in stocks.

For example, if you need your savings within a few years for a house or car, you should not invest in the stock market, where higher returns come hand in hand with higher risks. A bank savings account or money-market fund is more appropriate.

On the other hand, a young investor who builds his retirement portfolio around bond funds is like someone who builds a car out of granite: It will protect him from minor shocks but will not get him where he wants to go.

Putting long-term retirement money in bond funds "isn't going to work, but it's going to make people sleep well in the meantime," Cassidy said.

Investors can turn to financial-planning Web sites or professional advisers to figure out the proper ratio of stocks, bonds and cash to match their goals.

According to a traditional rule of thumb, the percentage of a portfolio invested in bonds should be the same as a person's age. So, for example, a 50-year-old woman would have half her money in bonds, and a 33-year-old man would have one-third there.

In recent years, because people are living longer, many professionals have made the formula less conservative, adding 10 percentage points to stocks, Cassidy said.

During the bull market of the 1990s many investors strayed from these asset-allocation formulas, and some wondered why they should not simply put all of their retirement account in the market. The last year and a half gave them their answer.

The market in the future is likely to teach investors why they should not put all their retirement savings into bonds when stocks look risky.

LOAD-DATE: October 21, 2001

SECTION: FINANCIAL; Pg. E01

LENGTH: 672 words

HEADLINE: Terror Alarms Send Stock Indexes Down

BYLINE: Neil Irwin and Krissah Williams, Washington Post Staff Writers

BODY:

The buoyant stock market of the past few days released some of its air yesterday, with major indexes falling amid new warnings of terrorist attacks.

"Obviously people are jittery and the markets are jittery," said Ken Sheinberg, head of trading at SG Cowen & Co.

The Dow Jones industrial average lost 66.29 points, or 0.7 percent, to close at 9344.16. The Standard & Poor's 500-stock index slipped 5.78 points, or 0.5 percent, to 1091.65, which is within a point of its level the day before the Sept. 11 attacks. The Nasdaq composite index rose 1.93, or 0.1 percent, to 1703.40

On Thursday, markets rose sharply, putting some indexes above their levels of Sept. 10, the day before terrorist attacks brought grave new doubts about the near-term future of the economy and corporate profits.

Stocks fell through the morning yesterday; analysts cited reasons as varied as a disappointing earnings report from credit card issuer Providian Financial, the release of government data showing poor retail sales in September, the FBI's warning that new attacks could be imminent and sellers rushing into the market to take advantage of the gains on Thursday. "We've had a very dramatic rally," said Al Goldman, chief market strategist at A.G. Edwards. "What we were getting today is a very narrow pause to refresh. It almost recovered everything it lost due to the tragic events on the 11th."

"You have a lot of portfolio rejiggering that's going on, and I think that's adding to volatility," said Bryan Piskorowski, a market analyst at Prudential Securities.

The drop accelerated after the midday announcement that an NBC employee had been infected with the anthrax virus and the evacuation of the New York Times headquarters after an anthrax scare. They heightened fears that the terrorist-induced disruptions to the U.S. economy will continue. "I think it certainly scared people when it first came out," said Ned Collins, head trader at Daiwa Securities America. "The first reaction for traders was to get out of their positions."

The threat of biological terrorism by mail drove the stocks of package-shipment companies down. UPS lost 3.5 percent, Airborne slipped 5.2 percent and FDX, the parent of Federal Express, fell 4.1 percent. "I'm sure that [threat] will have some sort of impact on those companies," said Brian Belski, fundamental market strategist for U.S. Bancorp Piper Jaffray.

However, the market partially recovered from decline in the early afternoon. The swing illustrated how much volatility has increased in the market since the terrorist attacks. "We are on a rocky road to recovery," said Alan Ackerman, a market strategist at Fahnestock & Co. "The market downtrend may not yet be fully ended. But one of the underlying factors is a sense that the outlook may be bright for many companies in next year's earnings environment."

Staff writer Carol Vinzant contributed to this report from New York.

* The New York Stock Exchange composite index fell 3.81, to 561.98; the American Stock Exchange index fell 7.60, to 827.33; and the Russell index of 2,000 small stocks fell 2.45, to 428.59.

* Declining issues led advancing ones by 3 to 2 on the New York Stock Exchange, where trading volume fell to 1.35 billion shares, from 1.7 billion on Thursday. On the Nasdaq, decliners outnumbered advancers by almost 5 to 4, and volume totaled 1.35 billion shares, down from 2.49 billion.

* The price of the Treasury's benchmark 10-year note rose 31 cents per $ 1,000 invested, and its yield was unchanged from late Thursday at 4.66 percent.

* The dollar fell against the Japanese yen and the euro. In late New York trading, a dollar bought 121.12 yen, down from 121.42 yen late Thursday, and a euro bought 91.13 cents, up from 90.23 cents.

* Light, sweet crude oil for November delivery settled at $ 22.50 a barrel, down 84 cents, on the New York Mercantile Exchange.

* Gold for current delivery rose on the Commodity Exchange division of the New York Mercantile Exchange to $ 284.90 a troy ounce from $ 281.80 on Thursday.

LOAD-DATE: October 13, 2001

SECTION: FINANCIAL; Pg. E01

LENGTH: 979 words

HEADLINE: Stocks Return to Pre-Attack Level;
Investors More Hopeful About Economy and Stability, Analysts Say

BYLINE: Neil Irwin and Carol Vinzant, Washington Post Staff Writers

BODY:

The stock market clawed back yesterday to its level before the Sept. 11 terrorist attacks as many investors appeared increasingly optimistic that the world's political situation may be stabilizing and that the economy won't get much worse.

"A wall of worry is slowly being dissipated," said Larry Wachtel, a market analyst at Prudential Securities, citing what he calls the apparently successful military attack on Afghanistan and some slightly better-than-expected economic data.

But the FBI warning that more terrorist attacks could be on the way -- issued after the market closed -- could threaten the rally of the past three weeks. "If nothing else, it is a reminder to all of us that we are far from out of the woods," said Ted Weisberg, a trader on the floor of the New York Stock Exchange and founder of Seaport Securities.

The Standard & Poor's 500-stock index, which tracks the stocks of 500 large companies and is considered one of the best overall measures of the market, topped its pre-attack level yesterday by rising 16.44, or 1.5 percent, to 1097.43. The Nasdaq composite index, which has a heavy concentration of technology stocks, also topped its Sept. 10 level by climbing 75.21, or 4.6 percent, to 1701.47.

The Dow Jones industrial average rose 169.59, or 1.8 percent, to 9410.45, or about 2 percent below its close on Sept. 10. At its lowest point after the attacks, on Sept. 21, the Dow was down more than 14 percent from its Sept. 10 close.

Global markets also rallied yesterday, and the dollar strengthened against the yen and the euro.

In addition to the World Trade Center towers, the attacks damaged or destroyed several buildings in Manhattan's financial district and forced the stock markets to close for four trading days. When the markets reopened, stock prices plunged out of fear and uncertainty about the economic fallout from the nation's war on terrorism.

"We clearly had a panic sell-off in the week we came back after the attack," said Ed Yardeni, chief investment strategist at Deutsche Bank Alex. Brown. "Many institutional investors have learned over the years that whenever you have a panic sell-off in the middle of a crisis, it's a great time to buy."

But since the Dow's low point, stocks have steadily risen. The reason, market analysts say, is not that anyone sees good economic times immediately ahead. Rather, many investors believe corporate results are not getting any worse, and they are betting the economy will start to improve in the spring.

"In a market braced for aftershock after aftershock, maybe there's an absence of overwhelmingly negative news, and that's enough to drive things up," said John Powers, managing director of institutional sales at Robertson Stephens.

Economists, however, are divided on when an economic rebound will come; some argue it will be early next year, others expect it later in the year or beyond.

Many analysts are increasingly optimistic about the prospect that tax cuts, new spending and other plans being weighed by Congress will help stimulate economic growth. But some economists continue to debate whether such measures will work at a time when many consumers and businesses remain unsure and cautious.

Even before the attack, stocks were priced with the assumption that third-quarter profits would be down sharply from year-earlier levels. Those expectations fell further after the terrorist attacks, as consumers and businesses trimmed spending.

Thus, because expectations were so low, even mediocre quarterly financial results have bolstered the markets, some analysts said. Yesterday, for example, General Electric Co. reported earnings of $ 3.3 billion for the period ended Sept. 30. That was up only marginally from $ 3.2 billion in the same period a year earlier, but investors viewed it as a positive sign that business was stable, and GE stock rose $ 1.04, to $ 38.95.

Similar earnings reports -- in line with expectations but not spectacular -- were announced by such companies as Juniper Networks yesterday and Yahoo on Wednesday.

Historically, the stock market has turned up before a broad economic slowdown ends, as investors are basing their decisions on expectations about future economic conditions. Thus, the market is predicting that good times aren't too far away, said Richard Cripps, chief equity market strategist at Legg Mason.

Some analysts took heart from the Labor Department's report yesterday that new claims for unemployment benefits fell last week by a seasonally adjusted 67,000, to 468,000. That decline followed two weeks of big increases. But the four-week moving average of jobless claims, which smooths out week-to-week fluctuations, rose last week to 463,000, the highest level since Dec. 14, 1991, when the country was in a recession.

* The New York Stock Exchange composite index rose 5.92, to 565.79; the American Stock Exchange index rose 0.71, to 834.93; and the Russell index of 2,000 small stocks rose 9.38, to 431.04.

* Advancing issues outnumbered declining ones by more than 3 to 2 on the NYSE, where trading volume rose to 1.7 billion shares, from 1.31 billion on Wednesday. On the Nasdaq Stock Market, advancers outnumbered decliners by more than 2 to 1 and volume totaled 2.49 billion, up from 1.8 billion.

* The price of the Treasury's 10-year note fell $ 5.31 per $ 1,000 invested, and its yield rose to 4.66 percent, from 4.60 percent late Wednesday.

* The dollar rose against the Japanese yen and the euro. In late New York trading, a dollar bought 121.42 yen, up from 120.37 late Wednesday, and a euro bought 90.23 cents, down from 91.10.

* Light, sweet crude oil for November delivery settled at $ 23.34 a barrel, up 81 cents, on the New York Mercantile Exchange.

* Gold for current delivery fell to $ 281.80 a troy ounce, from $ 285.70 on Wednesday, on the New York Mercantile Exchange's Commodity Exchange.

LOAD-DATE: October 12, 2001

SECTION: A SECTION; Pg. A17

LENGTH: 859 words

HEADLINE: Overseas Markets Lower, Investors Assess Action

BYLINE: Paul J. Blustein and Carol Vinzant, Washington Post Staff Writers

BODY:

World financial markets, which have been bracing since Sept. 11 for a U.S.-led attack on Afghanistan, are facing new uncertainties as investors assess the outcome of yesterday's military action, analysts said.

Asia-Pacific trading opened sharply lower today as investors, who had awakened to news of the bombings, reacted with the initial skittishness that many experts had anticipated.

The Australian stock market fell 1.6 percent in early trading. In Honk Kong, the Hang Seng index fell more than 3 percent in early trading, while Korea's Kospi index lost 2 percent, Taiwan's TWSE fell 2 percent and Singapore's Straits Times index was down 3.29 percent. In Japan, markets were closed for a national holiday.

Oil markets were bolstered slightly by the attack. U.S. November light crude rose to a peak at $ 22.85 a barrel in early trading in Asia before retreating to $ 22.52, a rise of 13 cents.

In U.S. markets, where professional and individual investors have had a day to digest the news, the reaction may well be positive, some experts predicted, because of evidence that the U.S.-led attack was well coordinated.

U.S. bond markets are closed today for the Columbus Day holiday, but stock markets are open.

The market's direction, however, will depend on other factors, such as whether a backlash erupts in the Muslim world or whether terrorists retaliate.

With the U.S. military responding to the Sept. 11 attacks on the World Trade Center and the Pentagon, a "relief rally" is possible, said Nicholas Checa, president of Medley Emerging Markets, a New York firm that advises major international investors.

"The fact that Germany, France, Australia and Canada have joined, along with the U.S. and the British, sends a powerful signal to markets that this is not just a one-off, unilateral, retaliatory attack; it's got the entire Western world behind it, and I think that will reassure markets," Checa said.

There is a wild card, Checa said: "What happens in terms of retaliation?" By warning that more terrorist acts are likely, U.S. officials have helped prepare financial markets for such an eventuality, Checa said.

"But this is just phase one [of the anti-terrorist campaign], and the question going forward, which very soon markets will be focused on, is how soon the next phase begins and what the scope of the conflict really is," he said.

The U.S.-led attacks came after Wall Street staged a partial recovery following the Sept. 11 attacks, which closed stock trading for several days. The Dow Jones industrial average, which fell 1,369 points in the first week after markets reopened Sept. 17, has regained about 66 percent of the loss. The Nasdaq composite index , which rose 7.1 percent last week, stands about 5 percent below its level before Sept. 11.

Wall Street's recent rally sparked concern about a sharp retreat among some analysts because a number of U.S. companies were expected to report disastrous third-quarter earnings this week and issue gloomy forecasts for the rest of the year. The economy virtually ground to a halt for several days after Sept. 11, and economists widely expect growth to be negative in the fourth quarter as well.

Beyond that, the outlook has become exceptionally difficult to discern because of unanswerable questions about the long-term impact of the terrorist attacks on the confidence of consumers and business executives.

Opinions differed over whether yesterday's developments would increase or diminish perplexity among investors.

Robert Dugger, a Washington-based partner at a hedge fund firm, was optimistic. "The market reaction is going to be positive," he predicted. "We all knew that action was necessary; now it's being taken, and we're closer to a positive conclusion."

"This might be the next step to removing some uncertainty," said Ed Yardeni, an economist at Deutsche Banc Alex. Brown Inc. Stocks might start trading lower this morning, he said, but investors were confident of a U.S. victory. The market would likely rally if U.S. forces caught Osama bin Laden or if several days passed without a retaliatory attack, he said.

Dugger said the effort to eradicate terrorism "is not going to be easy, and the risks may even increase at this point. The important thing, though, is that the work of ultimately eliminating the source of risk is now clearly underway."

Other analysts fretted about the possibility of chemical or biological weapons being used against U.S. citizens, which would presumably deal an even more severe blow to confidence and ultimately to the economy.

"I'm not nearly as sanguine as everyone else," said Hugh Johnson, chief investment officer at First Albany Corp. "This increases the level of uncertainty. Simply because of that I think a lot of buyers are going to be very edgy tomorrow morning."

Investors might look at the Gulf War period as a guide to how markets would react this week.

Iraq's invasion of Kuwait in August 1990 sent stocks down and oil prices up. The Dow Jones industrial average fell 10 percent that August. When the war started in January 1991 investors expected stocks to drop further, but instead they rallied.

LOAD-DATE: October 8, 2001

SECTION: FINANCIAL; Pg. H01

LENGTH: 1136 words

HEADLINE: Royally, Straight-Out Flushed;
Bull-Market Gains? Gone, Unless You Bet Against Stocks

BYLINE: Carol Vinzant, Washington Post Staff Writer

DATELINE: NEW YORK

BODY:

For investors in stock mutual funds, the third quarter was so thoroughly awful that it essentially annulled the unprecedented bull market of the late 1990s.

Just three months ago, the average diversified U.S. equity fund had a five-year return of 11.8 percent. Now it's 7 percent -- below the stock market's historical return over many decades. The quarter brought 10-year returns down from 13.6 to 10.8 percent.

Even the buy-and-hold investors among the nation's 93 million fund owners who did what they were supposed to do, who did not get swept up in Internet investing or anything else too fancy or risky, will find plenty of damage when they open the envelopes and e-mails containing their quarterly fund statements in the coming days.

Stock funds had the worst quarter since 1987, losing an average of 17.9 percent. It hardly mattered which fund had your money. Sure, conservative investments did slightly better. But blue-chips, small-caps, international stocks, high-tech and even value and balanced funds all lost money. According to Lipper, 97 percent of stock funds were in the red.

The few investors who did well this quarter avoided stocks, or bet against them.

Quarterly mutual fund results have probably never been more important than they are now. Consumers' confidence and spending patterns have in turn never been so crucial to the economy. According to an annual report released this week by the mutual fund trade group, for the first time the majority of American households own mutual funds -- 52 percent, up from 49 percent last year.

After the attacks on Sept. 11, everyone was expecting a loss. The terrorist attacks sent the whole country, including the stock market, into a deep funk, interrupted only by moments of panic.

The only surprise is that most of the real financial damage was done before the attack. Funds had already lost 11.7 percent by Sept. 10. The attacks just sped up the market's already-determined downward course.

Tech funds had their worst quarter ever, down 38.9 percent. Tech-fund investors, after seeing exponential gains in 1999, now are essentially break-even over the past three years. The five-year average return for science and technology funds is now a paltry 4 percent.

Russell Kinnel, director of fund analysis at Morningstar, a Chicago-based mutual fund research company, calculates that investors who jumped into tech late in the game would have been better off in municipal bond funds. Muni bonds have averaged 4 percent for the last three years and 5.8 percent for five years.

What did work? Backing out of stocks altogether.

Bond funds flourished as interest rates declined. According to Lipper, muni bonds gained 2.5 percent and government bond funds were up 4.9 percent.

Gold funds were the only one of Lipper's 42 investment objective categories that gained this quarter. This small, obscure, risky and widely derided sector gained 2.3 percent.

Brian Belski, fundamental market strategist at U.S. Bancorp Piper Jaffray, said gold has lured people in but been a bad investment for centuries. For the past 15 years, gold funds have lost an average 1.7 percent annually.

"It's your typical historical reaction: 'Let's buy gold!' " Belski said. "It's dangerous thinking."

Real estate mutual funds, which invest in property-management companies or real estate investment trusts, lost 3.6 percent for the quarter but are still ahead 3.8 percent for the year.

Funds with a value tilt -- that is, those that look for cheap stocks with reliable earnings -- did better than funds that invest in companies expected to have high growth prospects. Value funds only lost 13 percent to growth funds' 24 percent slide.

Balanced funds, which split their money between stocks and bonds, fared better but still lost about 8 percent.

During the bull market, funds that invested in big, growth companies led the market. This quarter the best big-cap growth fund, the Chase Growth Fund, lost 9.2 percent. That might have been considerably worse without a significant investment in Johnson & Johnson, which gained about 10.8 percent for the quarter.

Some fund managers tried to play to investors' need for security, buying companies that they felt they could depend on: those with brand names, dependable earnings and products people would buy no matter what. Often even that didn't work. "Health care did a little less badly" is about the most positive thing Kinnel could say. Health-care funds lost 11.2 percent.

The only funds with phenomenal returns, the kind that investors have grown accustomed to in the bull market, were those that bet against the market.

In the early 1990s, Rydex Funds of Rockville pioneered a kind of index fund with a twist. Rydex offers funds that do the opposite of what a market or sector index does. They also offer leveraged funds, which use complicated strategies involving options and short-selling to let investors bet more money than they actually have. That enables the funds to offer up to double the positive and negative returns of an index. Former Rydex employees went on to form a local cluster of similar fund families that includes ProFunds of Bethesda and Potomac Funds, which has offices in Alexandria and New York.

For example, the ProFunds UltraOTC offers twice the daily performance of the Nasdaq 100 index. Potomac's Dow 30 Plus fund gives investors 125 percent of the Dow Jones industrial average's daily gains or losses. The Rydex Ursa Fund does the opposite of what the S&P 500 does. The two top funds, ProFunds Ultra Short OTC and Rydex Dynamic Venture 100, both offer to do double the inverse of the Nasdaq 100's daily return. In the third quarter, the Nasdaq 100 lost 36 percent, but because of the mathematical quirks of compounding the funds both gained about 117 percent.

These leveraged funds, used mainly by the pros, are dangerous because they can multiply losses quickly. Even Charles J. Tennes, Rydex senior portfolio manager, does not want investors to rush into his leveraged bear funds simply because of quarterly results. The way to use the funds is to hedge the risk of other investments, he said. For example, investors might split their hedge money between a money-market fund and a leveraged fund to balance risks to a stock portfolio.

No one can figure out whether the market plunge has stopped or whether it has only paused for a rest. After the quarter closed, for example, the market as a whole gained 2.8 percent this past week and Nasdaq rose 7.1 percent.

The big catch with looking at any performance results is that in the stock market, the meek have a long track record of inheriting the earth. One period's winners become the next's losers and vice versa. The only question is how long before the shift happens. And no one knows the answer to that question.

LOAD-DATE: October 7, 2001

SECTION: FINANCIAL; Pg. E01

LENGTH: 1068 words

HEADLINE: Life at the Makeshift Office;
Lower Manhattan Workers Face Tight Quarters, New Commutes

BYLINE: Justin Gillis, Washington Post Staff Writer

DATELINE: NEW YORK

BODY:

Once upon a time, Malcolm Draper and his colleagues worked in a pretty ordinary office in Lower Manhattan. That was before the terrorist attack of Sept. 11 drove his company out of three buildings, shut off the power and phones, and left 60-foot heaps of smoldering rubble outside the Park Place building housing his firm's main computer center.

Multex.com Inc. workers have since been able to return to their headquarters at 100 William St., a few blocks from where the World Trade Center towers once stood. But now they step beneath two tons of electrical cables -- the fat kind normally strung on utility poles -- that stretch from a backup computer room, through crudely cut holes in the wall, across the ceiling, out a window and down six floors to a huge generator in the street.

One group of employees is stuffed into what used to be a conference room, using improvised workstations jammed together on a fancy table. The room is half the size of the space it replaced and "a little bit tough to get used to," said Eric Todor, a Multex manager. Other employees peer through a glass darkly, their windows still caked with the choking dust that billowed through the streets after the World Trade Center collapsed.

These are crazy times in the financial capital of the world.

Even as the noises and some of the normal rhythms of life return to the streets of Lower Manhattan, small companies such as Multex and giants like Merrill Lynch & Co. continue to cope with the aftermath of the terrorist attack: limited phone service, spotty power, lingering fear, and employees moved by the tens of thousands to makeshift offices scattered across three states.

At Merrill, the huge financial services firm, 9,000 employees have been driven out of Lower Manhattan by the disaster. The lives of many have been whipsawed as whole departments were moved to temporary quarters -- and moved again, as far as 40 miles away, as the company has scrounged to find room for everybody.

"We've all been scrambling a little bit," said Jeff Hughes, a Merrill executive. "Basically, you sit in a room and say, 'We gotta do it and we gotta do it now, and what does that take?' "

Commuting patterns in the New York region have been turned upside down by the attack. Some Merrill employees who used to have two-hour commutes -- say, from southern or western New Jersey to Lower Manhattan -- now have four-hour commutes to Jericho, on New York's Long Island, where the company has temporarily housed its international equities division.

Merrill has offered hotel rooms to the most-affected and counseling to all employees, but Hughes said the situation is taking an emotional toll.

With subway lines and stations near the World Trade Center shut down, probably for years, workers who still commute to Lower Manhattan depend on ferry service, expanded after the attack. But it's a tough situation: Ferries and the remaining trains, especially those to and from New Jersey, are jam-packed.

Christopher Feeney, Multex's president, lives 45 miles west of Manhattan and used to have a leisurely ferry ride into the city. "There are thousands of people doing it now, and there used to be hundreds," he said. "They're having a hard time just getting the crowds organized and getting the boats into the slips. We're in an old, reconditioned boat that leans to the left a lot of the time."

The disruption to business in New York extends well beyond the World Trade Center area. Thousands of nearby businesses, large and small, are without some essential service such as phones, power or sanitation. New York City estimates that 80,000 to 100,000 employees, as many as a third of those who normally work in Lower Manhattan, have been displaced.

Many employees have found an emotional outlet in helping their companies get back into gear.

"It helps you overcome the tragic event," said Isaak Karaev, chairman and chief executive of Multex. "You start worrying right away. . . . Are my people okay? How do I get electricity? How do I get phones? How do I get the thousands of clients we have back up and running?"

The challenge of keeping business going has produced folk heroes at many companies. Malcolm Draper, Multex's vice president of international operations, is one of those -- the sort of unflappable fellow you want to have around in a crisis.

When other employees fled Lower Manhattan right after the attacks, he and colleague Thomas D'Ambrosio, chief information officer, stayed. They slept on the floor and scrounged around the office for food.

Multex, with 500 employees, normally supplies financial information to professional investors and other clients via electronic networks, but Draper and D'Ambrosio were forced to shut their systems down when the power and phones went off. They began planning a recovery.

They realized that their main computer center, at 75 Park Place, would likely be out of service for a long time. But they were able to retrieve some equipment from there and add it to backup equipment they had at headquarters.

They found a generator and got it shipped to Manhattan in the days after the attack, but initially couldn't get permission to move it through the police lines. As the situation dragged on, the trucker hauling the rig parked overnight under a highway overpass near the East River. Afraid the man would give up and leave, Draper spent part of the night sleeping on the bed of the truck next to his precious generator, using his arm as a pillow.

"You get focused on what it is you need to do," Draper said. "So you just do it."

Eventually they got the generator through, improvised all manner of technological fixes, and were running their company on emergency power when the stock market reopened on Sept. 17.

"It was like 'Who cares what your job title is?' " said Samantha Topping, a spokeswoman for Multex. " 'Here's a drill. Cut through the wall.' "

Power has since been restored to the headquarters, but the situation in the area remains so chaotic that Draper isn't giving up the generator for a while.

Police captains were more worried about moving fire and rescue workers into the stricken zone than accommodating a small company like Multex, but they eventually cooperated. "Secondary on their minds," Draper said, "was that we don't want the terrorists to succeed in any more ways that we can help it."

Staff writer Carol Vinzant contributed to this report.

LOAD-DATE: October 2, 2001

SECTION: FINANCIAL; Pg. E01

LENGTH: 912 words

HEADLINE: SEC Extends Period For Easier Buybacks;
Rules Relaxed to Help Stock Trading

BYLINE: Glenn Kessler and Carol Vinzant, Washington Post Staff Writers

BODY:

The Securities and Exchange Commission said yesterday that it had modified and extended until Oct. 12 a new policy that makes it easier for corporations to buy back their shares, continuing an emergency effort to smooth trading in the wake of the Sept. 11 terrorist attacks.

Easier buybacks had been sought by some companies, without success, over the past decade. The SEC originally eased its restrictions for just five days under an emergency order, and then extended the rules change for another five days -- the maximum for emergency orders.

But late yesterday the SEC said it would continue to permit buybacks in a modified fashion. The rules, which impose limits on the timing and volume of stock repurchases, are designed to prevent companies from manipulating the price of their stock.

The SEC's action is one of a number of times rules have been relaxed since the attacks, even though trading appears to have operated smoothly since the markets reopened.

Many market professionals say the waivers have been necessary in a turbulent market. But if the waivers remain in effect for much longer, some wonder if the interests of small investors will get trampled by the needs of big Wall Street firms and corporations.

Before the SEC rules were eased, companies were not able to repurchase their own shares in the first or last half-hour of trading when the market is most volatile and vulnerable to manipulation. Jake Zamanksy, a prominent New York investors' lawyer, said he supports laying aside the strict buyback rules for a while, but is worried that some opportunistic insiders may try to exploit the change. "Our hope is that no insider or company will take advantage and profit," he said.

SEC Chairman Harvey Pitt told Congress earlier this week that the independent agency rejected a number of rule-easing proposals made by Wall Street firms. "We did, however, take action -- not intervention -- whenever we could to be responsive to industry concerns and to facilitate a smooth reopening of the markets," he said.

The SEC also said yesterday that it would allow airline and insurance companies to sell stock under expedited registration procedures. On Thursday, the Nasdaq Stock Market said it would waive standards that would otherwise force it to delist some 300 companies.

Joel Seligman, dean of the Washington University School of Law and co-author of the most widely used securities law book, said historically the market has simply closed during national crises -- as it did right after the attack on the World Trade Center -- but since 1987 the SEC has tried to keep the market open with minor, protective rules.

"In periods of extraordinary volatility, it seemed wise to have rules to cushion the extent of wide price swings, in particular drops," Seligman said. "The focus this time was on how you could create larger buyer interest."

Since the week of the terrorist attacks, 297 companies have announced programs to buy back a total of $ 36.03 billion of their own stock, said Brian Schmidt, senior research analyst at Thomson Financial. It isn't clear how many have actually purchased shares or if any purchases had the effect of boosting the company's stock price. The SEC said it did not anticipate that buyback rules would continue to be eased beyond Oct. 12.

Nasdaq's rule easing would keep companies trading on Nasdaq even if they fail to maintain a closing price of $ 1, a limit that Oklahoma City securities lawyer Bill Federman said was put in place for a reason -- to set a standard and protect investors.

"This is a prime example of a self-regulatory organization operating more on behalf of member firms than for the market," Federman said. "I do think there's an adverse effect to the investors."

Michael Emen, senior vice president of Nasdaq's department of listing qualifications, said market regulators were worried that not lifting the rules would penalize businesses for events that may not have been connected to their company. The waiver will last until Jan. 2.

"Many companies are struggling to deal with the change in the business environment," Emen said. "We decided to do this so that to the extent they can get a breather from worrying about this particular rule, we can let them manage their business as best they can."

But Federman said that explanation ignores the reality of the free-market system. "The reason firms are under $ 1 is their value is less than a dollar," Federman said. "It's not because of the unfortunate circumstances in New York, it's because of management decisions and the true value of the company."

Not all regulators are relaxing their rules. The Financial Accounting Standards Board, a private-sector body that sets accounting standards, yesterday backtracked from earlier guidance that suggested companies would be able to separate losses and expenses due to the terrorist attacks from the course of ordinary business. This would have had the effect of improving the financial picture a company presents to its investors.

Tim Lucas, chairman of a task force examining the issue, said the group had become increasingly uncomfortable with the idea of permitting companies to try to separate out ordinary business from the events of Sept. 11. He anticipated that companies would try to explain how their business was affected by the terrorist attacks, but he said that belonged in the footnotes and management notes accompanying the financial statements, not on a separate line.

LOAD-DATE: September 29, 2001

SECTION: FINANCIAL; Pg. E03

LENGTH: 717 words

HEADLINE: Stocks Off Again on Ratings, Warnings

BYLINE: Jerry Knight and Carol Vinzant, Washington Post Staff Writers

BODY:

The stock market turned down again yesterday as Wall Street analysts cut their ratings on dozens of stocks, several key companies warned that business is continuing to fall off, and a poll showed optimism about the market fell to its lowest level in more than four years.

AES of Arlington led losers in the Standard & Poor's 500-stock index, dropping almost 50 percent, from $ 24.25 a share to $ 12.25. The company said its worldwide network of power plants is generating about 30 percent less profit than expected.

The S&P 500 fell 5.23, or 0.5 percent, to 1007.04, while other measures of the market suffered bigger losses. The Dow Jones industrial average fell 92.58, to 8567.39, a 1.1 percent decline. The Nasdaq Stock Market composite index fell 37.60, or 2.5 percent, to 1464.04, pulled down by ratings cuts on several technology stocks.

Analysts downgraded International Business Machines, Intel and Caterpillar, among others, casting a shadow on both high-tech stocks and old-line manufacturers. The tech-dominated Nasdaq 100 index fell 3.7 percent as 87 of the stocks declined.

Ratings were also cut on an assortment of names familiar to shoppers: Coach, Tommy Hilfiger Corp., Nautica Enterprises and Jones Apparel.

And if there was any doubt that the outlook for consumer spending is weak, the chief economist of General Motors said the company is preparing to cut its forecast for fourth-quarter sales. GM is offering free financing, and other carmakers are cutting prices, but those incentives are not expected to allow the industry to reach a sales forecast of 16 million vehicles for the year.

The bad news out of corporate America was a preview of what's in store for Wall Street, warned Jim Paulsen, chief investment officer of Wells Capital Management.

"There just isn't enough positive news to get anyone excited," Paulsen said. "You get a litany of bad news from companies, some of them announcing layoffs, others announcing downgrades. I think we're en route to a constant litany of that day by day."

It's not only Wall Street traders and analysts who are pessimistic about the market, but also financial advisers who help investors manage their portfolios, according to a poll by Investors Intelligence newsletter.

Only one-third of financial consultants say they are bullish about stocks, the weekly poll found. The number of investment advisers calling themselves bears climbed for the eighth straight week, with 24 percent of them saying they expect the market to fall an additional 10 percent.

Losers outnumbered winners by roughly 2 to 1 among both the S&P 500 and the Dow Jones industrials.

But its was the larger drop in the Nasdaq stocks that worried other analysts.

Fane Lozman, chairman of Chicago-based market tracker Scanshift, said the Nasdaq does not seem to have the energy to pull out of its slump.

"I'm not excited to see [the Nasdaq composite index] 40 points off the low of last week," Lozman said. "It just doesn't have the momentum to come out of this hole."

"There's always a tendency to move to larger companies in times of economic turmoil," Paulsen said, in part because bigger firms are usually better able to cut costs when business slows.

Vinzant reported from New York.

* The New York Stock Exchange composite index fell 1.43, to 524.56; the American Stock Exchange index rose 5.74, to 786.20; and the Russell index of 2,000 small stocks fell 6.39, to 389.79.

* Declining issues outnumbered advancing ones by 8 to 7 on the NYSE, where trading volume fell to 1.56 billion shares, from 1.63 billion on Tuesday. On the Nasdaq, decliners outnumbered advancers by nearly 5 to 3 and volume totaled 1.69 billion, down from 2.09 billion.

* The price of the Treasury's 10-year note rose $ 5.31 per $ 1,000 invested, and its yield fell to 4.63 percent, from 4.70 percent late Tuesday.

* The dollar rose against the Japanese yen and fell against the euro. In late New York trading, a dollar bought 117.72 yen, up from 117.63 late Tuesday, and a euro bought 92.31 cents, up from 92.28.

* Light, sweet crude oil for November delivery settled at $ 22.38 a barrel, up 57 cents, on the New York Mercantile Exchange.

* Gold for current delivery rose to $ 293.30 a troy ounce, from $ 290.50 on Tuesday, on the New York Mercantile Exchange's Commodity Exchange.

LOAD-DATE: September 27, 2001

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HEADLINE: Nasdaq May Ease Listing Rules;
Share Prices Might Be Allowed to Fall Below $1

BYLINE: Yuki Noguchi, Washington Post Staff Writer

BODY:

The Nasdaq Stock Market is considering changes in its listing standards to help companies whose stock prices are dangerously low continue trading.

"We're looking at those requirements for continued listing to help companies remain listed during these uncertain times," said a Nasdaq spokesman, who declined to comment on details.

Normally, when a Nasdaq company's stock trades below $ 1 a share for 30 straight days the market starts delisting procedures. A waiver of the requirement until the end of the year, a likely course, according to sources, would enable embattled firms to keep trading on the Nasdaq.

Staying on the Nasdaq Stock Market, instead of being forced to trade over the counter, would mean that affected companies would have better access to Wall Street investors, analysts and brokers -- and keep the prestige that goes with it.

SteelCloud Inc. is one company that would benefit.

The Dulles technology firm's stock price fell below $ 1 a share after the Sept. 11 terrorist attacks. That same week, the company finished a successful, months-long process of appealing to keep its shares listed, in spite of having traded under $ 1 for 30 consecutive days. If the rules are not changed, SteelCloud would have to defend its listing before another Nasdaq review panel.

Granting a temporary reprieve from the stock-price rule would buy time for the struggling companies and would help shore up Nasdaq's diminishing roster of 4,300 firms -- many of which are technology companies in danger of falling off the Nasdaq's screen this year.

The Nasdaq maintains several other eligibility requirements, including a minimum-asset requirement, but the biggest hurdle lately for many firms is the $ 1 a share floor. So far this year, 325 companies have been delisted for not meeting the requirements, far outpacing last year's total of 240, according to New York-based market.

The Nasdaq composite index, representing the top 500 stocks, has fallen 71 percent since reaching its high in March 2000 -- a much bigger drop than the Dow Jones industrial average's 23 percent drop since its high the same month.

"I think it's a good idea," Brandon Becker, a partner with Wilmer, Cutler & Pickering, a law firm in Washington, said of the waiver being contemplated. "It will give companies this breather and allow for a broader window to see whether the problems are temporary or long term."

Jack Coffee, a visiting securities law professor at Harvard University, said that in the past the Nasdaq enforced the $ 1 price rule rigorously because low-priced stocks were vulnerable to market manipulation. He said $ 1 a share is an arbitrary price: "I don't think the $ 1 rule was something that Moses brought down from the mountain in stone."

The move would likely benefit the Nasdaq itself, which receives $ 152 million a year in revenue from companies paying listing fees.

"The volatility, the action and the volume has been in the Dow," which has a more stable base of companies, said Fane Lozman, chairman of Scanshift.com, a Chicago-based research firm. In both prestige and importance, the Nasdaq is dying as a marketplace, he said.

In April 2000, the Nasdaq composite index would move more than 200 points within a day. Now the index swings an average of about 50 points a day.

The delisting process is time consuming because it involves panel reviews, appeals and lots of paperwork for the Nasdaq market.

James H. Schropp, a parter and securities lawyer with Fried, Frank, Harris, Shriver & Jacobson, said, "A large backlog of companies [in danger of delisting] would overwhelm them." And that's what the Nasdaq faces, following a prolonged decline and a market dive after the Sept. 11 terrorist attacks, he noted.

This year isn't the worst in Nasdaq's recent history. In 1998, 596 companies were delisted, but many of those were Internet firms, and other were inherently weak, Schropp said. The difference now, he said, is that the delistings are affecting telecommunications companies and other, larger firms that "not too long ago would have been thought of as promising companies."

A short-term reprieve might not save some companies from eventually getting pushed to the over-the-counter market.

"They're really just throwing a bone to the issuers [of stock]," said Sean McGuinness, a partner with Georgetown-based law firm Swidler Berlin Shereff Friedman LLP. Many of the firms facing delisting have many other problems besides stock price, he said. "If you look historically, very few of those companies come back in any meaningful way."

Staff writer Carol Vinzant in New York contributed to this report.

LOAD-DATE: September 27, 2001

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HEADLINE: Scotland Yard Says Hijackers May Have Trained in Britain;
Terror Suspects Arrested in Spain, Holland

BYLINE: T.R. Reid and Allan Lengel, Washington Post Staff Writers

DATELINE: LONDON Sept. 26

BODY:

Eleven of the men who hijacked U.S. airliners on Sept. 11 may have traveled this year to the United Kingdom for meetings or training, including a possible strategy session that drew five of the terrorists in June, Scotland Yard said today.

As the attacks reverberated far beyond ground zero, Dutch police detained an Iraqi man suspected of belonging to a radical Islamic network planning attacks, and Spanish authorities arrested six Algerians they said were "directly linked" to suspected terrorists arrested in Belgium and the Netherlands two days after the bombing.

In the United States, a federal magistrate ordered two men held without bond on minor charges, telling an Alexandria, Va., courtroom that these are not times of "business as usual." Police in three states, meanwhile, arrested at least nine men accused of falsely obtaining licenses to drive trucks carrying hazardous materials.

Britain, which has a large Muslim population, relatively open borders and broad freedom for political groups, has long served as a base for militant Islamic fundamentalist groups, including the network of Osama bin Laden, the exiled Saudi militant believed by the Bush administration to be the architect of the Pentagon and World Trade Center attacks.

London was the base of operations for Khaled al-Fawwaz, said to be a top bin Laden lieutenant and a recruiter of young men for al Qaeda military units. Al-Fawwaz and two of his associates, Ibrahim Eidarous and Adel Abdul Al-Bary, have been jailed for three years here, after their indictment in New York on charges of helping plan the 1998 bombings of two U.S. embassies in East Africa.

Zacarias Moussaoui, arrested in Minnesota last month after flight school officials became suspicious of his desire to learn only to steer a Boeing aircraft -- not practice takeoffs or landings -- once lived in London, where police have searched his former home. French intelligence authorities told the FBI that Moussaoui is a member of bin Laden's network.

British authorities said little today about the 11 hijackers' visits to the United Kingdom, which were first reported by the Times of London. They said the FBI asked for their help in reconstructing their local activities, a task that Scotland Yard's assistant commissioner, David Veness, called a "top priority."

Authorities in Spain said the suspects under arrest today financed themselves by falsifying documents -- including passports and airplane tickets -- and by creating fake credit cards. Police seized state-of-the-art equipment for forging documents.

In the United States, court documents unsealed today showed that state and federal officials have known for more than a year about an alleged truck-licensing scam in Pennsylvania involving 20 men, nine of whom were arrested in Michigan, Missouri and Washington. They became enmeshed in the terror probe on Tuesday because of fears about attacks using hazardous materials.

Attorney General John D. Ashcroft told lawmakers Tuesday that "our investigation has uncovered several individuals, including individuals who may have links to the hijackers, who fraudulently have obtained or attempted to obtain hazardous material transportation licenses."

Justice Department spokeswoman Susan Dryden said none of the nine arrested today have any known links to the hijackers. But the FBI has issued alerts to the trucking industry and has ordered its field offices to check whether any of the hundreds of people being sought for questioning in the terror probe obtained hazardous materials licenses.

The fear among law enforcement officials is that such a license could be used as part of a plot involving dynamite, radioactive waste or dangerous chemicals. But officials also cautioned today that, given that nearly all the charges stem from one apparent scam, the men could simply be otherwise law-abiding immigrants who cut corners to get lucrative trucking licenses.

In Alexandria, a District man accused of helping several hijackers obtain Virginia licenses was ordered held without bond today by U.S. Magistrate W. Curtis Sewell. The suspect, Herbert Villalobos, said he met five of the hijackers for the first time last month in a state motor vehicle department parking lot.

Defense attorney Mike Lieberman noted at the hearing in U.S. District Court in Alexandria that the crime was minor and argued that his client, a legal immigrant from El Salvador, deserved to be released on bond. He said, "There's no reason to treat this defendant differently because of what somebody else did, as horrible as it was. There's no evidence that he had anything to do with it."

Assistant U.S. Attorney John Morton said the government has no direct evidence to show that Villalobos knew about the attack plans, but the prosecutor also said that authorities believe Villalobos has more information than he has disclosed.

Sewell ordered Villalobos held behind bars.

"One of the unspoken issues today is, after the events of September 11th, is it going to be business as usual?" Sewell said. "I suspect not. The defendant, either wittingly or unwittingly . . . but certainly unlawfully, contributed in some way to the horrific acts."

The FBI is searching for a man -- publicly known only as "Jalali" -- who may know of a terrorist threat that forced former defense secretary William S. Cohen to cancel a trip last year to an American air base in Incirlik, Turkey, according to federal officials and an FBI affidavit.

During a search last week of a Detroit home, FBI agents seized a day planner that refers to the "American Defense Minister" and crude sketches of aircraft and runways that appear to correspond to the Incirlik base, which is used by pilots enforcing the no-fly zone over northern Iraq.

Cohen canceled his trip to the base last year after "learning of a credible threat against him," a former U.S. Department of Defense official said.

Agents found the day planner after going to an apartment in southwest Detroit in search of Nabil Al-Marabh, a former Boston cabdriver who is a suspected associate of bin Laden. Agents also seized false documents that bore the name "Michael Saisa." Authorities said the photo on the passport may actually be that of Jalali, who apparently had lived in a previous apartment with two of the three men arrested last week. The men, according to authorities, said they had kept the documents in case he returned for them.

In other developments today:

* The Securities and Exchange Commission took the unprecedented step of asking the entire securities industry to search for records of business dealings with suspected terrorist groups. The agency asked firms to find out whether they ever had accounts or made trades with anyone on the FBI's list of 19 suspected hijackers or the list of 27 individuals and groups President Bush named this week as financiers of terrorism.

* SunCruz Casinos LLC has turned over to the FBI surveillance pictures and other records from two Florida gambling cruises on Sept. 5. In both cases, a company official said, there was a passenger who looked similar to one of the hijackers, and the name given by the passenger was either the same or similar to the hijacker's name.

* U.S. Attorney Mary Jo White announced that San Antonio radiologist Al-Badr Al-Hazmi, arrested by the FBI on a material witness warrant, "voluntarily answered all questions put to him" before his release. She said he is "not a subject of this investigation."

* Federal aviation officials no longer believe that accomplices of the hijackers made phony bomb threats to confuse air traffic controllers on Sept. 11. Sources said reports of multiple threats were apparently the result of confusion during the early hours of the investigation and miscommunication in the Federal Aviation Administration. FAA officials did say today, however, that there was a telephoned threat on Sept. 11 that a plane would crash into the FAA air traffic center in Nashua, N.H.

Lengel reported from Washington. Staff writers Justin Blum, David Fallis, Brooke A. Masters, Don Phillips, Lois Romano, Peter Slevin and Carol Vinzant, and special correspondent Pamela Rolfe in Madrid, contributed to this report.

LOAD-DATE: September 27, 2001

SECTION: FINANCIAL; Pg. E03

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HEADLINE: Stocks Calm Down After Monday Surge;
3 Major Indexes Post Small Gains

BYLINE: Jerry Knight and Carol Vinzant, Washington Post Staff Writers

BODY:

The stock market's strong Monday rebound turned out to be a one-day wonder.

Market indicators ticked up less than 1 percentage point yesterday as Wall Street experienced its calmest day since trading resumed after the Sept. 11 terrorist attacks.

"The panic has subsided," said Michael Davey, a technology analyst at the Battery Park office of Investec Earnst, an international investment bank.

"I think people are now not as inclined to do any kind of heavy buying or heavy selling," he said.

Traders said they and their colleagues are regaining their composure and finally starting to relax a bit as the shock of the attacks wears off.

"I think last week you saw more emotion. Now there's more discipline," said Regina Feeney, a managing director and senior trader for Merrill Lynch. The nation's biggest brokerage firm has moved its trading floor to temporary quarters in New Jersey because of damage to its regular quarters near the rubble of the World Trade Center.

Traders gauge the volatility of the market by looking at how much it rises and falls during the day. Until yesterday the Dow Jones industrial average had made a leap or dive of more than 100 points every day since the attacks, but Tuesday's swings were all smaller than that.

At the closing bell, the Dow was up 56.11 points at 8659.97, a gain of 0.65 percent. The Standard & Poor's 500-stock index gained 8.82 points, or 0.88 percent, to 1012.27. The Nasdaq composite index rose 2.24 points, or 0.15 percent, to 1501.64.

Davey said he expects stock prices to swing with the political mood, perhaps going lower than they did Friday, the end of Wall Streets's worst week since the Great Depression. U.S. military action against terrorists won't necessarily help stocks, he added: "I don't expect we'll see a huge relief rally. . . . If we do some operations in Afghanistan, people will realize that's not the end."

After several days of frantic trading, he said, investors again "are assessing the prospects of an individual company or industry."

That process played a part in the decline of General Motors stock, which was the day's worst loser among the Dow Jones industrials, down $ 1.87 at $ 41.36. Even though GM says sales have picked up since it announced a free-financing plan last week, analysts said sales -- and GM's stock -- could still go down more.

The markets had only two unsurprising economic statistics to digest for the day.

Consumer confidence crumbled in September. The Conference Board's index of consumer attitudes plunged 16.4 points, to 97.6, its lowest reading since January 1996.

Home resales accelerated to a record rate during August -- 5.5 million houses a year -- but have slowed drastically since then, the National Association of Realtors reported. The agents said business is off 10 percent nationwide and 20 percent or more in the Washington and New York areas.

On Capitol Hill, Federal Reserve Board Chairman Alan Greenspan told the Senate Finance Committee that assessing the economic impact of the terrorist attack will be difficult until two key pieces of data are reported Thursday: Orders for durable goods in August and the number of new claims for state unemployment benefits.

The day's winners included Boeing and United Technologies, both of which rebounded for the third day in a row but are still far below the pre-attack prices. Boeing gained $ 1.53 to $ 34.33 but is still $ 10 below where it was before airlines began canceling orders after the attacks. United Technologies, which makes engines and other equipment for jetliners, was the Dow's top gainer, up $ 2.20, to $ 46.80. It was at $ 66 before the attacks.

The Dow's other gainers included SBC Communications, Procter & Gamble and Wal-Mart Stores -- all considered defensive investments, or stocks likely to suffer less than most if the market drops further.

The blue-chip Dow stocks and the broad-based S&P index were nearly evenly mixed between advancing and declining issues. The Dow had 14 stocks up, 15 down and one unchanged. For the S&P, 283 of the 500 stocks were up. But the technology-dominated Nasdaq 100 index was much weaker, with 60 of the 100 stocks down at the close. The tech sector was hurt by the announcement that computer chip maker Advanced Micro Devices is cutting 2,300 jobs and closing two factories in Texas. The cuts amount to 15.3 percent of AMD's global work force of 15,000.

* The New York Stock Exchange composite index rose 4.57, to 525.99; the American Stock Exchange index fell 0.20, to 780.46; and the Russell index of 2,000 small stocks rose 2.39, to 396.18.

* Advancing issues outnumbered declining ones by nearly 3 to 2 on the NYSE, where trading volume fell to 1.63 billion shares, from 1.75 billion on Monday. On the Nasdaq, advancers and decliners were nearly even and volume totaled 2.09 billion, up from 1.99 billion.

* The price of the Treasury's 10-year note rose $ 1.25 per $ 1,000 invested, and its yield fell to 4.70 percent, from 4.72 percent late Monday.

* The dollar rose against the Japanese yen and fell against the euro. In late New York trading, a dollar bought 117.63 yen, up from 117.54 late Monday, and a euro bought 92.28 cents, up from 91.71.

* Light, sweet crude oil for November delivery settled at $ 21.81 a barrel, down 20 cents, on the New York Mercantile Exchange.

* Gold for current delivery rose to $ 290.50 a troy ounce, from $ 289.70 on Monday, on the New York Mercantile Exchange's Commodity Exchange.

LOAD-DATE: September 26, 2001

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HEADLINE: Stocks Surge;
Dow Rises 4.5%;
Analysts Warn More Volatility Is Ahead

BYLINE: Jerry Knight and Carol Vinzant, Washington Post Staff Writers

BODY:

The stock market rebounded yesterday for the first time since the attacks on the World Trade Center and the Pentagon, bouncing so aggressively that analysts warned investors to brace themselves for a bout of extreme volatility.

The Dow Jones industrial average posted its biggest point gain since April -- up 368.05 points, or nearly 4.5 percent, to 8603.86. The Standard & Poor's 500-stock index also made its strongest advance since spring, rising 3.9 percent with a 37.65-point gain that pushed it back over the 1000 mark, to 1003.45. The Nasdaq composite index rose 76.21 points, or 5.4 percent, to 1499.40.

Stocks recovered about a quarter of the $ 1.4 trillion in value that was wiped out last week, Wall Street's worst decline since the Great Depression.

Investors should expect such extreme ups and downs to become routine, warned Art Hogan, chief market strategist at Jefferies & Co. "I think volatility will become the norm, not the exception," he said.

"Swings that were once all-time records are now relatively tame and taken in stride," said Ed Keon, director of quantitative research at Prudential Securities.

With world events and the war on terrorism replacing corporate profits and economic statistics as the drivers of the market, that pattern can be expected to continue, Keon said. "When you get such dramatic events, interpretation can change minute to minute," he said.

The interpretations of the market's rebound were cautious, with analysts reluctant to proclaim it a turning point for Wall Street.

"It was oversold, so we had to have a bounce-back," Hogan said.

"The crucial question is: How high will the bounce take the market, and how long will it last?" said Joseph Liro of Stone & McCarthy Research Associates.

"The market must still wade through dismal [third-quarter] earnings reports and a slew of downgrades to the [fourth-quarter] profit for many companies. The economic headlines will be increasingly glum for the next several months as the ramifications of the Sept. 11 attacks spread throughout the economy."

Underscoring the fickle nature of the market was the total lack of corporate or economic news that might be credited for the broad rally, which produced gains for 423 of the S&P 500's stocks, 87 of the top 100 Nasdaq issues and 28 of the 30 Dow Jones industrials.

The only new economic data out yesterday was the index of leading economic indicators released by the Conference Board, a business research group. It was down 0.3 percent in August. Although intended to predict what the U.S. economy will do in the future, the data were compiled before the Sept. 11 terrorist attacks, which altered all the economic equations.

Before the market opened, two well-known Wall Street figures urged investors to put more of their money into the market, lest they miss out on the big bounces that historically have followed stock catastrophes.

Banc of America Securities' Tom McManus and Goldman Sachs's Abby Joseph Cohen advised their firms' clients to move some of their money out of bonds and cash and into the stock market. McManus recommended that investors raise the portion of their portfolios allocated to stocks from 65 percent to 70 percent. Cohen -- one of Wall Street's peppiest cheerleaders -- suggested 75 percent stocks and 25 percent bonds.

With bonds paying the lowest interest rates in years, stocks don't have to go up very much this year to give investors a better return than they can get on bonds, one Wall Street firm after another has told clients.

While Cohen's comment that "we conclude that it is time to buy U.S. stocks" was widely quoted, the three-page commentary she issued included cautions.

"The short-term outlook for economic and profit performance is far more uncertain than usual," she noted. "There is no question that third and fourth quarter results will be poor."

Cohen's case for buying stocks reflected the theme that President Bush sounded today at a news conference. "While the numbers aren't going to look too good in the short run, we'll be a stronger nation as a result of this," he said.

The other argument for buying stocks now was made yesterday by money manager Louis Navillier -- though several other commentators have cited the same statistics. Historically, they point out, stocks have rebounded after catastrophic events in a few big leaps like yesterday's.

"Investors who missed the five best trading days during the year following a tragic event significantly underperformed the market," Navillier said. After the stock market's 1987 crash, the invasion of Kuwait and the Cuban missile crisis, the markets came back strongly, with a few big days producing much of the gains.

Last week, however, was no ordinary catastrophe for investors. The Dow Jones industrial average dropped 14.3 percent -- its worst performance since 1933.

"Last week's washout has created an almost unprecedented oversold condition that normally triggers some upside relief," Larry Wachtel of Prudential Financial said in his morning market commentary.

Wachtel's comments, however, were tinged with caution. After what he described as "a snap-back opening," Wachtel noted that "from there it's a matter of follow-through and actually schlepping out a winning session, no inconsiderable task these days."

And it may be a while before the markets regain some stability.

"In truth, uncertainty is unlikely to go away quickly," said UBS Warburg's chief global strategist, Edward Kerschner.

* The New York Stock Exchange composite index rose 17.21, to 521.42; the American Stock Exchange index fell 6.16, to 780.66; and the Russell index of 2,000 small stocks rose 14.90, to 393.79.

* Advancing issues outnumbered declining ones by nearly 3 to 1 on the NYSE, where trading volume fell to 1.75 billion shares, from 2.32 billion on Friday. On the Nasdaq, advancers outnumbered decliners by nearly 5 to 2 and volume totaled 1.99 billion, down from 2.5 billion.

* The price of the Treasury's 10-year note fell $ 2.81 per $ 1,000 invested, and its yield rose to 4.72 percent, from 4.69 percent late Friday.

* The dollar rose against the Japanese yen and fell against the euro. In late New York trading, a dollar bought 117.54 yen, up from 116.58 late Friday, and a euro bought 91.71 cents, up from 91.49.

* Light, sweet crude oil for November delivery settled at $ 22.01 a barrel, down $ 3.96, on the New York Mercantile Exchange.

* Gold for current delivery fell to $ 289.70 a troy ounce, from $ 291.90 on Friday, on the New York Mercantile Exchange's Commodity Exchange.

LOAD-DATE: September 25, 2001

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HEADLINE: Wall Street Has Worst Week Since '33;
Stock Market Falls on Fear of War, Recession

BYLINE: Steven Pearlstein, Washington Post Staff Writer

BODY:

Wall Street Friday wound up its worst week since 1933 as the American economy prepared not only for war but for recession.

About $ 1.4 trillion in stock value was wiped out in five trading sessions -- easily 10 times the estimated property damage caused by the terrorist attacks on the World Trade Center and the Pentagon.

But investors were worried less about real estate damage than about the direct hit to consumer confidence, and the impact that is certain to have on spending, employment and profits.

Since the Sept. 11 attacks, U.S. corporations have announced the layoffs of 115,000 workers, most of them in the airline, travel and aerospace industries, but also in the already-weak technology sector. Auto companies trimmed production while leading newspaper companies, steelmakers and chemical manufacturers warned of lower profits in the months ahead. Major retailers scaled back orders for fall goods.

Some economic forecasters predicted that the nation's unemployment rate, which stood at 4.9 percent in August, could reach 7 percent by next spring as the effects of the terrorist attacks ripple through the U.S. and global economies. Every percentage-point increase in the rate represents another 1.4 million Americans without jobs.

The National Association of Business Economists, which only 10 days ago predicted a rebound for the U.S. economy beginning this fall, issued a revised forecast Friday predicting that the economy would contract for at least the next six months, with anemic growth during the rest of 2002.

"There's just a ton of bad news and little prospect that it will get better very soon," said James Paulson, chief investment strategist at Wells Capital Management in Minneapolis.

Others, however, cautioned that while the next several months could be brutal, the combined effect of falling energy prices, lower interest rates and a big increase in federal spending would lay the foundation for a robust rebound by early next summer.

"I don't think we are at the point where the bottom is going to fall out and we're going to slip into a deep recession," said Jerry Jasinowski, president of the National Association of Manufacturers.

Across the country this week, investors, corporate executives and consumers adjusted their behavior to reflect the lowered expectations and heightened uncertainties about the economy.

On Wall Street, the adjustments have taken place with lightning speed since trading resumed on Monday.

With Friday's 140-point drop, the blue-chip Dow Jones industrial average ended the week down more than 14 percent, at 8235.81, the biggest percentage decline since July 1933. Since its peak in January 2000, the Dow has fallen 30 percent to levels last seen in October 1998.

The technology-heavy Nasdaq composite index ended the week down 16 percent. Since its peak in March 2000, the index has fallen 72 percent. The broader Standard & Poor's 500-stock index ended the week down nearly 12 percent. It has fallen 37 percent since the bear market began.

Despite the steep decline and record volume, trading all week was orderly, with little of the panic or "throwing in the towel" capitulation that typically characterizes the end of bear markets. Rather, the market displayed the reluctance of committed, long-term investors to buy shares in the face of heavy, forced selling.

"It's a buyers' strike," said Bernard Medoff, chairman of a large trading and market-making firm in Manhattan. "People are confused, frightened, uncertain. That's why I think you'll see this level of volatility for quite a while."

All week, individual investors remained largely on the sidelines. "I thought about moving out of stocks," said Cathryn Lehman, a Rockville resident who holds mutual funds in retirement accounts. "But after I heard everyone say, 'Don't sell,' I held on. I'm losing a lot of money but I'm making a point."

Some, however, did not have the luxury of following their political instincts. Trading desks reported an unusually high volume of sell orders from individual investors who had received "margin calls" from brokerage firms that lent them the money to buy shares that were now not worth enough to cover the loans.

"Margin calls are definitely playing a huge role," said Cornelia Spring, managing director of J.P. Morgan Private Bank.

More than $ 9 billion left stock mutual funds during the first three days of this week, according to TrimTabs.com, a research firm in Santa Rosa, Calif.

Hedge funds, pension funds and insurance companies were also reported to be heavy sellers as managers tried to raise cash and shift their capital to less-risky investments, such as short-term Treasury bills -- so much so that they drove down interest rates on three-month securities to 2.21 percent Friday, down a full percentage point for the week. Yields on two-, five- and 10-year notes also dropped to unusually low levels.

Although emotions were running high all week on trading floors, Charles Pradilla, chief investment strategist for S.G. Cowen & Co., said the activity reflected a rational repricing of stocks by investors to reflect the lowered expectation for corporate earnings over the next 18 months and the higher level of risk associated with holding stocks.

"It's not fun but it's rational," Pradilla. Stock prices might decline another 5 percent to 10 percent before they rebound in December or early next year in anticipation of an economic recovery, he said.

Propping up the market all week were dozens of corporations that had announced plans to spend a total of $ 45 billion buying their own shares under a relaxation of rules adopted by the Securities and Exchange Commission. The agency Friday voted to extend the relaxed rules for another week.

This week's sell-off on Wall Street was yet another blow to the confidence of the American consumer, whose free-spending ways had kept the economy out of recession. In the days following last week's terrorist attacks, discretionary spending came to a virtual halt, and figuring out how low it will be for how long has now become the top concern for policymakers, investors and corporate executives.

"How will all this affect confidence? I simply don't know," said John Makin, an economist with the American Enterprise Institute. "And neither do all those people who say we'll have a bounce-back by next spring. We're in uncharted waters here."

The early data are mixed.

The Conference Board Friday released results of a survey of 750 households taken after Sept. 11 in which slightly more than 30 percent said they would postpone or cancel plans for air travel. About 20 percent said they would defer making investments while only 10 percent said they would cancel or defer major purchases.

At the end of the week, airlines said their planes were between 20 percent and 40 percent full, while the nation's hotel occupancy was down to 50 percent, industry sources said.

Traffic at the nation's biggest malls during the week was down between 4 percent and 10 percent compared to the same days last year. Sales were soft but not disastrous, with discounters such as Wal-Mart reporting sales returning to normal.

One factor depressing consumer spending is the large credit-card debts built up during the 1990s boom. On Friday, the American Bankers Association reported that 3.93 percent of credit-card accounts were more than 30 days past due at the end of June, the highest level since the association began tracking the statistic in 1980. The delinquency rate is expected to climb even further as more Americans lose their jobs.

At the same time, households and businesses can expect some relief in the coming months from lower energy prices as the slowdown in the global economy reduces demand for oil and natural gas.

In 1990, the prospect of war in the Persian Gulf drove oil prices to $ 40 a barrel, a major factor in triggering the last recession in the United States. But crude oil prices fell this week, to just over $ 26 a barrel Friday on New York's spot markets, with many traders expecting further declines.

Consumers may also take some comfort from the swift action by Congress and the Bush administration to approve new federal spending that aims to prop up the airline industry, beef up the military and intelligence services, and rebuild lower Manhattan. Additional tax cuts are also under consideration. Some Wall Street analysts now predict a combined package of spending increases and tax cuts of as much as $ 100 billion -- more than twice the size of the summer tax refund.

"With the amount of stimulus that is being considered, and further rate cuts by the Federal Reserve, we can forecast meaningful recovery by the middle of next year," said Robert Barbera, chief economist at Hoenig & Co.

At the same time, Barbera warns that things could get pretty rough before they turn around, with waves of layoff announcements, falling retail sales and declining corporate profits.

"Right now, I have to admit, things look pretty scary -- I've never seen anything quite like it," said Lyle Gramley, economist emeritus at the Mortgage Bankers Association and a former Fed governor. "But the consumer won't remain hunkered down forever. I think we'll snap back from this rather quickly."

Staff writers Carol Vinzant, Greg Schneider, Peter Behr, Martha McNeil Hamilton, Neil Irwin, Sara Kehaulani Goo and Keith L. Alexander contributed to this report.

LOAD-DATE: September 23, 2001

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HEADLINE: Wall St. Ends Worst Week In 68 Years

BYLINE: Steven Pearlstein, Washington Post Staff Writer

BODY:

Wall Street yesterday wound up its worst week since 1933 as the American economy prepared not only for war but for recession.

About $ 1.4 trillion in stock value was wiped out in five trading sessions -- easily 10 times the estimated property damage caused by the terrorist attacks on the World Trade Center and the Pentagon.

But investors were worried less about real estate damage than about the direct hit to consumer confidence, and the impact that is certain to have on spending, employment and profits.

Since the Sept. 11 attacks, U.S. corporations have announced the layoffs of 115,000 workers, most of them in the airline, travel and aerospace industries, but also in the already-weak technology sector. Auto companies trimmed production while leading newspaper companies, steelmakers and chemical manufacturers warned of lower profits in the months ahead. Major retailers scaled back orders for fall goods.

Some economic forecasters yesterday predicted that the nation's unemployment rate, which stood at 4.9 percent in August, could reach 7 percent by next spring as the effects of the terrorist attacks ripple through the U.S. and global economies. Every percentage-point increase in the rate represents another 1.4 million Americans without jobs.

The National Association of Business Economists, which only 10 days ago predicted a rebound for the U.S. economy beginning this fall, issued a revised forecast yesterday predicting that the economy would contract for at least the next six months, with anemic growth during the rest of 2002.