Mark Mehl used to beleve that baptism by fire offered the best way to experience a bear market. He entered the securities industry 13 years ago, as the market entered its 40-year low. This gave him a healthy respect for the cyclical nature of the business, he says.
Then, the other day as he was shaving, a thought hit him. ``I started to think that the young might be more adaptable in surviving a bear market,'' recalls the senior vice-president at Drexel Burnham Lambert Inc. in New York. ``Look at the old ompanies who said that young companies wouldn't survive: The young were more nimble and flexible than the old dinosaurs.''
The bull market has created record employment in the securities industry. In New York City, for example, more than 82,000 people have entered the field in the last 10 years, reaching 152,000 as of June, the Bureau of Labor Statistics reports.
The industry accounted for one-third of the jobs created in the last year in the city, according to Samuel M. Ehrenhalt, the bureau's regional commissioner. The city also accounts for more than one-third of the nation's jobs in securities.
``New York's job expansion of the last 10 years has been powered by Wall Street,'' Mr. Ehrenhalt says.
Between 50 and 60 percent of the industry's current sales force was not working in the last bear market, in 1973-74, estimates veteran Wall Street-watcher Perrin Long. ``It's good to experience some adversity, because it gives a broader perspective and understanding of what might trigger something in the markets,'' says Mr. Long, of Lipper Analytical Services in New York.
The last bear market left a void in the work force of those between the ages of 30 and 40, says Paul Stuka, who through his Boston-based company manages assets of $42 million. ``People washed out, and nobody really was hired between 1974 and 1979. The time was spent cutting staffs; it was difficult for firms to make money,'' he observes.
Last week the Dow Jones industrial average closed up 24.07 points at a record 2709.50. The 45-point drop Tuesday spooked some into thinking that the market was turning, causing people to wonder aloud how the ``untested'' employees would weather a change to hard times and low salaries.
Bear markets don't ring a bell when they start, says Charles Clough, chief investment strategist at Merrill Lynch. ``Sometimes it's tricky to recognize one, because the first selloff might be another buying opportunity,'' as happened with the technology industry in 1983.
When the market got smacked in 1981 and '82 with a ``little'' correction, says Kevin Sullivan, ``people who had become defensive in anticipation of a drop really got hurt, because the market went back up.''
Mr. Sullivan, who has an executive-recruiting firm in New York, says too much can be made of the lack of bear-market experience. ``The young people generally are not running around unsupervised,'' says Sullivan, who spent eight years as a portfolio manager and securities analyst.
In some cases, ``experience'' is hard to gain. Since the last bear market, new products, like stock options and mortgage-backed securities, have come into being. Also, people are running departments that didn't exist then, Sullivan points out.
Mr. Mehl of Drexel says a person's outlook can be more important than experience. ``With young people, I look at the expectation level. When I hand out year-end bonuses, I wonder if they say grace.''
Besides depriving younger workers of the baptism by fire in the bear market, the five-year-old bull market has caused some not-so-realistic expectations in a business that is cyclical.
People hired since 1979 think they can always make money, says Mr. Stuka. He used to manage Fidelity's OTC Fund, which grew in 18 months to $1 billion. ``They think it's a fairyland.''
The ``biggest negative'' is that huge salaries are thrown around to bring in analysts and others who won't be needed a year from now, he adds. ``In one year, there will be a consolidation. These people will be selling newspapers.''
The five-year duration of this bull market has also encouraged intolerance for the bear market. Says Dave Hunter, chairman of the brokerage firm Parker/Hunter Inc. in Pittsburgh.
``There's a tragically high correlation between a booming market and people who want to move to brokerage firms,'' he says. ``You have little highly educated bundles of greed who want to enter at the top. No one wants to be there at the bottom, however.''
Stuka says he expects the market to reach some ``ridiculous'' high, like 3,500, before it falls. ``The other side will be very bad,'' he says.
Some people have begun anticipating the market's change. ``You know things don't go up forever,'' says Long at Lipper Analytical, who has been observing the markets for 30 years.
``There is a lot of overhead and inflated salaries that eventually will correct,'' says Drexel's Mehl. ``The amplitude of the market indicates this.''
One clue in tracking expected change in the industry is found in hiring. Mr. Clough of Merrill Lynch says the most dramatic news recently is the Salomon Brothers announcement last week on freezing hiring.
``There's been a lot of expansion in firms' foreign operations, which requires building up staffs,'' he notes. ``There's been an increase in sales and trading and in the number of retail brokers. ``If security prices fall, most of the security firms are leveraged into the markets themselves; they're never fully hedged. Volume tends to dry up in a bear market.''
Long says a company's support people and operational people are generally the first to be let go. ``Most things happen in hindsight. When you start cutting costs, it's too late,'' he says. ``The last thing you want to do is cut the sales force.''