The University of Idaho Argonaut

Turbulent movement in the stock market affects investors and student groups at the University of Idaho who actively trade in the financial sector.
The Davis Group, a student-managed portfolio that conducts trading on the stock market, has committed to a long-term strategy in spite of a large fall in the stock market on Oct. 2.

“Our vision is long term,” said Brett Olsen, faculty adviser to the Davis Group.
“We want capital gains and income, and we can’t get distracted by these day-to-day changes, but it’s hard not to be distracted by these huge moves.”
Olsen said assessing the portfolio for diversity is the key to weathering drastic changes in the market.

“We revisited our strategy … we asked if we are diversified enough to handle this, so that when the market moves, we move a little less,” Olsen said.
The Barker Capital Management Group also gives students the opportunity to trade securities. Students conduct individual trades with profits being used for scholarships.
“The key words for us are ‘risk management’ and ‘opportunity’,” said Terry Grieb, director of the Barker Group. “We need to put capital at risk, but we are also concerned with preserving capital, so when an event like this happens, you don’t get blown out the window.”

Risk management plays a key role in trading successfully during volatile times. Grieb said examining trades with a good risk management strategy can result in gains or minimal losses.
“We try to structure our risk management so that our losses are much smaller than our wins,” Grieb said.
Heather Bloom, a student trader in the Barker Capital Management Group, has been impacted by the recent market shifts.

“I am a cautious trader,”Bloom said. “If I don’t have an idea of where the market is going I won’t trade. At this point I think the best play is to sit on the sidelines.”
If taken by other investors this opt-out approach can further negatively impact stock performance by reducing the liquidity in the market.
Bloom remains confident the market will recover soon.

“Once the bailout has had time to work by providing banks with liquidity, we will start to come out of this,” Bloom said.
Avoiding future situations like this has become a concern for some investors, with emphasis placed on regulating mortgages and other credit to prevent another credit crunch.
“The causes of these sub-primes are moral hazards,” Grieb said. “There was no incentive for the people originating these loans to check the quality of the borrower, knowing they get paid for packaging them up, not for ensuring quality.”

Grieb expects to see a period of re-regulation over the next three years when the government adopts new laws aimed at preventing another financial meltdown.
“Regulations get stronger and weaker in cycles,” Grieb said. “It is important to keep the larger perspective in focus … and concentrate on regulation that is best for the market, corporations and consumers.”