Reno Gazette-Journal from Reno, Nevada • Page 59

In Perspective SUNDAY, JANUARY 21 2001 RENO 7E Trends of 2000 could stick with investors i'hi, si suffered a deep dive in 2000, due largely to the tech sector's crash. Challenging conditions ahead: Last year should have scared some sense into the average investor. For the first time in years, diversification worked, and greed didn't. Cautious investors triumphed, and those who believed that "things are different this time" learned otherwise. rgj.comnewsbusiness By Josh Friedman LOS ANGELES TIMES Mutual fund investors might be thrilled that the Federal Reserve has begun to cut interest rates, but when they see their funds' year-end statements, many will wonder what took the Fed so long.

As technology stocks plummet-i ed amid a weakening economy, the average domestic stock fund sank 8 percent in the fourth quarter, according to fund tracker Morningstar Inc. That was the worst loss since the third quarter of 1998. For the average tech fund, the fourth-quar-' ter loss was a stunning 36 percent. For the year, the average domestic fund posted a modest 1.9 percent decline, but that is misleading: The figure is skewed by the hefty gains last year in fund sectors where people have relatively few dollars invested, including natural resources funds and financial services funds. Real-estate-related funds had a terrific year, up 26.2 percent on average, as real estate investment James Gipson and Michael Sandler scored with holdings such as Fannie Mae, Freddie Mac and Philip Morris.

The trend was the same overseas: Foreign funds with a value slant, such as Tweedy Browne Global Value, Oakmark International and Longleaf Partners International, fared much better than the typical fund. But investors who now realize they shouldn't have chased growth-stock funds after 1999 ended might naturally wonder whether the value funds and other top performers of 2000 should be avoided today. Indeed, health-care funds, the biggest winners last year (with a 55.2 percent average gain), were battered last week as investors took profits in drug stocks. Another group of big 2000 winners, utility stock funds, also tumbled last week. Whitman, though, insists that his strategy of buying stocks at ultra-cheap valuations will continue to succeed long term.

"I just put a lot more of my own money into the fund," he said. cash outflows from many of the funds as investors fled. Sometimes, of course, strong performance persists. Schroder Micro-Cap, managed by Ira L. Unschuld, rocketed 147.7percent in 2000 after gains of 95 percent in 1999 and 63 percent in 1998.

Unschuld slashed his tech stock stake last year and loaded up on financial and health-care stocks, Morningstar analysts noted. "Deep-value" funds made a big comeback. Martin Whitman's small-cap Third Avenue Value fund gained 20.8 percent in 2000 after beating most peers, but badly lagged the Standard Poor's 500 stock index in recent years. As investors looked for "safer" stocks amid the tech sector's crash, the average small-cap value fund rose 17 percent in 2000, while the average large-cap value fund gained 5.6 percent. Among large-cap value funds, Clipper and UAM Clipper Focus, both slightly in the red for 1999, returned 37.4 percent and 44.3 percent in 2000, respectively, as the management team headed by "Value" investors cofh see bright times: A year ot Dig gains for previously over looked and trampled-under stocks has done nothing to convince "value" investors that there aren't many more market lemons waiting to be turned into lemonade.

Still a future in growth: After two spectacular years, "growth" stocks the best performances ever by a stock fund slumped 36.4 percent in 2000. Ryan Jacob was hailed as a wunderkind when he rang up huge returns at the Internet Fund in 1999, but his Jacob Internet had a miserable debut in 2000, losing 79. 1 percent. Likewise, international stock funds had a spectacular 1999, soaring 49.6 percent on average, nearly twice the gain of the average U. S.

stock fund. In 2000, most foreign funds were slammed by falling overseas markets and the strong dollar. The average inter nn yl Kin liUU InvestRestoring a sense of balance is good for ercise. As famed economist John May-nard Keynes said: "When the facts change, I change my mind. What do you do?" Still, even confronted with the possibility that the U.S.

market could be in the middle of its first two-year decline since 1973-74, many individual investors probably look at things this way: "If I'm really in this for the long term, I can't get too pessimistic." However this year plays out, many of the dramatic shifts of 2000 won't soon be forgotten. Hopefully. From 1E But it didn't last, and most major share indexes still lost ground for the week. The reversal pointed up what is for many investors the most troubling aspect of the new market environment of the last year: The speed with which stock prices now rise or fall has become remarkable, and remarkably aggravating. 'Market volatility can be measured in many ways, and by nearly all of them stocks' volatility rose sharply in 2000.

By the measure that most people can relate trust shares returned to favor. But real estate funds hold just $1 1 billion in assets, according to fund tracker Lipper Inc. By contrast, investors' favorite funds those that target growth stocks suffered steep losses in 2000. The average large-capgrowth fund fell 14.1 percent for the year, Morningstar data show. Those funds hold nearly $440 billion of investors' money.

Of course, last week's growth-stock rally on the heels of the Fed rate cut might have helped recover some of what fund owners surrendered in 2000, though by Friday, stocks were in retreat again. In any case, many investors may not soon forget the trends that dominated stock fund performance last year. Among them: Chasing the previous year's winners didn't pay in most cases. Though its turnaround was extreme, the Nicholas-Applegate Global Technology fund exemplified how dramatically things can change when market dynamics shift. Global Tech, which returned 494 percent in 1999 one of to the intraday moves in share prices 2000 had no peer in the post-World War II era.

Market statistician Ned Davis Research in Florida calculates that the Dow Jones industrial index's average intraday swing last year was 3.7 percent. In other words, that was the difference between the Dow's low and high for the day, on average. That was the largest intraday volatility figure for the Dow since the 4.5 percent recorded in 1932. What does it mean? Historically, periods of wild volatility have been associated with the end of If he has a weakness, Beckelman said he needs to be more introspective and that he can spread himself too thin. "I am a little impatient also; I don't like to lose," he said.

He also wasn't shy about criticizing the RSCVA marketing plan as filled with a lot of "puffery." And he said local people he spoke with about the agency have low opinions about its effectiveness. If hired, things certainly look like they're going to change. In the meantime, though, he must pass a battery of psychological and behavioral tests and financial background checks. Then there's the issue of money. Don't expect him to be a bargain.

Sales talent comes with a price. How much is RSCVA willing to pay? Stay tuned. In a recent survey of gaming executives across tne country Businesses 659 for Sale Income Investment national fund's decline in 2000: 17.8 percent, according to Morningstar. Among major fund families, Janus Capital suffered one of the most severe turnabouts. Janus Mercury fund, which zoomed 96 percent in 1999, sank 22.8 percent last year; Janus Overseas, which soared 86 percent in 1999, lost 18.6 percent; and Janus Venture, which climbed 141 percent in 1 999, plummeted 45.8 percent.

The family's growth-stock bent had a domino effect, which by the fourth quarter triggered net economy has weakened. Beyond that, it's easy to look at such factors as the crumbling situation in the Middle East, the surge in energy prices and the rise in the U.S. murder rate in the last year, and wonder whether the equity market is losing many of tangible and intangible factors that made investors so eager to own stocks in the 1990s. And if that's the case, are share prices cheap enough already or do they have to get a lot cheaper to reflect the new realities? It isn't comforting to contemplate such reversals, but it's a necessary ex is not shy "As its gaming industry revs up in dramatic fashion in coming years, these perceptions will likely shift," the report added. "California casinos will own a distinct competitive advantage: their quality of life." The Observer and Bristol Associates Inc.

of Los Angeles teamed up for the survey, which got 152 executives' responses from across North America. It's meant to give some indication to gaming companies about a location's importance in finding and retaining key executives and weighed that against base pay and bonuses. "Only 24 of 152 respondents gave the highest priority to both base compensation and location, while 49 listed location as the top priority," the report says. "About one-third of the executives who stress location as a top priority are considering leaving their present employer within the next two years. "Two-thirds of the Land for Sale 670 Office Space for Lease 672 StearnsRSCVA candidate about speaking out responding executives are quite content.

"The translation of all this: Don't throw money at executives who don't need the additional financial incentives. Indian casinos will have to press their advantage by stressing quality of life," the report said. So what did the survey say about Reno? "You have to assume a lot of people in the industry are still unfamiliar with Reno" and that the numbers aren't necessarily a negative reflection on the city, Pollock said in a phone interview from his Atlantic City office. "It's more an impression and impressions count. If more people were familiar with Reno, the numbers would go up." The numbers would not seem to indicate that companies must work harder to retain their key executives with higher pay; "If the indications of our survey hold true, it would mean Reno as a Western location Office Space for Lease 672 Office Space for Lease Hacienda Plaza (2) Pad Sites 12S0-5500sfGreenbraeS 85cam Terminal Way $1 35 Tenant improvement allowance negotiable.

Centrally located. Gaston A Wilbersw 121-1111 OmceArHagton Cardans Marl 455 pq ft. Possible office space ad to busy lunch restaurant Gastoa A Wiltsrsna I2I-1I11 OFFICE SUITES AVAIL NOW Htft Traffic Airport loo-Hew Utilities lacladsd 1 8 Mm Suite 4175 2 Room Sutte S250 CALL 122-2111 CECUTIE 42010 1900 sq MILL 100 to 1500 sg THE 300 to 3300 sq VIRGINIA LAKE 600 to 3650 sq FINANCIAL 211 to 3700 sq CANNON S52 sq ft A00I GALLERIES 3500 sq ft BIBLE WAT 496 1250 everyone Many people turned more conservative in their investing last year, and that was probably overdue. Risk again became a four-letter word, as it should be. Many people looked around and discovered there was more to investing than funneling more money into highly valued tech stocks.

Long-ignored sectors of the market got attention, including smaller stocks, "value" stocks, energy issues and real estate-re-latedshares. In a market universe out of kilter, one could argue some sense of balance has been restored. In the long run, that's good. already has one of the key advantages locales need and that is that the people working there, to some degree, presumably already have some roots in the area and that's a critical factor." It seems logical to assume, however, that as California gaming revs up, many Reno executives could be tempted to move west. While Reno also has a good quality of life, the California lifestyle could be hard for some to pass up if the money is right.

So not only could Reno face a customer drain from California Indian gaming, but a brain drain as well something else to think about for Reno casinos. To view the report, go to www.bristolassoc.com, click on "gaming," then scroll down to and click on "executive and management career satisfaction survey." John Stearns can be reached at (775) 788-6217 or jstearnsrgj.com. 672 Office Space for Lease 672, 1250 to 7400 SF at 4600 Kietlte Ln. garden setting, full service. SI 15 sf Property 675 Manaemen Rcmicfu PROFESSIONAL MANAGEMENT Commefcial Properties Industntti Properties Leasing Associatran Mulli-Fjmihf Units Licensed A Crtrfvcjted 828-3380 Mary Hot man CCIM CPM Broker Retail Space 676 for Lease Ml INC TON GARDENS MAU 471 sq ft ratarl space avamcle Charming ctr at PlwnnVArtNigtoa Carton A Wittersoo 121-1911 FROM 75 Pf St) FT.

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"Eventually volatility reaches extremes, and that's usually in conjunction with market bottoms," said Tim Hayes, global equity strategist at Ned Davis. But extremes in volatility are only evident in retrospect. Many analysts believed the Nasdaq index crash in April and May marked the bottom. Little did they know that it was just a prelude. What disturbs many Wall Street veterans is not that tne market is down, but that the vast backdrop for the market seems to ha ve changed for the worse.

Obviously, the asking their preferred locations to work, 9 percent considered Reno on par with Atlantic City, N.J., among states with gaming. That was slightly better than Mississippi at 7 percent, but trailed California at 14 percent and Las Vegas at 27 percent. As a place to live and work, regardless of whether the state has gaming, Reno again scored 9 percent, equal to Florida, better than Mississippi at 3 percent and Atlantic City at 4 percent, but below Las Vegas at 1 5 percent and California, v. hich was king, at 18 percent. "This seeming anomaly California is preferred by 18 percent of respondents among all locations, but is only preferred by 14 percent among gaming locales has one simple explanation: California is still not widely viewed as a gaming destination," according to the Jan.

1 issue of Michael Pollock's Gaming Industry Observer. 664 Industrial Property for Lease 666 ltOOOSF njitJiyarat 2U5 Dkbersass or J7f Unread Circle Mart Ciena. 324-3100 INDUSTRIAL PROPERTIES OF NEVADA (775)858-8080 MEISER COMPANY 775-359-0303 27aCHS(rto OfrtrxtVplrstMge. ZrMOrxasi. DnytHTI Reno wfisf Mtopl TrMooft ofTtces 600-2B65 si rack.

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carper 117 CM sf M. anam poansr. nca A ran uars 22 desue efnees pot to Contact Cary Beam LEE ASSOCIATES B2HMJ NevMa Largest industrial Oevekner (775) 858-8080 McCarran. 395 A I73S2IPOSM Marti. etc Property Iklltvl From 1 The Sundowner has about 650 slot machines, 14 table games and 500 employees, Karadanis said, adding he and Maloff have invested about $1 million in new games and another $1 million in property upgrades the last two years.

The city has enough business to go around, but downtown casinos seem to be doing their best to cannibalize the other guy's business, he said. "It's a real cutthroat (environment)," he said, noting that if you don't have loyal customers, you lose them. Karadanis and Maloff, meanwhile, have sold their Lake Tahoe Inn in South Lake Tahoe to make way for the city's redevelopment program and remain partners in Timber Cove Lodge there. The two have been partners on a handshake since 1959, Karadanis said. Karadanis knows what it's like to fight, both for his life and his business, but he also recognizes when the time is at hand to ride off into the sunset and relax.

Now is that time if the right buyer would emerge from the sunrise and switch saddles with Karadanis. Jeff Beckelman, the man favored by the Reno-Sparks Convention Visitors Authority Board of Directors to be the agency's next president and chief executive officer, suggested in his job interview Monday that he'll shake things up if he's hired. "I will not have a (chief operating officer)," said the 54-year-old vice president of sales and marketing at the Venetian Resort Hotel Casino and Sands Expo Center in Las Vegas. Why? "Because I want all of my senior managers on the same level," he said. What that might mean for COO Lynn Thompson, when he's not acting CEO, is unclear.

Beckelman also wanted to know if he would be allowed to reorganize staff and make personnel changes if necessary. While interviewer Jim Shaw, a Washoe County commissioner, seemed uneasy about such moves on the heels of a major reorganization last May and the many trials RSCVA had last year, interviewer John Farahi of the Atlantis Casino Resort appeared to wave a green fag. "One of the most important" things the CEO needs to do is evaluate every job to ensure the best possible team is in place, he said. "If we tie your hands, shame on us." Beckelman said he had some people in mind who could round out his RSCVA team and he could take action quickly if hired. He would want real goals for his sales people and would hold them accountable.

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