Perpetual's Plunge Points Up the Risks Investors Must Face
On a fall day in 1984, at a downtown business luncheon, I met a veteran local stockbroker and asked him what he thought was the most promising stock in Washington. He answered, without hesitation, that Perpetual Financial Corp. was the best.</br></br>The broker was quite right. Within two years, the stock became the darling of Washington investors. It moved from about $3.25 a share, adjusted for a two-for-one split, to about $20, a gain of more than 500 percent.</br></br>Unfortunately, the euphoria over Perpetual stock was short-lived. In 1987, Perpetual shares, along with many others, were badly battered in the stock market crash. Within another two years, the economy was slowing down and the real estate crisis was upon us. Before long, the thrift examiners were knocking on Perpetual's door.</br></br>Few investors wanted to believe that the area's biggest thrift institution would go under and, in fact, many faithful investors held onto their Perpetual stocks and bonds until the bitter end.</br></br>It had been much the same with investors in National Bank of Washington and James Madison Bank. Like Perpetual, they were old Washington institutions and shareholders kept hoping for a miracle that would help them survive. But miracles in the financial services industry are in short supply these days.