Investors Bet on Terrorism

Financial sources here and in New York say some speculators are buying the airline's stock in hopes the investigation underway will rule out other causes, such as technical malfunction, that might have been TWA's fault.

Their reasoning, stock brokers interviewed said, is that if the airline was not to blame, its stock will rise again. "Investors aren't going on fundamentals," said one consultant at the Wall Street firm Merrill Lynch. "They're going on fears and greed."

The airline's stock has been falling in value for some time. It was trading at around $11 just before the crash, having slipped from around $23 earlier in the year, brokers said.

This week (mid August), the stock hovers around the $10 mark, having dropped to a low of 8 1/8 in the five days after the disaster.

This bounce back in price, though not conclusive, contrasts with falling prices in the U.S. airline industry as a whole, according to sources at Merrill Lynch and Chase Investment Services.

Speculators betting on terrorism will find little comfort in the U.S. Army's conclusion, based on computer simulations, that it is highly unlikely the passenger airliner was the target of a missile attack. Indeed, said one analyst, this news may have contributed to a slight dip in the volume traded during late July, an indication that fewer shares changed hands.

But debate over whether it was a bomb will continue as investigators turn their attention to fuselage fragments bearing marks commonly associated with damage caused by high explosives.

Saying they are fearful of affecting the market, brokers and industry analysts are careful to point out that the speculators seem to be few and limited to individual and small business investors. They do not appear to be trading in particularly large quantities of TWA stock. Institutional investors, who buy and sell stock on behalf of corporations and mutual funds, are not playing the game, analysts insist.

Speculators are drawn to disaster. As one financial consultant at Merrill Lynch put it: "Major news makes stock prices very volatile."

Similar trading followed the recent crash of a Valujet flight over Florida. In that case, speculators banked on bad weather as the cause. Some were lucky enough to buy shares at around four dollars and to see their value rise to around nine dollars.

Of course, the speculators could be wrong. TWA's fortunes could suffer if the crash is blamed on terrorists. Passengers might avoid the airline for fear of future terror attacks, brokers say. All the same, profits should accrue.

"They're trying to make a quick buck," said a Merrill Lynch consultant. But if TWA's stock remains depressed, they will still have the intuitive assurance that they bought low. They'll just have to wait a little longer to sell high.