Having just been in the mountains of West Virginia I was reminded of some very interesting parallels to today’s stock market.  From the mountaintop it seems one can see forever.  The view is spectacular, the air is fresh and clear, and problems seem miles away.  But down in the valleys everything is close and problems seem omnipresent.  Travel can be treacherous on the tight sharp switchbacks.  Just yards ahead around the next curve there may be a ten-ton coal truck barreling down the hill pushing the limits of control. 

The third quarter is drawing to a close and almost everyone in stocks lost money.  European stocks had some of their biggest losses of the past 15 years led by Europe’s largest economy, Germany.  The German DAX lost 32%, the largest since its introduction in 1987.  The U.K.’s FTSE 100 fell 17% for its largest loss since 1987.  France’s CAC 40 fell 24%.  Japan’s Nikkei 225 Stock Average declined 12% and reached a 19-year low during the third quarter.  Hong Kong, South Korea and Taiwan all lost as much as 10%.  Contrary to the trend, Pakistan rose 16% in response to U.S. economic sanctions being lifted.  In Latin America, Argentina gained 13%, but Brazil declined 38%, the world’s worst performance for the third quarter.  At home, the S&P 500 lost 14%, falling to a 4-year low and the NASDAQ fell 16.4% to a six-year low. 

Every year, for the past 20, a group of about 30 faithful Christ Church parishioners go into the hills of West Virginia on a trip to renovate, re-roof, re-floor, re-found, re-wire, and add bathrooms where there were none; but mostly they go to restore the hope that people care.  McDowell County in the southeastern hill country of West Virginia, north of Bluefield, was one of the state’s richest coalfields. 

You know from your July and August statements just how badly the markets mistreated long-term investors.  A few statistics from Credit Suisse First Boston help put the period into even better perspective.  A record $29 billion was removed from mutual funds in July 2002.  Stock funds experienced record outflows, while bond funds enjoyed record inflows.  Net outflows from equity funds in July 2002 were almost twice as large as those during September 2001, and more than five times larger than those during August 1998.  Every style of equity funds was affected by investors’ withdrawals in July.