The severity of the bear market, the second worst in one hundred years, cannot be attributed to poor economic performance. We are emerging from the shortest, shallowest recession on record. It doesn't begin to compare, fortunately, with the decade long serious economic disruptions experienced in the 1930's and the 1970's. We have to look elsewhere to explain the depth of the market decline and we don't have to look very far.
Over the past thirteen months citizen, consumer, and investor confidence has been seriously undermined by a series of events starting with 9/11. Then we had the revelations of massive corruption in a half dozen high profile corporations, most notably Enron and WorldCom.
Meanwhile the terrorism issue continued to dominate the media and we have been bombarded with an unrelenting stream of news regarding potential threats and the steps being taken to counteract them. Over the past several months layered on top of this series of events has been the increasing prospect of war with Iraq.
Six months ago when we began planning our 10/22/2002 client appreciation event we looked around for the best person available to speak on those issues. We selected Dr. Robert Gates, former head of the Central Intelligence Agency. During the climactic years of the Cold War he worked at the highest level of our government. Currently he is President of Texas A&M but clearly has maintained close contact with his friends and former colleagues in the second Bush administration.
We were not disappointed and here is a summary of his presentation. Please don't hesitate to call with questions and comments.
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Fred G. Mitchell, CFA
Mitchell Capital Management Co.