Mutual funds shrank by $1.1 trillion in October, to $10.7 trillion. Most of that was from investment losses. But $127 billion of the drop was people cashing in their funds, and that includes a $72 billion net sell-off of stock mutual funds, the biggest dollar drop in the industry's history.
"Stock Investors Lose Faith," said the Wall Street Journal on Monday, citing those numbers and worries that more people will sell by the end of the year.
The big question is whether the relatively well-paid professionals and corporate employees whose faith in the rising market survived every market shock since Ronald Reagan was president will give up this time, as so many did in the 1930s and the 1970s.
Investment Company Institute
, the mutual fund lobby, says things aren't really that bad. Stock and bond mutual funds lost 3 percent of their assets to net sales "from the end of August until mid-December," said
spokeswoman Rachel McTague
. The dollar value is frightening, but the industry is bigger than it used to be. The percentage drop is a little less than what funds lost in the single month of October 1987, after an earlier (and brief) stock crash.
But, as the Journal noted, there are long periods when stocks don't do much except die. An index investor in 1929 would not have gotten his money back until the 1950s, or later if you count inflation. Investors made a lot of money in the 1960s, but after the market peaked in 1968, smart investors sold, and "from May 1972 through March 1980, total dollars in stock funds fell 42 percent."
The switch from government-guaranteed pension plans to you're-on-your-own 401(k) plans helped lock in mutual fund investments, and ICI says 401(k) investors haven't been bailing out. Tax policy and company copayments sweeten the pain.
There are still bulls and bargain-hunters.
, the Wharton School professor whose book
Stocks for the Long Run
provided intellectual cover for the long bull market, told World Affairs Council members at the Union League last week that this is a great time to buy stocks - as always, he says, when they're trading at less than 10 times earnings.
That's encouraging for long-term speculators, but it's not much comfort for recent retirees now spending - and even paying taxes on - their depleted principal and wondering where the drop stops.
Energy, military, cancer and debt-collection are the region's most fertile hiring fields as the national economy slows, says
, founder and president of
McGrath Systems Technical Staffing Inc.
, a 24-person placement agency based in Blue Bell with offices up and down the East Coast.
"Anything related to energy is red hot, from fossil fuels to nuclear energy," Wiley told me. "That's a shift from 12 to 24 months ago, when we had emphasis on structural and civil engineers. Those skill sets have gone bye-bye for now."
Among military contractors, "
, for example, are busy," Wiley says. Washington as usual, is where the big action is for military contracting.
Wiley also expects to place "a lot of accounts payable and accounts receivable. The credit crunch has had a ripple effect."
More companies are hiring small staffs of in-house collectors, instead of outsourcing as they did in busier times.
What about pharma, Philadelphia's growth industry for the last decade? "I'm starting to see some interesting trends," says Wiley. "Twelve to 24 months ago we were putting a lot of people into research and development, sales, marketing. Those positions are no longer hot."
Instead, "We're seeing demand from over-the-counter drugs, vaccines, pharmaceuticals that have connections to oncology treatments," he says. "That's where the money is. The pharma companies are able to charge a premium for that. They're not seeing the same returns in other drugs."
Financial services is another area in flux. Wiley says: "Folks in the home mortgage industry have been displaced, [so] we're able to take a lot of the folks that were compliance-related, and who, for example, used to verify loan-to-value data. Their skills are transferrable to employers looking for financial analysts."