Lori Owen sits nervously, struggling with a statistics assignment. Her concern shifts to the unstable stock market.
“I’m meeting my financial adviser this week,” sighed the USM senior. “I know I have 20 more years to work. If I were 60, I’d be really worried right now. But it is depressing.”
The University of Maine System offers its employees an opportunity to invest their pensions in a variety of ways, including stocks and bonds. Many of them have additional funds withdrawn from their paychecks on a weekly basis for additional investments in their retirement.
Though it isn’t clear at this time exactly how much damage the recent stock market collapse has caused, officials said there will be an impact.
“People who will retire soon are nervous. The continuing decline will make it difficult to retire,” said USM President Richard Pattenaude.
The stock market took a 15 percent plunge the week of Sept. 17. But last week the Dow ended with a rally of almost three hundred points.
Altogether, in the two weeks following the Sept. 11 attacks, the Dow dropped almost 450 points or 5 percent.
And while the market continues to fluctuate, UMS officials remain somewhat optimistic.
“We don’t know how much of the portfolio has taken a hit,” said Michael Soucy, financial systems analyst for UMS.
Soucy added that UMS investments are diversified in stocks and bonds, and that despite the severe losses in the stock market, overall bonds are doing well.
At the end of June 2001, UMS, which handles investments for each individual campus, had $87.4 million invested in its endowment fund, primarily for scholarships. An additional $65.9 million is invested in its pension fund.
Soucy said UMS will know the exact status of each fund by mid-October.
Uncertain of the long-term effect of the plunge, Pattenaude said, “My basic feeling is that the market will rebound.”
Director of Labor Relations Jerry Blazek said that faculty and administration financial benefits packages such as TIAA-CREF, Fidelity and Aetna investment plans have been greatly affected in recent months. Despite major losses following the Sept. 11 attack, the stock market has been slowly falling for at least six months.
“Most funds have been affected pretty dramatically over the past six months. This did not begin on Sept. 11,” said Blazek. “Most packages have funds, all similar to investment funds. I haven’t seen anything positive.”
The UMS pension fund fell $1 million between fiscal years 2000 and 2001. The endowment fund fared worse with a drop of over $9 million.
Executive Director of UMS Human Services Tracy Bigney said UMS employees have several options in choosing where their money goes.
“Our employees can put their funds into different stocks,” said Bigney. “Funds can go into international investments, growth funds or get indexed all over the market.”
Retirement funds are tax-sheltered and the funds aren’t high risk, said Bigney. The specific impact of market losses depends on how employees have allocated their investments.
Some employees invest conservatively while others invest aggressively, said Bigney.
Professor of Business Joel Gold paints a gray picture of the current market, compared with the much brighter market of the last few years.
“[On the week of the 17th] the market took a 15 percent plunge. The stock market doesn’t like uncertainty and there is now a lot of uncertainty.”
Gold added the political situation doesn’t help matters.
“The market especially doesn’t like political risk,” he said.
“In a normal war, wars like World War II and Vietnam, we spend money the economy got bolstered, especially in defense spending,” said Gold. “Where this isn’t a traditional war, spending may not occur. There is a lot of uncertainty.”
“The market has never seen a situation like this,” said Gold. “Even if the economy comes back strong, this is a long-term endeavor. I don’t think anyone will know the impact.”
Owen said she’s worried by the instability of the stock market.
“My mentality is that I’m in it for the long run,” said Owen. “So I am not going to do anything with them.”
Exactly how much money has Owen lost since the fall?
“I don’t know,” she said. “I don’t want to know.”
Staff Writer Alex Steed can be contacted at: [email protected]