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FINANCE-TUMULT Sep-18-2008 (840 words) With photos posted Sept. 17. xxxn
Shocks to economy raise concern about housing, energy, food prices
By Mark Pattison
Catholic News Service
WASHINGTON (CNS) -- The financial shocks that have staggered the U.S. economy in September have raised worries about the prices of housing, energy and food as well as retirement income, said a spokesman for a Catholic-run investment services firm.
Those shocks include federal takeovers of mortgage-loan giants Fannie Mae and Freddie Mac as well as insurance giant American International Group, or AIG; the bankruptcy of financial services firm Lehman Bros.; a sharp rise in the number of jobless in the country; and a steep decline in the value of the stock market.
"The American public are investors in the stock market through 401(k) programs," said Frank Haines, chief investment officer for Christian Brothers Investment Services, which directs a $4 billion portfolio for the Christian Brothers and other religious orders.
"They're concerned ..., number one, their housing values are falling, not rising. They're concerned about energy prices, food prices," he said. "They read in the press -- our 24-hour headlines thrive on crisis, and that exacerbates situations in some sense. They're worried that their stocks are falling. They're worried that, in their mature years, will they be able to retire?"
"For clients who might be closer to 60 (than) they are to 30, we put out a comment piece for our distribution system to remind our clients what's going on," said Chat Horning, chief investment officer for Mennonite Mutual Aid in Goshen, Ind., a fraternal organization analogous to the Knights of Columbus which has a portfolio worth nearly $1.9 billion.
"During the calm times it's best to think about their investment objectives. What's their tolerance for risk? Now's the time to check that again. It only changes if something fundamental has changed," he said.
"The phone calls we've received in the past week mainly have been new account holders rolling over their money," said Sam Saladino, portfolio manager for the Epiphany Faith and Values 100 Fund in Fort Worth, Texas, during a Sept. 17 telephone interview with Catholic News Service.
Epiphany was created less than two years ago and manages about $2 million in assets, all from individual investors. Saladino said the average account was $20,000.
Epiphany excludes investments in several kinds of companies, including firms with Occupational Safety and Health Administration fines levied against it and firms that contribute to Planned Parenthood. "Our fund's still down, about 8 percent for the year, and the S&P (Standard & Poors) is about 18" percent down, Saladino said.
The now-bankrupt Lehman Bros. "is a screen-out company from the start, so we never had them" in an investment program, Saladino said. "They have X's in several categories" that keep them out of Epiphany's portfolio, he added, citing a discrimination suit lodged against the company as well as questionable business practices.
Sister Amata Miller, an Immaculate Heart of Mary sister who is an economics professor and director of the Myser Initiative on Catholic Identity at the College of St. Catherine in St. Paul, Minn., told CNS in a Sept. 17 telephone interview from St. Paul that while people tend forget that the economy has both boom and bust cycles, they also likely have forgotten that "we have had 20-some years of lack of regulation of these entities" that are now stretched nearly to the breaking point.
She counts herself among those who are "arguing for another stimulus package, which would really reach people who need extra financing."
"People have said since the beginning that instead of sending checks out to everybody," she said, "we need to have a set of programs that would have funded an increase in food stamps, in unemployment compensation, in benefits for the people who could use those monies or have needed them since they've been suffering from the downtown, and that will stimulate renewed spending in the economy."
Just as critical as a market turnaround, Sister Amata said, is a "turnaround of the mindset."
"As people lose confidence in the economy it becomes a self-fulfilling prophecy," she added. "Something has to happen to turn people's confidence level around. One of the things that can turn it around is an effective stimulus package so they can spend it on the things they need."
Haines, of Christian Brothers Investment Services, suggested that individuals already in the market should stick with it.
"If you bail out now and go to cash, you just lock in the losses that occurred, and get out of the potential for an upside," he said. "Every individual should have a long-term (financial planning) policy in mind, and stick with it."
Frank Rauscher, senior principal at Aquinas Associates in Dallas, concurred. "Don't panic. Look out for yourself, because those financial institutions aren't going to look out for you. If you've got an ARM (adjustable-rate mortgage), refinance. But don't panic."
He had a recommendation for those with ARMs, whose interest rates are likely to spike: "Don't wait until they send a letter out to you, giving you three, four months to hunt (for refinancing options). Start now."
END
Copyright (c) 2008 Catholic News Service/USCCB. All rights reserved.
This material may not be published, broadcast, rewritten or otherwise distributed.
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