Newspaper article The Christian Science Monitor

'Paper' Losses, Real-World Impact ; as Stocks Losses Mount - Now $8 Trillion since Peak - Tough Choices Face Retirees, Colleges, and Nonprofits

Newspaper article The Christian Science Monitor

'Paper' Losses, Real-World Impact ; as Stocks Losses Mount - Now $8 Trillion since Peak - Tough Choices Face Retirees, Colleges, and Nonprofits

Article excerpt

Plunging stock prices, having already devastated the "paper" value of investor portfolios, are increasingly having tangible impact on Americans' lives - whether they own stocks or not.

* In Washington, D.C., a charitable organization expecting $500,000 in donations from family foundations received only half that, forcing a clinic it funds to abandon plans to give out HIV- prevention materials.

* With his mutual funds sinking in value, Florida retiree Bob Latcham has returned to work. The former school principal is doing background checks for a placement service.

* A Philadelphia charity that counts on gifts of stock has cut 1- 1/2 slots from its already small workforce and has sharply curtailed the number of people receiving its annual report.

These are just a few ways that one of the worst bear markets in the nation's history is now starting to affect the fabric of American lives. Since their peak in March 2000, stocks have lost about $8 trillion in value, an amount equal to the annual economic output of Japan, Germany, and Canada combined.

The past two weeks in particular have been the financial equivalent of a train wreck. The Dow Jones Industrial Average has shed more than 1,200 points, ending just above 8000 after a 390- point drop Friday.

Many Americans know about these losses because they get monthly statements from a brokerage account, mutual fund, or maybe a 401(k) retirement plan. And even the millions who have no stake in the market - direct or indirect - are being affected.

That's because everything from jobs to government tax revenues is impacted somewhat by changes in stock market wealth.

Wall Street's slide has made some economists start to worry about a "double dip" - a return to recession - as battered share prices prevent a recovery of business spending and cause consumer confidence to weaken.

A decline in capital-gains tax revenues, meanwhile, is hitting many state governments.

Squeeze on schools

Or consider the education system. Many colleges and universities ended their fiscal year on June 30. As they assess their portfolio results, many will be looking at double-digit declines over the past two years.

"This will be painful," says John Griswold, senior vice president at the Commonfund Institute, which manages $30 billion for 1,600 nonprofits from its base in Wilton, Conn. To date, most of these organizations have resisted making cuts based on the stock market, he says. But, he says, "There will be some serious cuts in ... operating expenses this coming year. Some will need Draconian plans."

At Berea College in Kentucky, for example, investment officers are on edge. The small school does not charge tuition or room and board to educate 1,570 underprivileged students from Appalachia. Three quarters of its operating budget comes from its endowment, which is down 17 percent in two years. If the market continues to drop, the college will have to freeze hiring and cut its payroll through attrition.

"We probably would look at fewer students, too," says Ron Smith, vice president for finance.

The National Philanthropic Trust in Philadelphia has already cut its staff and overhead - everything from magazine subscriptions to travel to conferences. …

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