mPower Advises Investors to Make `No Changes' to Portfolios Following Tuesday's Tragic Event.

Business Editors

SAN FRANCISCO--(BUSINESS WIRE)--Sept. 14, 2001

Dr. Scott Lummer, Chief Investment Officer of mPower, Says

"Long-term Growth" Investing Rationale Remains Just as Valid Today

mPower, the nation's first and leading online investment advisory service, is recommending that investors "not make any changes" to their investment portfolios as a result of the tragic events of earlier this week.

In a letter to mPower users and investors overall, Dr. Scott Lummer, chief investment officer of mPower, advised that "the reasons why you should have invested in stocks in the first place, mainly long-term growth, are still valid today.

"For those of you who can do something to ease the human burden, such as donating blood, I urge you to do so," said Dr. Lummer. "But no action is warranted on your investment portfolio." Dr. Lummer said he was "encouraged by the heartfelt and thoughtful" response he has already received to his letter from mPower users nationwide.

The full text of Dr. Lummer's letter to investors is below. It can also be found at the mPower Web site: http://www.401k.mpower.com/daily_market_lummer.xsp

Letter to Investors by Dr. Scott Lummer, Chief Investment Officer, mPower

Security exchanges in the United States have been closed since Tuesday and are not expected to open until Monday. The impact on U.S. stocks of Tuesday's attack is still uncertain, but the uncertainty hasn't prevented several pundits from predicting very dire consequences. I disagree with them. While there has been a huge effect on human lives and the nation's psyche, I believe the impact on our economy will not be as severe, for several reasons.

Before talking about economic impact, I need to comment first on separating the financial analysis from emotional and political responses. The events of Tuesday shook me and most other Americans like no other event has or likely ever will. These events will and should impact our foreign policies, and will never leave our consciousness for the rest of our lives. Any comparisons I make between Tuesday's attack and other catastrophes are purely in economic terms.

That being said, in terms of pure property damage, the United States has experienced natural disasters that caused similar amounts of physical destruction. Most recently, the earthquakes in Northridge in 1994 and San Francisco in 1989, as well as Hurricane Andrew in 1992, caused large disruptions, but had relatively minimal impact on national economic activity. According to news reports, estimates of economic damage around the World Trade Center range between $5 billion and $25 billion. By comparison, Hurricane Andrew is estimated to have caused $26.5 billion in damage. As I said before, as an analyst I must separate the emotional distress of the attack from the economic impact (which is hard to do, since I know several people who worked in the World Trade Center). In terms of pure dollars and cents, however, the effect of yesterday's calamity appears to be in line with the economic effects of natural disasters the U.S. has experienced.

Much of the impact on businesses that we see now will be short-lived. Of course, some companies will face severe hardships. But the economy is made up of thousands of businesses, and the impact felt by a few of them will not severely impede the economy. The largest effect we are experiencing right now is the disruption of the transportation system. However, some airlines have already resumed flying today, and over the next several days air service will slowly return to normal. The FAA has enacted tremendously heightened security measures, which will result in inconvenience but will not dissuade business travelers from taking necessary trips. Of course, it may take time for all people to regain complete comfort in traveling, but Americans have always been resilient in terms of recovering from the fear of flying that has followed air disasters.

In addition, the initial financial data we are seeing suggests that the immediate reaction by many pundits was overstated. Although in the few hours after the attack oil futures prices did rise substantially, they have returned to their levels before the disaster. The first security markets to be open after the attack were in Asia, and stocks were down sharply. However, the major European stock exchanges in London, Paris and Frankfurt have all increased slightly in value in the two days since the attack, meaning that the current consensus of security analysts is that the impact on the global economy will not be harsh.

Finally, remember that most of you are investing for long-term purposes. Although the European markets have been relatively stable, I would not be surprised if the U.S. markets dropped sharply immediately after opening. And we will certainly see a great deal of volatility. Yet, even if there are some declines, they are not likely to be long-lived. The reasons why you should have invested in stocks in the first place, mainly long-term growth, are still valid today.

For these reasons, I recommend that you do not make any changes to your investment portfolio as a result of Tuesday's attack. There is a tendency in times of crisis, economic or human, to want to take action. For those of you who can do something to ease the human burden, such as donating blood, I urge you to do so. But no action is warranted on your investment portfolio. The prudent investment reaction to Tuesday's events is no action.

Scott Lummer, Ph.D., CFA 

Chief Investment Officer, mPower

About mPower

Founded in 1995, mPower Advisors, L.L.C., (http://www.mpower.com), a federally registered investment advisor, was the first to offer affordable, online investment advice to defined-contribution plan participants, and remains a leading provider in this field. mPower's Web site also offers award-winning investment education information to help individual investors learn more about defined contribution plans, including the 401(k), 457 and 403(b) plans, and Individual Retirement Accounts (IRAs).