November 18, 2018

Mystical Teachings From the Stock Market

Photo from Pixabay

The wild fluctuations in the stock market last week, and Americans’ fear response, has me thinking about our spiritual relationship to change.

I know it’s a little nontraditional, but the truth is, I often like to think of the stock market as a sort of mystical teacher that reflects spiritual realities about human desires and the inevitability of cycles.

This theory of mine began during the Great Recession. I happened to have an artist residency on Wall Street at the time, and this proximity made the financial world seem less irrelevant to my scrappy artist life; I began to read the newspaper’s financial section for the first time.

And then the Bernie Madoff scandal broke. At first I was interested in Madoff as a sort of modern version of the Emperor Who Has No Clothes. But as more information came out, I began to be more interested in the nuances of what happened.

In physics as in stocks, in spirituality as in lasting love, we’re reminded that what goes up must come down.

His returns, in fact, were nothing special. What was extraordinary were their consistency, a straight line going up without the jagged peaks and falls of the real market. There was a general sentiment that his investors must have been extraordinarily greedy, but this is largely unfair to his victims. I began to think that instead of reflecting his investors’ greed, Madoff’s decades-long fraud reflected something essential about the American dream, and, in fact, our human longings.

People were not necessarily looking to get rich. They just wanted a safe place to put the money they’d worked so hard to save — a safe harbor, buffeted from the ups and downs of the market, of life.

But this is impossible.

In physics as in stocks, in spirituality as in lasting love, we’re reminded that what goes up must come down. And then, most likely, it will go up again. In the words of my favorite Buddhist sutra, “It is the everlasting and unchanging rule of this world … that everything changes, nothing remains constant.”

Change is not just a basic fact of life — it’s the basic fact of life. And yet with the exception of a few dopamine-loving thrill seekers — some of whom can certainly be found on the floor of the stock exchange — we humans are generally known to resist it.

Change is destabilizing; it makes us feel unsafe. Even a relatively small shift can strike fear in our hearts. The markets plunge and investors rush to sell, even though all the experts advise against it. Not a single person is in any physical danger, yet the news is on the same sort of high alert reserved for earthquakes and train crashes.

My favorite Jewish teaching on change comes from the mystics, who envision an endless back and forth (or perhaps up and down) as the basic state of existence. They believe that the state of being alive — of being itself — is ratzo v’shov, running and returning. The world is in a constant state of transition, shuttling back and forth between divine energy and worldly matter.

Our spiritual lives echo this motion, as well. We run to God, our souls drawn to the fire of transcendence, of holiness, to change our lives and find our best selves. And then we return to our own limited self, because we must, to remain alive and in one piece. And then the process begins again.

This is how we love one another, too. Studies show that although babies thrive on being close to their mothers, they need to break eye contact after a certain period of time; if the mother does not turn away, the baby will. This continues into adulthood; although times of alienation can feel like awful emergencies, they are in fact part of the fabric of love. We run to each other, to love each other; we make ourselves anew, forgetting everything that came before. And then we return to ourselves, back home to our own particular body, our story, our limits, our needs.

Ratzo v’shov, run and return, bull and bear, sacred and mundane, coming together and coming apart and coming together again. This is what it means to be alive.

Alicia Jo Rabins is a writer, musician and Torah teacher who lives in Portland, Ore.

Are Jews allowed to make stock market investments?

It has been a common conception that playing the stock market is a form of gambling. Gambling is usually considered unethical by some religions. While economists may argue that there is no connection between gambling and investing in the stock market since it is a constructive way to invest savings, the view is not unanimous. Renowned English economist John Maynard Keynes compared the stock exchange to a casino. However, this assumption may not entirely hold true when closely scrutinized.

The main objective of the Torah is to promote individual spiritual development and not the efficiency of the capital markets. According to the Talmud, there are two ethical problems posed by gambling. The Mishnah disqualifies a habitual gambler from giving testimony. The Talmud then goes to ask what wrong a gambler has done. In giving the answer, the wrong that a gambler does is that the winner takes advantage of the loser, who may not be fully aware of the adverse odds he faces. Thus, gamblers will have contempt for productive work because of the easy ways they get money. Therefore, the gambler is considered not to respect ethical and legal sanctions because to him, life is a game and a gamble. This is especially true in casinos where the environment can be considered as that of immorality and immodesty. However, can the same be said of the stock market?

It is true that there are some excesses in the stock market as evidenced when media exposes some under deals in securities trade. However, this problem should not be perceived as endemic since most business establishment also suffers their own problems. It is also true that some unscrupulous brokers will take undue advantage from unsuspecting investors. However, these cases are rare and most of the brokers will be well informed about the investments they make for their clients. It is also evident that those investing in stock markets are committed to social stability and are no different from other workers in other professions. About every profession faces ethical challenges, and workers, especially in the financial markets, need to exercise special care to escape the strong lure of greed.


What about the speculative activity?


The aim of speculators is to buy assets at low prices, hoping to profit by selling them when prices increase. While economists are of the opinion that speculators are vital to the economy, they are viewed with suspicion by popular opinion. However, while Jewish religion does not inherently condemn speculation as unethical, it does have genuine considerations for popular sentiment. Nonetheless, speculation is economically productive because it encourages efficient allocation of resources. For example, speculators may hoard commodities anticipating for a future shortage. When this happens, there will be adequate stockpiles when the shortage occurs. In addition, speculation contributes to the effective exploitation of scarce resources in modern competitive markets.

Nonetheless, when left unchecked, speculation may be harmful to the economy. There have been cases where speculators collude with the market to create an artificial shortage with the aim of inflating prices. This may be harmful since instead of alleviating hunger, it creates it. This is why speculation, when viewed from the perspective of human consequences, raises ethical issues. Talmud censures hoarding not because of the economic consequences, but the likelihood of humans suffering tragic consequence which may lead to the destruction of solidarity in the society. When speculators take this route, they are only concerned about enriching themselves. The end result is the exploitation of common hard working people who may not afford to meet their needs because of high prices, and thus end up facing abuse and enslavement.

It is therefore our duty to unify our economic and human interests so that we are not enticed to quench our greed and betray our ideals. For example, we may consider a player in a football team about to play a game. If his team wins, he earns a huge sum of money, but if they lose, his earning will decrease. According to economic theory, it would be more advisable to bet against his own team. This may be considered a betrayal of loyalty since it is like betting on a disaster. While Jewish law does not regulate most kind of speculations, it is the duty of an individual speculator to ensure they are “not betting against the home team.”







Confessions of a Day Trader

I write this because, as one young lady who took my course in American Studies at CalState  Fullerton, back in the 1970s,  told me without too much exaggeration: “You are the honest-est person I have ever met.” She was not BS-ing me because I was a permissive grader, and her grade was already in.  “Crazy-honest”—and given to excessive  self-revelation—I still am.

Financially, the most foolish day of my life was in early 2000 when I decided to “invest” in the stock market. I never had much cared about money—in this way only, I was like the (mythical?) Love Children of the 1960s. But I had some money, really for the first time, and it seemed like a good idea to “invest.” I really wanted to turn my money over to an investment counselor and leave the worries to him. I had one, a friend-of-a-friend,  lined up, but for convoluted (mostly personal) reasons, it did not turn out. I decided to do it myself.

I became a day trader—a very bad idea for a smart but impulsive person like me. I’ve seen statistics that 80-90 percent of day traders belly up in a year or two. Not me. I just lost 80-90 percent of my money.

I’ve made some back since, and continue to dabble. My experience this summer, however, should be a cautionary tale for any novice out there unless you’re moral constitution is lots steelier than mine. My problem was—and is—not that I cannot discern trends. I can. The problem is the lack of resolve to act on them, patiently but decisively, in the right way.

I’ve known for at least a month that the market was headed for, as they say on the Street, “a correction” of at least 5-10 percent down. Many talking heads on cable finance news shows said so, but I knew it in my gut.

So I  bought a 3-X  Short ETF, which means that it goes up three times when the S&P Average goes down.  For a while, I waited patiently—and lost money, as the market continued to go up.

Then came August,. I still lost money for a few days, but began to recoup. Yesterday was the moment of truth. As I expected, the terrible news about the North Korean nuclear crisis, and the war of bombastic words on both sides, initially depressed the market in the morning. But then it began to rally around 11:00 Am Pacific Time. I sensed an inflection point—and sold out to take my profit. 

By day’s end, I felt cautiously vindicated because the market had continued to rally until the close, and—if I had not liquidated my position—I would have lost almost all my profit.

I should have known better: in my gut—which told me to stay short until this October—I did indeed know better. Today, the market really tanked. If I had stayed the course—stayed short—I would have made quintuple what I made yesterday. I guess I deserve such frustrating humiliation for sins I committed in a earlier life. That’s Jewish Karma—but that’s NOT Entertainment!

Be forewarned by this fool’s experience.

Yet I also assure you that—when I write about history and politics—you can trust my judgment, within limits. I’m not a sucker across-the-board, just on Wall Street. I wish you better luck.

Harold Brackman is a historian in Los Angeles.

Wall Street in 2016: What could possibly go wrong?

By all rights, 2016 should be a good year for the U.S. stock market.

The Federal Reserve's recent rate hike signals confidence in the economy and presidential election years typically reward investors. Most experts are predicting a seventh year for the current bull market, with strategists in a recent poll expecting the Standard & Poor's 500 stock index to end 2016 at about 2,207, roughly 8 percent higher than it is now. 

But a lot could go wrong. The same strategists have cataloged a long list of worries – everything from a destabilizing U.S. election to a meltdown far away – that could hit stocks hard.

Here is their laundry list of concerns. For those who'd rather stay optimistic, remember the old chestnut: Wall Street climbs a wall of worry. 


Most of the 30 strategists polled by Reuters cited weak earnings as their prominent concern. With S&P earnings growth projected to be flat in 2015, stocks already are pricey. The market is trading at roughly 19.3 times trailing earnings, well above its 15 average. Any stumble in earnings would make stocks even pricier.

Thomson Reuters analysts now expect revenue to grow 3.9 percent in 2016, meaning any increases in costs could keep earnings flat for a second year in a row.

“If labor costs start moving up a bit and interest expense is moving up … it's going to be hard to keep margins up,” said Bob Doll, chief equity strategist at Nuveen Asset Management in Princeton, New Jersey.


The dollar, up 8.4 percent against a basket of currencies in 2015, is expected to see further gains next year as the United States hikes rates while other countries continue easy money policies.

That could further pressure sales of U.S. companies with heavy international exposure because it makes U.S. goods more expensive overseas.

“If we have a similar movement to last year, then we're going to have roughly a $28-billion hit to corporate America,” said Wolfgang Koester, chief executive of currency risk consulting firm FireApps. He said he expects the dollar to shave 3 to 4 cents from first-quarter earnings of U.S. companies with foreign exposure. 


Stocks historically do well in a presidential election year, with the S&P gaining in 13 of the 16 presidential election years since 1950, regardless of which party won, according to the Stock Trader's Almanac.

But strategists wonder if 2016 might be one of the exceptions to the trend, with outliers like Donald Trump and Bernie Sanders running this year.

“The more extreme the candidate, the less well-received the candidate typically is by the stock market,” said Kristina Hooper, U.S. investment strategist at Allianz Global Investors. She said she expected election activity throughout the year to contribute to market volatility. 


The stock market rallied on Dec. 16 when the U.S. Federal Reserve announced its first rate hike along with strong hints that it would move slowly on future increases.

But if the central bank continues to raise rates without seeing higher inflation or an earnings pick-up, that could dent stocks. “Rate hikes should be a consistent worry,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York. 

As rates rise, stocks could become less attractive compared with other asset classes like bonds.


The continuing decline in oil prices, which has hurt energy companies and the banks and investors that lend to them, has some investors spooked.

“The commodity picture could get out of control to the downside,” said John Manley, chief equity strategist at Wells Fargo Funds Management. 

U.S. crude is now about $37 a barrel, down more than 65 percent since June 2014. Should the prices of oil and other commodities fail to firm, the risk is of spreading deflation, as declining earnings in those sectors spread to financial firms, suppliers and more, said Manley.


Even with gasoline under $2 a gallon, consumers have resisted spending sprees and higher interest rates may entice them to tilt even more towards saving. 

The price-to-sales ratio of the S&P has already topped previous peaks, says Jeff Weniger, senior portfolio strategist at BMO Private Bank in Chicago. Without sales, the whole growing economy-growing-earnings-improving-stock-prices structure could go south.


“China is the 800-pound gorilla,” said Allianz's Hooper. 

In August, Chinese stocks fell and the U.S. market swooned in response. With the outlook for the world's second-largest economy still weak, investors worry that it could hurt demand for commodities, currency balances and more. Furthermore, weakness in China could ripple across the globe, hitting emerging markets and the United States as well. 


At least nine of the strategists polled listed terrorism or Middle East instability among their biggest concerns for the stock market in 2016.

“The obvious risk is some sort of geopolitical event that freezes up travel and trade. It could happen,” said Steve Auth, chief investment officer for equities at Federated Investors. Consumers, too, could be kept at home by any public events perceived as terrorist in nature.

While free-falling oil has proven bad for stocks, the reverse would not necessarily help. A systemic crisis in the Middle East could easily spike oil prices, raising costs for consumers and businesses.

Not dark enough? Manley of Wells Fargo says he worries about “the risk that the vital spirit has gone out of the world's economy.” 

He said, “The deepest darkest fear I have is that we didn't really fix it six years ago, we just delayed it for a while. And rather than being sunk by a gash we are being sunk by a slow leak. It's not what I think, but it is what I worry about.”

Wall Street has worst day in four years, S&P now in correction

U.S. stock indexes plunged almost 4 percent on Monday as investors, rattled about China's economy, sold heavily in an unusually volatile session that confirmed the S&P 500 was formally in a correction.

The Dow Jones industrial average briefly slumped more than 1,000 points, its most dramatic intraday trading range ever, with key component Apple falling heavily only to claw back and end down 2.5 percent.

It was the S&P 500's worst day since 2011 and followed an 8.5 percent slump in Chinese markets, which sparked a sell-off in global stocks along with oil and other commodities .

Wall Street had stayed in a narrow range for much of 2015, but volatility jumped this month as investors became increasingly concerned about a potential stumble in China's economy and after Beijing surprisingly devalued its currency, the yuan.

Some investors unloaded stocks ahead of the close after looking to make money from volatile price swings earlier in the session.

“If things don't settle down in China, we could have another ugly open tomorrow and you wouldn't want to be caught holding positions you bought this morning,” said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin.

Apple's Chief Executive Tim Cook, in comments to CNBC, took the unusual step of reassuring shareholders about the iPhone maker's business in China ahead of a dramatic 13-percent drop and rebound in its stock, which closed down just 2.5 percent at $103.12.

The Dow Jones industrial average closed down 588.4 points, or 3.57 percent, at 15,871.35.

The S&P 500 lost 77.68 points, or 3.94 percent, to 1,893.21, putting it formally in correction mode.

An index is considered to be in correction when it closes 10 percent below its 52-week high. The Dow was confirmed to be in a correction on Friday.

The Nasdaq Composite dropped 179.79 points, or 3.82 percent, to 4,526.25, also in a correction.

Futures for Hong Kong's Hang Seng index were down 2.1 percent, suggesting that more bleeding may be in store when trading begins again in Asia.

The CBOE Volatility index, popularly known as the “fear index”, briefly jumped as much as 90 percent to 53.29, its highest since January 2009.

Preliminary data from BATS Global Markets show 1,287 trading halts on U.S. stock exchanges on Monday due to excessive volatility or tripping of circuit breakers, far more than usual.

The S&P 500 index showed 187 new 52-week lows and just two highs, while the Nasdaq recorded 613 new lows and eight highs.

“Emotions got the best of investors,” said Philip Blancato, chief executive at Ladenberg Thalmann Asset Management in New York.

“The conjecture that the Chinese economy can propel the U.S. economy into recession is ridiculous, when it's twice the size of the Chinese economy and is consumer-based.”

All of the 10 major S&P 500 sectors were down, with energy losing 5.18 percent.

U.S. oil prices were down about 6 percent at 6-1/2-year lows, while London copper and aluminum futures hit their lowest since 2009.

Exxon and Chevron each fell more than 4.7 percent. U.S. oil and gas companies have already lost about $310 billion of market value this year.

The dollar index was down 1.72 percent. It fell more than 2 percent earlier to a seven-month low as the perceived probability of a September U.S. interest rate hike receded.

Traders now see a 24 percent chance that the Federal Reserve will increase rates in September, down from 30 percent late on Friday and 46 percent a week earlier, according to data from inter-dealer money broker Tullett Prebon.

Wall Street's sell-off shows investors are becoming increasingly nervous about paying high prices for stocks at a time of minimal earnings growth, tumbling energy prices and uncertainty around a Fed rate hike.

Alibaba lost 3.49 percent to $65.80, below its IPO price of $68, making it the second high-profile tech company to fall below its IPO price in the past week after Twitter on Thursday.

Declining issues outnumbered advancers on the NYSE 3,064 to 131. On the Nasdaq, 2,632 issues fell and 281 advanced.

Volume was heavy, with about 14.0 billion shares traded on U.S. exchanges, double the 7.0 billion average this month, according to BATS Global Markets.

East Coast crippled by massive storm, death toll climbs

Millions of people were left reeling in the aftermath of the whipping winds and heavy rains of the massive storm Sandy on Tuesday as New York City and many parts of the eastern United States struggled with epic flooding and extensive power outages.

The storm killed at least 40 people, including at least 18 in New York City, and insurance companies started to tally billions of dollars in losses.

Sandy, which crashed ashore with hurricane-force winds on Monday near the New Jersey gambling resort of Atlantic City, was the biggest storm to hit the country in generations. It swamped parts of New York's subway system and lower Manhattan's Wall Street district, closing financial markets for a second day.

Businesses and homes along New Jersey's shore were wrecked and communities were submerged under floodwater across a large area. More than 8 million homes and businesses in several states were without electricity as trees toppled by Sandy's fierce winds took down power lines. Across the region, crews began the monumental task of getting power back on.

[Related: Jewish community bears impact of Hurricane Sandy]

The storm reached as far inland as Ohio and caused thousands of flight cancellations. Cellphone outages also were widespread.

Parts of West Virginia were buried under 3 feet of drifting snow from the storm.

Some East Coast cities like Washington, Philadelphia and Boston were spared the worst effects from Sandy and appeared ready to return to normal by Wednesday. But New York City, large parts of New Jersey and some other areas will need at least several days to get back on their feet.

“The devastation is unthinkable,” New Jersey Governor Chris Christie said after seeing pictures of the New Jersey shore.

The storm interrupted the U.S. presidential campaign just a week before the Nov. 6 election. The damage it caused raised questions about whether polling places in some hard-hit communities would be ready to open by next Tuesday.

Seeking to show he was staying on top of a storm situation that affected a densely populated region, the White House said President Barack Obama planned to tour damaged areas of New Jersey on Wednesday accompanied by Christie.

The New Jersey governor, who has been a strong supporter of Republican presidential challenger Mitt Romney, praised Obama and the federal response to the storm.

“New Jersey, New York in particular have been pounded by this storm. Connecticut has taken a big hit,” Obama said during a visit to Red Cross headquarters in Washington.

Obama issued federal emergency decrees for New York and New Jersey, declaring that “major disasters” existed in both states.

Power outages darkened large parts of downtown Manhattan. A large blaze destroyed more than 80 homes in New York City's borough of Queens, where flooding hampered firefighting efforts.

“To describe it as looking like pictures we've seen of the end of World War Two is not overstating it. The area was completely leveled. Chimneys and foundations were all that was left of many of these homes,” New York Mayor Michael Bloomberg said after touring the area.

Neighborhoods along the East and Hudson rivers in Manhattan were underwater, as were low-lying streets in Battery Park near Ground Zero, where the World Trade Center once stood. Lower Manhattan could be without power for four days.

One disaster modeling company said on Tuesday that Sandy may have caused up to $15 billion in insured losses. That would make it the third-costliest hurricane on record, behind hurricanes Katrina, which laid waste to New Orleans and the Gulf Coast in 2005, and Andrew, which devastated parts of Florida in 1992.

That figure did not take into account residential flood losses or flooding of tunnels and subways, meaning ultimate insurance claims could rise higher still.


Obama and Romney put campaigning on hold for a second day. The campaign truce was likely to be short-lived, as Romney planned to hit the trail again in Florida on Wednesday. Obama appeared likely to resume campaigning on Thursday for a final five-day sprint to Election Day.

Obama faces political danger if the government fails to respond well, as was the case with predecessor George W. Bush's botched handling of Katrina. Obama has a chance to show not only that his administration has learned the lessons of Katrina but that he can take charge and lead during a crisis.

All along the East Coast, residents and business owners found scenes of destruction.

“There are boats in the street five blocks from the ocean,” said evacuee Peter Sandomeno, one of the owners of the Broadway Court Motel in Point Pleasant Beach, New Jersey. “That's the worst storm I've ever seen, and I've been there for 11 years.”

Sandy, which was especially imposing because of its wide-ranging winds, brought a record storm surge of almost 14 feet to downtown Manhattan, well above the previous record of 10 feet (3 meters) during Hurricane Donna in 1960, the National Weather Service said.

Water poured into the subway tunnels under New York City. Bloomberg said the subway system, which normally carries over 5 million people each weekday, would likely be closed for four or five days.

“Hitting at high tide, the strongest surge and the strongest winds all hit at the worst possible time,” said Jeffrey Tongue, a meteorologist for the weather service in Brookhaven, New York.

Hurricane-force winds as high as 90 miles per hour were recorded, he said. “Hopefully it's a once-in-a-lifetime storm,” Tongue said.

The U.S. Department of Energy said more than 8 million homes and businesses in several states were without electricity due to the storm.

“This storm is not yet over,” Obama told reporters at the Red Cross as he warned of the dangers of continued flooding, downed power lines and high winds. Obama, possibly mindful that disgruntled storm victims could mean problems for his re-election bid, vowed to push hard for power to be restored.

The flooding hampered efforts to fight a massive fire that destroyed more than 80 homes in Breezy Point, a private beach community on the Rockaway barrier island in the New York City borough of Queens.

New York University's Tisch hospital was forced to evacuate more than 200 patients, among them babies on respirators in the neonatal intensive care unit, when the backup generator failed.

Besides the deaths in New York City, others were reported in New York state, Massachusetts, Maryland, Connecticut, New Jersey, Pennsylvania, Virginia and West Virginia. Toronto police also recorded one death – a woman hit by flying debris. Sandy killed 69 people in the Caribbean last week.

U.S. government offices in Washington were due to reopen on Wednesday after two days. Schools were shut up and down the East Coast but were due to reopen on Wednesday in many places.

U.S. stock markets were closed on Tuesday but exchanges are expected to reopen on Wednesday.

The storm weakened as it plowed slowly west across southern Pennsylvania, its remnants situated between Pittsburgh and Philadelphia, with maximum winds down to 45 mph, the National Hurricane Center said.

As Sandy converged with a cold weather system, blizzard warnings were in effect for West Virginia, western Maryland, eastern Tennessee, eastern Kentucky and western North Carolina.

Garrett County in Maryland had as much as 20 inches of heavy, icy snow that knocked out power to almost three-quarters of the area's 23,000 customers.

“It's the biggest (October snowstorm) that I remember and I've been here 25 years,” said area resident Richard Hill, who planned to huddle by his wood stove.

Hope vs. slippery slope


With economy faltering, nonprofits brace for recession

Americans continue to default on their mortgages in numbers not seen since the Great Depression. Banks continue to become more reticent about lending money. The stock market continues a herky-jerky tumble downhill.

The finance industry is still roiling from last month’s stunning collapse of Bear Stearns, Wall Street’s fifth largest investment bank. The dollar continues to fall against other world currencies.

And the philanthropic world is becoming increasingly fearful about what seems to be a perfect storm brewing against the financial world.

While most philanthropy professionals feel some anxiety now, they are bracing for what could be a calamity in the world of charitable giving.

At its worst, they say, the stock and real estate markets could continue to slide and large foundations could be forced to cut their allocations significantly, smaller donations from the middle class could dry up and what has been a renaissance in Jewish programming over the past several years could come to a screeching halt. Also, the dollar’s decline could continue to stretch the budgets of Israeli nonprofits.

At its best, the economy could stabilize and there could simply be a short-term slowing of philanthropic dollars — a slowing that already has started.

“I think you will begin to see cutbacks now in terms of commitments for the future,” said Richard Marker, an independent philanthropy adviser and a professor of philanthropy at New York University. “If you were to start a major campaign now and are asking people for lead gifts, I think you will begin to see an atmosphere of reservation.

“People are beginning to be nervous, especially in places where the economy is so based on banking and real estate. And I don’t think that the Jewish community is going to be exempt. There is going to be tremendous pressure on both the philanthropists and the nonprofit world.”

Some are comparing the economic situation brewing now to the recession that followed Sept. 11, 2001 and the bursting of the high-tech bubble.

Some are holding tight to the notion that the economy ebbs and flows, and after a period of unprecedented growth over the past several years the market is simply correcting itself. But those considering the philanthropic world believe they are peering over the edge of a cliff unsure about whether they are about to fall over or be mercifully yanked away from it.

Philanthropy typically follows the economy by two years — if the economy falters, usually it takes two years for philanthropists to slow their giving. But Marker and others predict this downturn will have a much quicker effect.

“I think people are taking a deep breath,” Marker said. “I don’t think that people right now are looking to make major new commitments, whereas maybe a year ago, if a great new idea came along, someone might say, ‘OK, lets take the risk.'”

Marker, who acts as an adviser to a number of foundations and philanthropists, said he has heard of one foundation that already has said it will not provide grants next year, but declined to name it.

At the annual conference of the Jewish Funders Network (JFN), which gathered some 350 of the world’s wealthiest Jews and most prolific givers this week in Jerusalem, philanthropists and foundation professionals openly expressed concern that a philanthropic recession is on the way.

Yael Shalgi, the president of Israel Philanthropy Advisors, says she also knows of several foundations that already have cut their funding.

Even the behemoth of the Jewish philanthropic world, the Harry and Jeanette Weinberg Foundation, is nervous. The foundation, which last year was worth some $2.3 billion, gives out more than $100 million a year to charities, most of which are Jewish.

Foundations are required to give away 5 percent of their assets each year, which means they generally try to earn 7 percent annually on their investments to pay for their allotments and overhead.

But the Weinberg foundation, which has about two-thirds of its money invested in various markets and the rest in real estate, has lost 9 percent of the value on its invested assets since the beginning of the year, according to its treasurer, Barry Schloss.

Schloss said the impact on the foundation’s giving will not be felt immediately, as its allocations for the last fiscal year, which for Weinberg ended Feb. 28, are already set.

“We’re not cutting grants at the moment,” Schloss said. But if the market continues to tumble, “the real effect will happen next year. We will probably have to make cuts. But we don’t stop giving when we get to that point.”

At the JFN conference, Schloss said that because of the falling dollar, some of the Israeli organizations funded by Weinberg will have to do less with their money than they expected. He noted a program that pays for dental care for needy children that will be able to help only 175 children with dental surgery rather than the intended 200.

The real crunch, though, may come not from major foundations but the middle class.

Givers tend to make charitable donations in accordance with how comfortable they feel financially. Thus, in this economy the middle class — and therefore smaller donations — could suffer tremendously.

“We are very concerned about the manner in which the volatility in the markets and the repercussions of the credit crunch will have [an effect] on fund raising in general and the abilities of the charities to function,” said Sandy Cardin, the president of the Charles and Lynn Schusterman Family Foundation.

While he expects those charities that receive a significant portion of their budgets from foundations to be relatively secure, charities that depend on smaller donations from the public could be in trouble.

“Regarding the larger group of donations — gifts from the general public — it is unknown,” Cardin said.

Charitable contributions are among the first cuts for Americans feeling insecure financially, say experts in the field.

Smith Barney doesn’t manage this portfolio. My heart does.

A conservative, long-term investor, I’ll still admit to my sometimes ridiculous attraction to the highs and lows of risk.
Question is: How much can
I — or anyone — really handle?

At 22, I’d fearlessly seek the beta — or risk factor — in anticipation of the alpha — or excess — returns. I’d diversify my portfolio, but often follow a hot dot, whose value would quickly double, drop, then creep back up. When the market tanked? I reveled in my seemingly endless time horizon.

My strategy began to shift after some market volatility, which, combined with maturity lent a better understanding of my own assets and risk tolerance. I became more moderate, investing in diverse, well-researched stocks for a longer-term gain.

Still, my rate of return seemed nominal.

At times, I’d considered leaving the market altogether, but trusty advisers would encourage me to stay the course.

Investment decisions are best executed without emotion, they’d say.
Yeah, right, say I.

See, Smith Barney doesn’t manage this portfolio. My heart does.
Disturbingly analogous to the omnipotent stock market, in dating, the alpha of a long-term relationship drives us to invest even more: our hearts, minds, bodies and souls.

We’ll work diligently to review and build our personal assets (be it career, hobbies, looks, personality or all of the above); establish our search criteria (determine characteristics of a partner); and perform severe — if often frustrating — due diligence (dating the gamut to find that sometimes elusive, but impassioned and fabled, soul mate).

As our investment pool in this feverish search shifts, so do our emotions and risk tolerance — often dramatically. And sometimes unexpectedly.

High-risk (newbie) investors might trade short-term losses (“just hanging out”) for long-term gains (dating for crazy love). Moderates (more mature) might accept some risk (getting back out there post-burn) for higher ultimate returns (falling in love … again). Lowest risk takers (seasoned cynics) may seek the safest route (maybe even … gulp … settling).

At 22 and for a while thereafter, the process was thrilling. Working to build my own assets, I was myself an actual beta — figuring my way and learning fancy investment terms while marathoning my lifestyle.

My diversified portfolio included mostly my peers: the drummer, the elevator crush who made me blush, the student, the party-guy who might actually call, the tree-hugging college friend, and even the swamped getting-established professional. My relationships gave me butterflies and stomachaches, but I withstood the volatility, hoping for high returns.

The alpha on these short-term buys sometimes seemed negligible, but experience built my assets for the long term. It also lowered my risk tolerance — a dangerous bout in my maturing stage, wherein people have paired off, leaving bounds of skeptics.

What was “edge” seemed like attitude; opinions became stubbornness. “Stability” translated to boredom; “Fun” often meant noncommittal. And as I became more selective, my investment pool downsized.

Uh oh.

Determined still, I went moderate-to-low with lower-betas who seemed ready to commit: the great guy my age, the goal-oriented (too busy) professional and the creative guy who knew how to channel it.

Ratings seemed positive, but earnings ultimately disappointed. Our stock split, and hearts got broken.

Perhaps my search criteria was askew; I considered old standbys, friends; I diversified madly to mitigate losses, but my risk skyrocketed with my diminishing tolerance and time horizon.

Should I seek growth or the undervalued stock? Hedge? Strattle? Bail out? Or, shoot endlessly for off-the-chart heart-jumps that put me in the red, then black within a matter of days?

Not quite ready to index, I sought value with potential growth. I still sought the beta.

After a market slump, and bordering the defeatist pull-out, a tip off to a charming, intelligent (younger) option surfaced. I’d stay the course for long-term growth, I thought.

First, it was blissful and fun; carefree and light; we’d stay up late and dance around who liked whom. He called me “hot” instead of pretty, bought me chocolates and wrote me sweet cards. He called too late.

And the best part: he believed in “the one.” The one!

Things were swell until liabilities in my beta’s limited repertoire emerged. He struggled to fully identify with me. My skin felt comfortable; his was still filling out. He wasn’t cynical, which, to me, meant he didn’t reflect…. Or maybe, at 25, hadn’t yet lived.

Despite my short-term disappointment, I’d already learned to sell out sooner in lieu of a more “appropriate” investment.

See, while he was still diversifying, I was — apparently — ready to focus my assets.

General rule says: the greater the risk, the greater the return. And in today’s rough relationship market, determining risk tolerance may indeed help assuage some long-term “damage.” Problem is: it may also risk a lower alpha.

And that’s no fun.

Maybe — ultimately — we’re all just betas making our way; our yields to maturity are just different.


Dara Lehon, a freelance writer living in New York City, can be reached at

Wall Street’s Wild Ride

The Los Angeles Times’ front-page article that reported the Aug. 31 stock market plunge referred to the drop as “a financial bloodbath,” then, a few sentences later, cautioned that the “tumble wasn’t a crash.” The following week’s edition heralded the biggest one-day point gain ever, which was erased over the ensuing couple of days.

With unpredictability the only certainty about the current market, opinions about the best course of action vary, but the consensus seems to be “stay the course.”

Most market analysts agree that the stock market drop was an overdue correction. “Stocks got higher and corporate profits were slowing,” explains Gail Ludvigson, senior vice president at Schroder and Company Inc., a Westwood brokerage firm headquartered in Britain. “That’s not a good combination.”

Political and financial instability in Asia, Russia and Latin America — not to mention anticipation of the Starr Report release — fueled the uncertainty, and the result, says Ludvigson, was that “it was time for a pause.”

“This is very normal when we have had the kind of upswings we’ve had,” says Steven Holtz, an independent certified financial planner in Westwood, who says this kind of correction normally occurs one in every three to four years.

Ludvigson, Holtz and others concur that, despite problems abroad, the U.S. economy remains strong. “The economy in our country is good. Companies are doing well. Devaluation is deceptive,” says Mark Levin, managing director for Imperial Capital, a Beverly Hills-based broker-dealer specializing in high net worth investors. Levin says that the decrease in valuation is inconsistent with current domestic trends, making this a good opportunity to buy.

Holtz agrees. “Things are going on sale,” he says. Investors who have a long-term time horizon can look at this as a buying opportunity because prices “will be higher in five years, and higher still in 10 years,” says Holtz.

The message is that investors should stick with their long-term investment plans, and not let market fluctuations drive their decisions. Analysts caution that each individual investor needs to look at his or her personal situation before determining the best course of action. Investment strategy should take into account the individual’s time frame for needing to have money in hand, tolerance for risk and ultimate financial goals. Investors with shorter-term goals, or those near retirement, would take a different course from those in for the long-term.

“Stay the course as long as you have good quality stuff,” advises Ludvigson. “This is the way you create real wealth.”

Holtz agrees. “There are two ways to protect yourself from the movement of the market,” he says. “Be invested for the long term… and develop an asset allocation that takes into account your long term goals and desires and your ability to handle volatility.” Holtz also suggests investing “across various asset categories,” — varying the mix of investment vehicles to include stocks, bonds, treasury bills, etc. — in order to minimize risk.

The danger with the kind of volatility we have recently been experiencing is the temptation for investors to try to make a quick profit, which analysts insist is a chancy business. Those who try “are the ones who come out losers,” says Eric Sussman, a faculty member of UCLA’s Anderson Graduate School of Management. “Stay the course. Invest for the long term. If you have a long-term perspective you’ll come out fine,” Sussman advises.

Holtz concurs. “For the average person to try to predict which way the market will go is a huge mistake. People with decades of experience have no idea which way the market will go,” he says. Ludvigson shares the same sentiment. Her advice: “Buy quality and hold a long time.” In addition to the inherent riskiness of trying to time the market, transaction costs and tax consequences make this strategy quite costly, Sussman cautions.

Although most investors know, at least in theory, that the market grows over time, it is sometimes difficult to translate that knowledge into practice when the market is behaving erratically.

“There is much emotion involved in the movement of the stock market,” says Holtz.

“The mentality is: Is this it or is there more?” says Ludvigson. “Any correction and people get fearful,” she says.

The recent ups and downs seem to have made many investors forget that the market is, at press time, about where it was eight months ago. “Things aren’t going badly. Just not as well,” reminds Ludvigson, noting that the market went up between 17 and 18 percent between January and July of this year. Now, “we’ve given that back,” she says. “Investors still have plenty of gains if they’ve been in the market the last five years,” she says.

Less Money, Less Giving?

Despite these gains, the analysts agreed that the market’s volatility would adversely affect charitable giving. Sussman felt there was “no question” that charitable giving would decline, noting that studies tie stock market movement with personal spending. “Uncertainty leads to inaction,” he says. “People will hold off giving… until the uncertainty passes.”

“When you’re worried about the future, you’re less likely to give,” Holtz says.

But Jewish Federation Executive Vice President John R. Fishel remains optimistic. “There are four months before the end of the year. A great deal can happen,” he says, noting that many donors have “made a lot of money over the last couple of years.”

When asked if she thought investors would be reluctant to part with disposable income, Ludvigson answered, “You bet. [There will be fewer purchases of] all the things you would think of as discretionary: vacations, luxury cars… “

“Personally, I’m not going to buy a new car,” says Levin, “I’d push that back one to two years.” But although Levin anticipates a “dampening on Rodeo Drive” due to lower spending by both domestic and Asian consumers, he notes that “in this city, people go overboard regardless of the economic cycle.”

According to Ludvigson, the thing to remember is that stocks have produced a 10 to 12 percent annual return on average over the last 70 years. The high performance that marked the last two to three years were an anomaly, but “people got used to it.” The S & P (Standard & Poor’s) 500 Index rose an average of 31 percent during 1995 through 1997, giving investors a false impression. “It started to look easy,” Ludvigson says.

Even though she believes we are in for “a period of sloppiness,” she projects that “probably the worst is over.”

So what’s a bewildered investor to conclude about the wild ride on Wall Street? That patience and a strong stomach pay off. As Ludvigson says, “In five years the market will be higher. Next week or next month is anyone’s guess.”