The Importance Of Philanthropy

“Living well has at least two parts to it: living a life that makes you happy, and living a life that is of service to others…To find an activity truly fulfilling, you must both take pleasure in it and feel a strong sense of connection between it and a larger purpose for your life.” 

~ Christopher Eisgruber, President of Princeton, referencing the work of Kwame Appiah, in his welcome address to the incoming class of 2017 on September 8, 2013.

This blog is going to be a departure from my usual financial or investment discussions. Instead, I want to talk about something even more important, something that has been integral to my life since I was a child, and something that has become more even imperative over the past few years.

Living a life that is of service to others, as Mr. Eisgruber cites above, is one of the best pieces of investment advice I can give you. It is a very powerful phrase, and one I take to heart. As some of you may know, I am honored to serve on the Board of the Food Bank for Westchester #FB4W. I say honored because I truly believe that I’ve been very fortunate in my life and I feel a powerful imperative to give back to those members of our community who haven’t shared the same blessings.

Hopefully some of you also know that September is Hunger Action month #HungerAction. Last week I had the good fortune to participate in the press conference that formally kicked-off our efforts to raise awareness of the pervasive problem of hunger in Westchester, and the rest of the country #GoOrange. As I was writing my speech it again hit home to me how important it is that I can do whatever I can, both with my money and my time, to make a difference in my community.

I can tell you from personal experience that the act of giving is incredibly powerful and life affirming. There is so much need in the world that it can be hard to know how to start. So I recommend that rather than focus on the enormity of the problems, think instead how you can help one single person. You can serve a meal, help build a house, provide a mosquito net, teach someone to read, mentor a child, dig a well, etc. The ways in which you can help someone are limited only by your time and imagination. When you put philanthropy in those terms, it becomes much easier to see how the efforts of one person can make a real difference in the life of someone in need.

If you are inclined to make a donation, you can enjoy the tax benefit of that contribution. Recent tax laws enable giving directly from a retirement plan, which also has great tax implications. Please discuss this with your tax professional before doing anything.

Whatever you decide, I urge you to do something today. Pick your favorite charity and send them some money today. Then try to make philanthropy a core part of your life. And make sure to talk to your children about what you’re doing, and try to involve them as much as you can so that it becomes part of their lives. The time is now to begin living a life in service to others. #GiveBack.

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What I’m Thinking Today

In honor of the extra day in February this year, and on the eve of Super Tuesday, I thought it was a good time to jot down some random thoughts on the market, the economy and the election. So, in no particular order, here goes . . .

  • I hope you listened to my pleas in the last few newsletters not to panic and sell your quality holdings into the correction. If you didn’t, you’ve enjoyed a gain of almost 1,000 since a bottom was made on February 11.
  • I don’t think February 11 was “the bottom” for the year. We’re likely to have at least one, if not two more, corrections this year. That being said, I do believe the market will be higher over the next few years.
  • I would substantially overweight, or even limit, your investments to blue-chip, dividend paying, U.S.-based equities as most of the rest of the world is a mess and income is at a premium.
  • Although I’m happy to see oil prices firming above $30 I don’t think the pain is over. There is still way too much oil sloshing around the world and not enough demand to soak it all up. When the stories of bankruptcies in the oil patch begin to dominate the national media, that will be time to start buying stocks in the energy sector.
  • Large-cap pharmaceutical and biotech stocks have been too beaten up; some great values are starting to present themselves.
  • There is almost zero chance the Federal Reserve will raise rates this year. The greater chance is that they’ll cut rates, although I don’t think that will happen either, at least not in the next few months.
  • When times get scary, and you aren’t sure what to do, it’s ok to do nothing. Outside of some family accounts, in which I bought some stocks during the downturn in January (which proved too early), I have made next to no trades in 2016. And that’s just fine. Sometimes the best trades are the ones you don’t make.
  • When you’re an investor, it’s paramount that you recognize that markets go up and down. There are good times and bad. Up cycles and down cycles. The sooner you accept reality the better. Then you’ll be able to accept the down down with some equanimity and the good times with humility. Investing properly is a marathon, not a sprint.
  • The stock market does not like uncertainty and one of the greatest uncertainties right now is the election. Notwithstanding Bernie’s surprising resilience, I think most people would agree that Hillary will be the Democratic nominee for President.
  • Less certain, though increasingly likely (and I can’t believe I’m writing this), is that Donald Trump will be the Republican nominee. If he sweeps the majority of the #SuperTuesday states tomorrow, his coronation will be virtually assured. And no sane person could really want that to happen. The closer Trump gets to the presidency the more likely the stock market is to be rattled. And that’s not good.
  • All of the Trump supporters out there who think a vote for Trump is a vote for change (“throw the bums out”) and that he will “Make America Great” again, should stop for a minute, listen closely to what he’s actually saying (or more to the point, what he’s not saying) and ask if he is really the person we want leading this country for the next four years. Perish the thought.
  • Tell the important people in your life how much they mean to you. Spend more time with your friends and your kids. Go out and do the things on your bucket list. Don’t wait to drink that great bottle of wine. Life is too short and too precious to waste a moment of it.
  • Give more of your time and/or your money to those less fortunate and count your blessings for how lucky you are; I do every day.

Prepare For Year-End, Not the Fiscal Cliff

There are three weeks left in the year and the world won’t be coming to an end, literally or figuratively, regardless of what the various doomsday prognosticators have to say. It’s impossible to turn on the television or open a newspaper without being assaulted with dire warnings about the impending disaster that is the “Fiscal Cliff”. It’s gotten to the point where I can only watch CNBC is when it’s on mute.

For those of you who’ve been living under a rock, the Cliff is the December 31st deadline after which substantial tax increases and mandatory spending cuts will take effect. The tax increases are largely from legislation passed by President Obama to pay for his health care program along with the end of the Bush tax cuts. The spending cuts were mandated during the last failed deficit negotiations. It’s been estimated that should all of these tax increases and spending cuts come to pass, it will shave 4%-5% from GDP growth, sending the country into a deep recession.

While I’m growing more and more angry and frustrated (if that’s even possible) at the intransigence emanating from both parties in Washington, I honestly don’t think the looming fiscal cliff is really the nightmare everyone is saying it will be. It is HIGHLY UNLIKELY that every tax increase and spending cut will, in fact, come to pass. Some compromises will certainly be made by our leaders in Washington, despite the radical bleatings of the far right and far left.

Whether the deal is brokered in the next two weeks or the next two months, I’m confident a deal will be made that will leave both sides less than happy but will stave off the worst result, which would be simply doing nothing. It is truly in the best interests of everyone, other than perhaps that fiscal terrorist Grover Norquist, to get a deal done. There is simply too much self-interest in Washington, especially in the House of Representatives, where they must stand for re-election every two years, to allow a fiscal calamity to happen on their watch. That’s a great way to get thrown out of office by a pissed off electorate.

So if we’re able to drown out the noise about the cliff, what should you be truly focused on between now and the end of the year? Given all of the current uncertainly, there are no simple answers, but here are a few suggestions for you to ponder:

  1. If you have large unrealized gains, consider realizing some of them this year to take advantage of the low capital gains tax rate, which is likely to rise next year.
  2. If future capital gains taxes aren’t really an issue, don’t forget to match gains with losses where possible to minimize your tax bill this year.
  3. Check your portfolio to see if your holdings need to be re-balanced. Avoid having any one position be too large a percentage of your overall holdings. I generally like using 10% as a maximum position size. Similarly, either add to, or get rid of, positions that are simply too small to make a difference.
  4. If you have a large estate, consider making gifts of up to $5.1 million before year-end to take advantage of the large estate tax credit that expires this year. Unless a compromise is reached, it reverts back to $1 million next year.
  5. Speak with your adviser to make sure your investments are suitable for your financial objectives and risk tolerances. Times and conditions often change, and our investment approaches sometimes must change as well.
  6. If you don’t have a will; write one. If you have a will, but haven’t updated it in more than five years, it’s probably time to look at it again.
  7. If you haven’t already done so, consider giving some of your time and/or money to a worthwhile charity. There are so many organizations out there that desperately need your help, especially during the holidays. So open your heart and your wallet and make a difference for those in need.