Jewish Journal

Philanthropy and investing: ‘Both tax-deductible at this point’

by Brad A. Greenberg

April 21, 2009 | 12:03 am

The Atlantic has a great cover story this month from Jeffrey Goldberg, the veteran of Middle East politics. This article is a bit off the beaten path for Goldberg. Instead of Israel or Islamic terrorism or politics, it deals with the financial crisis and why he got such bad advice from his broker at Merrill Lynch.

If you were one of millions of Americans who did everything you were told to do and now find yourself in the worst financial position of your life, read Goldberg’s article.

In it, he visits with financial advisers and catching them stumbling over catch phrases and investment cliches. For example: a video of Richard Bernstein, the chief investment strategist at Merril, l telling clients they need to “lengthen their investment horizon.”

Goldberg writes:

To which I would add this observation from Keynes: “In the long run, we are all dead.”

This is what I heard Bernstein say: give up. You’re not going to make money on your investments in the next 10 years, or 15, or 20, so you should stop worrying about your portfolio and go to the movies like everyone else.

I called Bernstein and asked him if he was, in fact, advocating a form of Stoicism. He said I was misinterpreting his views. “This is not some sort of psychological compensation device. What I’m saying is that in looking for investment ideas, we should be looking over a five-, six-, seven-year time period. You have to give an investment strategy time to reach gestation.”

But my investment strategy gestated for 15 years. And then it died.

As I write this, the markets are back down to 1997 levels. In Japan, they’ve sunk to 1983 levels. I pointed out to Bernstein that 1983 was 26 years ago. The investor who bought Japanese equities in 1983 and held on to them has stayed absolutely flat. “That’s not correct,” Bernstein said. “That doesn’t take into account dividend payments.”

Even with all those munificent dividend payments, my net worth has dropped by a third, and new vistas of worry open up for me each day.

Goldberg mentions some of the bad advice he and others received from Merrill. Among the “buy and hold” picks was Nokia. To which I had to send Goldberg this e-mail:

Not to be disappointed, I saw you included Nokia in the can’t-miss picks from Merrill. This brought back memories far more traumatic than the 35 percent I’ve recently lost off the top of my FMA. When I graduated from high school, my grandfather gave me $5,000 to get started. I decided to invest $4,000 in the stock market and put the rest in my money market savings account. I didn’t have a stock broker, but my father’s referred me to one of his juniors. He talked a big game but actually knew less than nothing about investing and recommended putting all my money into Nokia—96 shares at $41 a piece. I didn’t know better, and before I finished my first quarter of college, the stock had fallen to under $12 a share. As you know, it never recovered.

Yeah, that was an expensive lesson.

You can read Goldberg’s article, “Why I Fired My Broker,” here. The money quote was found at a small gathering Goldberg attends of wealthy New Yorkers who want to give back.

“I thought this was a perfect time to talk about philanthropy and investing, because they’ve merged,” Bill Ackman, the founder of Pershing Square Capital and leader of the discussion, said in his opening remarks. “They’re both tax-deductible at this point.”

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