Professor Robert Aumann, winner of the Nobel Prize for Economics in 2005, returns to Goldstein on Gelt to share more of his insights on pairwise matching, what this means, and how to apply its logic to making everyday decisions.
Posts Tagged ‘finance’
One of the hottest topics across all spectrums in the Jewish community is the financial sustainability of Jewish day school education in America. Schools have invested a lot of time and resources to train their professionals in the art of fundraising, developing donor relationships, and launching effective capital campaigns. And there has been a concerted effort among Jewish educational organizations to establish programs to assist day schools in improving their governance and developmental practices.
In early 2011, the AVI CHAI Foundation, along with local foundations and federations in various Jewish communities, provided support to Yeshiva University’s Institute for University-School Partnership (YUSP) to launch a broad-based program to improve growth and performance. The goal of the program was to collect data from a pool of approximately 35 schools and then use that data as a comparative benchmarking tool to identify opportunities for revenue enhancements and expense reductions at a minimum of 10 percent of their respective budgets. Collectively these schools have a budget of $225 million, so a 10 percent improvement translates to $22.5 million.
In addition, Torah Umesorah is scheduled to begin a training program to educate yeshiva day school executives in effective leadership and management skills, including an emphasis on board development and fundraising.
And the Partnership for Excellence in Jewish Education (PEJE) recently announced the launch of MATCH, for the fourth time since 2004. This program, which went into effect on August 1, is designed to strengthen Jewish day schools by broadening the community of donors. To accomplish this, the program provides first-time donors the opportunity to leverage a donation of $10,000 or more at a matching rate of 50 cents to the dollar, up to $50,000.
These approaches are highly innovative and have the potential to be successful and helpful to many schools. However, programs that focus on fundraising and development can only be effective if there are no cracks in the school’s administrative foundation. A ship can only set sail once there are no leaks in its hull; otherwise it will not get very far.
I know of a school that found itself in dispute with local storekeepers for thousands of dollars in merchandise. There was general confusion concerning what was purchased and what was owed. As is the case with many schools, principals and teachers would purchase goods on credit, often forgetting to submit the bill to the finance office. At other times, the stores would mail the invoice to the finance office, which was unaware a purchase had been made. The invoices would not be paid right away so the store would then fax in the invoice. Over time, no one knew what was ordered, what was actually received, or what was paid. Sometimes the same invoice would be paid twice, even three times.
All this could have been avoided had some simple and easy internal controls been in place. Ultimately, that is exactly what the school did. First, it authorized one person to do all the purchasing of goods and services for the school and put a strict ban on all staff from making any purchases on credit. A letter was then sent to local stores informing them of this new policy. Storeowners were warned that if they accepted a purchase on credit from anyone other than the school’s authorized purchaser, they would be sent a tax receipt for the “donation.” Faxes would no longer be accepted either. Payments would only be made from the original invoice.
A requisition form was also introduced for all purchases of goods and services. Approval from the executive director was required before any purchase was made. When goods arrived at the school, they were counted and matched to both the invoice and the approved purchase requisition form. The school’s administrators were surprised to see how many times the quantity of items stated on the invoice was greater than what was actually received. A lot of money was saved by catching these errors. Even the shopkeepers were happy when they started getting paid on time.
To be clear, there are a great number of schools that do operate at a very high level of competency. Their administrations take seriously their fiduciary duty to parents and donors to operate their schools in the most professional and financially efficient manner. They have their finance offices humming along like well-oiled machines and their lay leadership is to be commended. For these schools, the YUSP benchmarking and strategic planning program, as well as other pioneering programs, would not only work but could ensure their viability and sustainability for decades to come.
One of the main headlines in world financial news this August has been the fate of ZeekRewards.com, an online company that offered investors the chance to get rich quick. Interestingly enough, I heard about ZeekRewards before this company hit the headlines, when one of its salespeople contacted me and asked me to represent them. The very pushy salesman nagged me to set up a meeting, but the more he pushed me, the more uneasy I felt. So I decided to follow my mother’s adage of, “If it sounds too good to be true, it probably is,” and I didn’t meet him.
Reading the headlines, I’m very relieved with my decision. ZeekRewards offered promises of returns such as 1.5% of the investment at the end of each day and shares of 50% of the daily profits. Wouldn’t everyone want that kind of deal? However, this August, the Securities and Exchange Commission (SEC) filed an emergency action in a North Carolina federal court because this investment project was yet another Ponzi scheme.
The owners of ZeekRewards must have realized that many of these potential investors were going to ask questions. So, in a bid to protect themselves they added a clause for new users stating that they were not purchasing stock or any kind of “investment or equity,” and they even labeled the whole thing as an “e-commerce subscription.” The SEC saw through their ruse and said that this was not the case and in fact the company was offering its subscribers false securities. However, the average investor did not have the knowledge to understand what they were getting into, and the abovementioned clause probably sounded fair enough.
As people kept subscribing and playing the company’s game, investing and reinvesting, the company’s cash outflows began to exceed its total revenue, leading to a collapse and many unhappy subscribers who were left with nothing.
This time, there are more than 1 million victims of the scheme, making this the largest such bankruptcy case, with around $600 million at stake.
Interestingly, many observant Jews, both in Israel and America, have fallen prey to this scheme. It’s not the first time that Jews have been hit hard by Ponzi schemes (think Madoff).
This raises the question of why Ponzi schemes such as ZeekRewards are tempting to the religious Jewish community. One possible answer is that many religious Jews have large families and in this economic climate finances may be tight. Offer a person who is trying to find legitimate ways to support his family a way to make some extra money, and it’s tempting to find out more.
Sadly, as stated above, ZeekRewards is not a one-off story. Apart from desperation to make more money, another possible reason people fall for these schemes is that the scammers may have gotten smarter.
However, there are three basic measures that you could follow to protect yourself from falling victim in a financial scheme:
1. Remember my mother’s rule: “If it sounds too good to be true, it probably is.” ZeekRewards offered high gains for pressing a few buttons and looking at some ads. This is the first sign of something suspicious. When something sounds too good to be true, ask yourself, “What’s the catch?”
2. Do your research. One potential investor who decided against investing with ZeekRewards said that when he heard about it, he did his homework. He discovered that the company’s securities offerings were not registered with the SEC as required by U.S. federal law. Recognized authorities monitor investments for a reason; their absence speaks volumes.
3. Don’t feel pressured. If the company/salesman/friend keeps nagging you, saying that the investment opportunity will be gone if you don’t “buy now,” it may be wise to let the opportunity pass.
While there are no guarantees in the world of finance, taking these three steps will provide a basic level of protection against becoming a victim of the next Ponzi scheme that rears its ugly head.
If you are interested in hearing more about the biggest investment fraud in history, watch this TV interview that I did on the subject of Bernie Madoff. Although this was four years ago, the points remain the same. If anything, there are more frauds out there and we need to be more careful than ever. So be wary and tread with caution.
Wealth transfer is a hot topic in financial planning. Thinking about how to pass funds from one generation to the next can be emotionally difficult. Perhaps the older generation doesn’t approve of the way the younger spends the money, or the younger generation isn’t involved in the family business. Furthermore, tax and legal issues can complicate matters.
While estate and inheritance planning can be complex, other wealth can be transferred more easily: the wealth of knowledge. My grandmother successfully passed a financial education to my mother, who transferred it to me, as I am a proud third-generation licensed broker. My maternal grandmother Miriam Rosofsky struggled against social norms to enter the work world. But eventually she had the distinction of being one of the first women to hold a U.S. Securities license. She started as a secretary in a brokerage firm, but then began picking up her own book of clients. My mother Rhoda Goldstein was an associate vice-president in Dean Witter. Dinner-time conversation around my childhood table alternated between medical issues (my father was a surgeon) and economic discussions. I saw how both my parents helped people gain and maintain their physical and financial health. It was therefore only natural for me to begin my financial career partnering with my mother on Wall Street.
After I made aliya, I founded Profile Investment Services, Ltd. with the aim of helping people living in Israel create financial plans and maintain U.S. brokerage accounts. I try to follow in my mother and grandmother’s footsteps in transferring the wealth of financial knowledge to my own children. Even though none have announced their desire to be financial planners (but my wife recently became a licensed U.S. broker), they do check stock prices regularly.
We frequently discuss fiscal responsibility, budgeting, and other economic topics at our dinner table. Some of the kids are reading books on behavioral finance, and others are reading books about loyalty, fidelity, and trust. My mother, keen to pick up on children’s natural curiosity about money and the way the “grown up” world works, recently came out with a book geared for young adults about how the stock and bond markets work, and how an entrepreneur can raise the funds necessary to fulfill his dream. If you’re interested in sharing this information with your children and transferring the wealth of financial knowledge to them, visit my website to get her new book Stocks, Bonds, and Bicycles. Let me know if you recognize any of the characters in the story.
What did you do when you built your portfolio? Did you invest the money and then simply walk away? Did you then expect to take another look in ten years’ time and find that you had miraculously become rich?
The financial world, like many other things in life, is always subject to change. Markets go up, and markets go down. What if there is a war in your part of the world, or a huge banking crisis? The financial markets are affected by so many outside factors, a lot of which are not necessarily as dramatic as the above two examples but still have their ramifications upon investments. For this reason, it is always a good idea to take a periodic check of your portfolio to see if the level of risk is still appropriate and if you need to readjust your investments in favor of something that would be better for your present circumstances.
This fiscal check could be compared with the annual reevaluation that Jews are supposed to make at this time of the year. The months of Elul and Tishrei are a time to examine your deeds. You look at what you have done over the past year and where you are going. Are the decisions that you made in the past for yourself and your family still right for you, given the circumstances in your lives that may have changed during the year? How have various challenges that you may have undergone affected the way that you live your life? When you look at the future, what do you see? Although you cannot predict what will happen, there are certain things that you may need to keep in mind and prepare for. Are you prepared for these events?
Spiritual accounting is similar to the financial accounting. In order to be an effective investor, it’s a good idea to sit down once a year with your financial adviser and ask:
– What has happened over the past year that might have changed the balance in your portfolio? – Which of your investments have become more or less risky as a result of market performance? (Learn more about assessing whether high or low risk is good for you.)
– What are your goals for this year, and do you have the means to accomplish them?
– Do you need to change anything in order to improve your financial situation? And if so, exactly what?
– What are the pros and cons of any possible financial move that you may be considering, in terms of hidden costs and taxes, as well as potential profits?
With best wishes in starting the New Year with renewed spiritual strength…and a reevaluated, stronger portfolio.
A mass rally that was supposed to combine Social justice activists with the ‘Suckers Camp’ proved once again that there’s such a thing as too many rallies. Last night the Tel Aviv square looked very sparsely populated, despite organizers’ promises/hopes.
But whether or not this spells the end of this wave of rallies – the prime minister, his finance minister and the Israel bank governor made a compelling case for budget cuts, fuel, cigarettes and beer taxes, and imposing an extra point on the already high VAT – it’s clear that someone somewhere in Tel Aviv last night managed to turn on the bat signal.
A lot of good it did them…
Samaria will have its first full university, pending the go-ahead of the Israeli military.
The Ariel University Center on Tuesday was recognized as a full university by the Judea and Samaria Council for Higher Education, which handles educational concerns in the “disputed territories.” The center, which has more than 10,000 students, Jewish and Arab, would be called Ariel University.
The 11-2 vote came despite a vehement recommendation against approval by the planning and budget committee of Israel’s Council for Higher Education, as well as opposition from the country’s other seven universities, and from public figures, all of whom objected to upgrading a college which had passed all the prerequisites for the boost, but was still unable to conceal the damning fact that it was located in the “West Bank.”
Last month, in a letter to Netanyahu, the presidents of Israel’s seven universities said that an eighth university would deal a “fatal blow to the higher education system in general, and the universities in particular.”
On Sunday, Finance Minister Yuval Steinitz announced that his ministry would earmark extra funds for the Ariel University Center, so that it would not cut into the funding of Israel’s other universities. Steinitz said he will ask the government to grant an allocation of some $5 million to $7.5 million for the next two fiscal years, with plans to increase the sum in future years.
That’s an approximately $4 million a year fatal blow.
Professor Daniel Zajfman, head of the Weizmann Institute of Science, said he would cancel all academic and professional cooperation with Ariel U.
Hebrew University President Menahem Ben-Sasson was concerned about gentile reaction to the move, specifically Norwegians and Swedes, warning: “We are putting the next Nobel Prize in danger.”
MK Einat Wilf, head of the Knesset Education Committee, said it was still all about the money: “If the Finance Minister and the Education Ministry have tens of millions of extra shekels for higher education, they should have been used to assist the existing universities, which are recovering from a decade of tough budget cuts.”
Again, that’s approximately $4 million a year.
For comparison, as of 2010, the Hebrew University deficit was estimated at $2.5 billion.
And the Tel Aviv University salaries and pensions alone have reached $165 million a year.
No doubt, depriving the fledgling Ariel of $4 million a year would go a long way to balance those hemorrhaging deficits.
Of course, the report on the center’s progress that was submitted to the committee of Israel’s academic establishment praises Ariel’s accomplishments and left no doubt as to its ability to take its rightful place as a major academic institution.
The final authorization for making the Ariel center a university will be made by the IDF central commander in the West Bank, Maj.-Gen. Nitzan Alon. At this point, Alon is expected to back up the Judea and Samaria council’s decision.
The Judea and Samaria council was established in 1997 after the Council for Higher Education refused to discuss academic issues concerning the “West Bank.”
In 2007, the Ariel academic center was granted temporary recognition as a so-called university center, and its status was to be reexamined within five years. The city of Ariel, with a population of about 20,000, is located southwest of the biblical city of Shchem, where the patriarch Jacob was hoping to settle down and study some Torah, when unexpected thing started to happen.
Like it or not, Jacob’s dream is becoming a reality now.
JTA content was used in this report.