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The Long View

Zuckerberg Example: Demonstrating What The Wealth Is For

December 17, 2015 | By Charles Lowenhaupt

The birth of a child is a wondrous event, and all the more if you’re one of the richest – and most thoughtful – people in the world.

On “Giving Tuesday” two weeks ago, Facebook Founder Mark Zuckerberg and his wife, Priscilla Chan, announced the birth of their first child, a daughter Max. At the same time, in a 2,200-word letter to Max, they pledged that 99% of their Facebook stock will go to charitable purposes to promote equality and human potential. The shares, currently valued at $45 billion, would be one of the world’s largest gifts ever. It puts Zuckerberg on par with philanthropists Warren Buffet and Bill Gates, two of the world’s most generous givers.

Not surprisingly, an act of this magnitude elicits a lot of commentary and deservedly so. Bill and Melinda Gates said the gift is “an inspiration to us and the world.” Philanthropist and former New York City Mayor Michael Bloomberg said, “when it comes to philanthropy, 30 is the new 70.”Read More

Why Investors Are Concerned

By Donna Gilding

Everywhere you look these days, investors are concerned about market risk. Some of the biggest risks facing investors today are fears about the impact of changes to US monetary policy, the resilience of the Eurozone, the strength of the US equity markets, the lack of potential in the global fixed-income markets and the strength of China’s stock market.

The heightened market uncertainty, and the perceived lack of opportunity in the US equity and fixed-income markets, has encouraged investors to funnel vast sums of money to alternative assets. This surge of money into private equity, hedge funds and infrastructure funds has raised questions about the ability of alternative managers to deliver the exceptional returns that many investors are seeking.Read More

Second Quarter 2015 Market Review

By Donna Gilding

The month of June was a pretty lousy month across the board. Equities and fixed income posted negative returns. The quarter was lackluster, especially for interest-rate sensitive securities such as REITs and MLPs. On a year-to-date basis, US and emerging markets small cap stocks have been the best performers. The Russell Microcap, for example, is up 2.80% and emerging markets small cap is up 8.25%.Read More

The Export-Import Bank: Why it Still Matters

By Donna Gilding

The Export-Import Bank was created in February 1934, as part of the New Deal, to finance trade with the newly established Soviet Union. A second bank was created a month later to finance trade with Cuba and shortly thereafter expanded to include all countries with the exception of the Soviet Union. Congress passed legislation to combine the two banks in 1935. They also granted the unified bank more powers along with more capital. While the Bank did extend credit to a few countries, such as Italy and China prior to World War II, its primary efforts were concentrated on Latin America as part of the Good Neighbor Policy.Read More

Will Consumers Spend the Oil Dividend?

By Donna Gilding

In the latter half of last year, the price of crude oil dropped by over 50%. This was soon followed by a significant decline in the price of gasoline for motorists. It was assumed that this drop in price would have freed up money to spend elsewhere. The markets bet on this. The run-up in the US stocks last year reflected the belief that cheaper oil would act as a stimulus to the economy. This, in turn, would allow the Fed to increase rates, attract funds to the US, and push up the dollar.Read More

Why Fairness Trumps Equality In Sharing The Family Wealth

By Charles Lowenhaupt

Question: When should wealth owners plan to leave unequal portions to their children?

Answer: Strange as it might seem, “almost always.”

Before dividing an estate, wealth owners need to get past the definitional ambiguity of “equal” and “unequal.” Most wealth holders define “equal” as a dollar-for-dollar split where each child gets the same amount. Yet another perspective might consider meeting needs equally, regardless of amounts. Research shows that about two-thirds of people choose dollar-for-dollar equality at death — but in our experience, most opt for equally meeting needs while they are alive.Read More

What Can’t Money Buy?

By Charles Lowenhaupt

The challenge of living with great wealth or raising children with great wealth is putting money in its place. That notion may seem oddly counter-intuitive because most people believe they have dominion over their money, not the other way around. In fact, money poorly managed often exerts a force of its own and has unintended – and often negative – consequences.

The key question is this: How should the wealth creator or wealth inheritor lead life to its fullest without drowning in the administration and emotion that can come with riches?Read More

What Will 2015 Bring: Three Economic Scenarios to Consider

By Donna Gilding

2014 turned out to be a notable year for a number of reasons even excluding geopolitical risks and global financial crises:

      • Small cap stocks had a great December and fourth quarter – up 2.97% and 10.06% respectively
      • REITS and long Treasuries were the best performers for the quarter – up 14.35% and 8.62%
      • REITS and long Treasuries led the markets for the twelve-month period – up 30.26% and 25.07%
      • We did not see a lot of folks betting on either REITS or long bonds of any flavor.

2014 is the sixth year with positive returns, the third year of double-digit returns and the 4th longest bull market in post-war history.Read More

Mobility and Freedom From Wealth

By Charles Lowenhaupt

The noted journalist Robert Frank tells us that the world’s rich are buying visas and passports to the tune of billions a year. Large private jet sales are booming, and luxury travel is being sold in every magazine and newspaper. A friend of mine whose parents were Holocaust survivors owns hotels in six or seven places around the world and in each maintains a penthouse. When I ask whether his real estate holdings are good investments, he says they are his best: “They lose money, but they allow me the comfort of knowing that I can always leave where I am to find security somewhere else.”

If wealth is for anything, it is for freedom – freedom to lead the life you want to lead, freedom to become all you can become, freedom to find freedom when a homeland does not offer it, and freedom to travel. Mobility is a luxury that the rich have become accustomed to whether they come from the U.S., from China, from Russia, from Saudi Arabia or from Venezuela.Read More

A Surprising Period of Unwavering Confidence

By Donna Gilding

Even as the headlines include wars in the Middle East and Eastern Europe, and as the European Central Bank announced further rate cuts, the consensus of our managers is that complacency and confidence continue to exist in the US. For example, none of the following events was greeted with apprehension about overheating or an imminent correction!

  • In the four years ending in August 2014, the S&P 500 gained more than 80% and crossed 2000 mark for the first time
  • The new jobs numbers for August were disappointing and showed that the US failed to create at least 200,000 new jobs for the first time in seven months.

Last year, even the suggestion of ending of quantitative easing, created a spasm in the global markets. However, once the tapering started, the stock market took it in its stride.Read More

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