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New Charities: Helpful Or Excessive?

Monday, January 4th, 2010

The rapid growth of the number of charitable organizations is raising some red flags for some.

  • There is concern that some nonprofits are exploiting the IRS’s broad definition of what constitutes a 501(c)3 organization.
  • The issue isn’t whether the charities are fraudulent as much as whether the applicants are following state and federally-mandated regulations and laws.
  • The IRS stands by its streamlined process that distinguishes between small and large organizations.

Facts & Figures

  • Last year the IRS approved 99% of all applications for public charity status (that’s more than one every 10 to 15 minutes!)
  • In 2008, $300 billion was donated to charities which cost the federal government more than $50 billion in lost tax revenue.
  • The tax code defines public charities as organizations that are “religious, educational, charitable, scientific, literary, testing for public safety, to foster national or international amateur sports competition or prevention of cruelty to animals.”

Best Quote:

“It just seems utterly implausible that anyone can be doing due diligence in any way that constitutes a serious review of the applicant, let alone keeping an eye on them after they are approved. Why bother to have a review at all if you only reject 0.5 percent of the applicants?” – Rob Reich, Associate Professor of Political Science at Stanford

Starring… The Perfumer?

Monday, January 4th, 2010

The fragrance industry takes a new approach to selling their products: promote the perfumer.

  • Previously fragrance companies linked their perfumes to the identity of designers, then celebrities, now it’s the actual maker.
  • Fashion magazines increasingly reference perfumers by name, helping drive this trend.
  • Fragrances made by large manufacturers are less likely to publicize a fragrance’s creator, as they rely on a team of art directors, consultants, clients, as well as perfumers.

Facts & Figures

  • Frederic Malle’s company, Editions de Parfum, was the first to celebrate perfumers by name.
  • Seminars are held where perfumers meet with customers and discuss the inspiration for their fragrances.
  • During the first nine months of 2009, sales of prestige fragrances were just over $1.38 billion in department stores, representing an 11% decline.

Best Quote

“Makeup did it with the makeup artist. Skin care did it with doctors. What’s happening is the fragrance industry is realizing the perfumer is the ultimate celebrity of fragrance.” – Karen Grant, Analyst at NPD Group

Goldman Sachs Pays Highest Officers In Stock

Friday, December 11th, 2009

Goldman Sachs, the famous and most profitable Wall Street investment bank, will pay its top 30 executives in stock bonuses instead of cash bonuses this year.

  • Paying the executives in stock is meant to reduce public anger over large profits and the $5 billion that has been set aside for employee compensation in the wake of the financial crisis this year.
  • Paying the executive bonuses in stock means that employees cannot reap the benefits of that money for at least five years.
  • The internal reason for paying out stock is to encourage future performance by the whole company – not just focused reward for one particular year.

Facts & Figures

  • Goldman set aside $5.38 billion dollars this year for compensation for its 31,000 employees
  • The average employee at Goldman will earn roughly $700,000 in 2009
  • Compensation and bonuses are at an all-time high for Goldman Sachs

Best Quote

“We believe our compensation policies are the strongest in our industry and ensure that compensation accurately reflects the firm’s performance and incentivize behavior that is in the public’s and our shareholders’ best interests.” -  Lloyd Blankfein, Chairman and Chief Executive at Goldman Sachs

iTunes Invades the Internet

Thursday, December 10th, 2009

iTunes became the mp3 champion of the world by curbing illegal downloads while still allowing customers to “own” their purchased music files, but now the company is considering an entirely different model based on paid access, not ownership.

  • Apple is planning to extend its mp3-selling business beyond its popular iTunes music store, which keeps purchased music files saved on a single computer.
  • Having just absorbed lala.com, which allows users to purchase music that is stored remotely and accessible anywhere there’s Internet, Apple is considering a web-based mp3 storage model that will have a significant impact on the industry.
  • Making music purchases available outside of the iTunes program will allow the company to reach more customers through search engines and websites.

Facts & Figures

  • Apple paid $85 million to acquire LaLa Media Inc.
  • Wal-Mart Stores Inc. was the biggest supplier of music until last year, when Apple usurped it.
  • iTunes forecasts revenues of $2 billion this year.

Stocks, Bonds, Diamonds?

Tuesday, December 1st, 2009

A pink diamond sold for a record amount in Hong Kong to… an anonymous bidder.

  • A 5 carat pink diamond, the size of a chickpea, set in a silver ring was auctioned off for a record $10.8 million.
  • The diamond was sold to an unidentified individual. Christie’s International (which held the auction) would not confirm if he or she was Chinese. This unidentified person beat out Chinese millionaire and successful stock investor Liu Yiqian and his wife Wang Wei.
  • Many items that were sold in the auction sold for prices greater than their value due to a drive in Chinese buying and the growing interest in jewelery among the Chinese.

Facts & Figures

  • This pink diamond sale beats out the previous record of $10.5 million for a 7.03 carat blue diamond.
  • A cushion-shaped 16.65 carat sapphire set by Van Cleef & Arpels sold for just under $2.4 million.
  • Total sales at the Christie’s auction came to just under $48 million.

Best Quote

“Some prices were crazy, way above what one would pay even at a jewelry store. There’s a lot of mainland Chinese buying; either they didn’t know what the items are worth or they wanted them so badly that price didn’t matter.” – Donald May, Hong Kong-based Gem Dealer

Black Friday 2009 In Review

Monday, November 30th, 2009

Shoppers showed up the day after Thanksgiving, but their cash went to bargains, sales and less expensive items.

  • More shoppers hit the stores this holiday weekend than last year, but this time they were in search of sales and small appliances.
  • Department stores were a big hit, with just over half of all shoppers visiting at least one during the weekend (a 13% increase from last year!)
  • Cyber Monday, the Monday after Thanksgiving weekend, attracts many shoppers to the Internet for large sales on items that did not sell as well during the weekend. Cyber Monday is an important day in sales for many e-commerce sites, but projections are lower based on the fact that many people who would normally shop during their lunch hours at work are too worried about job security to do so.

Facts & Figures

  • 195 million shoppers ventured into stores during the holiday weekend, as compared with 172 million last year.
  • Average spending, per consumer, dropped to $343.31 per person, down from $372.57 a year ago.
  • 63.8% of shoppers shopped for themselves this year (though Black Friday is traditionally popular among gift shoppers). Also, 31.2% of shoppers were in line for stores at or before 5:00 am.

Best Quote

“During a more robust economy, people may be inclined to hit the snooze button on Black Friday, but high unemployment and a focus on price caused shoppers to visit stores early in anticipation of the best deals.” – Phil Rist, Executive Vice President for Strategic Initiatives at BIGresearch

Stop Crying, It’s Hurting Your Portfolio

Wednesday, November 25th, 2009
If investors just trusted classic investing strategies instead of getting so emotional, their portfolios would be much better off…
  • A new study found investors are making two big mistakes: 1) they get too emotional about their investments and make hasty decisions, and 2) they assume recent performance dictates future performance.
  • The study also explained that the most classic investment strategies – asset allocation and portfolio rebalancing – would help investors avoid these mistakes.

Facts & Figures

  • Over the past 2 years, a basic portfolio with conservative asset allocation and annual rebalancing dropped by only 3.5% compared to a 30% S&P drop during the same time.
  • During a boom, a basic portfolio with conservative asset allocation and annual rebalancing returned 8.3%, not so much less than 9.7% for the S&P.

Best Quote

“People spend all their time looking at the trees and not the forest. It’s the forest that’s important, and that’s asset allocation.” – Gary P. Brinson, Chicago-based Asset Manager

It’s Time To Talk About Your Rich Kid Guilt

Tuesday, November 24th, 2009

Young people from wealthy families in Washington, D.C. take comfort in talking to their peers about the mixed feelings and guilt they experience because of their societal privilege and wealth.

  • Resource Generation, a national membership organization, brings wealthy young people together who want to use their money for progressive change.
  • The organization’s meetings provide members with a place to discuss personal issues that accompany being young, wealthy and committed social justice.
  • Many members feel their inheritance and the accompanying privilege they enjoy perpetuates the injustices they work hard to fight against and change.

Facts & Figures

  • A Boston College study concluded that about $50 trillion will be passed from one generation to the next over the first five decades of this century.
  • The number of children of millionaires decreased from 26 million in 2007 to 19 million 2009, according to the Center on Wealth and Philanthropy at Boston College.
  • There are a little more than 250,000 millionaire households in which the head of household is 35 or younger.

Best Quote

“I definitely feel like I am at war between my desires instilled in me to eat out at nice restaurants and my better sense and principles. If I make different choices when I am older, I hope to God they’re coming out of principles. Everyone changes. My great-grandmother was a communist in her 20s and a total conservative in her 90s. I won’t rule out anything.” – Janelle Treibitz, 28, Part-Time Waitress

Discount Fever Breaks at High-End Retailers

Tuesday, November 24th, 2009

Expensive retail stores such as Saks Fifth Avenue and Neiman Marcus are retraining customers to paying high prices for exclusive goods this holiday season…

  • Retailers have driven prices up and maintained sales during this fall by keeping inventory low and promoting a sense of exclusivity.
  • Over the past year, consumers became accustomed to seeing large discounts not only at “big-box retailers” such as Walmart, but also at high-end stores such as Saks.
  • Earnings are improving for large stores because they are selling more items at full price, as opposed to same amount of items at discounted prices (as in Fall / Winter 2008).

Facts & Figures

  • In the fall and winter of 2008, merchandise in luxury stores was discounded as much as 50-70% off full price
  • Inventory at Saks is down by double digit percentage points compared to last year
  • By keeping inventory low this holiday season and playing up the exclusivity factor, retailers can keep items at their full price

Best Quote

“What’s luxury retailing about? It is about a scarcity of supply.” – Stephen I. Sadove, Chairman and Chief Executive of Saks Fifth Avenue

Size Isn’t What Matters In Philanthropy

Monday, November 23rd, 2009

While celebrity philanthropists tend to dominate the headlines, charities are waking up to the importance of cultivating a base of modest givers.

  • Many organizations are responding to the recession by casting a wider net for more donors who can give smaller amounts.
  • Fidelity Investments, which houses the largest pool of donor-advised funds, used to require all outgoing donations be at least $100. A year ago they dropped the minimum to $50.
  • Small grants have produced some of the more important success stories, including the $96,691 that the Ford Foundation gave to Mohammed Yunus to found the Grameen Bank (which specializes in providing financial services, including microcredit, to impoverished people in Bangladesh).

Facts & Figures

  • March of Dimes recently raised $6 million at Kmart checkout lines, where shoppers were asked to add a manageable $1 donation to their purchase.
  • Global Giving, an online fundraising organization, has raised $22 million since it started in 2002, with an average donation of just $54.
  • After the disastrous Southeast Asian tsunami in 2004, Americans gave $2.78 billion in aid. The median gift was $50; the average gift was $135.

Best Quote

“We are deluded by the attention paid to the large contributors in our country. Small checks coming through the mail are the bread and butter for most organizations.” – Wendy Smith, Author of Give a Little: How Your Small Donations Can Transform the World

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