Tuesday, September 28, 2010

The Book of Life – Another Chapter

by Alexandra Lebenthal

You may recall last year, almost a year to the date of the great market meltdown of 2008 Abby and Jon sat in Temple on Rosh Hashanah. At the time, Abby thought about what had transpired for her friends who had survived the worst financial crisis since The Great Depression.

This past Saturday, September 18, Abby sat in nearly the same seat at Yom Kippur services and looked around the room at many of the same people. She realized their stories were still unfolding.

The Rabbi asked everyone to rise and recite U'netaneh Tokef prayer. It was no less moving for Abby to read the words out loud this year than last.

On Rosh Hashanah it is inscribed,
And on Yom Kippur it is sealed.
How many shall pass away and how many shall be born,
Who shall live and who shall die,
Who shall reach the end of his days and who shall not,
Who shall perish by water and who by fire,
Who by sword and who by wild beast,
Who by famine and who by thirst,
Who by earthquake and who by plague,
Who by strangulation and who by stoning,
Who shall have rest and who shall wander,
Who shall be at peace and who shall be pursued,
Who shall be at rest and who shall be tormented,
Who shall be exalted and who shall be brought low,
Who shall become rich and who shall be impoverished.

In 2008, it seemed as if the world was beginning to collapse on Rosh Hashanah. By Yom Kippur, a mere ten days later, it had cratered. Abby remembered warning Jon not to dare look at his iPhone to see what the market was doing. It had been impossible for him to resist — and he wasn’t alone. It felt like it was the end of the world as they knew it — for many it was.

This year at least today was “No Device Day”, and both of them had agreed to keep all electronic devices off for a full 24 hours. There was something liberating about not turning on their phones and pdas, although Jon commented that he was feeling the effects of that more than fasting.

Abby thought about the last twelve months. In 2009, recovery seemed to finally get underway, then sputtered. Last Spring Greece, Portugal and Spain, (with Italy and Ireland right behind them), became the latest chapter in the now too long global crisis. That was quickly followed by the “flash crash” in May when the market fell over 1000 points in minutes. Was it an inadvertent sell order, a technological glitch, or a sign that the world was so connected that panic could spread instantaneously?

Sadly, as the year wore on it was apparent to even his greatest supporters that the excitement and optimism of Barrack Obama’s election had turned into mistrust, anger and partisanship. Even as many banks paid their TARP money back with a profit to the US Government there was still a backlash against Wall Street and overpaid bankers which only seemed to make the anger and discontent stronger.

The passage of the historic healthcare bill only made that more apparent. Wall Streeters and the wealthy decried the end of capitalism. Interestingly enough, Abby realized, in the days leading up to this Yom Kippur, the market had gone up. Some said it was in the belief that the Republicans would take back the House if not the Senate creating a more hospitable environment for business and Wall Street, or at least a barrier to the President’s unwavering administration.
Looking around as she had last year, Abby saw Jon’s brother sitting behind them.

In 2008 he had to close his fund and sell his East Hampton house at a loss. With little job prospects in New York, he moved to Washington DC to work for the FDIC working on the valuation and sale of failed bank assets.

He enjoyed it but joked it was a good thing he was a Reform Jew rather than Orthodox since bank closings always came on Friday evenings. Indeed, he mentioned last night that another 6 banks had been seized that afternoon, making the total for this year 125 on top of the 140 closed in 2009.

Abby’s best friend Ellen and her husband Bob were sitting nearby. Ellen wasn’t working. Bob was still at Citi, and thankfully this year’s compensation wasn’t looking that bad, especially since the “Pay Czar”, Ken Feinberg had ended his oversight of the Banks pay policies last summer. What’s more Citi’s stock had managed to hold its value for the most part, hovering between $3.50 and $4.00. Bob had been able to exercise the stock options he had been granted at $2.50. At least they’d made nice money on that.

They tried not to think about the 50,000 options he still held at 15, 20, 45 and 52.

At least the government had sold 30% of the 7.7 billion shares of the company it acquired in 2009 and fears of nationalizing the bank now seemed like a long ago, horrible nightmare.

Things were still tight tough. They hoped they’d be able to go away for at least a few days this Christmas.

Not to the villa in Anguilla they rented in 2007, but at least it was a few days in Florida at a decent hotel.

It was hard when Bob saw his neighbor Jim who lived on the 13th floor of their Fifth Avenue apartment in the mornings. Jim worked at Goldman and his fortunes had been much better. Bob at least felt some Schadenfreude when Goldman had been charged with fraud by the SEC last spring, but then the firm settled the case and it appeared to move inexorably upward once again. At least Bob wouldn’t have to see Jim much longer. He and his wife Brooke were moving downtown to a loft, rumored to have cost $15 million.

The renovations were extensive and probably another $2 million on top. They would be gone in a few weeks. If Bob sold his apartment now, he would take a bath from the purchase price in 2006 and wasn’t prepared to do that. Housing prices would go up again… one day.

Abby realized she didn’t see Jim and Susan, whose parents had lost everything with Madoff and had to move in with them. She knew Susan had been suffering from deep depression and most days could barely get herself out of bed. She made a note to check in on her this evening after sundown. She couldn’t imagine what it was like for them day by day, let alone after losing their inheritance.

Down in the main sanctuary was Melanie, sitting as far away from Marty as she had last year. Their divorce had just been finalized. Marty seemed to have done well at Barclays Capital after they acquired Lehman, but it still didn’t make up for the $35 million in stock they had lost, which also resulted in the death knell for their marriage.

The knitwear business Melanie had started in early 2009, however, had done tremendously well. She had just reached $2 million in sales and was about to close on a deal with a venture capital fund that was going to give her the funds to expand. She was thankful she didn’t have to pay Marty alimony! She was happy and fulfilled for the first time in her life after many years of being Mrs. Martin Bronstein.

Abby saw their neighbor Joe who had finally gotten a job at a start up broker-dealer in 2009. He had been quite happy for a while, but the company couldn’t raise enough capital and closed its doors in mid 2010. Joe was searching for a job yet again. Abby hoped that this year the book of life had a better chapter for him this year.

Nearby was Jon’s college roommate Chad who had finally left AIG after putting up with the bonus protests, not to mention his own loss in net worth. He wasn’t a quitter, but finally decided it just wasn’t worth it. He’d finally gone to a private equity firm and couldn’t be happier.

Abby and Jon themselves both gave a moment of thanks and also hoped the coming year would be good for them.

A lot was on the line for their manufacturing business, AbJ LLC.

They had gone through the struggle of trying to get a bank loan to no avail, even after TALF was passed to increase bank lending. They finally got a $2 million Small Business Administration loan (SBA).
Just this past Thursday, the Senate had finally passed the new small business bill, which hopefully would allow them to borrow another $3 million. Yes, they’d still have to guarantee that loan with their personal assets but they had enough value between their apartment and summer home to cover it. With interest rates still at historical lows the new rate would also be around 6% as SBA loans are capped at prime plus 2 ¾%.

With the new loan they would be able to buy a new building next to them and some new machinery. They projected that their revenues would go up by 15% with the loan. All in all they still counted their blessings.

Each year as the U'netaneh Tokef prayer is recited, I feel that if this will be the year when everything changes. I've come to realize however that life is not a series of new stories that come to a distinct end, but rather each year is a continuation of the prior ones. Some take a turn for the worse, some for the better. Next year when Abby sits in services she will realize there have been more chapters in the book of life.

May this yet again be a sweet year for everyone.
Alexandra Lebenthal learned from her father, Jim Lebenthal, and grandmother before, about the basics of finances and investments. Today she is the CEO of Lebenthal & Co., LLC and its wealth management division, Alexandra & James Co.