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Wednesday, September 01, 2010

Guest Post: The New Normal

With thanks CJ Srullowitz, a financial advisor in New York City and blogger. I have more guest posts coming (as well as some original posts) and I am very thankful since I have work coming out my ears, to say nothing of the real work of the month, preparation for Yom Tov.

The New Normal

Once, when I was in the eighth grade, the boys in my class were discussing what to do with their bar mitzvah money. One of the boys mentioned something called a money market, which he explained was just like a savings account, and paid around ten percent interest. To my young, impressionable, pre-teen mind, that number became the benchmark against which all other rates of return were judged; for years, I considered ten percent to be a normal passive rate of return on money.

Fast forward many years. I became a financial advisor. I had already learned that ten percent money market returns were an aberration. In fact, no relatively safe investment could be counted on to deliver a return approaching that number. One would have to take on the full measure of volatility in the stock market to potentially average ten percent over time.
Fast forward to today.

Bill Gross is the co-Chief Investment Officer of PIMCO, a Newport Beach, California money management firm. PIMCO’s flagship Total Return Fund, under the stewardship of Gross, has grown to become the largest mutual fund in the world. Last summer, Gross and company described the economic circumstances and market conditions that they believe will face us over the coming years. They called it “the new normal.”

What is the new normal? Among other things it means slower economic growth, high unemployment, low interest rates, and tepid, “half-sized” - that is to say, four to five percent - stock market returns. In other words, you know the financial crisis we’ve been trying to shake? Well, get used to it. “All investors should expect considerably lower rates of return than what they grew accustomed to only a few years ago,” Gross insists.

The new normal will naturally have ramifications in the Jewish world, and in particular, the frum world. Consider:

  • Yeshivos today, most of which were never-even at the height of the economic bubble-flush with funds, are under enormous financial strain. Some are being starved out of existence.
  • While Information Technology is poised to be one of the growth areas of the new economy (along with Healthcare and Biotech), many frum people who are “in computers” do not currently possess the knowledge and skills for these jobs. According to a friend of mine who works for a cutting-edge IT firm, many are only trained for obsolete systems and have not kept up with the rapid changes in this field.
  • For awhile it seemed like every former yeshiva guy and his brother-in-law were mortgage brokers, working very long days and weeks financing and refinancing properties for anyone and everyone who came along-making terrific commissions along the way. No longer. Fewer people are buying houses, fewer people are qualifying for mortgages, and those who are and do are finding that some banks (Chase, for example) are not taking mortgage loan applications from independent brokers.
  • The frum world will always have its share of entrepreneurs, but with the severe tightening of credit, many are not getting the chance to borrow the money required to build, or even expand, businesses. Established real estate investors are finding deals, and many have cash on hand to finance them. But many younger people who are trying to get started in that business have it tough.
  • One of the biggest supporters of kollelim in Eretz Yisrael saw his fortune-in the hundreds of millions-evaporate in a matter of weeks. I happened to meet him briefly by chance when he was borrowing office space from a client of mine, and watched as he sat hunched over on his cell phone trying to keep his kollelim from going under. He will survive, but many of his beneficiaries are already leaving kollel and returning to America.
And the setbacks did not begin in the last two years.

In 2003, The Wall Street Journal reported how Indians were quickly replacing Jews as the premier diamond dealers in Antwerp, Belgium. The Jews, who had at one point controlled 70% of the trade, saw their influence dwindle to just 25% in a few years. That number is even smaller today. At the time, Henri Rubens, one of the community’s leaders, declared the end of the glory days noting, “We were too complacent. Now that we realize it, it’s too late.” Mr. Rubens went into real estate.

These past few decades have been remarkable for the Jewish nation, and for the Orthodox in particular. We have grown both materially and spiritually, and the two often worked hand-in-hand. Much of our largesse was committed to building a strong infrastructure of homes, shuls, yeshivos and mosdos.

But the last couple of years have been challenging; the infrastructure is showing strain and even some cracks. Many feel that we simply have to get through this rough period before going back to “normal.” But what if we’re in for a new normal? What if we need to adjust our thinking and our budgets accordingly-not just for a few years but permanently?

God will surely provide us with what we need; but our definition of “need” may have to be adjusted. Should a more moderate financial future face us, we must not allow it to slow down our spiritual growth. Our commitment to Torah and mitzvos, to educating our children and feeding our poor, to learning diligently and working honestly, must not waver.

But what we spend on our homes, our cars, our vacations, and even our simchas may need to be reigned in considerably.


tesyaa said...

Is CJ Srullowitz a pseudonym? I understand why someone prefers to use an anonymous handle, but using a name that sounds like a "real" name and not identifying it as a pseudonym is problematic. Can you ask the author to clarify?

Zach Kessin said...

I am a programmer and can talk about that field.

First of all if you want to do well you need to put in the time and effort to really become an "A" list person. That takes years of hard work, not just 9-5 but learning whats new and what the next big thing is.

And the technology changes, if you take a course in say Java and then do nothing to update your skills in 5 years what you learned will be worthless.

JS said...


Yes. Technology moves forward at an astronomical rate. Those who don't keep up are going to get swept away with the tide. 5 years might as well be 5 decades in the technology world. Computer languages are updated all the time. What languages are "in" changes all the time. The tools people use to program change frequently. The person who sits complacently at their job doing whatever tasks are assigned and never updated their skill set is going to be in for a rude awakening when they're eventually laid off and have to reenter the job market. And, the way things are nowadays, layoffs are almost a certain thing in many technology jobs.

I'd also add that it's not enough nowadays to just know how to program (for example). You need skills that can't be outsourced. This requires actual knowledge of computer science and algorithms. You want to be the guy who's designing the system, not the guy who has to sit and code according to some specification.

The yeshivish attitude that you can learn a job skill in some no name college in a few weeks is absurd in today's economy.

JS said...

"Much of our largesse was committed to building a strong infrastructure of homes, shuls, yeshivos and mosdos.

But the last couple of years have been challenging; the infrastructure is showing strain and even some cracks."

I'd quibble with this point. I don't think there was ever a strong infrastructure in the vast majority of our institutions. Instead, there were a few wealthy individuals who were relied upon to constantly bail out the institution and front money for expansions. There was never much of an effort towards sustainability such as setting up endowments or other long-term planning. If anything, our institutions are remarkably short-sighted.

In the Modern Orthodox world, when looking at the yeshivas, I think only Ramaz has any sort of endowment, and I don't believe it's all that much and a chunk of it was lost to Madoff. No other yeshiva has any endowment or sustainability plan. They all rely on local donors and full tuition paying parents. Those who run the yeshivas have known for years parents are getting squeezed and they have uniformly responded with new and expanded campuses for the yeshivas, each spending 10's of millions of dollars doing so. So, in short, no endowment, reliance on increasingly smaller support base, and running up costs for many years into the future.

The economy isn't to blame. It's not a "new normal"'s fault. We've had sustainability problems for years, just no one wanted to pay attention.

Anonymous said...

"While Information Technology is poised to be one of the growth areas of the new economy (along with Healthcare and Biotech), many frum people who are “in computers” do not currently possess the knowledge and skills for these jobs. According to a friend of mine who works for a cutting-edge IT firm, many are only trained for obsolete systems and have not kept up with the rapid changes in this field."

Many frum people elect to work for frum-owned businesses rather than large corporate entities. The smaller businesses are often running informal shops in which they are not using tools or systems which are current and industry-standard.

As a result, they do not have the toolbox of skills to ever work in a cutting-edge corporate setting, where in fact, that is where the available jobs might be. Many are stuck with little opportunity to escape a life of underemployment which characterize smaller businesses (in which one is not the principal)

Mark said...

I completely agree. And sometimes I wonder if it's "punishment" not only for the complacency of the majority, but also perhaps for the crimes of the tiny minority.

conservative scifi said...

With a very good (or Miami Al's first rate ivy league) education, there are a lot of opportunities which are "frum friendly" but which don't have many frum practitioners. For example, a scientific researcher, while needing a Ph.D., can probably avoid ever needing to work on Shabbat or holidays, unlike a doctor. A college professor has even greater flexibility, and might even be able to spend time in Israel on sabbatical (though these are quite a bit harder to arrange). Insurance companies need actuaries, a reasonably well paying job that requires advanced math skills. These are three of many "frum friendly" careers which would allow a "frum" family to be 200K chumps, rather than kollel welfare kings and queens.

Ariella said...

I agree with JS. Of course, though, you know the flip side of the high rate of return on the MMA was a a very high rate of interest for borrowing, including mortgages. As it says in Koheles, those who say the days gone by were better are not speaking wisely.

Depressed said...

Well done, with one quibble: "God will surely provide us with what we need". Says who? Sometimes he chooses not to; and sends an inquistion, holocaust, etc. Last week's parsha talked about some truly horrible stuff that God chooses to do. Thus, I disagree with the statement; unless you mean that 'what we need' might be some truly horrioble stuff.

If we do stupid things with the blessings he had give us in this wonderful country, for all we know, He might decide that enough is enough.

Happy New Year to us all.

Anonymous said...

Shana Tova,
We lost our retirement savings, and my wife recently was laid off. We are not depressed, however, as we have faith and a solid support system. I know others who value material things, and they are the ones truely suffering. My kids' school refuses to budge with regard to tuition, as they have their own expenses. So we had to pull one of our kids. She understands but we as parents felt that we were letting her down, as she has a true love of Torah.

Dave said...

Very very few college professors (and it is worth noting that tenured positions are harder and harder to find) make $200k.

Last time I looked at Academia, it paid a half to a third of what the private sector did (admittedly in a field where there is a strong private sector demand).

And I doubt actuaries are pulling in $200k, although I have no first hand knowledge of that.

Reality check: Median household income in the United States is around $50k.

Anonymous said...


"Reality check: Median household income in the United States is around $50k."

True-exactly why Orthodoxy is not sustainable as currently practiced. Paradoxically the Day School movement isresponsible for much of the problems.If one does not have a high income one just can't be part of MO. Even if family has a moderate income if child hasIQ below approximately 110-115 in verbal areas not achance to succeed in biligual program necessary in the US.
To get an idea of real salaries look at the Bidens 1040 return posted on -as a matter of policy thePrez and VP posttheir returns-as VP andh iswife as an academid total income below 300k. Of course, every other Federal employee from suprem Ct justices to Cabinet memebers on down earned less than Biden except for thePrez.

Mark said...

Dave - And I doubt actuaries are pulling in $200k, although I have no first hand knowledge of that.

Many do earn more than $200k, and the particularly clever ones at the top of their profession earn more than $300k!

Dave said...

PayScale disagrees with you, as far as the general salary range for Actuaries.

Do outliers make more? I'm sure they do. Should you depend on it?

I wouldn't.

Anonymous said...

Actuaries who've completed their professional exams earn far more than the PayScale range. Technically you can't call yourself an actuary if you haven't completed a certain level of exams, though people do it every day.

Female life actuary said...

That's a national payscale, in NYC the starting salary is over $50,000 and by the time you finish your exams you are over $100,000 and with experience you do earn at least $150,000, usually with a bonus on top of it, and then benefits such as life, health and disability insurance and a pension plan. Remember that you don't need to go to grad school, so the early years when you are taking exams (where you are making the starting salary for ex) is instead of grad school. So not only do you not have to borrow to pay grad school tuition and then have crushing student loans, but you actually are getting paid while you are doing your advanced training. It is really a great job - the only drawbacks are it is a corporate job with little flexibility in hours and that you really have to be good at both math and taking exams.

CJ Srullowitz said...

"Last week's parsha talked about some truly horrible stuff that God chooses to do." - Depressed

According to the parshah, these horrible things occur only when our behavior warrants it. But without getting into a whole discussion of "tzaddik vera lo," I agree with you that the definition of "need" must be expansive.

Raizy said...

I would like to see a discussion of whether single, childless religious adults in their prime income years are currently contributing to the yeshiva day schools in their community. Does anyone have any knowledge of this? How do you encourage mature professionals who have no children to contribute to the day schools? How do you create a feeling of connection to the schools on the part of adults who have no children?

CJ Srullowitz said...

Raizy raises (raizes?) a good point.

The Talmud states "Whoever teaches his friend's child Torah is considered to have given birth to him."

tesyaa said...

Unfortunately, singles & childless couples see themselves as not part of the mainstream of Orthodox society. They understandably have less in common with couples who are busy raising children, and they sometimes feel like they're treated with pity, or as nebech cases.

Also - childless couples, even those who earn a good living, may have little money available due to expensive fertility treatments. Singles, in addition to incurring dating expenses, often spend money on travel and entertainment with their friends, to keep their spirits up.

And who's to say that singles and childless people aren't already helping out with their nieces' and nephews' educations? In my workplace, there is an older non-Jewish woman who has not retired because she is paying her niece's way through Catholic high school.

Raizy said...

Nebech cases? Was Alice Tully a nebech case? She was a lady who never married who paid for Alice Tully Hall, the concert hall named after her in Lincoln Center. Was George Washington a nebech case? He and his wife were childless. The best way to "keep your spirits up" is to take responsibility for important unmet needs you see around you. Travel and entertainment are shallow pursuits ultimately because they are self absorbed. Educating children is meaningful. How can I help?

tesyaa said...

Raizy - gosh, I don't know. Maybe singles & childless who still have some money left over would rather it go to the sick and impoverished , not middle class people who just happen not to be able to afford expensive private education. There is a lot of need everywhere. Who is to say that yeshiva education is the most worthy cause?

tesyaa said...

One more thing: would you tell a married couple exhausted from raising young children not to go on a short vacation or out for some "kosher" entertainment, if that helps keep their spirits up? Is that shallow? If not, why is it shallow for a single or childless woman?

Anonymous said...

Another IT comment.

In the late 90's I commuted with a number of IT professionals that were ex-Kollel guys.

I begged them to update their skills as I believed that once the Y2K spending binge was over, these jobs would head for India.

Unfortunately, this happened and about 1/2 of them are no longer capable of getting a well paying job in the corporate field.

Maasah Avos Siman L'Bonim.....

Anonymous said...

Back to our discussion about actuaries, I know over 5 actuaries making over $300,000. They have no student debt to service and seem to have many opportunities in finance, education, healthcare, government come their way. They are also sought out by banks, hedge funds and think-tanks for their raw-talent and their ability with numbers. They typically work 9-5 and have a good work-life balance.
If you are an actuary with a personality, you can go really far.
It is probably one of the best jobs to have.

Dave said...

So, the obvious question is, what is the catch?

After all, if something is in high enough demand to command six figure salaries without a formal education requirement, there has to be some other gating factor.

Otherwise everyone would do it, and the supply would drive the wages down.

So what are the gating factors for a career as an actuary?

Anonymous said...


Anonymous said...

The exams are brutal. I know several people who went to Ivy League schools to get MAs in mathematics and did well but could hardly pass the first three exams.
You need to be really good with math and have the discipline to study for the exams.

Anonymous said...

Let's put it this way: Differential Equations is child's play for an actuary!

Anonymous said...

I know so many frum actuaries. I heard a few years ago that AXA downtown(if I am not mistaken) has so many frum actuaries that they have a small bais midrash in their basement.

Anonymous said...

"But what we spend on our homes, our cars, our vacations, and even our simchas may need to be reigned in considerably. "

Halevai!!!! This would be a wonderful thing for Orthodox Jews in and of itself, whether or not the step was needed due to depressed finances.

On the subject of actuaries, I hold salary records for many of the actuaries at my company. As other posters have pointed out, the starters (who are in the midst of taking exams) are mostly in the 60-90K region. Those who are done with exams are making 120K minimum. The ones who have been promoted to actuarial management are 150K+. And those in higher levels of management are topping 200. The outliers can go even higher, but then again, the outliers of any profession can get to the same place. Actuaries with personality are something of a rarity, and are more likely to go far than the stereotypical actuary, but lack of personality is not necessarily a barrier to advancement.

The catch is simple. Most people cannot do the work and/or the exams.

Another source for actuaries' income range is