Wednesday, November 30, 2016

Low and negative interest rates means nuns are jumping into the market, buying pharma stocks

Is Sister Lioba doing better with her portfolio than you?
Credit: Georgi Kantchev, Wall Street Journal

Unusual story about a stock-trading nun in Germany* by Georgi Kantchev in the Wall Street Journal:
On a recent morning, Sister Lioba Zahn read the Bible, attended prayer, did the laundry and then prayed again. In the afternoon, she called her bank and started trading. 
...For over a century, Mariendonk financed itself by selling milk and candles, and through income on its bank deposits. After the European Central Bank began cutting rates, eventually going all the way below zero to their current -0.4%, Sister Lioba realized her convent needed extra income to survive. 
“With rates so low, we must get a better return if we want to sustain the convent,” says Sister Lioba, who holds the position of “cellerarin,” a convent’s version of a chief financial officer. 
Back in 2013, the nunnery’s roof needed repairing and the only car that the 28 sisters owned was nearing the end of its life. Calling her bank, Sister Lioba was offered a seven-year savings bond that carried a 1% annual return. She said she couldn’t believe what she was hearing. “You don’t need to have studied mathematics to see that we were going down,” said Sister Lioba, who had studied psychology. 
After morning prayer, she gathered her fellow nuns into a wood-paneled room inside the convent and showed a PowerPoint on low interest rates. Presiding over the meeting, Sister Christiana Reemts, Mariendonk’s abbess, made an observation. “Twenty years ago we could get enough money from interest to renovate our whole building,” she remembered saying. “Now the interest rate can bring tears to one’s eyes.” In Mariendonk, a decision was made and global markets had a new investor.  
Sister Lioba now runs a portfolio of roughly €2 million, or $2.1 million, from her convent office. “I started by googling what a swap is,” Sister Lioba says, referring to a derivative that allows an investor to exchange the income stream of one asset with that of another. 
Like many investors, Sister Lioba remembers the first stock she bought: Novo-Nordisk AS, a Danish drug company. She bought it in late 2013 and its value increased by around a third before she sold it earlier this year at a profit. “My only regret is why we didn’t buy some more at the time,” she says.... 
Her trading has brought her convent a 2.6% return, which isn't great, but not bad compared to negative rates. I'm guessing Sister Lioba doesn't charge much for her services... (Why not just put it into an index fund?)

*Can't get to the article? Google the headline: "Get Thee to a Brokerage! Low Rates Turn Nuns Into Traders" 

2 comments:

  1. Wasn't there a legend about Joe Kennedy getting out of the market in 1929 when his shoeshine boy started giving him stock tips?

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    1. Yeah, for some reason, I can't remember the appropriate adage here about "when retail investors get in, time to get out."

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