Monday, December 17

Did the credit crisis kill Santa Claus?

Back in August when the sub prime housing bubble sparked a sell-off in the stock market, the New York Sun wrote an article asking if year-end fundraising would get caught in the downdraft.

"The credit crisis and the stock market turmoil are having a preliminary impact on the nonprofit sector and concern is growing that fund-raising could be hurt if the downturn continues to gain steam."
Yet before fundraisers could blink, the market rallied and stocks hit multi-year highs in the early fall and everything seemed fine again.

And then November happened. Investors began to see that the impacts of the housing "bubble" were beginning to spread and infect consumer spending. Huge financial institutions began to write off billions of dollars in bad debt. As a result, the stock market appears poised for another precipitous decline - one that could threaten to wipe out most of the gains from 2007 in the Dow and the S&P index.

If stocks suffer, year-end bonuses will suffer, and therefore, year-end giving will also suffer.

I know some fundraisers who dug out that newspaper article from August and are already preparing their excuses in case they don't hit their year end numbers. I've joked before about creating a major donor fundraiser anxiety index and selling it to the guys on Wall Street who would use it as a leading market indicator of consumer confidence.

Fundraisers don't need Morgan Stanley to tell them that the country will enter a recession in 2008... the smart development directors see it happening already.

Two more articles on Monday finally confirmed for me that Santa Claus might be having trouble making his adjustable rate jumbo mortgage and therefore won't be bringing many year-end presents.

First, MasterCard announced that sales of women’s clothing, a traditional pillar of the holiday shopping season, are unusually bleak so far this year. "From high-end dresses to bargain coats, spending on women’s apparel dropped nearly 6 percent during the first half of the Christmas season, compared with the same period last year."

The second ominous sign came from Tracie McMillan who published an article on MSNBC this morning profiling the fundraising worries at the National Wildlife Federation where fears of a donor drain have made it difficult to replace departing benefactors.
Bill Levis, the author of a new pilot survey by the Urban Institute that documents the trend. Levis’ survey shows that most nonprofits post an average gain of just 10 percent each year: they lose 52 percent of their donations, which is then offset by a 62 percent gain in new or upgraded donations. In short, says Levis, nonprofits are losing almost as much as they’re gaining, pouring a river of money into a nearly open drain.
You could make an argument that different nonprofits have different fundraising structures. Some cash strapped organizations are dependant on aggressive short term revenue targets at the expense of growing a more sustainable long term donor value... but that misses the point.

If the economy is about to hit a recession, nonprofit fundraisers will be among the first to know it.

UPDATE: I can't imagine what it must be like to live in Manhattan and be surrounded by this shit all the time - but a Wall Street blog is reporting that Morgan Stanley and Bear Sterns are "much lower" than last years.


Jon said...

You are absolutely right "fundraiser." Even if people aren't trying to sell their house in this down market... they most likely feel a little bit poorer. And people who feel lighter in the pocket are going to be less likely to make a donation.

Anonymous said...

a friend of mine works for a nonprofit in Connecticut and they were very dependant on a particular board member to "give and get" a large portion of their annual budget. when that board member was forced out from the executive suite of the bank where he worked it has been hard for the charity to make their budget.

Alan G. said...

Santa wasn't killed by his adjustable rate mortgage - he was killed by the Federal Reserve.

Kris Kringle said...

Rumors of my death have been greatly exaggerated.