At The Wall Street Journal, Akane Otani explains the tendency of ESG Funds (funds focused on investing for environmental, social or governance preferences) to invest in certain types of stocks that may not actually be the best match for the mandate they have been given. The end result may be that these funds are just closet tech funds. He writes: Companies focused on issues that the environmental, social and governance movement has come to be associated with, such as renewable energy, clean water, and racial and gender diversity, are relatively underrepresented among such funds. For instance, … [Read more...]
Archives for February 2020
When the Rules Apply to You but Not to Them
Justin Baer reports at The Wall Street Journal that the giant bond investing firm, Pacific Investment Management Co. (Pimco), "was aware employees had used the services of the firm founded by the figure at the center of a sweeping college-admissions scandal but it had “no information” suggesting these workers acted improperly." He writes: Douglas Hodge, a longtime Pimco executive who served as its CEO until 2016, was one of 33 wealthy parents accused this week of paying for bogus entrance-exam scores or fake athletic achievements to get their children admitted into competitive … [Read more...]
The Costs of A Prolonged Period of Low Rates
Bloomberg points out here that a decade of ultra-low interest rates is not helping public pension funds. Low rates increase the projected liabilities of pension plans. Low rates also make retirement much more expensive which drives up savings and helps to dampen the intended impact of providing monetary stimulus in the first place. What will pension funds do if the next big bear market occurs before rates are normalized? A woefully under-reported side effect of perpetually easy money is the impact on the pension industry. We’ve looked at this issue in the past, and unfortunately the news … [Read more...]
A Lesson from Legends: “Don’t Confuse Activity with Achievement”
The Boston Celtics reached yesterday’s NBA trade deadline without making a trade. “Celtics president of basketball operations Danny Ainge keeps a John Wooden book on his desk,” explains the Boston Globe’s Adam Himmelsbach, “and he likes to think back to one of the legendary UCLA coach’s famous quotes when the NBA trade deadline arrives.” Himmelsbach writes: “Don’t confuse activity with achievement,’’ Ainge said. “It might be that the best thing you ever did was stand pat. Red [Auerbach] told me in my first year doing the job, ‘The best trades I ever made were the ones I didn’t make. I held … [Read more...]
Is Uber About to Be Beaten on Price in London?
An Indian car-booking service named Ola is targeting Uber's business in London. The plan is to defeat Uber on price and capture the top market share within a year. Tim Bradshaw reports for the Financial Times: Ola believes it can unseat Uber as London’s top car-booking service within a year, an executive at the Indian company has said, as the two SoftBank-backed companies prepare for battle in one of the world’s toughest transport markets. Bengaluru-based Ola will make its long-awaited debut in London on Monday, six months after obtaining a permit from Transport for London. It is hoping … [Read more...]
You Probably Know Exactly Why People Want to Abandon Big Cities
You probably know exactly why people want to abandon the big cities of America. They look at rural states and towns with low taxes and low cost of living, and they see the freedom they expect America to provide. But in the big cities of America, when the government tries to solve problems of high rents and lack of housing, it actually makes them worse. The Wall Street Journal's editors explain how big-city governments are actually hurting their residents with overregulation of the housing market, writing: In a December 2019 working paper, Harvard and University of Pennsylvania researchers … [Read more...]
Are Markets too Complacent about Coronavirus?
The FT reports here that China’s energy executives anticipate a 25% drop in the country’s oil demand. That equates to a 3% drop in global consumption. China accounts for 16% of the global economy and an even larger share of its growth. With the stock market back at an all-time high, are investors being too complacent? Sun Yu, Anjili Raval and David Sheppard write for FT: “The epidemic has dealt a huge blow to our business,” said one executive at a Chinese refinery, who asked not to be identified because of the sensitivity of the issue. An executive at another refinery said that if the … [Read more...]
Apple Needs Another China
Tripp Mickle reports the troubles faced by Apple in China as a result of the outbreak of the coronavirus. He writes: Coronavirus has given new meaning to something Apple Inc. executives have been saying for years: Apple needs another China. The rapid spread of the virus and the disruption it has caused is the latest test of Apple’s dependency on the world’s most populous nation, both as a consumer market but more fundamentally as a manufacturing base for most of the iPhones, iPads and Macs sold world-wide. The outbreak prompted China to keep many factories closed after the Lunar New … [Read more...]
Don’t Let Tax-Free Wag Your Fixed Income Investments
When you read about crap muni bonds issued by Chicago, you see why they do not belong in your portfolio. The Editors at The Wall Street Journal write (abridged): In January Chicago shaved $310 million off this year’s deficit by issuing another $1 billion in sales-tax bonds to refinance outstanding GO bonds. Investors didn’t seem to care that the new bonds are subordinate to the previous tranche. Tax-exempt bonds maturing in 2040 yielded 2.4%, which is on par with the 30-year Treasury. We know investors are hungry for yield, but are they famished? Chicago’s budget woes are mounting, and … [Read more...]
One More Reason You Shouldn’t Invest in China
The coronavirus is just one more reason you should avoid direct investment in China. Symptoms of a bigger problem are the decisions of the Chinese government to: restrict information on the spread of the virus, deflect blame onto others, and to silence early attempts to alert the public to the problem. In 2012, I explained China’s bigger problem to readers, and why you should avoid the Middle Kingdom as an investment destination: China I have long advised against direct investment in China. Among the many reasons I am bearish on China is the country’s vastly distorted … [Read more...]