The Biden administration plans to undo a Trump-era rule that prevented 401(k) managers from taking ESG factors into account when they picked investments. Instead, the Trump-era rule from the Department of Labor required plan managers to use actual financial metrics to judge the quality of investments for plan participants. Biden's new rule will allow managers to use ESG factors to weigh on their choices, and of course, big ESG money managers like BlackRock will be the beneficiaries. Biden's economic advisory staff is loaded with former BlackRock employees. The company acted as a virtual … [Read more...]
QE Should Be Retired from the Monetary Policy Arsenal
You read here on Youngresearch.com for years about the problems with quantitative easing, but despite our pleas, the Federal Reserve and other central banks persisted. Now, Allison Schrager, a senior fellow at the Manhattan Institute, joins the chorus of those speaking out against quantitative easing and hoping that it will be retired from the Fed's monetary policy arsenal forever. She writes at Bloomberg: The great quantitative easing experiment was a mistake. It's time central banks acknowledge it for the failure it was and retire it from their policy arsenal as soon as they’re … [Read more...]
Private Equity Burns State Pension Fund with FTX Investment
You have read for years that Your Survival Guy is worried about the risky bets being made by state pension fund managers who, after politicians overpromise and under-fund for state employee retirements, are left chasing performance to fill in the gaps. One way states have attempted to juice performance in pension funds is by allowing them to invest in private equity. The problem is that these investments are often riskier than what's available on public markets and don't always turn out well. Missouri is the latest state to find out that riskier investments in private equity can come back and … [Read more...]
Investing’s Cults of Personality Problem
Investing has many problems, and with each era, new ones arise, and others fade. According to Peter Atwater, one of today's problems is the cult of personality. He writes in the Financial Times: With all the attention on Sam Bankman-Fried and the crypto collapse du jour, it feels as if the crowd is missing the big picture. If we step back and look at the major collapses of organisations over the past five years, they are different from other meltdowns. When the dot.com and housing market bubbles burst, what we witnessed was the failure of institutions that then resulted in a subsequent … [Read more...]
CRYPTO CHARLATANS: Investors Lulled to Sleep by Celebrities, Influencers
Investors in cryptocurrency on the FTX exchange weren't just taken in by the celebrities they saw pitching it to them during the Super Bowl. There were self-styled "financial influencers" who also pushed crypto onto unsuspecting investors eager to beat the zero-interest rate environment. Despite Tom Brady's endorsement of FTX, investing is supposed to be boring, not run like a fantasy football team. Listen to what crypto buyers interviewed by The Wall Street Journal have to say about their involvement with FTX: “My blood is boiling,” said Matthew Way, a fundraiser for an Illinois orchestra … [Read more...]
What Happened to All the Stock Buybacks in 2022?
Stock buybacks have fallen short of expectations in 2022. At The Wall Street Journal, Spencer Jakab explains what happened, writing: Washington hates stock buybacks as much as Wall Street loves them. This was supposed to be not just a record year for American companies’ favorite way of rewarding shareholders but also one when a big, gaudy number—a middle finger of sorts to sanctimonious politicians—was supposed to be reached. Buybacks for companies in the S&P 500 were predicted by Goldman Sachs and others to cross the $1 trillion threshold. After they got off to a raucous start, … [Read more...]
Remember This from FTX Bankruptcy and You Can Thank Yourself Later
The fall of crypto exchange FTX is a brutal lesson in fear and greed. Not the fear of losing but the fear of missing out or FOMO. FTX founder Sam Bankman-Fried (SBM) said this on the podcast “Odd Lots” describing how venture capitalists pick investments (highlighted by Jason Zweig in his WSJ column the “Intelligent Investor”): You get a bizarre f—ing process that does not look like the paragon of efficient markets that you might expect. [Venture capitalists] see what all their friends are chattering about, and their friends keep talking about this company…and they start FOMOing [feeling the … [Read more...]
Paying Capital Gains on Losing Mutual Funds
Imagine owning a mutual fund with big losses and then being forced to pay capital gains on that mutual fund because of sales in the fund. Suzanne Woolley reports how just that is happening to some investors. She writes: Owning a mutual fund that’s down 20% or 30% is bad enough. Now, holders of many money-losing investments will be asked to pay capital gains taxes too. The gains come from managers buying and selling securities inside the portfolio over the past year. If they sold a stock they’d owned for a long time, they may have a big gain on it — even if that stock, and the broader fund, … [Read more...]
What’s the Hardest Thing About Owning Company Stock?
OK, we know how much the billionaires are worth—less than they were—like they’re acquaintances. Job cuts are happening by the tens of thousands. The tech oligarchs will be just fine paying the heating bill. But think about the worker who started the year with stock worth a million—worth less than a hundred grand now. That’s life changing. It’s tough selling company stock. It’s a double-edged sword. A sale looks like a lack of faith. And it’s devastating to think about missing out on future gains. And then the crash comes. When prices are going up, it’s hard to think about developing a … [Read more...]
The Price of Excluding Russia from the Global Economy
As the war in Ukraine drags on, the world is feeling the price of excluding Russia from the global economy. Ever since Russia invaded Ukraine, Western nations have been levying heavier sanctions, and Russia has used its own economic power as a blunt instrument to hurt Ukraine's friends in the West. Jessica Rawnsley explains in the Financial Times how the war is wreaking havoc on global supply chains, writing: The war in Ukraine is wreaking havoc on global supply chains. Western sanctions in response to the invasion, price shocks resulting from Russia’s weaponisation of energy, and disruptions … [Read more...]