Wondering on Wednesday 4/3/24

Ready... Set... Wonder!

I saw an article in The Week about 'passive investing' - using index funds to do the work for you, or for your 401(k). The Week, if you aren't familiar with it, presents news items with multiple viewpoints from different media outlets. Here's a bit of the piece on index funds, with my emphasis added.

A market doesn’t work if everyone just “sits back and watches their money grow,” said Katie Martin in the Financial Times. It sounds “a little snobbish” to rail against passive investing, “which has unlocked wealth for millions of people who otherwise might not be active in financial markets at all.” But several recent studies have found that indexed stocks have begun to “show lower sensitivity” even to major economic shocks than their non-indexed counterparts. That turns investing from a process of “seeking out, rewarding, and profiting from successful companies” to a “circular bet” on more money flowing into the market.

The article came out before Trump Media and Technology Group (DJT on the Nasdaq)  went public with a value of some $8B, even though the company has ridiculously poor financial performance.

Is this the kind of company you'd 'seek out and reward,' I wonder?

*****     *****

Perhaps as many as half a million folks in California got a raise this week, as the minimum wage for most fast-food workers - and only those workers - increased from $16/hour to $20/hour. The raise stems from a bill signed by Gov. Gavin Newsom last fall, and comes a few weeks after workers formed the California Fast Food Workers Union.

Generally, I'm not a fan of politicians singling out a category of workers and changing their minimum wage without adjusting the minimum wages for other low-paid workers, but I don't wonder why politicians do it.

What I do wonder is why so many people think it's OK for the government to make a random distinction between a fast-food worker and a day-care worker, a home health aide, or a janitorial staffer. And I wonder why, when the politicians do this for some but not for all, people are so comfortable telling the other workers to 'just go ask for a raise,' or 'organize and fight for themselves.'

And, of course, I wonder how the pols come up with the convoluted rules they apply. This law applies to "restaurants offering limited or no table service and which are part of a national chain with at least 60 establishments nationwide. Restaurants operating inside a grocery establishment are exempt, as are restaurants producing and selling bread as a stand-alone menu item."  

A shoutout to anyone who can make this make sense. I sure can't.

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This one has me scratching my head with wonder. I was not aware that there's a thing out in the Interwebs asking, "Who actually eats at Arby's?" And, until this morning when I saw this article that Arby's is going to give "skeptics" four free sandwiches this month, to try and convince them how good the food is. According to the company's Chief Marketing Officer, the chain is "putting our money where our mouth is," and that April is

the perfect opportunity for any skeptics out there to try any of the sandwiches they've been eyeing.

There's just one catch: the 'skeptics' who have been "eyeing" the sandwiches have to be enrolled in the company's rewards program to get the free sandwiches. Call me skeptical, but I wonder how many of the free sammies are going to go to existing rewards members, not to new customers?

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It seems 'the right' found itself in a bit of a snit over Easter Sunday. It seems that 'the left' has attacked Easter with the same zeal as it fights the war on Christmas. First, President Biden dared recognize the annual Transgender Day of Visibility, celebrated annually on March 31st. That's a bad thing, it would appear, when Easter also falls on March 31st - at least according to House Speaker Mike Johnson and the other usual suspects. But that's only half of the problem. 

The other issue? A ban on religious Easter eggs at the Biden White House. I kid you not.

...guidelines for the contest in which kids submit decorated eggs for a White House display specify that the art "must not include any questionable content, religious symbols, overtly religious themes, or partisan political statements. 

There's only one problem: the guidelines don't belong to 'the left' and they don't come from the Bidens. They come from the American Egg Board, which has had the same rules since the 70s. And that means former president Donald Trump attacked Easter using one of the exact same weapons as President Biden used.

So, what am I wondering here? With all the effort 'the right' puts into manufacturing wars by 'the left' against Christian holidays, I wonder why they don't put even one iota of effort into attacking the very un-Christian, unreligious, unpleasant, unpatriotic Easter 'truth' posted by their fearless leader. 

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Louisiana Gov. Jeff Landry (R-MAGA) is unhappy that LSU's women's basketball team wasn't on the floor for the playing of our country's National Anthem (not to be confused with "America's most recognized patriotic anthem," Lee Greenwood's God Bless the USA) at their Elite Eight appearance in Albany on Sunday. 

So unhappy, in fact, that he wants the state's Board of Regents to create a policy requiring student-athletes "be present for the National Anthem or lose their scholarships." He even managed to bring his mother into the mix with his tweet on the subject, which said, in part,

My mother coached women's high school basketball during the height of desegregation, no one has a greater respect for the sport and for Coach Mulkey. However, above respect for the game is a deeper respect for those that serve to protect us and unite us under one flag !

Landry apparently doesn't know that college athletes in his state, and others, typically aren't on the court or field for the anthem, which is played several minutes before the game starts. And he apparently doesn't know that they haven't been, for many years. And he apparently doesn't know that the Regents have nothing to do with scholarships. 

It kind of makes me wonder whether he gave this whole thing any thought at all, or if he just shoots from the lip like the guy who endorsed him for governor.

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Oh - in case you're wondering, here's the current status of the GoFundMe to raise money to help the former president pay his judgments. I'll continue to report on this each week, but for now, it looks like it's gonna take a while.

*****     *****

What's on your wondering mind tonight?

Quick Takes (v30): Guns and Money

Quick Takes

Most of us are familiar with the old adage "all roads lead to Rome." We intuitively know that every single road doesn't lead to Rome, but that there are many ways to get there, some of which require more effort and stick-to-it-iveness than others. 

For the purposes of today's post, let's recognize (and celebrate, in my case) that there's more than one way to 'get thee' and do something about guns in America. Here's a headline that appeared in the business section of my local paper:

Investors push gun industry for reforms

The article, from Bloomberg, talked about a group of 13 investors, including state pension funds in California, Florida and Connecticut, among others, that collectively have trillions of assets under management, and who are

banding together for the first time to pressure gun manufacturers and sellers to make firearms "safer, more secure and easier to trace."

The approach is not to threaten to divest from the manufacturers; instead, it's to apply pressure on manufacturers to encourage them to make changes that comply with five Principles for a Responsible Civilian Firearms Industry which focus on new technology; dealer standards; training and education programs; best practices in background checks, inventory management, and point of sale policies; proactive assistance to law enforcement; and collaboration with the signers of the Principles moving forward.

Christopher Ailman, who's the Chief Investment Officer for the California State Teachers' Retirement System (CalSTRS), said that

As investors, we're focused on taking steps to reduce risks while increasing the long-term value of the companies in which we invest. But as individuals, we are also deeply saddened by the gun-related tragedies our country is experiencing. We hope these principles serve as the start of a new conversation to address gun safety in the civilian firearms industry, and we look forward to progress through the reasonable and broad framework for engagement they provide. 

Ailman also noted that CalSTRS has tried this before. According to this NY Times article from December 2012, after the Sandy Hook shooting, the fund had about $750M invested in Cerberus Capital Management, which in turn was invested in the Freedom Group, which manufactured the Bushmaster rifle used in Sandy Hook. Here's what CalSTRS had to say:

At this point our investment branch is examining the Cerberus investment to determine how best to move forward given the tragic events of last Friday in Newtown, Conn.

Back then, there was little expectation that things would change. The problem? Firms like Cerberus and others are obligated to maximize their investors' funds, even if that means holding positions in 'sin' companies such as guns, gambling and tobacco.

Similarly, it might be a while before any impact from these Principles and these investors is seen. After all, there's long been concern from manufacturers that things could change - and yet... Here's just one example, excerpted from a note to investors about a (shelved) IPO that predates Sandy Hook:

The regulation of firearms and ammunition may become more restrictive in the future and any such development might have a material adverse effect on our business, financial condition, results of operations or cash flows. In addition, regulatory proposals, even if never enacted, may affect firearms or ammunition sales as a result of consumer perceptions. 

Two manufacturers -  American Outdoor and Sturm, Ruger - both recently had shareholder proposals approved, asking for reports on gun violence and the risks of selling guns. And while the reports didn't spur any changes in product offerings, I think it's safe to say that Americans will continue trying to find ways to deal with our mass shooting problem, whether we call it a gun problem, a mental health problem, a domestic terrorism problem, or something else entirely. A rose by any other name, and all.

Whether it's investment, divestment, or other shareholder actions; changes to the background check process; voluntary changes by manufacturers, perhaps to include limiting sales of ammunition or or eliminating the sale of bump stocks; increased opportunity for mental health treatment; ER research on gunshot victims; or what have you, sooner or later, I think we'll reach some kind of critical mass where common ground can be found.

Wondering on Wednesday (v155)

Welcome, friends, to our regular wondering and wandering through the news. Here's a snipped of what's on my wondering mind.

Facebook is under fire again, this time facing grilling from an international panel that's frustrated with the social media behemoth for a host of reasons, including privacy issues, not being able to control misinformation and propaganda, and worse. CEO Mark Zuckerberg did not attend, which did not endear his company to the inquisitors - no wondering there.

But what I do wonder about is this: if you think Facebook has an obligation to protect us from ourselves and our inability to discern what's real from what's fake, what's intentional misinformation from what's an accidental share of something outdated, or from the general threat of interference in elections, who else should ace the same solution, whatever that might be? Would be be everyone below or to the left or right of the green box on the Media Bias Chart 4.0? Or would the yellow box get to stay  too, as long as it was heavily disclaimed?

And, as I've wondered before, who's more dangerous, a 400-pound guy in a basement, the Russian intelligence machine,  the Chinese government  picking pro-Trump industries for tariffs, or the president himself?  For example, here's just one of the president's many actions on Twitter today:

That's right - the president of the United States retweeted this picture today.  #MAGAMA, if you know what I mean.

Also today, NPR reported that enrollment in Affordable Care Act plans is down some 400,000 people in the first 17 days this year compared to last year. Also down this year? Spending by the feds on support for enrollees in the plans.  In 2016, $63 million was spent on funding for navigators, the people who help others, in person, find a plan and get enrolled. Last year, it was $36M, and this year? $10M.

Now, we can somewhat logically guess that some of the decrease in enrollment is because of the lower unemployment rate; after all, most of us get our insurance through our employers not through healthcare.gov, the federal exchange. But it's hard not wondering how much further the Trump administration will go to 'repeal' the ACA by continually drying up the funding. You know, like they  might do with the Mueller investigation...

Finally today, I can't help wondering whether the speech by Jerome Powell, chairman of the Federal Reserve, was driven at least in part by the president's treatment of Powell and not only by the collective thinking of the central bankers. From this article on The Street,

Prior to Powell's appearance, Donald Trump criticized him and the Fed in an interview with the Washington Post in which he accused the central bank of pushing US stocks lower and triggering a decision by General Motors Co. to shutter five plants in North America and two additional plants outside North America, and cut 15% of its salaried workforce. 

Trump  told the Post in an interview that he wasn't "even a little bit happy with my selection" of Powell to head the Federal Reserve, adding that the Fed's current stance on interest rates was "way off base." Trump's remarks followed a similar interview with The Wall Street Journal in which he accused the central bank of being a "bigger problem than China."

Now, maybe Powell is another Jefferson Beauregard Sessions III, a guy who will continue to do his thing in spite of the obvious attempts at interference from his boss. But at the end of September, Powell suggested our low interest rates was no longer necessary, suggesting that rates would continue to rise in the near future. I don't pretend to understand this stuff, but the timing of this change, which delighted the market today, is interesting. 

And one thing we won't have to wonder about much is how soon the president will being tweeting about the stock market again.

There's more out there we could focus on -- what's on your list, I wonder?

TGIF 3/2/18

If you're in the danger zone for Winter Storm Riley, or the California storms, or any of the other major weather events happening tonight, please stay safe.

If you're Jared Kushner, you're probably wishing you were in the middle of the danger zone for the storm - somewhere on Cape Cod, for example - instead of in the middle of the media storm that's swirling around you.

There are the reports of the fruitful meetings Kushner had at the White House, which somehow ended up with hundreds of millions of dollars being loaned to his company, on top of the loss of his coveted interim security clearance which gave him access to our country's most secret secrets.  And now, there's news about an SEC inquiry into one of those "meet with us and we'll loan you hundreds of millions" companies; the inquiry was dropped just weeks after the loan was made.

Now, there is no proof (yet) of a quid pro quo (yet) and Kushner, the Kushner Companies (run by his family, which tried to sell visas for half-million investments in the company), Apollo Global Management, who loaned the $184M, and their founder Joshua Harris, have all vigorously denied there being anything nefarious here.

And there's likely nothing to be concerned about, either, that Apollo Global receives backing from the Qatar Investment Authority, a sovereign wealth fund of the Qatari government. Because in the world of high finance and skyscrapers and almost broke real estate companies, what's to be concerned about when a White House staffer and family member of the president has his company's fanny saved by a loan from a foreign government?

If you're the president, and your world is falling apart and you're fighting with your own appointees and your staff is leaving and people are unhappy with you for pretty much everything, including lying to school children about gun control (or else lying to the NRA about gun control), you go and launch a trade war (but it's not official, yet, so maybe you won't really do it).

And that's not all. If you're the president, you attack Alec Baldwin on Twitter, proving again how much you're going to miss Hope Hicks.

And if you're me, on the back side of the nor'easter and pretty much done with this nonsense, which included 7 hours of power outages (in two separate stints) and more than a foot of snow, today you're happy that this week is over.

TGIF.

Meanwhile Back in Albany (v14)

Nathaniel Brooks/NY Times

New York's Sonofa Governor Andrew Cuomo gave his eighth State of the State (SOTS) address last Wednesday.

He chose a much more traditional route this year - no dog and pony shows across the state, just a "Castro-esque" speech about all of the things he wants to do as president in 2020 governor in 2018. The Castro comment, which I love, came from Colgate University professor Tim Byrnes; it comes near the 20-minute mark in this video.

So what's on the gov's wish list this year? He starts with sexual harassment, and a laundry list of proposals:

• no taxpayer funds should be used to pay for any public official's sexual harassment or misconduct;
• no state or local government enter into a secret nondisclosure agreement; 
• companies doing business with the state disclose the number of sexual harassment; adjudications they have, and the number of nondisclosure agreements they've executed;
• state pension funds only be invested in companies the Comptroller determines have adequate female and minority representation in management or on the board of directors.

And, he asked for enactment of the contraceptive care act and state legislature approval of Roe v. Wade. And a new independent, government-wide whistleblower process. And a strict, uniform code of sexual harassment policies that would be binding on all employees, all branches and agencies, all authorities, and all local governments.

Then came criminal justice reform, starting with the bail process. We need to be color-blind and wealth-blind, he said, and so unless the person poses a significant flight risk or threat to public safety, bail is out of the picture and everyone is released on their own recognizance. And a full work week for trial parts of our courts, judge performance used as a consideration for advancement, more timely filling of judicial vacancies, and speedier trials.  Legally binding corrective action plans for out-of-compliance jails is also on the table.

Then, after some talk about youth unemployment and non-specific requirements that local governments meet the same MWBE goals as the state does, Cuomo tackled homelessness.

What does it say about us as a society? That we now pass men and women lying on the streets with the same ease that we pass light poles and mailboxes. It has become part of our new normal, but it is abnormal and it is wrong...

New York state will ensure that every local government is effectively reaching out to homeless people, or they will not receive state funding. Period. I'm also directing the MTA and Port Authority, Centro, CDTA, the RGRTA, the NFTA and all our cities to do the same.  

And, for those who would say that they're unable to help the mentally ill homeless because the law doesn't let them, Cuomo vowed to change the law.

And speaking of changing the law, Cuomo dropped a little ethics reform into the mix here, vowing to ban all outside income for legislators. This may be a non-starter, since his commission to give legislators a pay raise (on the theory that they're full time, not part time) failed in 2016. You can read about that process here, here, here, and here.

Next up? The environment. Finally tackling the threats to our water, including toxic algae and the Grumman Plume. And,

• ending any investment in  fossil fuel-related activities in the state pension fund;
• two new RFPs for offshore wind, enough to power 400,000 households;
• suing the federal government if they release GE from any further obligation to clean up the Hudson River.

Opioids? He hit on that too, promising a "comprehensive solution: more prevention, more education, more enforcement, more treatment"  -- and more lawsuits.

But we also want to advance a new approach this year, the ultimate 'follow the supply chain' strategy. Big corporations may own Washington, but they don't own New York...

The opioid crisis was manufactured, literally and figuratively. Unscrupulous distributors developed a $400B industry selling opioids, and they were conveniently blind to the consequences of their actions. They pumped these pills into society. And they created addictions. Like the tobacco industry, they killed thousands, and they did it without warning.  We will make them pay for their illegal and reprehensible conduct. We will sue them, and we will stop the spread of opioids because too many innocent lives have been lost and the time for action is now before we lose another single life.

I was surprised not to see another call out on pension investments here. Big Pharma companies seem like an easy target, I would think, for a governor who seems particularly litigious this year.

Maybe dropping everything tied to 'fossil fuel-related activities' (which seems to mean no more oil and gas companies, no more chemical companies that are involved in any kind of research or development on petroleum products, or any companies having anything to do with fracking, or staffing and supporting oil rigs, or any of the oil and gas distribution companies and possibly any of the utilities, for starters), coupled with dropping companies that don't have an 'adequate' number of women in leadership roles in the company or the boardroom, is enough pain to suffer on behalf of all the over one million members, retirees and beneficiaries in the nation's third largest pension fund?

I'm going to stop here -- going back to Professor Byrnes' comment on Castro-esque, this has gotten us not quite to the bottom of page eight of the governor's nineteen-page SOTS address. We'll pick up in another post this week.

Tidbits and Trivia (v4)

A quick look at some un-fact-checked facts, quotes and trivia:

• According to a GSS-NORC/University of Chicago poll, 55% of white Republicans say black Americans are stuck in poverty due to a lack of willpower or motivation; 26% of white Democrats agree. 42% of white Republicans, and 24% of white Democrats, believe blacks are inherently lazier than whites

• Under the failed version of the American Health Care Act, tax cuts to the 400 highest-income taxpayers (averaging about $7,000,000 each) would have saved more than the total Affordable Care Act subsidies to more than 800,000 people in 20 states and Washington DC ($2.8 billion). 

• According to this article, published in mid-May, pizza franchiser Domino's stock has risen 5000% since 2008, (and more than 2000% since 2008, better than Amazon, Google, Apple and Facebook, I read). Better taste, adoption of technology, and franchisee managing seem to be the keys. Domino's delivers more than 1 million pizzas each day.

• According to this Bloomberg article, many of us are fools for whom parting with money is easy. Check out the opening paragraphs of the article:

"One of the most lavishly funded gadget startups in Silicon Valley last year was Juicero Inc. It makes a juice machine. The product was an unlikely pick for top technology investors, but they were drawn to the idea of an internet-connected device that transforms single-serving packets of chopped fruits and vegetables into a refreshing and healthy beverage. 

Doug Evans, the company's founder, would compare himself with Steve Jobs in his pursuit of juicing perfection. He declared that his juice press wields four tons of force - "enough to lift two Teslas," he said. Google's venture capital arm and other backers poured about $120 million into the startup. Juicero sells the machine for $400, plus the costs of individual juice packs delivered weekly. Tech blogs have dubbed it a "Keurig for juice.""

Sounds good, right? Except that someone figured out that you could squeeze the juice packs with your bare hands and get the same - or even better results - than with the $400 internet-connected product. Another report noted that full refunds are being offered. 

Addressing Income Inequality (v3): Coporate Profits

My #FeeltheBern friends, my #ImWithHer friends, and my less overtly political friends and I have had conversations about the hot topics today. In this edition of my Addressing Income Inequality series, we'll look at corporate profits; the first post was on 'living wages' and the second was on CEO salaries.

Like most of you, I've heard and read that corporate profits are out of control, and they make CEO pay out of control, and the giant profits being shared with people other than the workers who make the profits possible are killing the middle class.

And like some of you, I sort of sit up and take notice when I see articles like this:

• Apple reports biggest annual profit in history with net income of $53.4B...
• ExxonMobil earns $16.2B...
• Berkshire Hathaway releases profits of $24B...

According to this article (from October of 2015), the ten most profitable companies in the world include the three above; Apple and Exxon Mobil were numbers one and two, respectively; Berkshire Hathaway came in at number four. Who are the rest of the top ten?

#3 Samsung Electronics (South Korea)
#5 Chevron (US)
#6 Toyota Motor Corp.(Japan)
#7 PetroChina (China)
#8 China Mobile (China)
#9 Walmart (US) and
#10 Johnson and Johnson (US).

That's six American companies, two Chinese, one Japanese, and one South Korean firm in the top ten.

So I have to ask, what was your first reaction seeing the list?

Are you on the "those bastages, look at all that money and why don't employees see any of it?" side of the fence?  Maybe you're on the "Alright, look at our American companies go!" Or, possibly, you just go "Hmm... how on earth do they do that?"

I'll be honest,  frequently find myself in the group that says "I sure hope my 401(k) is invested in companies like these!"

All of those reactions are possible, and none of them are really wrong; it's all about perspective, and all about perception.

Now, regular readers know I'm not an economist, a statistician, an accountant or an auditor. I mention this because, while I'm capable of finding lots of information on lots of topics, I'm not qualified to say whether the information I find is 'more right' or 'more wrong.'

But, after all we've heard from the politicians about evil corporations and huge profits, would you be surprised that (according to this info) corporate profits fell to their lowest level in four years in the last quarter of 2015?

Or that, for all of 2015, profits were down over 5%?

And for one of the most left-reviled industry sectors - petroleum and coal - profits were down $124.3 billion in the fourth quarter alone, and down $40.6 for the full year?

What does all of this mean?  As with our other Income Inequality measures - minimum wage and CEO salaries, the proof may be in the pudding, but the beauty is in the beholding.

Where some might seem happy that profits are down, because everything is so unequal, others lament the fact that the numbers are down, because that can negatively impact so many other things, including investment accounts, pensions and 401(k)s.  Some would say that not everyone has the chance to have a pension, or investments, or a retirement fund -- so too bad, so sad for those people who are rich enough to have them... And so it goes.

Should the government have the right to tell a company that they can't make as big a profit as they're able? Should we be complaining that our American companies are making great profits?  Isn't that what we want them to be doing? I mean, I can't imagine anyone --  an Apple, an ExxonMobil or a mom and pop corner store - going into business to lose money, any more than we all go to work every day to do a crappy job.

Why would anyone bother?