Posts Tagged ‘Investment Management’

Al Gore Crafts Blueprint for ‘Sustainable Capitalism’ and Responsible Investing

by Doug Powers on Friday, February 17th, 2012

This is article 19 of 61 in the topic Finance

Al Gore reminds me of the Wizard who had the curtain pulled back on him planning to be taken more seriously by getting Toto sent away to obedience training.

From Reuters:

Former U.S. Vice President Al Gore wants to end the default practice of quarterly earnings guidance and explore issuing loyalty-driven securities as part of an overhaul of capitalism which he says has turned many of the world’s largest economies into hotbeds of irresponsible short-term investment.

Together with David Blood, senior partner of ‘green’ fund firm Generation Investment Management, the environmental activist has crafted a blueprint for “sustainable capitalism” he wants the financial industry to adopt to support lasting economic growth.

“While we believe that capitalism is fundamentally superior to any other system for organising economic activity, it is also clear that some of the ways in which it is now practised do not incorporate sufficient regard for its impact on people, society and the planet,” Gore said.

At a briefing ahead of Thursday’s launch, David Blood said capitalism has been blighted with short-termism and an obsession with instant investment results, which had ramped up market volatility, widened the gap between rich and poor and deflected attention from the deepening climate crisis.

The Goracle has reportedly made around $100 million just in the last decade, much of it very quickly — dare I say “short term.” But that was “good” short term… right now we’re discussing “baaad” short term.

How come losing billions in taxpayer money overnight on clean energy “investments” is good for society and the economy in the long run, but a private investor seeking to earn a fortune overnight is bad for society and the economy in the long run? The answer is that both are perfectly acceptable as long as Gore has a piece of the action.

If Gore wants to get rid of corporate quarterly reporting, let him be the first to invest millions in a business that is only compelled to update him on it’s progress, or lack thereof, every few years or so. I’ll even volunteer to be the person who heads up that company just to show how much I care about the cause.

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The So-called Stimulus Is Over, But The Crushing Debt Burden Remains

by Thomas E. Brewton on Thursday, January 19th, 2012

This is article 337 of 526 in the topic Government Spending

The fabled Keynesian “multiplier” boost to the economy from government deficit spending once again, as it always has since the 1930s, failed to produce promised results.  Now even more wealth, via taxes and currency inflation, will have to be sucked from working citizens to pay off the trillions of dollars of debt Obama fecklessly dumped on workers.

 

An article on the Barron’s website tells the story.

On Borrowed Time
Heavy debt loads slow the U.S. economy now and pose threat to the future.

By RANDALL W. FORSYTH

Can a stimulant become a depressant? As with alcohol, government borrowing and spending initially can give a boost, but later becomes a drag. America has hit the downside of that progression.

So says Lacy H. Hunt, chief economist of Hoisington Investment Management (whose eponymous head, Van R. Hoisington, recently was interviewed in the print edition of Barron’s.) The deficits that had aimed to stave off a rerun of the Great Depression after the 2008 financial crisis now are having a depressing effect on the U.S. economy, Hunt contends.

Catching up with Hunt on the road after meetings with Hoisington clients, he expounded on his latest quarterly review, “High Debt Leads to Recession,” a conclusion that runs counter to economics as it is taught in most institutions of higher learning. For most of us who studied the conventional Keynesian economics as taught in the textbooks of Paul Samuelson and his successors, government spending “primes the pump,” to get money back into the economy after the flow of spending had been turned off by a private sector, which was intent on saving “too much.” As a result, resources sat idle, especially the unemployed. Borrowing and spending by government would expand national income by a multiple of its expenditures.

Actually, the opposite is happening. The multiplier from government spending is no better than zero, Hunt says on the basis of econometric evidence. If the economy is “shocked” with a deficit, gross domestic product will get a lift for three-to-five quarters. After 12 quarters, however, the original stimulus is spent, literally and figuratively. But the debt that was incurred to finance the spending remains, and has to be repaid, with interest. That requires a shift of assets from the private sector to the public sector.

Japan provides an example of this process. That nation’s government debt has expanded during its “lost decades” to 200% of GDP from 50%. Meanwhile, nominal GDP in yen terms is basically unchanged. In other words, Japan’s debt has quadrupled but has nothing to show for it—except higher interest costs, which has to come out of the private sector.

Hunt cites the now-familiar conclusion that debt-to-GDP ratios over 90% retard growth from economists Kenneth Rogoff and Carmen Reinhart, authors of the popular This Time is Different: Eight Centuries of Financial Folly, who also presented that conclusion in a 2010 National Bureau of Economic Research working paper, Growth in the Time of Debt.

Hunt also points to an even more exhaustive study on the effects of debt from Stephen G. Cecchetti, M. S Mohanty and Fabrizio Zampolli from the Bank for International Settlements, presented at the Federal Reserve’s Jackson Hole confab last year, The Real Effects of Debt , which takes into account the retarding effect of not only government but also corporate and household debt.

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Al Gore: ‘Good for Mitt Romney!’

by Doug Powers on Thursday, June 16th, 2011

This is article 75 of 1300 in the topic 2012 Elections

Mitt Romney’s Massachusetts health care plan has already earned plaudits from many Democrats, and now Romney’s stance on global warming is getting some positive attention from Al Gore:

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No doubt Al’s expecting the Democrats to purchase copious amounts of carbon credits from Generation Investment Management in return for this particular kiss of death.

What’s next for Romney? NARAL praising his abortion stance?

Update: Nope, NARAL wasn’t next up to praise Romney… CAIR was.

(h/t Politico)

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Obama Admin. Spending over $17 Million Exploring Market for Carbon Credits

by Doug Powers on Thursday, June 9th, 2011

This is article 28 of 334 in the topic Global Warming

Did anybody really think the collapse of the Chicago Climate Exchange’s emissions credits trading would stop the effort to force a market for it? Not when they have more of our money with which to bring something similar back to life:

(CNSNews.com) – The Department of Agriculture (USDA) announced that it has awarded $17.4 million for pilot projects that will begin exploring how to establish a market for greenhouse gas (GHG) credits, a key component of a cap and trade system, to help reduce carbon and other emissions that apparently contribute to global warming.

Agriculture Secretary Tom Vilsack said the projects were the “foundational work” for establishing an American carbon market.

“This is really sort of foundational work that’s being done,” Vilsack told reporters on a conference call on Wednesday.

The administration is determined to force a demand, much like the CEO of Government Motors wants to artificially create a market for hybrid vehicles — and can afford to do so thanks to taxpayer money. The last time carbon trading was tried in the US, the resulting ups, downs and ultimate flat-lining resembled a graph that could very well represent Anthony Weiner’s political career:

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The search continues to find a way for Al Gore’s Generation Investment Management, Goldman Sachs and the rest to clean up, all on your dime (and then some). These things are almost entirely hinged upon who’s power in Washington (the above graph collapse coincides almost perfectly with the 2010 election results), so that’s yet another thing to keep in mind when choosing candidate(s) to support during the 2012 election season.

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Borrowing costs plummet for Wisconsin after Walker’s budget moves

by John Lott on Saturday, May 14th, 2011

This is article 199 of 526 in the topic Government Spending

Wisconsin went from having to pay almost a half a percentage point above top-rated general obligation debt premium on its debt to only two-tenths of a percentage point premium. That isn’t bad for a few months work.

Governor Scott Walker’s moves to limit the power of public worker unions in Wisconsin may have been rewarded by investors as the state’s borrowing costs fell by more than half since the Republican took office in January.

Walker signed a bill March 11 that eliminates the ability of public employees except police and firemen to collectively bargain for benefits. The unions have said that the governor was using the deficit as a pretext to break their power.

The state today is offering about $286 million in tax- exempt debt following an “overall tightening of spreads” since January. Wisconsin’s improved premiums may be a result of Walker’s efforts to address the state’s projected $3.4 billion deficit, said Duane McAllister, who helps oversee $1.7 billion for M&I Investment Management in Milwaukee.

The state sold about $429 million on Jan. 12, with a 10- year maturity priced to yield 3.75 percent, or about 47 basis points above top-rated general obligation debt, according to Bloomberg Valuation pricing. The same security was yielding about 21 basis points above the benchmark yesterday. A basis point is 0.01 percentage point.

“The state’s addressing the fiscal challenges,” McAllister said. “We’re looking at structural changes and that’s very favorable for the market.” . . .

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