Eggs and Baskets: the Secret of Resilient Investing

Diversification is, at its root, a response to the ancient admonition you might have learned from grandma: don’t put all of your eggs in one basket. If that basket drops they could all break, ruining your and grandma’s breakfast! This proverb can be traced back to the 17th century, and was popularized by Cervantes in Don Quixote[1]. (Later, Mark Twain, ever the contrarian, proposed the exact opposite: “pull all your eggs in the one basket and—watch that basket!”[2]

The wisdom of Cervantes goes nearly unquestioned today. Virtually every reputable financial firm teaches people about diversification, extolling the importance of spreading out risk. But—and this is an important but—we contend that however well intentioned, Wall Street’s version suffers from two major omissions: first, they focus solely on one’s financial instruments, and second, they can’t model the possibilities of Breakdown/Breakthrough, so they presume that we’ll be Muddling Through for the foreseeable future.

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Get Your Microplastics Out of My Beer!

The community I call home, Duluth, MN, happens to be perched on a steep hillside that runs down to the shores of the largest freshwater lake in the world, Lake Superior. There’s hardly a place in town where you can’t turn around and see the lake stretching out across the horizon. With such an expansive geographical feature nearby, it’s not surprising that people who live here share a special affinity for the lake, borne out in the names of local businesses (Lake Superior Brewing Company, Lake Superior Garden Center), local colleges (Lake Superior College), and the plethora of Lake Superior tattoos that adorn the bodies of many young locals.

Because Duluth people love Lake Superior with such fervor, we were outraged when we read about a recent study published in the peer-reviewed journal Plos One that found eight of nine tap water samples taken from all five Great Lakes, including our beloved Lake Superior, contained plastics. It was especially alarming for the significant population of beer lovers in our community to learn that scientists also found micro-plastics in all of the 12 brands of beer brewed with water drawn from the Great Lakes.

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Data vs. Drama – A Cautionary Tale

Factfulness by Hans Rosling

FACTFULNESS: Ten Reasons We’re Wrong About the World – and Why Things Are Better Than You Think
By Hans Rosling
Hardcover: 352 pp. Flatiron Books

The conundrum about this book is that it really should be read by those folks who never read books. You know who I’m talking about. The late Hans Rosling, who died in 2017 after an impressive career in education and public health, urges us to let the data tell the story, rather than imposing a narrative based on our “dramatic instincts.” He highlights ten ways that our instinctual bias and craving for drama, similar to our craving for sugar and lethargy, undermine our wellbeing.

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What’s Up on Wall Street – Summer 2018

The stock market headed into summer on an up note, with large company stocks rising 3.4% for the quarter and small company stocks up 7.8%, though foreign stocks were down 1.2%. More interest rate hikes continued to weigh on bonds, which were off 0.2% over the three months.

The bond market is historically far less risky (volatile) than the stock market, though the market still does fluctuate. One of the key drivers of bond market fluctuations is movement in interest rates. The Fed, which sets short-term rates, has increased the rate twice so far in 2018 and has stated its intention to raise it twice more.

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Advocating for Our Collective Future

I was one of several Natural Investments advisers to travel to Washington, D.C., in May to participate in a day of advocacy organized by USSIF: The Forum for Sustainable and Responsible Investment.

You may be wondering why a group of financial advisors who are on a mission to transform the world into a more equitable place would venture into the political arena. It’s a good question, and it’s one with an important answer. Right now, strategies for using investing as a tool for social change are under attack. The Security and Exchange Commission is trying to scare pension funds away from socially responsible investments by rolling back rules put in place during the Obama era. In Congress, Republicans are trying to strip

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Resilient Investing: One World, Many Futures

We hope by now some of our new readers are feeling eager to explore the soaring vision of resilient investing that most of our clients share. Be aware, though: if you want to be a resilient investor, you need a pioneering spirit. In these volatile, uncertain times, the old road maps that guided 20th century investors are no longer sufficient. The landscape has changed, and you’ll be traveling on new pathways that have yet to see much traffic. This can be disconcerting, as it lacks the appearance of stability. That Rock of Gibraltar was once an image of the financial industry, but turned out to be a mirage.

The uncertainty that plagues today’s investors became clear to us over the past several years, as clients and friends shared their notion that the world has come unmoored, and that “business as usual” is no longer a reliable anchor for making decisions about their investments, or their lives. While these wide-ranging conversations are often rich with insight and full of passion, our role as investment advisors asks us to act from an objective view of the world, free of personal and emotional bias. As you can imagine, this is no easy task!

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The Rule of Law, Wealth Inequality, and Our Response

The rule of law is the principle that all people and entities are subject to laws that are fairly applied and enforced. No one, according to this principle, is above or outside the reach of the law—neither presidents nor corporations.

Unfortunately, the rule of law in the United States is being undermined. The current president is well known for attacking the federal judiciary in spoken and written word, though federal judges have life tenure, which affords them some degree of immunity from his political ravings. The more alarming shift—with profound, long-term implications for the rule of law—is the current administration’s nomination of partisan extremists to the federal bench and the record pace at which the Senate is confirming many of them. (It should be noted that some of these nominees are so poorly qualified that even Republicans turned their noses).

The extreme politicization of the judicial nomination process has already begun to erode the rule of law in the US. Perhaps the most egregious example of this is the Supreme Court’s 5-4 vote in the infamous Citizens United ruling, which invalidated parts of a federal law that had imposed limits on corporate money in politics.

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Investing in Community and Nature

Carpenter Training Male Apprentice To Use Mechanized Saw

Socially responsible investing (SRI) is a diverse field with various aims, standards, goals, and objectives focused on sustainability, responsibility, and positive impact (SRI, again). The industry includes both corporate and community development dimensions and covers everything from startup innovation, international micro-finance, and ecosystem services to changing corporate policies and practices, advocating for regulatory and legislative improvements, and facilitating evolutionary shifts in the financial system.

As we pointed out in The Resilient Investor, we must embrace change on many levelspersonally, locally, and globallyin communities, boardrooms, and nature if we are to adapt to a more complex and uncertain trajectory for human civilization.

While the media and conventional investors may be obsessed with the next tech IPO or tax breaks for major corporations, we keep our focus attuned to our long-term vision of a world in balance, and that includes careful consideration of how we can support the social and racial justice and regenerative environmental activity that will allow us to thrive in these turbulent times. In other words, when investors, including SRI proponents, are focused on exclusively on short-term growthlarge companies merging and acquiring others and startups going public from nothingwe will fail to remedy the underlying social issues that stagnate the economy in the long term.

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Fighting Deregulation with Community Investment

On May 24, President Trump signed legislation to roll back critically important regulations on the financial industry. The consumer protection measures, which were put in place under the former Obama administration as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, have now joined the long list of public-interest regulations to be terminated by this administration.

When Obama signed Dodd-Frank into law in 2010, the mortgage meltdown that had begun in 2008 was in full swing, the government was bailing out the big banks that had caused the crisis with taxpayer dollars, and Americans were furious enough that legislators were able to push through the most significant changes to financial regulation since the reforms that followed the Great Depression. These include the Volcker rule, which keeps banks from taking speculative investments, and the creation of the Consumer Financial Protection Bureau—which is responsible for regulating consumer financial companies like banks, lenders, and credit unions. The act also created stipulations for banks to create plans to wind themselves down, instead of filing for bankruptcy, in the event of another economic collapse.

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