{"id":108447,"date":"2017-07-03T10:25:52","date_gmt":"2017-07-03T14:25:52","guid":{"rendered":"http:\/\/countingpips.com\/?p=108447"},"modified":"2017-07-03T06:26:18","modified_gmt":"2017-07-03T10:26:18","slug":"thud-socially-responsible-investing-meets-reality","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/07\/thud-socially-responsible-investing-meets-reality\/","title":{"rendered":"Thud: Socially Responsible Investing Meets Reality"},"content":{"rendered":"<div id=\"inves-2172759182\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">July 3, 2017<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><p>By <a href=\"http:\/\/WallStreetDaily.com\/\"><u>WallStreetDaily.com<\/u><\/a> <img loading=\"lazy\" decoding=\"async\" class=\"attachment-home-th size-home-th wp-post-image\" style=\"display: block; margin-bottom: 5px; clear: both;\" src=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/06\/0617_investing_feature.jpg\" sizes=\"auto, (max-width: 580px) 100vw, 580px\" srcset=\"https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/06\/0617_investing_feature.jpg 580w, https:\/\/s3.amazonaws.com\/wallstreetdailywebsite\/wp-content\/uploads\/2017\/06\/0617_investing_feature-300x155.jpg 300w\" alt=\"\" width=\"580\" height=\"300\" \/><\/p>\n<ul>\n<li>The biggest con since Madoff.<\/li>\n<li>The dumbest \u201csmart\u201d money in history.<\/li>\n<li>A perverse world where sinners are saints.<\/li>\n<li><strong><a href=\"https:\/\/pro.agorafinancial.com\/m\/704717\" target=\"_blank\" rel=\"noopener\">Also recommended: 3 stocks M.A.R.K.E.D. for profits\u2026<\/a><\/strong><\/li>\n<\/ul>\n<hr \/>\n<p>The goal of business is to make money.<\/p>\n<p>Plain and simple.<\/p>\n<p>Or so I thought\u2026<\/p>\n<p>According to the latest data, money is spilling into sustainable investments.<\/p>\n<p>Chalk it up to America\u2019s newly evolving \u201coutrage\u201d culture that now pervades our lives.<\/p><div id=\"inves-3324680639\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>The last two years have witnessed investors push more than $2 trillion into socially responsible funds.<\/p>\n<p>To these folks \u2014 and their trillions\u2019 worth of capital \u2014 businesses should value certain social criteria above making money.<\/p>\n<p>What if a business fails in this regard? Then it isn\u2019t worthy of investment.<\/p>\n<p>That\u2019s how the socially responsible investor thinks!<\/p>\n<p>But I\u2019ll furnish hard proof today that socially responsible investors \u2014 among the fastest-growing demographics on the planet \u2014 are playing a fool\u2019s game.<\/p>\n<p><b><u>Spoiler Alert<\/u><\/b>: CNBC characterized it best \u2014 \u201cIf you want to feel good about the stocks you\u2019re holding, you\u2019ll pay the price in lower performance.\u201d<\/p>\n<h2 class=\"subhead\">It\u2019s Anything but \u201cSmart Money\u201d<\/h2>\n<p>In the early 1970s, with the war raging in Vietnam, protesters found it deplorable that companies like Dow Chemical (the maker of napalm) were actually profiting from the war.<\/p>\n<p>The controversy gave rise to the world\u2019s first socially responsible investing (SRI) fund \u2014 the Pax World Fund.<\/p>\n<p>Fast-forward nearly 50 years and SRI funds are enjoying their salad days.<\/p>\n<p>According to the latest data from the Forum for Sustainable and Responsible Investment\u2026<\/p>\n<p>More than one out of every five dollars under professional management in the United States \u2014 roughly $8 trillion \u2014 is invested alongside socially responsible mandates.<\/p>\n<p>But don\u2019t be fooled by the increasing popularity or large capital inflows.<\/p>\n<p>Considerable research demonstrates this is anything but \u201csmart money.\u201d<\/p>\n<p>As Nobel Prize winner Milton Friedman put it in 1962:<\/p>\n<p>\u201cThere\u2019s one and only one social responsibility of business \u2014 to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.\u201d<\/p>\n<p>While I don\u2019t think it\u2019s bad for businesses to improve society, as Milton Friedman points out by no means is it a requirement.<\/p>\n<p>Instead, it\u2019s more of a self-policing system like Adam Smith imagined it in <i>The Wealth of Nations<\/i>:<\/p>\n<p>\u201cBy pursuing his own interest [an individual] frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.\u201d<\/p>\n<p>Let\u2019s be clear on this\u2026<\/p>\n<p>Social responsibility is largely a byproduct of conducting good business.<\/p>\n<p>Good businesses sustain, and their stock prices expand.<\/p>\n<p>Bad businesses cut corners, and they ultimately fade into irrelevance.<\/p>\n<p>Therefore, buying solely on the merits of socially responsibility needn\u2019t be a motivating force.<\/p>\n<p>Nonetheless, the behavior persists.<\/p>\n<p>I suspect it\u2019s a way for people to give their wealth-building pursuit more meaning.<\/p>\n<p>But what few investors realize is that their noble endeavors to enforce social responsibility fail on several fronts\u2026<\/p>\n<h2 class=\"subhead\">Alcohol, Tobacco and Firearms to the Rescue?<\/h2>\n<p>If social responsibility is to be a primary goal for businesses, there should be some way to measure it.<\/p>\n<p>Yet aside from a few very subjective surveys, there isn\u2019t one.<\/p>\n<p>That\u2019s why you\u2019ll never see an analyst write: \u201cShares of Starbucks are worth at least $15 more because of the company\u2019s commitment to improving water quality in impoverished nations.\u201d<\/p>\n<p>Put simply, social responsibility might be admirable \u2014 but that\u2019s it.<\/p>\n<p>Publicly listed companies will never be able to elevate socially responsible goals above growth.<\/p>\n<p>To be frank\u2026<\/p>\n<p>The moment companies list shares publicly and the dough starts rolling in\u2026<\/p>\n<p>Their singular obligation is to increase shareholder value. Period.<\/p>\n<p>That\u2019s why shareholder value is so easily measurable in terms of profits and share prices.<\/p>\n<p>Like I said, we invest in companies to make money, not to save the world.<\/p>\n<p>Before I sign off, I\u2019ll give you the bottom line on the performance of SRI funds.<\/p>\n<p>If you\u2019re an active contributor to America\u2019s outrage culture, you may want to stop reading now.<\/p>\n<p>CNBC recently \u201creviewed years of Morningstar data on the performance of socially responsible funds versus traditional funds and benchmarks.\u201d<\/p>\n<p>They found that any funds designed to exclude \u201csin\u201d stocks \u2014 that is, tobacco, alcohol and guns \u2014 dramatically lagged in performance.<\/p>\n<p>Thud.<\/p>\n<p>Ahead of the tape,<\/p>\n<p>Louis Basenese<br \/>\nChief Investment Strategist, <em>Wall Street Daily<\/em><\/p>\n<p>The post <a href=\"https:\/\/www.wallstreetdaily.com\/2017\/07\/03\/thud-socially-responsible-investing-meets-reality\/\" rel=\"nofollow\">Thud: Socially Responsible Investing Meets Reality<\/a> appeared first on <a href=\"https:\/\/www.wallstreetdaily.com\" rel=\"nofollow\">Wall Street Daily<\/a>.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By WallStreetDaily.com The biggest con since Madoff. The dumbest \u201csmart\u201d money in history. A perverse world where sinners are saints. Also recommended: 3 stocks M.A.R.K.E.D. for profits\u2026 The goal of business is to make money. Plain and simple. Or so I thought\u2026 According to the latest data, money is spilling into sustainable investments. Chalk it [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-108447","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/108447","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=108447"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/108447\/revisions"}],"predecessor-version":[{"id":108456,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/108447\/revisions\/108456"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=108447"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=108447"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=108447"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}