Morality and Investing

Back in the day, Americans trying to pressure South Africa to jettison its Apartheid system of government decided to put pressure on American businesses and other investors with financial links to Pretoria. Reverend Leon Sullivan created a set of principles in 1977 that ultimately was adopted by the United States government in 1986 that created serious economic backlash for those that profited in South Africa.

The campaign probably worked more from a moral embarrassment standpoint than an economic boycott.

I supported the campaign. I think so did most people that understood how unfair Apartheid was and how poorly it looked on America to support it in the United Nations and through investment. But managing your wallet based on your own moral compass can mean limited options and even limited returns on investments.

Anyone that considered Chinese workers to be under duress and in a state just north of slavery and refused to invest in Apple, missed one of the most amazing stock stories of a lifetime (unless they bought two months ago). The point is we all have issues that we care deeply about. The investing world is wide and surely there are enough stocks out there to avoid one that impacts your sensibilities. If there is a stock or industry that goes against your sense of morality and standards, then it is fine not to invest in or patronize that company.

But there are clear differences between sins and different opinions on how to live life. In other words, all moral compasses aren't programmed the same. Some people will not buy stocks of sugary snack companies, others cigarettes companies, and others certain stem cell operations. There are millions that have sworn off General Motors (GM) stock and its products. There are such things as company values that make it easier for me to avoid products but more difficult to not invest in that company. Offending my sensibilities is one thing, but offending my religion is another.

This brings me to the scandal of Urban Outfitters (URBN).

Cool Always on Edge

Yesterday the stock soared on a regulatory filing that suggests sales are running ahead of consensus. Beyond Wall Street, the headlines focused on the latest line of items that express vulgarity. The words used on clothes, mugs, and other items would make a sailor blush. We aren't talking about a grey area; we are talking about going there with gusto. I received a letter from a former customer of the store (see sidebar) outraged at the latest push of the envelope.

I've been in Urban Outfitters and must say this stuff has been going on for a long time. Although now it's clear the bar has risen. Initially, I was shocked and still find it hard to believe. The company also owns the ultra-cool Supreme stores and clothing line. Earlier this year, as I walked away from the store with my son, he remarked that the sales guy, who knows me well, was surprised I let him buy a certain t-shirt. I asked to see the shirt and promptly made my son exchange it. By the way, this was the same sales guy that let us in without standing in an hour-long line.

I can see how someone would want to boycott the products and the stock, yet such protests might not mean much. There is a larger issue.

The vulgarity on those Urban Outfitters products reflects the current world in which our children reside. There are a few Taylor Swift's out there, but for the most part, vulgarity is omnipresent. Nobody blushes and nobody thinks twice. I don't think Urban Outfitters is the problem, just a symptom. But there are worse things than gutter curse words expressed on clothing and iPad cases even though it speaks to lost morality in general. When I step into an Urban Outfitters store I see crassness and I see crowds.

Our subscribers are in the stock because the products are in demand. The products are in demand because they are cool.

There are different reasons things become cool, but the one thread that connects cool stuff to the beginning is an anti-social, anti-establishment aspect. These days language on regular television is enough to make one blush, so going against the norm means really going out there.

That being said, the pendulum on class and crassness cannot swing much further into the filth zone. I don't know when the pendulum comes back to those Mayberry R.F.D. days, which portrayed a time that never existed but was nice to visit each day to make us feel better.

I will say I'm not sure that show was ever considered "cool." Let's face it, cool has always been edgy and risqué even back then.

I'm not asking anyone to go against their beliefs, but I am saying that at some point, investing might mean owning assets, including stocks, where people think differently than you. Don't violate your religion, but keep an open mind on where society is, and if you want to change it, that's fine, but your investing dollars probably will not make a difference, unless it's an issue on par with Apartheid and not just bad words on a t-shirt.

Ben To Keep Printing

It's not even headline news anymore. The Federal Reserve is ready to push its balance sheet to over $4.0 trillion and nobody is batting an eye.

Today, Ben Bernanke will speak to the media, which will for the most part, lob him softballs about the current economic environment. If I were able to pose questions here are my top four:

* Why is he so confident the Fed can stop the threat of inflation once it rears its ugly head since official measures make allowances that underestimate real life cost of living?
* If full employment is part of the Fed's role, then how alarmed is he at the rapid exodus of Americans from the labor force?
* To what extent is political bickering and incompetence mitigating efforts of the Fed?
* Is the balance sheet the ultimate example of elasticity - can it grow forever?

Fiscal Cliff Update

Late yesterday, Harry Reid threw a monkey wrench into the market, on purpose, with more nonsense about democrats not cutting any spending. This bizarre form of public negotiation is only moving us further from resolution. The market took a ding, but more and more there is a belief a deal of some sort will materialize. The quality of the deal is what's in question. I have shifted my position to now thinking that no deal would be better than a complete surrender. Forget about the blame game, because history knows the Commander in Chief must bind competing interests together.

Business Roundtable Letter

I'm sure some members of the organization don't want higher taxes, and virtually all understand it's a net negative for the economy, but they just want it resolved. It's not much different than the reaction of someone that's been water-boarded... just stop, I'll say and do anything.

Comment: What is the JCSB Think Tank ? In one sense, it’s the Judeo-Christian small business version of the Business Roundtable. Yes, the BR that wants compromise on the $1 Trillion annual deficit spending of Congress. I guess that means $980 million of annual deficit spending. Heck of a way to run a business. The JCSB supports $0 of annual deficit spending by Congress. JCSB supports a whole new era where government operates with constant surpluses. Think about it.

Ping

Exploratory Discussion Group

Judeo-Christian, Small Business (JCSB) Think Tank

You don't for vote for them - or even know them. But they govern your life.

Congress needs small business morals and common sense - they work.

FReepmail me if you want to be on or off the JCSB Think Tank ping list.

I remember the anti-aparteid movement. The mailhandler’s union, like the others came out with a list of companies doing business in SA. They also told us not to buy granny smith apples. What that had to do with apartheid, no one could explain, just shut the f*** up and do what you’re told.

And that worked out so well, and post-apartheid governments of Zimbabwe and South Africa are such paradises for white and black alike.

Author Robert Heinlein once advised

If you are part of a society that votes, then do so. There may be no candidates and no measures you want to vote for...but there are certain to be ones you want to vote against. In case of doubt, vote against. By this rule you will rarely go wrong. If this is too blind for your taste, consult some well-meaning fool (there is always one around) and ask his advice. Then vote the other way. This enables you to be a good citizen (if such is your wish) without spending the enormous amount of time on it that truly intelligent exercise of franchise requires.

The part about "well-meaning fool" can also apply to investing.

That being said, the pendulum on class and crassness cannot swing much further into the filth zone.

What makes anyone think its a pendulum?

It isn't going to swing back of its own volition. You have to build the culture you want to live in.

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