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How the Fed's Interest Rate Cut Affects Your Investments

After three years of aggressively hiking interest rates, the Federal Reserve is finally moving towards “normalizing” rates. Now that the Fed lowered rates by a half percentage point, the biggest cut in 16 years, it’s a good time to discuss how rate cuts affect your investments, especially sustainable investments.

The Fed is sending a message that it believes inflation is under control and the economy has recovered. Even though the Fed is late in cutting rates (compared to other countries), if it is correct inflation should continue to slowly ease.

This rate cut will have a huge impact on consumers and investors, affecting mortgage rates, bond prices, hiring practices, real estate prices and most importantly to many of us: the value of our investments.

Peter Ricchuiti, a senior professor of finance at Tulane University’s Freeman School, who also created the nationally acclaimed Burkenroad Reports student stock research program, explains: “Interest rates are enormously important to stock valuations. More than half of the valuation models I teach at Tulane University use interest rate levels to determine fair stock prices.”

Let’s begin by looking at how lower interest rates affect sustainable investments.

Climate change

Companies involved in combatting climate change are “generally younger and need to borrow a great deal of money to grow,” says Ricchuiti. “Lower interest rates reduce the cost of borrowing, and therefore helps these businesses increase earnings.”

Ricchuiti notes that the U.S. presidential election will have a far greater impact on climate change than interest rates. “Lower interest rates are a positive for sustainable initiatives and will help stem the tide of blowback from Republican lawmakers.” He adds that he believes this is arguably the best U.S. economy in six decades.

One place where lower interest rates won’t have a noticeable effect is the cost of homeowner’s insurance. Because of climate change, and the increase in climate-related disasters, the cost to insure homes, especially in vulnerable areas of the country, is likely to keep rising.

Green companies

According to Ricchuiti, “green companies are one of the most interest rate sensitive sectors of the market. The Fed decision to lower interest rates is a big boost to the industry.”

He explains that when the Fed started raising interest rates, “the shares of green companies such as Sunnova and NextEra Energy began to underperform the general market. However, as inflation dropped about 65% over the past 30 months or so, the shares of many green companies have been outperforming the overall stock market.”

When the economy is strong, Ricchuiti notes, “companies are more willing to put some of their focus on doing what’s right. When the economy and corporate earnings suffer, these initiatives are pushed to the back burner.”

The good news for sustainable investors is that clean and green investments will continue to be a high-priority investment, especially as extreme weather events play havoc with the world. Regardless of how interest rates rise or fall, scientists, technicians and researchers will still be asked to solve many of the world’s environmental problems by developing new technologies.

How the Fed and interest rates affect other areas of the economy

Let’s take a look at other areas of the economy where lower interests may affect your finances:

· Hiring: According to the Fed, weaknesses in the labor market provided motivation to urgently cut rates. Many economists believed the Fed was “late to the party,” and should have cut rates sooner. Nevertheless, the rate cut should boost the weakening labor market.

· Mortgages: Hopefully, the days of high mortgage rates are over. Typically, the Fed will continue to cut rates at future meetings rather than “one and done.” That means patient home buyers and renters should expect to see lower mortgage rates in the months and years to come. Also, those who want to refinance will have an opportunity to refinance with reduced monthly payments.

· The housing market: Lower interest rates should make it easier for people to rent or buy a home. Higher interest rates caused problems for renters and buyers. Although it won’t happen immediately, the rate cut should provide relief. It will also give home sellers an opportunity to sell their current homes as well as find new homes at lower interest rates.

· Savings accounts: The one place where lower interest rates are unwelcome is savings accounts, where lower rates means lower returns. Often, those with large cash holdings parked in savings accounts move their money into the stock market as interest rates fall.

· Bonds: Bond prices rise as interest rates fall, so lower rates are good news for bond investors.

Conclusion

As discussed in a previous article, no matter who enters the White House in January 2025, there is no need to make any sudden financial moves if your candidate loses. In other words, do not “panic sell.”

You can still invest in the stocks, mutual funds and ETFs that reflect your beliefs and values. The clean and green companies that have helped sustain the environment should not be affected immediately by lower interest rates, or even by a new president.

The Best Election Year Portfolio Strategies for Impact Investors

LINK TO ARTICLE: https://rebrand.ly/qovpf4r

We previously discussed a number of important ideas including thematic investing as well as green, clean and renewable energy. Impact investing is another important financial strategy we believe in.

What is impact investing?

Impact-investing is a socially-responsible investment philosophy that seeks to earn a profit while helping to improve society, the environment and government. Put another way, impact investors want to use their money to make a positive impact on the world, or as the saying goes: “You can do good and do well.”

Impact investors can own any asset class or sector, but they tend to focus on agriculture, finance, housing, health care, education and the environment, to name a few.

For example, impact investors may buy individual stocks, ETFs or mutual funds that own shares in companies that focus on solar power or alternative fuels. They may also make investments that address poverty, help people find affordable housing, enhance health care or improve educational opportunities. All of these are examples of impact investments.

Note: Although impact investing is similar to ESG (environmental, social and governance), and SRI (socially-responsible investing), they are technically not the same.

Impact investing and the upcoming election

The outcome of the 2024 presidential election will have huge implications for the future of U.S. environmental policies. Impact investors are already motivated and engaged about the issues. The upcoming election should motivate them to do even more.

Now that the election is only weeks away, accusations will be made against both candidates. This could convince some investors to sell all their stocks and funds just because their candidate lost. This is usually a huge mistake. It is much wiser to take a “wait-and-see’ attitude no matter who is president.

Even if you believe the “wrong” person has entered the White House, positive or negative changes to the environment or the workplace won’t happen for at least two years, according to several experts. A lot depends on who controls Congress.

Look for impact investment opportunities

If you are an impact investor, there will be many future investment opportunities. This means focusing on companies that have a positive impact on society.

If you are a new investor, buying a mutual fund or ETF is a good place to start. This allows professionals to do the stock-picking for you.

According to the MSCI, here are the “gross returns” of the MSCI USA ESG Leaders index (as of August 30, 2024):

1-year return +26.63%
3-year return +9.29%
5-year return: +16.21%
10-year return +12.75%

The top 10 companies in the index include Nvidia NVDA

, Microsoft MSFT , Alphabet A {symbol link=GOOG], Alphabet C, Lilly (Eli) & Company LLY , Tesla TSLA , Visa , Procter & Gamble PG , Mastercard MA , and Johnson & Johnson JNJ .

Note: The total return of the S&P 500 index during the last year was 27.14%. In other words, the index produced nearly the same result as the S&P 500 index. However, if you had invested in a few of the top individual stocks in the MSCI ESG index, your results would have been even more spectacular.

Election implications for impact investors

The next president will decide whether oil and gas leasing on federal lands will be allowed, whether offshore regions will be protected or ravaged, such as the Artic. In addition, renewable projects, and clean and green incentives including electric vehicles, will either be prioritized or ignored depending on which party takes office.

The UN Climate Change Conference (UNFCCC COP 30) will take place in Brazil in November, 2025. This is when the parties who signed the Paris Agreement will meet. Depending on who is sitting in the White House in January, the United States will either participate or walk out, as they did in 2020.

While the president can choose which issues to prioritize, Congress has the power to pass bills. An environmentally friendly Congress (with help from the president) may pass legislation to encourage clean and green spending, tax cuts, federal government subsidies and offer other incentives for researchers and companies who develop impact-friendly businesses.

One political party may prioritize ESG programs, while another political party may choose to ignore them. It often begins at the presidential level, as the president and their party decide early in their term whether the environment and related issues are important or not.

No matter which party takes control in January, impact investing will be in the news. There is no doubt that climate change will be at the top of the list beginning with our continuing to participate in the Paris Agreement.

What can you do to make an impact?

Vote. When you head to the polls this November (or earlier), your vote has an impact on the future of our environment, society, workplace and economy.
Research which mutual funds, ETFs or stocks reflect your values.
Be careful to avoid misinformation. Doublecheck any dubious or outlandish claims, especially when accusations are made with no facts to back them up.
If you are new to impact investing, start small and don’t plunge into an investment with too much of your money. Try to have a diversified portfolio (i.e., don’t put all your eggs in one basket).
Keep in mind that no matter who wins the White House in November, there is no way to predict how impact investments will perform in the future.

Note: For a list of impact investments including mutual funds and ETFs, a great source is Morningstar, which rates each fund’s performance while providing a “sustainability” rating.”

Conclusion

As an impact investor, one of your goals may be to help save the planet from the ravages of climate change while also helping to make life easier for others. No matter your political affiliation, everyone wants to see a robust economy, a healthy environment and a strong infrastructure.

It may take a while to achieve results, so patience is required. The next president and Congress play an extremely important role in deciding where our tax dollars are spent, one of the reasons why this election is so critical.

'Dr. Doom’ warns about ‘Magnificent Seven’ stocks: ‘The whole world has been gambling.’

LINK TO ORIGINAL ARTICLE: https://rebrand.ly/70280cs

“Dr. Doom” will see you now.

Investment manager Marc Faber, a.k.a. “Dr. Doom,” earned that moniker after advising his clients to get out of the stock market before the October 1987 crash.

Faber, publisher of the investment newsletter “The Gloom, Boom, & Doom Report,” doesn’t foresee an imminent market crash now, but is wary of the U.S. stock market and continues to be concerned about stock valuations. Says Faber: “The market has been driven higher by a handful of stocks,” that is, “any stock that has anything to do with artificial intelligence.

These stocks, Faber notes, are “grossly overvalued.”

After 50 years of investing and trading experience, Faber has learned many important lessons. No. 1: Respect the power and unpredictability of the stock market, if only to avoid being caught by surprise when the market makes extreme moves.

In this recent interview, which has been edited for length and clarity, Faber talked about his view of both the stock- and housing markets, strategies investors should use to protect a portfolio, how interest rates could reach unsustainable levels, and the disastrous effects of still-high inflation.

MarketWatch: What’s your view of the U.S. stock market right now?

Faber: I am relatively negative about the U.S. market. Most stocks haven’t done well. However, the market has been driven higher by a handful of stocks — semiconductors and anything to do with high-tech, especially with artificial intelligence. In my view, these stocks are grossly overvalued and have substantial downside. When there is a change in leadership, these stocks will go down as the market moves away from these favorite stocks to more value-oriented stocks.

MarketWatch: What are the red flags you’re seeing in stock prices?

Faber: First, if you look at valuations by historical standards, they’re very high, especially the favorites I just mentioned. Second, the profit margins of American companies will come down because of inflationary pressures, and also because of weak demand. The problem in America with many sectors is affordability, especially in the housing industry. Housing affordability in the U.S. is at its lowest level ever. That reduces the demand, which reduces earnings potential.

MarketWatch: What can the U.S. government do to boost economic demand?

Faber: The question is how can you operate on the economy without putting the patient into the hospital? It will be very unpleasant for two, three or four years. But what must be done — and will be done eventually — is to bring fiscal deficits down.

There are three choices. First, politicians could increase taxes. However, if politicians go to American voters and tell them they must increase taxes, they will not get elected. Second, politicians could cut government spending. But no one will elect them if they cut police, fire, and army veteran pensions, or cut Social Security contributions for those over 65. The third option, which is what every government has embarked upon, is inflation.

The government prints money and the inflation rate goes up. But inflation rises because of deficits and money printing. In other words, it’s a tax. The bad aspect of inflation is that it touches different sectors of society differently. For example, I have cash, stocks, bonds, commodities and no debt. I love inflation because the value of my assets goes up.

But as a social observer, historian and economist, I know it’s a disastrous policy with a disastrous outcome. The poor people get hurt the most during inflationary times because they have no assets. That’s why if you look at every inflationary period in history, wealth inequality increased dramatically.

MarketWatch: How can investors protect their money in this environment?

Faber: People should reverse their thinking and start to contemplate the view that instead of everything going up, think what would happen if everything that you own goes down in value. I want to stress that it’s not a disaster if everything comes down and you have no debts. The problem arises for people who have a lot of debts, because debts don’t come down.

If I were an investor, given the uncertainty we have in the world, I would own some precious metals. I’m not saying the precious-metals market will go up tomorrow. But when I look at the debt levels in America — the unfunded liabilities of the U.S. government and those of pension funds, in my view — the only way out is to print money. There is no other option. That’s what governments have always done.

MarketWatch: Are you shorting the U.S. market?

Faber: I used to be one of the larger short sellers. But during the technology boom in 1999 and 2000, I lost a lot of money. I decided that shorting stocks in a money-printing environment is a dangerous proposition. Based on fundamentals, a stock should go down, but because of monetary injection, the stock goes up.

MarketWatch: What is one of the most important lessons you’ve learned about the stock market?

Faber: I have a very good lesson that everyone should remember: The market is unpredictable. On any trading day, we don’t know how the market will close. And in six months, where will the market be? Do you know? I don’t know. That’s why most individual stock investors and traders will lose money.

MarketWatch: Are you seeing different conditions in stock markets outside the U.S.?

Faber: Actually, the whole world has been gambling on the “Magnificent Seven” stocks — especially Nvidia

Michael Sincere (michaelsincere.com) is the author of “Understanding Options,” “Understanding Stocks,” and the forthcoming “Help Your Child Build Wealth” (Wiley, 2024).

How Colleges are Divesting from Fossil Fuel Investments and What Students Can Do

Link to Article: https://rebrand.ly/t2kg9gb

Most of you probably know that governments must soon change to cleaner and greener energy sources to prevent people from suffering or dying from the damaging effects of pollution and severe weather-related events.

Fewer people know that students and environmental activists have pressured university and college officials for years to divest their endowment funds (donations or gifts to educational institutions to support their missions in perpetuity) of all fossil fuel holdings.

The endowment numbers are huge. Universities and colleges have a combined total of $800 billion in endowments with investments in many places, including the fossil fuel industry.

The student’s goal is to force higher educational institutions to stop investing in companies in the fossil fuel industry and to divest all current investments in that financial sector. Divestment is one way to help force environmental changes.

The divestment pressure has shown results. Worldwide, almost 1,500 educational institutions have fully or partially divested from fossil fuels. In the United States, nearly 250 such institutions have “committed to some form of fossil fuel divestment.”

There is political pressure on both sides. On one hand, the fossil fuel industry spends hundreds of millions of dollars to lobby (and finance) politicians to maintain the status quo. More importantly, the industry creates jobs.

On the other hand, as an increase in extreme weather conditions (such as droughts, hurricanes, wildfires and floods) results in more deaths and destruction, world governments will be pressured to find alternative energy sources and reduce their reliance on fossil fuels.

Campaign to change university fossil fuel investments

No one said it’s easy to move from reliance on fossil fuels to clean energy, or that it will happen quickly. After all, jobs (and votes) are on the line. Another factor is that these educational institutions share in the billions of dollars in profits by collecting dividends.

Also, in certain areas of the country where oil is a huge part of the economy, such as in Texas or Alaska, divestment is not welcome.

The good news for investors is that experts say that investing in clean energy and sustainable technologies is more profitable than investing in fossil fuels. The International Energy Agency calculates that “the world now invests $1.7 trillion per year in clean energy, higher than the $1.1 trillion being invested in fossil fuels.”

As new clean and green technologies are developed, additional educational institutions may feel the pressure to divest.

Both small and large colleges and universities have already divested, including Antioch University, Dartmouth College, University of California, Chico State University, Harvard University, Wellesley College, Boston University, Georgetown University, Brown University, New York University, Princeton University, University of Michigan, Unity College, Loyola University Chicago, Rutgers University, Yale, Cornell, Columbia University, and Goddard College, to name a few.

A full list of participating colleges and universities can be found here.

How to start your own divestment campaign

If you are a student who wants to start a divesting campaign at your university or college, there are steps you can take to convince the board of trustees to divert and reinvest in more environmentally-friendly companies.

First, start small by asking for a meeting with the board of trustees, or the university president. In the email or letter, politely request a freeze or drawdown in fossil fuel investments. If university officials are willing to speak to you, that is a significant first step.

However, if the board of trustees ignores or denies your request, you can take other steps:

Recruit friends, concerned citizens, faculty members, donors, or alumni who may be willing to help with a divestment campaign.

Educate students and faculty about the issue such as arranging a debate, show films, write an op-ed in the campus newspaper, write a letter to the editor of the town newspaper or have a divestment party.

Consider creating a website devoted to the divestment campaign, and using social media to bring attention to the issue. Contact the national media to request that a journalist cover the story.

Start a petition to prove there is enough interest in the issue to bring it up for discussion.
Bring the petition to the college president with letters of support from all concerned parties. Try to meet with the board of trustees again to see if they are open to change.

Not all divestment campaigns at universities have been successful even with pressure from students and faculty. If no action is taken by the college president or board of trustees, you could try to turn up the heat with campus demonstrations, sit-ins or walk-outs. Admittedly, these are more aggressive actions that few would be willing to take.

New York University success story

One divesting success story was at Manhattan’s New York University, where four student activists were given the opportunity to tell the school’s board of trustees “why the university should divest the fossil fuel stocks in its $5 billion endowment.”

The students were surprised when board chair billionaire William Berkley agreed with them. He said they no longer owned stocks in fossil fuel companies, and committed to avoid any direct investments in these companies in the future.

Another successful campaign occurred at the University of Michigan. At first, university officials aggressively resisted student’s demands, but after campus protests exploded, the board of trustees agreed to completely divest from fossil fuel companies.

Conclusion

No one is expecting the world to become fossil-fuel free anytime soon, but many, beginning with college students, are working hard to change the public’s mindset.

Environmental scientists warn that if something isn’t done now, future generations will suffer the consequences. Pressuring educational institutions to divert their money to companies that promote green and clean energy is a good place to start.

Investing in Women-Led or Owned Companies

LINK TO ARTICLE: https://rebrand.ly/hhni8sp

Many investors buy stocks in companies that match their values, whether it be environmental, social or governance issues, minority-owned, women-owned or companies led by women.

For many, this is a smart investment decision. After all, in the United States, “women-owned firms are growing at more than double the rate of all other firms, contribute nearly $3 trillion to the economy and are directly responsible for 23 million jobs.”

As mentioned in Part 1, companies with a larger percentage of women managers tend to outperform those with male leaders. The research measured variables such as profit, corporate governance and creativity. For this reason, many investors seek out companies predominantly led by women, although the list is still small.

“We find that funds managed by women or mixed teams produce similar and sometimes better risk-adjusted returns than male-only managed funds but they are few in number, and find it difficult to raise significant amounts of assets,” concluded a British research study published in the Journal of Applied Finance & Banking.

If women-led or women-owned companies are important to you, the following investments should help give ideas of how to get started. These include stocks, exchange-traded funds and mutual funds that focus on women.

ETFs focused on women empowerment and equality

Let’s start by taking a look at ETFs who invest in companies with women CEOs or women in leadership positions. Although the one-year results below serve as a guide, don’t use past performance as the main reason for deciding whether a security will be profitable in the near term.

Note: The following securities, listed in random order, are not recommendations, but are ideas to motivate you to do additional research. The goal is to invest your money and earn profits with the issues and ideas that are important to you.

Note: Over the last year (as of August 29, 2024), the S&P 500 gained 25.22%.

1. SPDR SSGA Gender Diversity Index ETF

SHE tracks an index provided by MSCI that scores companies based on women representation in leadership as well as their diversity programs for staff.

One-year total return: +27.94% (as of August 29, 2024)
Assets Under Management (AUM): $247 million
Expense ratio: .20%
Top three holdings: Nvidia, Apple, Microsoft (MSFT)

2. Impact Shares YWCA Women’s Empowerment ETF
WOMN tracks an index provided by Morningstar that is designed to include companies with strong gender diversity programs. Additionally, all profits from this fund are donated to the YWCA.

One-year total return: +23.13% (as of August 29, 2024)
Assets Under Management (AUM): $59.4 million
Expense ratio: .75%
Top three holdings: Apple, Meta Platforms, Amazon

3. Hypatia Women CEO ETF
WCEO invests in all publicly traded American companies with female CEOs.

One-year total return: +19.62% (as of August 29, 2024)
Assets Under Management (AUM): $3.3 million
Expense ratio: .85%
Top three holdings: Lumen, Arista, Advanced Micro Devices

4. NYLI Engender Equality ETF
EQUL tracks an index provided by Solactive that is designed to include companies with gender equality, represented by equal pay and balanced leadership.

One-year total return: +20.30% (as of August 29, 2024)
Assets Under Management (AUM): $7.2 million
Expense ratio: .45%
Top three holdings: Kellanova, Globant SA, Halozyme Therapeutics

Mutual funds focused on women leadership

There are also a handful of mutual funds focused on women’s leadership, including the following.

1. Impax Ellevate Global Women’s Leadership Fund
PXWEX uses an in-house gender score to identify companies with diverse leadership, gender equity, and strong diversity programs and practices.

One-year total return: 18.23% (as of August 29, 2024)
Assets Under Management (AUM): $749 million
Expense ratio: .77%
Top three holdings: Nvidia, Microsoft, Apple

2. Fidelity Women’s Leadership Fund
FWOMX invests in companies with female representation in the senior management team or board of directors, or who have what the fund managers consider strong gender diversity practices.

One-year total return: +20.29% (as of August 29, 2024)
Assets Under Management (AUM): $154 million
Expense ratio: .69%
Top three holdings: Amazon, Microsoft, Nvidia

3. Fidelity Women’s Leadership ETF
FDWM follows the same methodology as the Fidelity Women’s Leadership Fund, but is instead available as an ETF.

One-year total return: +20.76% (as of August 29, 2024)
Assets Under Management (AUM): $3.9 million
Expense ratio: .59%
Top three holdings: Amazon, Microsoft, Nvidia

Women CEOs in Fortune 500 companies

The following is a partial list of women CEOs at Fortune 500 companies. As you see below, some of the largest companies in the world are led by women:

· Karen Lynch, CVS Health CVS

· Gail Boudreaux, Elevance Health ELV

· Mary Barra, General Motors GM

· Carol Tome, United Parcel Service UPS

· Jane Fraser, Citigroup

· Corie Barry, Best Buy BBY

· Tricia Griffith, Progressive PGR

· Thasundra Duckett, TIAA

· Safra Catz, Oracle ORCL

· Lynn Good, Duke Energy DUK

· Sarah London, Centene CNC

· Priscilla Almodovar, Fannie Mae

· Phebe Novakovic, General Dynamics GD

· Kathy Warden, Northrop Grumman NOC

· Vicki Hollub, Occidental Petroleum OXY

Six stocks in women-led companies

In addition to the stocks listed above, the following stocks were culled from a number of online sources. Once again, these stocks are not recommendations, but may be used as a starting point to do additional research.

Reminder: Over the last year (as of August 29, 2024), the S&P 500 gained 25.22%.

1. Arista Networks ANET
Stock price: $349 (as of August 29, 2024)
One-year total return: +87.49% (August 29, 2024)

2. Sunrun RUN
Stock price: 20.64 (as of August 29, 2024)
One-year total return: +47.46%

3. The Hershey Company HSY

Stock price: 191.16 (as of August 29, 2024)
One-year total return: -9.69% (August 29, 2024)

4. Zoetis ZTS
Stock price: $183.26 (as of August 29, 2024)
One-year total return: -1.28% (August 29, 2024)

5. Accenture ACN
Stock price: 342.51 (as of August 29, 2024)
One-year total return: +6.74% (August 29, 2024)

6. Veracyte VCT
Stock price: 32.39 (as of August 29, 2024)
One-year total return: +26.23% (August 29, 2024)

Conclusion

If women-led companies, diversity and gender diversity are important issues for you, there are many excellent investment choices, several which handily beat the S&P 500 over the last year. As always, just because a stock or investment performed well in the past does not mean it will continue to do so.

Never forget that it’s possible for a stock price, or the entire market, to fall. That is the risk that all investors take when participating in the stock market. Fortunately, several women-led companies, including some of the ones listed in this article, have outperformed the S&P 500, and will continue to do so, even if there is a market pullback.

CEOs are paid 200 times more than their average employees, who fall further behind every year

LINK TO ORIGINAL ARTICLE: https://bit.ly/47nmmD2

Now that Labor Day is behind us, it’s a good time to evaluate whether American workers are getting paid what they’re worth. One good way to do that is to compare their pay to the salary of their CEOs.

According to data analyzed by the Associated Press, it’s estimated that many CEOs are getting paid nearly 200 times what their workers were paid last year.

“The median pay package for CEOs rose to $16.3 million, up 12.6%,” through 2023, according to the AP. Wages and benefits for private-sector workers increased by only 4.1% over the same period.

In other words, the typical worker wage not only trails that of their CEOs, but it falls further behind every year. This rising inequality between CEO’s compensation and that of their employees may be one of the reasons that some workers feel they have been left out, and will never catch up. Rampant inflation, which appears to be ending, ravaged employee’s earning power.

A number of outside observers believe that executive pay has reached extreme levels. Tesla CEO Elon Musk is exhibit No. 1.

CEOs with exorbitant CEO-to-worker pay ratios

In June, Equities News discussed how Tesla TSLA

shareholders approved a $46 billion dollar pay package for CEO Elon Musk, the largest compensation package ever given to a U.S. corporate executive.

Compare that to the salary of the typical Tesla employee. According to Tesla’s 2023 proxy filing, the “median annual pay of a non-CEO Tesla employee was $45,811.” (Musk’s pay was more than one million times that of his employees!)

Although Elon Musk’s pay package is miles higher than that of anyone else, other CEOs have exorbitant CEO-to-worker pay ratios. According to the Institute for Policy Studies annual Executive Excess Report 2024, Ross Stores CEO Barbara Rentler was given an $18.1 million pay package, meaning she was paid more than 2,100 times as much as “the $8,618 pay that went to her company’s ROST

median-compensated employee, a part-time store associate.”

Another CEO with an extremely high CEO-to-worker pay ratio: Nike CEO John Donahoe earned $32.8 million in 2023, “975 times as much as the athletic wear company’s NKE

$33,646 median pay,” says the Institute for Policy Studies.

CEOs with the highest 2024 compensation packages

According to the data analyzed by the AP, the following are the top five CEOs who recently had the highest yearly compensation packages (not including Elon Musk).

Hock Tan, Broadcom: $162 million per year
William Lansing, Fair Isaac Corp.: $66.3 million
Tim Cook, Apple: $63.2 million
Hamid Moghadam, Prologis, Inc.: $50.9 million
Ted Sarandos, Netflix: $49.8 million

Note: These are approximate pay packages that may include bonuses, awards and other perks.

Female CEOs with the highest salaries

According to the AP’s annual compensation survey, the following are the top five female CEOs of S&P 500 companies with the highest salaries.

Lisa Su, Advanced Micro Devices: $30.3 million
Mary Barra, General Motors: $27.8 million
Jane Fraser, Citigroup: $25.4 million
Kathy Warden: $23.5 million
Carol Tome, UPS: $23.3 million

Although more women have broken the glass ceiling and reached the C-suite, the pay gap between male CEOs and female CEOs is still quite wide.

Note: These are approximate pay packages that may include bonuses, awards and other perks.

Why are CEOs paid so much?

It’s up to the board of directors to explain to shareholders why their CEO deserves a higher-than-normal salary, especially when the amount is excessive. Many boards are willing to pay huge sums to top-notch CEOs whom they believe have the skills necessary to run the company (and help boost its stock price). They often claim that huge pay packages are necessary to attract and keep top CEO talent.

Institutional Shareholder Services, a proxy advising service, recently issued a press release about a study it conducted that claimed that roughly 70% of S&P CEOs in the study received a pay increase while approximately 27% of them saw their pay decrease.

They also discovered that most of the pay changes resulted from an increased value of stock and option awards. At the same time, they found that “companies in the S&P 500 generally exhibited strong total shareholder returns over the measurement period (one-year).”

Conclusion

As long as the stock market keeps moving higher and profits in major corporations keep increasing, CEO pay will likely increase. In reality, shareholders aren’t complaining and, in many cases, approve bloated pay packages.

Unfortunately, while their CEOs receive astounding salaries, employees often get the shortest end of the stick, especially for employees who earn lower wages (such as those working at retail stores).

The top ETFs, mutual funds and stocks for investing in women-led companies

LINK: https://bit.ly/3XuRlK6

Many investors buy stocks in companies that match their values, whether it be environmental, social or governance issues, minority-owned, women-owned or companies led by women.

ETFs focused on women empowerment and equality

Note: Over the last year (as of August 29, 2024), the S&P 500 gained 25.22%.

1. SPDR SSGA Gender Diversity Index ETF
SHE tracks an index provided by MSCI that scores companies based on women representation in leadership as well as their diversity programs for staff.

One-year total return: +27.94% (as of August 29, 2024)
Assets Under Management (AUM): $247 million
Expense ratio: .20%
Top three holdings: Nvidia, Apple, Microsoft (MSFT)

One-year total return: +23.13% (as of August 29, 2024)
Assets Under Management (AUM): $59.4 million
Expense ratio: .75%
Top three holdings: Apple, Meta Platforms, Amazon

3. Hypatia Women CEO ETF
WCEO invests in all publicly traded American companies with female CEOs.

One-year total return: +19.62% (as of August 29, 2024)
Assets Under Management (AUM): $3.3 million
Expense ratio: .85%
Top three holdings: Lumen, Arista, Advanced Micro Devices

4. NYLI Engender Equality ETF
EQUL tracks an index provided by Solactive that is designed to include companies with gender equality, represented by equal pay and balanced leadership.

One-year total return: +20.30% (as of August 29, 2024)
Assets Under Management (AUM): $7.2 million
Expense ratio: .45%
Top three holdings: Kellanova, Globant SA, Halozyme Therapeutics

Mutual funds focused on women leadership

There are also a handful of mutual funds focused on women’s leadership, including the following.

1. Impax Ellevate Global Women’s Leadership Fund
PXWEX uses an in-house gender score to identify companies with diverse leadership, gender equity, and strong diversity programs and practices.

One-year total return: 18.23% (as of August 29, 2024)
Assets Under Management (AUM): $749 million
Expense ratio: .77%
Top three holdings: Nvidia, Microsoft, Apple

One-year total return: +20.29% (as of August 29, 2024)
Assets Under Management (AUM): $154 million
Expense ratio: .69%
Top three holdings: Amazon, Microsoft, Nvidia

3. Fidelity Women’s Leadership ETF
FDWM follows the same methodology as the Fidelity Women’s Leadership Fund, but is instead available as an ETF.

One-year total return: +20.76% (as of August 29, 2024)
Assets Under Management (AUM): $3.9 million
Expense ratio: .59%
Top three holdings: Amazon, Microsoft, Nvidia

Women CEOs in Fortune 500 companies

The following is a partial list of women CEOs at Fortune 500 companies. As you see below, some of the largest companies in the world are led by women:

· Karen Lynch, CVS Health CVS

Gail Boudreaux, Elevance Health ELV

· Mary Barra, General Motors GM

· Carol Tome, United Parcel Service UPS

· Jane Fraser, Citigroup

· Corie Barry, Best Buy BBY

· Tricia Griffith, Progressive PGR

· Thasundra Duckett, TIAA

· Safra Catz, Oracle ORCL

· Lynn Good, Duke Energy DUK

· Sarah London, Centene CNC

· Priscilla Almodovar, Fannie Mae

· Phebe Novakovic, General Dynamics GD

· Kathy Warden, Northrop Grumman NOC

· Vicki Hollub, Occidental Petroleum OXY

Six stocks in women-led companies

Reminder: Over the last year (as of August 29, 2024), the S&P 500 gained 25.22%.

1. Arista Networks ANET
Stock price: $349 (as of August 29, 2024)
One-year total return: +87.49% (August 29, 2024)

2. Sunrun RUN
Stock price: 20.64 (as of August 29, 2024)
One-year total return: +47.46%

3. The Hershey Company HSY
Stock price: 191.16 (as of August 29, 2024)
One-year total return: -9.69% (August 29, 2024)

4. Zoetis ZTS
Stock price: $183.26 (as of August 29, 2024)
One-year total return: -1.28% (August 29, 2024)

5. Accenture ACN
Stock price: 342.51 (as of August 29, 2024)
One-year total return: +6.74% (August 29, 2024)

6. Veracyte VCYT
Stock price: 32.39 (as of August 29, 2024)
One-year total return: +26.23% (August 29, 2024)

Conclusion

Women's Equality Day: Celebrating the Right of Women to Vote

LINK TO MY ARTICLE: https://bit.ly/3T5Yluh

Monday is Women’s Equality Day, celebrating the anniversary of the 19th amendment to the constitution, passed in 1920, which gave women the right to vote. It forbids states and the federal government from suppressing the right to vote based on sex.

It was a huge victory for women across the United States, as the right to vote is vital to our democracy. It also meant that any candidate running for office had to include issues important to women in their campaign message.

This obviously influenced the political, social and economic direction of the United States, and paved the way for women to become elected officials. The 19th amendment made it easier for women to run for elected office, including the House of Representatives, senate, vice president, and perhaps even president one day.

In 1971, New York Congresswoman Bella Abzurg introduced a resolution that made April 26 Women’s Equality Day. In 1972, President Richard Nixon officially recognized this special day with Proclamation 4147, which Congress approved in 1973. Every president since has announced August 26 as Women’s Equality Day.

Not a level-playing field (yet)

Although women still face obstacles based on gender-based discrimination, the playing field is improving slowly. While the so-called “glass ceiling” still exists (i.e., a barrier to advancement in a profession, especially involving women and minorities), a few cracks have appeared.

One place where women are still not equal is in the C-suite (i.e., top management positions) and in the board room. In 2024, there were 52 women in charge of Fortune 500 companies, crossing 10% for the first time. The number continues to increase, but it will be a long time before women outnumber men as Fortune 500 CEOs.

According to research, companies with a larger percentage of women managers tend to outperform those with male leaders. The research measured variables such as profit, corporate governance, and creativity. For this reason, many investors seek out companies predominantly led by women, although the list is still small.

In addition to female-led companies, an investing theme involves investing in ETFs and mutual funds that are led by women. A British research study published in the “Journal of Applied Finance & Banking“ (Vol. 13, No. 5, 2023) by Jacob H. Schmidt and Bianca Hutton Chimes concluded: “We find that funds managed by women or mixed teams produce similar and sometimes better risk-adjusted returns than male-only managed funds but they are few in number, and find it difficult to raise significant amounts of assets.”

The benefits of having a women CEO

According to research, there are a number of benefits when women are appointed to senior management positions. First, adding women to the C-suite causes organizations to think differently, adding new ideas to the corporation while also encouraging more risk taking. This “changes how these firms made key strategic decisions.”

The research also shows that when female executives were included in decision-making, the firm gradually shifts from a merger and acquisition (i.e., M&A) mindset to a focus on research and development (i.e., R&D). The shift to increased R&D spending helped senior-level executives be more open “to change and aversion to risk” than when investing in M&A.

Nevertheless, these are not “hard-and-fast” rules. There are many examples of successful women executives who prioritized M&A investments over R&D. The key point is that the research suggests that having a more diverse management team helps make the entire team more open to change and less risk-averse. Ideally, that makes a company stronger and more flexible.

Not surprisingly, women CEOs differed in their management style from men, but research studies show that they “were just as effective in terms of the financial performance of their companies.”

Specifically, many women had a more open and positive communication style than their male counterparts, especially during the pandemic, when this research was conducted. In particular, “women CEOs used proportionately more expressions of joy and men used proportionately more anger.” The researchers concluded that during this time period, female CEOs had much more positive communications with their employees compared to men.

Conclusion

If female power and diversity are important issues to you, in Part 2 we will discuss specific ETFs, mutual funds, and stocks that reflect your values. When a company is diverse, especially in upper management, it is likely to be stronger as it includes a variety of employee experiences, opinions, and viewpoints.

The goal for many companies is to promote gender equality and equal compensation. As a result, female leadership helps a company to enhance creativity and problem-solving.

Stress is the biggest danger white-collar workers face

LINK: https://bit.ly/3WZJxOJ

We previously discussed the dangers that many workers face from extreme heat conditions, typically farming and construction industry employees, who often work outdoors without adequate breaks or access to fresh water.

Let’s not forget about white-collar workers, who appear to have cushy jobs in air-conditioned offices, but who may also be exposed to unhealthy environments. The extraordinarily long hours, demanding managers and tight deadlines have pushed some white-collar workers to the edge and, in some cases, have overworked them to death.

In May, 2024, a Bank of America investment banker and former Green Beret, 35-year old Leo Lukenas III, died after putting in 100 hours a week for a month while working on a $2 billion acquisition. He died when “a blood clot formed in a coronary artery.”

Twelve-hour days, 6 days a week, are the norm, say many interns, whose entry-level salaries may reach as high as $200,000 a year. Even 100 hours (or more) per week is possible for those working in high-stress jobs such as investment banking.

Many young employees don’t complain to their managers for fear of looking “weak.” One associate, according to the Wall Street Journal, left Bank of America when he was routinely asked to work 95-hour weeks. The WSJ, who spoke to dozens of bank employees, claimed that some upper managers told junior bankers to “ignore policies that limit working hours.”

These policies were installed years ago after a Bank of America intern in London, Moritz Erhardt, died in 2013 after having an epileptic seizure after working a series of grueling all-nighters. The new rules limited banker hours and gave bankers a “protected Saturday policy.”

Health problems from stress

For many young, ambitious employees, the long hours are worth the opportunity to make big bucks, while showing their managers they are willing to do almost anything to prove their loyalty and work ethic.

Not surprisingly, the excessively long hours and competitive workplace culture has taken a toll on the health of many workers, and not only investment bankers.

Some white-collar workers are sickened by unhealthy work environments such as mold, faulty or noisy air conditioners, and unsafe indoor air. Sometimes, these environmental hazards go undetected for years.

High levels of work-related stress

Stress has been another problem for many white-collar workers, who are often under extreme pressure to meet tight deadlines.

Some workers attempt to hide work-related stress symptoms such as extreme anxiety or burnout. Robert Sapolsky, in an article published by The American Institute of Stress, says: “The body is not designed to handle constant, unrelenting stress. Over time, the wear and tear can lead to severe health consequences.”

According to the American Institute of Stress: “Prolonged exposure to stress can lead to serious health problems including heart disease, hypertension and diabetes.”

A number of research studies have confirmed that long working hours and heavy workloads have led to physical problems such as heart attacks and strokes, weight gain, insomnia, as well as increased stress levels. Workplace stress not only keeps workers at home but makes them less productive at work.

Companies noted for providing first-class mental health support

Several independent sources have mentioned companies that provide first class mental health support to their employees. For example, Upkeep identified companies that have programs in place meant to improve the mental health of their employees.

These companies provided stress management and assistance programs (Johnson & Johnson), wellness programs (Unilever), suicide prevention campaigns (Union Pacific), physical and mental health services (Barry Wehmiller and New Brunswick Power), and a comprehensive mental health program (American Airlines)

Also, Forbes magazine publishes an annual list of the best 100 companies to work for. The list is based on a survey of employees, which asks them a wide range of questions, including if they feel respected, if they receive support for their well-being, and if the company treats them fairly.

This year’s top 10:

1. Hilton Worldwide Holdings

2. Cisco Systems

3. Nvidia

4. American Express

5. Synchrony

6. Wegmans Food Markets

7. Accenture

8. Marriott International

9. Cadence

10. Comcast

What can employers do to reduce worker stress?

There are a number of steps that employers can take to reduce worker stress.

Employers can follow the lead of the companies mentioned above by creating mental and physical health programs. According to the World Health Organization, depression is the biggest worldwide problem for workers, costing businesses nearly $500 billion in “lost productivity.”

Companies can also encourage employees to lose weight by helping them switch from a fast-food diet to a nutritious one. Employers may help workers find ways to quit smoking, provide healthy on-site meals and snacks, and allow unrestricted access to water coolers.

One idea for employers is to routinely give out anonymous stress surveys with an opportunity for employees to provide feedback. Occupational Safety and Health Administration (OSHA) has a survey on their website with sample questions.

Although not always possible, it helps when employees are given more freedom depending on the type of work they do. If this is not feasible, employers may give some workers a variety of jobs rather than forcing them to do the same job every day. Rotating jobs helps reduce burnout.

To avoid emotional and physical work-related problems, employees should avoid working more than 80 to 100 hours a week. A 120-hour work week is not only unrealistic, but dangerous for workers. The human resources department probably has rules that prevent employees from working that many hours, but some managers ask their employees to hide the true number of hours worked.

It’s helpful when new, and typically younger workers, are given adequate training and an ongoing training program. Training programs help reduce stress in workers, especially for inexperienced or new hires.

Comfortable chairs and desks with neck and back rests or support pillows help show office workers that the company cares about their physical and emotional well-being. This may also help relieve repetitive strain injuries, i.e., damage to muscles and nerves resulting from constantly and repeatedly using the same motion.

Conclusion

White-collar workers who are asked to work extraordinarily long hours with unrealistic deadlines risk physical and psychological injuries, including anxiety and stress. It is up to employers, with help from the government, to make sure their employees are not asked by rogue managers to put their health and lives in danger just so they can help achieve a company’s financial goals.

MarketWatch: My interview with legendary "Market Wizard" trader Tom Basso

LINK TO ARTICLE: https://bit.ly/3ySQGZ9

"Buffett sold half of his Apple position. Isn’t that market timing?" Stock trader Tom Basso reveals what it takes to win.

Tom Basso, a hedge-fund manager and veteran stock trader, was dubbed ”Mr. Serenity” in Jack Schwager’s classic 1992 book, “New Market Wizards.”

Here’s how Schwager described Basso more than 30 years ago: “When I first met Basso, I was immediately struck by his incredible ease about trading. He has learned to accept losses in trading not only in an intellectual sense but on an emotional level as well. Moreover, his feelings of exuberance about trading (or, for that matter, about life) bubble right out of him. Basso has managed to be a profitable trader while apparently maintaining complete peace of mind and experiencing great joy.”

After speaking with Basso about the current U.S. stock market environment, it’s clear he hasn’t changed. For him, the headwind for stocks and the challenge for traders and investors now — recession fears, interest rates, geopolitical risk — is just another chapter in a long-running story.

Basso should know. With 50 years of stock trading under his belt, he has experienced every type of market boom and bust, including the October 1987 U.S. market crash. If you want to know how he usually responds to these ups and downs, it’s spelled out in the educational website for traders he runs: enjoytheride.world.

In this recent interview, which has been edited for length and clarity, Basso talked about trading stocks, sticking to a plan, and how not losing can be more important than winning.

MarketWatch: “Enjoy the ride, world.” Your trading philosophy sounds like a solution to any challenge, but it’s easier said than done. What advice do you have for stock traders now?

Basso: You must have a plan. Many new traders, especially those who got their stimulus checks from COVID and were stuck at home because of the lockdowns, decided to take up trading. Many have never seen a disastrous bear market. Most have never seen anything except above-average historical returns on their portfolio. They haven’t been tested very much to the downside. I have been warning everyone to create a plan and then execute it. Otherwise, you will put yourself in harm’s way.

MarketWatch: What trading plan is best under current market conditions?

Basso: You must have indicators in place that measure where the stock indices are moving. If you are a trend follower, perhaps you notice the market is in a down move. You could sell out of your stocks or exchange-traded funds (ETFs) and move to cash. Other trend followers might get signals to go short. It’s different for different people. Although I use short strategies, some people are restricted from using that strategy. If you’re in cash right now, one plan is to watch until your indicators move to the positive side. Then jump in with full force.

MarketWatch: Which market indicators get your respect?

Basso: I follow three indicators that I use in conjunction with each other because each one measures a different form of what I call noise.

The first one is Donchian Channels, (a technical indicator used to identify bullish and bearish extremes over a period of time). The second indicator is the Keltner Channel, which is basically an exponential moving average that I use over different time periods. The third indicator I use is Bollinger Bands, which uses standard deviation to measure volatility.

I run all three indicators simultaneously and put stops at the closest point to where the market is. I have plans for the market going sideways, down, or up. This all happens automatically. I could be out playing golf, so I don’t get too stressed about my trades. That’s why [“New Market Wizards” author] Jack Schwager called me “Mr. Serenity.” I do my market work inside of an hour. I’m not sitting in front of a computer screen all day.

MarketWatch: What does your trading plan look like in action?

Basso: I don’t know what the market will do. All I know is that if it’s a down move, I act. I already have the plan in place. I have my stops in place. I have the position sized properly for the amount of volatility and the size of my account. I’m neither over-committed or under-committed. I’ll go short, and if the market breaks through the top side, I will get rid of my short positions and go long.

MarketWatch: That sounds like market timing.

Basso: People are fond of saying that you shouldn’t time the market because you can’t afford to miss the 10 best days. I tell them to see what happens when you miss the 10 worst days. Warren Buffett recently sold half of his Apple position. Isn’t that market timing? Buffett has bought and sold lots of companies over the years. To me, everyone is a trader. It’s just a matter of your time frame and what indicators you are using. They are just labels. I don’t worry too much about them. I just measure the market and go with the flow.

MarketWatch: Many investors rush to buy stocks when the market dips. Is that smart or a recipe for disappointment?

Basso: If you’re buying the dip when the market is down by 10% or 15%, and the market goes down 50% during a bear market, you’ll be sitting for a long time trying to make back your losses. Every monthly statement that comes in, and every time you look at your account value, will be like a little knife twist in your back. You’re not going to be a happy camper.

My attitude is to let the market fall to wherever it wants to fall. Sooner or later, buyers will come in, the market will stabilize, turn around and break through to the upside.

MarketWatch: What are the biggest mistakes traders make?

Basso: First, they don’t have the right amount of capital. I would encourage traders to save their money and get a second job, then build up a good-sized account so they can diversify and run some sensible strategies. Second, they must size their positions properly. Position sizing affects your results over the long run more than your buy- or sell position.

MarketWatch: What’s the maximum amount you risk on each trade?

Basso: I risk no more than 0.5% of my equity on each trade. I learned that from Larry Hite, who was interviewed by Jack Schwager in the first “Market Wizards” book. Don’t lose more than a small percentage on each trade. I cap the risk percent of my equity exactly the same for each trade. I’ve been doing that for over 40 years. Successful traders know how to size their positions. I wrote a book on it and provided the math. A lot of people say they will buy 100 shares of a stock because it’s a nice round number. But 100 shares of Amazon.com is a lot different than 100 shares of a utility company. A lot of new traders hear someone mention X, Y or Z stock, look at a chart, and buy 100 shares without knowing how to size their position, or have a strategy to buy or sell. They are just setting themselves up for failure and a lot of stress.

How to Invest in Green, Clean, and Renewable Energy

LINK: https://bit.ly/4fWjzVg

In Part 1, we discussed what is meant by thematic investing, and in Part 2, we explained the risks and rewards of using this strategy. In Part 3, we discuss how to invest in three specific themes: green, clean and renewable energy. To help give you an idea of possible investments, a list of exchange-traded funds, mutual funds and stocks are listed below.

As you may know, a lot of people want to help solve our environmental problems by investing money into clean, green and renewable energy. Also, a number of institutional investors (i.e., pension and hedge funds) have reportedly invested billions of dollars into green, clean and renewable energy, and that amount is expected to skyrocket over the next decade.

The U.S. Energy Information Administration has reported that by 2050, nearly half the global energy production is likely to come from renewable sources such as wind and solar power.

What is green, clean and renewable energy?

Many people believe that green, clean and renewable energy represent the same idea, but there are important differences. Here are the definitions:

· Renewable energy: This is any naturally occurring energy source that constantly replenishes itself, usually over a short time period. Theoretically, renewable energy is inexhaustible, meaning that the source is essentially infinite. Examples of renewable energy include wind power (or wind energy), solar power, marine power and hydroelectric power (i.e., energy that uses the natural flow of moving water such as when collected water is released by a dam to generate electricity). Although many renewable energy methods come with tremendous benefits, some renewable technologies may negatively impact the environment. For example, a hydroelectric plant can disrupt fish migration, and also water quality. In other words, some renewable methods are not completely “green.” Impact on the environment varies depending on the source.

· Green energy: This is any form of energy that comes from natural sources such as water, wind, sunlight or an ocean. Green energy should have very little, or zero, negative impact on the environment. Green energy is considered “clean” because it does not release significant amounts of pollutants (such as greenhouse gases) into the atmosphere. The impact on the environment is almost none (which is why it’s considered the most ecologically friendly).

· Clean energy: This is any energy source that emits a small amount of pollution, greenhouse gases, or chemicals. Although clean energy has some effect on the environment, the emitted greenhouse gases or pollutants are so small that the environment is not harmed. Impact on the environment: no adverse impact on the environment.

Now that you know a few of the subtle differences between the three energy types, let’s discuss specific investments.

Investing in green, clean or renewable energy

When deciding to be a socially responsible investor, the first step is to do your homework, that is, research. To help get you started, the following is a list of ETFs, mutual funds and stocks — including their one-year performance.

Although the one-year results serve as a guide, they should not be your main reason for buying. In other words, don’t use past performance in deciding whether a theme will become profitable in the near term. Note: The following securities, listed in random order, are not recommendations.

The following are green and clean ETFs. Keep in mind that many ETFs and mutual funds use the terms, clean, green and renewable energy interchangeably.

Ticker

ETF

1-year return (as of 8/9/2024)

LCDT

BlackRock World ex U.S. Carbon Transition Readiness ETF

+8.79%

FAN

First Trust Global Wind Energy ETF

+3.76%

NETZ

TCW Transform Systems ETF

+26.4%

USCL

iShares Climate Conscious & Transition

+22.7%

SPYX

SPDR S&P 500 Fossil Fuel Reserves Free ETF

+21.7%

FSLEX

Fidelity Environment & Alternative Energy

+16.1%

JCTR

JPMorgan Carbon Transition U.S. Equity ETF

+21%

USNZ

Xtrackers Net Zero Pathway Paris Aligned ETF

+22.6%

QCLN

Nasdaq Clean Edge Green Energy Index

-33.5%

ICLN

iShares Global Clean Energy ETF

-18.1%

Green and clean mutual funds: Before investing in a mutual fund, check to see if the fund has a load (sales charge). The following are “no-load” funds, so there should be no extra sales charges.

Ticker

Mutual Fund

1-year return (as of 8/9/2024)

PRBLX

Parnassus Core Equity Investor

+18.5%

PNOPX

Putnam Sustainable Leaders Fund

+24.5%

AMAGX

Amana Growth Investor

+21.7%

FITLX

Fidelity U.S. Sustainability Index

+21.7%

PARMX

Parnassus Mid Cap Fund

+14.2%

GAAEX

Guinness Atkinson Alternative Energy

-11.2%

Green and clean stocks: Although owning a single stock is theoretically riskier than investing in an index, if you do pick a winner, it should outperform an index (because poor-performing stocks in the index negatively affect results).

As you will see below, some stocks performed spectacularly well over the last year, easily beating the S&P 500 index. There is no guarantee these (or any) stock will continue to do as well in the future.

Ticker

Stock

1-year return (as of 8/9/2024)

FSLR

First Solar Inc.

+8.01%

NEE

NextEra Energy Inc.

+12.7%

BEPC

Brookfield Renewable Corp.

-4.39%

NEXNY

Nexans ADR

+55%

HASH

HA Sustainable Infrastructure Capital

+41%

ENPH

Enphase Energy Inc.

+20.6%

Note: If you are a stock picker, you can also choose stocks that are related to renewable energy such as electric cars, battery stocks, green utility stocks, LED stocks and recycling.

Does it make sense to invest in green, clean and renewable energy?

Climate change is a hot topic and will remain so for years to come. Government interest in clean energy depends on which party wields political power, resulting in more or less regulations, and more or less funding.

Investing in environmental themes will be volatile at times, and there will be winners and losers, just as with any investment. Nevertheless, it is possible to be both an ethical investor and good citizen while earning a profit.

Many businesses are already shifting towards environmentally friendly practices because their customers and shareholders are demanding it. It is almost certain that solar and wind companies will find innovative ways to make renewable energy more cost effective and efficient in the future. High-emission corporations will seek ways to reduce their carbon footprints (i.e., the total amount of greenhouse gases generated by their everyday actions.

Already, many utility companies are moving away from reliance on fossil fuels such as coal and gas to reduce their carbon output. This means including wind, solar and other technologies to improve energy efficiency.

Do your research and avoid the hype

Before investing in any of the above themes, do your homework (i.e., research). In early 2024, clean energy investing made the headlines when the Wall Street Journal reported that motivational speaker Tony Robbins invested $200 million into startup Omnis Energy, a West Virginia coal-fired plant that promises to “turn coal into clean-burning hydrogen without emitting any greenhouse gases.”

Robbins admitted that this revolutionary technology is untested, and that he could lose his entire investment, a risk he is willing to take. For most people, it is too risky to invest more than a small sum (or any amount) in experimental technologies.

Invest in the future

While green, clean and renewable have their risks, there is a place for this investment in your portfolio by choosing a broad-based index fund. Investors with a higher risk tolerance may consider green, clean and renewable investments, including the securities mentioned in this article.

As demand for energy increases across the world, and energy usage accelerates, scientists warn that using so much energy may have a detrimental effect on our climate. Higher temperatures are expected to wreak havoc on the environment until companies seek ways to replace fossil fuels with clean energy. These actions will save the planet while also becoming profitable for investors.

How to reduce AI’s harmful effects on the environment

LINK: https://bit.ly/46NEWE8

Equities.com spoke with Bill Wong, AI research fellow and lead AI researcher at Info-Tech Research Group. He is an expert on artificial intelligence strategies with a long career consulting, developing and writing about anything related to AI. He has held executive positions at a number of technology companies across the world, and is often asked to speak about AI at conferences and trade shows.

We wanted to know what Wong thought about the effect of AI on the environment, whether it is helpful or hurtful, how much power AI uses, if the government should get involved, and what might happen if technology companies and consumers ignore the effects of climate change.

Equities.com: Is AI a friend or enemy of the environment?

Bill Wong: There are both positive and negative impacts. On the negative side, it uses an extraordinary amount of compute resources, and that hurts the environment. It takes a lot of power, a lot of water and produces carbon emissions to develop these AI models. Power consumption is especially pronounced with the big technology vendors building large language or multimodal models.

EQ: What’s the positive side?

BW: On the plus side, AI has been trained to find best practices for lowering carbon emissions. You can run simulations and have interactive visualizations of the impact of AI on climate change or various weather anomalies. Many AI research laboratories are funded by the Department of Energy in the United States and are currently performing research on mitigating the impacts on climate change.

The EPA uses AI to help enforce environmental regulations. Of course, NASA uses AI to evaluate hurricane intensity and help to mitigate risk. There’s also a program from the Department of Energy called “Wildfire” that uses satellite imagery to assess the risk of wildfires.

EQ: How much computing power do the tech companies use?

BW: The big tech vendors don’t disclose how much resources they use. There have been estimates made, but all we have are ballpark figures. I think some people would be surprised at how much of our resources are needed to do even a simple search.

For example, one of Google’s initiatives was to build a data center in Chile. Everyone in the country was excited about it. However, when they did an analysis on the climate impact, the government was shocked at how much water this data center would require. A Google spokesperson said they submitted a change to the original design to have the center air-cooled instead.

EQ: So the tech companies who use AI are not transparent?

BW: They will argue that they are transparent. They will share some information but not all. What is often lacking is the hardware configuration used to produce the latest capabilities their AI models can deliver.

EQ: Why don’t more people discuss AI power consumption in the States?

BW: In the G7 countries, where water is plentiful, the impact of AI is kind of hidden, unless you are the data center manager who can see the monthly bill for power and water. In countries that are not as well off, the government can see the impact directly.

EQ: What other resources does AI use?

BW: It’s not only the running of the machines but it’s also chip manufacturing that plays a role. The chip manufacturing process requires a ton of resources that leaves a huge carbon footprint, and the data center makes its own carbon footprint.

EQ: Is there a solution to the amount of power AI uses?

BW: At this time, there still seems to be a notion that “bigger is better for AI model performance,” but it is not sustainable, in my opinion. I am joined by several researchers who believe there will be a number of breakthroughs where we may use AI models that don’t consume as much resources as they do today. We can’t continue on this current trajectory indefinitely.

EQ: What can the companies do?

BW: Today, companies planning to use AI can architect their solution using an agent-based approach. Instead of sending all the prompts or queries to ChatGPT or GPT-4, which is a common scenario, you could implement a solution that uses AI models that are more fit-for-purpose. Instead of ChatGPT receiving every request, smaller models can be used to address prompts and queries that can be processed more effectively and efficiently.

EQ: Are companies starting to think about the environmental impact of AI?

BW: We engage with a variety of executives and boards regarding the development of their AI strategy. Often, their primary focus is leveraging AI to improve operational excellence, customer engagement, sales or profit contribution, and their risk mitigation programs. We are also seeing new value-based drivers for their AI investments emerge, such as improving their environment, social and governance programs.

Organizations want to be more energy efficient — it reduces costs and waste. ESG programs can be a catalyst for transforming an organization’s AI strategy for improving business outcomes in a responsible and sustainable manner.

EQ: Should the government get involved?

BW: If the environmental requirements of these AI models continue and innovations do not get introduced to curb the energy consumption requirements, then the government may have to step in. I know the government doesn’t want this responsibility because they don’t want to stifle innovation. I understand that. But that has to be balanced with the health of the planet. Nobody wants to see a scenario where the government has to take drastic measures.

EQ: What happens if people ignore the climate change research?

BW: The current rash of wildfires, flooding and other extreme environmental events will
continue, but at an accelerated rate. If we continue to consume all this energy and resources, and
don’t pay attention to the possible impact on the environment, things will get worse.

The Risks and Rewards of Thematic Investing

LINK TO ARTICLE: https://bit.ly/4ckUujM

In Part 1, we explained what is meant by thematic investing, and how to get started investing in a theme, either as a self-directed investor, or by buying a mutual fund or exchange-traded fund.

To review: Thematic investing is a fancy way of saying that you want a long-term investment based on a theme (i.e., an idea or trend) that you believe will play a significant role in a changing society, the economy, or advancing technology.

Theme examples include solar energy, innovative or “disruptive” technologies, clean energy, renewable energy, clean water, scarce natural resources, to name only a few. Interest in thematic investments has exploded in recent years.

As we discussed in Part 1, it’s less time-consuming and usually less risky to buy thematic ETFs and mutual funds because you are letting a professional money manager do the research and select the stocks.

Here are a few of the rewards when following this path:

The rewards of thematic investing

The potential for higher returns: As with any investment, thematic investments can become wildly popular among individual investors, with the potential for the stock price to skyrocket. That is what happened with AI and bitcoin. No one could have predicted the success of these two technologies, but those who bought early are ecstatic they did. In the future, there will be other themes that will capture the public’s imagination, but it takes a visionary to predict which ones will make it to the winner’s circle.
Diversification: Owning a thematic ETF or mutual fund is a double-edged sword. On one hand, it is more diversified than owning only one or two stocks because you own a “basket” or portfolio of thematic stocks. Therefore, if a few stocks in the portfolio fail to deliver, it’s not a big deal. On the other hand, it is less diversified, and riskier, than investing in a broad-based index fund. To reduce risk, and have a more diversified portfolio, it makes sense to spread the risk by having other investments besides thematic stocks.
Professionally-managed investments: One of the advantages of owning a professionally-managed ETF or mutual fund is that an experienced professional chooses which stocks are in the portfolio. Theoretically, they will do the research, find potential winners and avoid the losers. Most people don’t have the time or knowledge to pick potential winners. This is especially true for thematic stocks, which may not fit neatly into a specific sector or industry.
Invest in your values and beliefs: Thematic investing allows investors the opportunity to support the issues they are passionate about. Perhaps they are concerned about renewable energy, ethical business practices or clean water. Investing in these themes, or many others, is not only morally and ethically satisfying, but offers an opportunity to earn profits.

The risks of thematic investing

Not all thematic investments succeed: Although some themes have done spectacularly well, many have not. Because thematic investments are based on long-term ideas and trends, many of the themes will take years, even decades, before making a profit (with no guarantees they will ever profit). Therefore, as with any investment, there is the chance of losing money when investing in a thematic stock or fund, especially in the short term. Kenneth Lamont, a senior manager research analyst for Morningstar, made this observation: “I would suggest that in five or 10 years, the big thematic winners won’t be the companies you think they’ll be. Basically, you are making a bet that a certain theme will play out and pay off.”
Incomplete track record: Many thematic ETFs and mutual funds have limited track records, making it difficult to evaluate their long-term performance. For example, the first artificial intelligence ETF, Amplify AI Powered Equity AIEQ - $35.88 0.959 (2.879%) , was created in October, 2017, only seven years ago. Even worse, some thematic investments may turn out to be short-lived fads that won’t last the summer. It’s not easy to separate the hype from the facts, especially when they have a short history.
Increased volatility: Some concentrated or “niche” thematic ETFs or mutual funds will be volatile (such as what recently happened with AI and cryptocurrency stocks). If investing in a thematic fund, you must be prepared for a roller coaster ride during some weeks or months. Increased volatility to the upside can bring fantastic returns when correct about a theme. Increased volatility to the downside occurs when the market recognizes that the theme has no real future, or when you picked the wrong stocks or fund. Sometimes there is a stock market correction, and nearly all stocks get punished. That appears to be occurring right now. Lamont confirms: “You are investing in a highly-concentrated basket of stocks which can be very volatile.”
High expense ratios and fees: While some thematic ETFs and funds have “reasonable” expense ratios, some charge high fees and expenses (e.g., expense ratios over 1.5 percent is considered high). To avoid this drawback, stick with thematic funds with expense ratios that are below 1 percent.
Market timing is nearly impossible: Unless the fund manager is a fortune teller, knowing when a specific theme or idea will succeed is a nearly impossible feat. For example, clean energy has been a hot topic that has been discussed for years. While some clean energy ETFs and mutual funds did well, many did not. Fund managers must have the skill to identify which themes have the potential to succeed in the future. Thematic investors must be patient and committed as the theme plays out.

Choosing the right themes

Understanding the risks and rewards of thematic investing is a good start, but to be successful you must periodically monitor your investment while also patiently giving the investment time to grow. Perhaps most important, choose themes that have the potential to outperform over time. No one said this was easy.

Morningstar research analyst Lamont summed it up this way: “Thematic investing has a place in your portfolio, but there are definite risks. They should never take up a large portion of your portfolio, and should not act as a replacement for a broad-based index fund.”

Is AI a friend or foe of the environment?

LINK: https://bit.ly/3LRTbOl

One of the hottest topics in the investment world right now is artificial intelligence. As some AI-related stocks skyrocketed higher, especially Nvidia, Google, Apple, and Microsoft many people started paying attention as investment accounts grew.

Some people believe that AI will “solve all the world’s problems,” quips David Rolnick, assistant professor and Canada CIFAR AI Chair at the School of Computer Science at McGill University in Quebec, Canada.

He warns that although AI is a useful tool, it’s not enough to justify the extreme valuation investors have placed on these stocks. “As an AI professor, I would argue that when people realize the hype is bigger than reality, the generative AI bubble will burst, and it could take a bunch of more useful AI with it.”

Although making money on AI stocks is great for investors and their pocketbooks, readers want to know whether AI harms the environment, and more importantly, do the benefits of AI outweigh its threats.

How AI is used to battle climate change

Let’s look at the positive ways AI is used to help combat climate change. “Many AI algorithms are being used to fight climate change,” says Rolnick. “From optimizing electrical grids to pinpointing flooding as it happens, mapping the effect of extreme weather on agriculture, or accelerating models of climate and weather.”

Using satellite imaging, researchers are developing AI programs that will help identify, forecast and track hurricanes more accurately, saving a countless number of lives. AI software can also monitor and pinpoint which corporations are potential polluters, and help them lower emissions.

“It is worth noting,” Rolnick adds, “that none of these particular applications involve the large generative models like ChatGPT that have captured public attention recently.”

How AI causes environmental damage

There are also a lot of negatives.

First, running an AI system eats up a lot of energy. In particular, many of the larger AI programs, especially those using ChatGPT, are having a negative impact on the environment. Scientists say that the massive amount of computing power and electricity plays havoc with the environment by increasing carbon dioxide emissions. For example, an AI data center needs an enormous amount of land, water and electricity to function.

According to many scientists, energy-eating AI computers have led to water shortages. Although some experts are hopeful that renewable energy will help reduce some of the damage in the future, rising energy demands may make it difficult to solve these problems.

Rolnick says that AI algorithms are used to help with oil and gas extraction, which is a huge negative. “This is estimated to generate a half trillion dollars in additional profit for the oil and gas industry in 2025,” he says.

Artificial intelligence companies have not been transparent about how much carbon pollution (i.e., carbon emissions) is caused by AI. Some groups, such as the World Economic Forum, have gone as far as saying there has been an explosion of “falsified information.”

Several large tech companies have pushed back against these accusations, pledging to cut their carbon emissions by huge amounts in the distant future.

How the government can help

As climate change causes havoc across the globe, governments are expected to introduce regulations and policies that help reduce AI carbon pollution. Most AI experts agree, however, that future AI regulations probably won’t be put in place until after the U.S. presidential election in November.

Nevertheless, there are people working behind the scenes to require AI companies to be transparent about how much energy they use, establish safety regulations and policies, and encourage accountability (i.e., such as by not punishing whistleblowers).

According to AI experts, it is important for companies to establish ethical guidelines and procedures to make sure AI is used responsibly and, specifically, to control how much computer power is used.

Right now, it’s up to each company to determine their computing power needs. As expected, many companies appear to be more concerned with shareholder profits than with the environment.

As Rolnick says, “Many large tech companies are spending a large amount of energy on AI algorithms. It’s now arguably a race to the bottom about who can build the biggest computer. They’re not motivated to solve the world’s problems, but that isn’t necessarily their fault. They have a product to sell and they want to sell it. Although AI is used to help the environment, that help is not coming from tech companies. That’s a tiny fraction of what they do.”

Competing forces

Not surprisingly, there are competing forces within the AI community. The challenge for technology companies, AI researchers and scientists, is to encourage the positive use of AI while minimizing or controlling the negative impact on the environment.

Unfortunately, most major technology companies are moving at breakneck speed to develop bigger AI models, primarily driven by profit.

Some AI programs are used to help solve environmental problems. Simultaneously, other energy-intensive AI technologies intensify the threat of climate change. Amidst these and other climate factors, scientists say, we can expect to see more hurricanes, more fires, rising oceans and more environmental damage as climate change ravages the earth.

Rolnick put it this way: “People have already started to die from climate change, but we get to decide just how bad it gets.”

What is Thematic Investing?

Link to article: https://bit.ly/4cZ7Gfp

Many of you have heard the term “thematic investing” and may have wondered what it means. Thematic investing is a fancy way of saying that you want a long-term investment based on a theme (i.e., idea or trend) that you believe will grow in importance.

Typically, these themes have the potential to change society, the economy or technology. Sometimes the changes may be so extreme that one day they could disrupt the normal way of doing business (i.e., disruptive themes). Thematic investments often focus on emerging technologies, the needs of demographic groups (such as an aging society) or societal trends.

These investments are not for short-term traders because it can take years or decades for these themes to unfold and become profitable (if they ever do). It takes patience to hold these investments for a long time period.

Kenneth Lamont, senior manager research analyst for Morningstar, put it this way: “Thematic investing allows you to express your views and align your interests and beliefs. Simply put, you are targeting future changes. You try to profit from these structured themes that tend to transcend the traditional business cycle.”

The AI thematic success story

One of the most successful thematic investments in recent history is artificial intelligence. It’s hard to miss the spectacular success of stocks related to AI, most notably Nvidia , but also Microsoft, Google, and Apple. Cryptocurrencies is another thematic investment that has received a lot of media attention.

Because of the success of the AI and bitcoin themes, interest in thematic investments has surged, attracting billions of dollars in investments.

In reality, thematic investments often have hot and dry spells. In the short-term, these stocks may be very volatile, both up and down. Although technology-themed investments are extremely popular right now, in a few years, or sooner, technology may fall out of favor as other themes take its place.

Although it is true of any investment, it is difficult to predict which thematic investments will do well over time and which may falter. Thematic investors are willing to wait for the theme to play out and generate large profits.

Let the pros do the work

The big question is, how do you find a thematic investment that reflects your values while also boosting your returns? Unfortunately, there is no easy answer, but you have several choices.

First, you can do your own research. Unfortunately, it takes a lot of time to review research reports, read news stories and study analyst ratings. Not everyone has the time to do-it-yourself, so for most investors, it’s easier and more practical to invest in mutual funds or exchange-traded funds that are designed for a particular theme.

You can still invest according to your convictions while letting a professional money manager find the right stocks. Be sure the stocks included in the fund reflect your values and goals, and the fund is doing as well as competitive funds, or at least as well as its benchmark. In addition, you also want to be sure the expense ratio is reasonable (avoid certain specialized funds that charge ridiculously high fees or expenses).

This also means you are limited only to what the mutual fund or ETF companies have to offer, but luckily, there has been a dramatic increase in choices over the last decade.

Making a thematic investment

Let’s say you are interested in one of these ideas: water sustainability, renewable, clean, or green energy, diversity in the workplace, electric vehicles, social networking, cyber security, blockchain, e-commerce, or a social, environmental or governance theme. To invest in one of these ideas or themes, you may buy an ETF, mutual fund or individual stock. Some brokerage firms offer a preselected package of stocks that reflect that theme.

FMI photo

For example, brokerage firm Charles Schwab allows clients to select among 40 different themes such as “pet passion,” “renewable energy,” “water sustainability,” “workforce diversity leaders” and “active lifestyle,” to name just a few.

How to find thematic-based ETFs and mutual funds

To find ETFs and mutual funds that reflect the theme or idea you want to invest in, use a search engine. For example, to find ETFs that include stocks in companies that want to develop clean water, type “top-rated water sustainable ETFs.” A list of ETFs will be displayed. Here is a sample list of ETFs (which are not recommendations):

Invesco S&P Global Water Index ETF
Global X Clean Water ETF
Ecofin Global Water ESG Fund
iShares MSCI Water Management Multisector ETF

A list of other top-rated ETFs and mutual funds from independent news sources may also appear. Before buying, be sure to do your homework. It’s always a good idea to start with a small sum of money when buying for the first time. That gives you time to monitor the investment and decide whether it makes sense to keep holding it.

Changing the world

Hopefully, you have a better idea of what it means to be a thematic investor. There is little doubt that thematic investing will continue to attract more interest as people grow more concerned about the environment and social issues, and try to predict future technological trends. As long as you are aware of the potential risks, investing in your beliefs makes sense for many investors.

As thematic investing gains in popularity, some people will decide “to put their money where their mouth is,” as the saying goes. Or as Morningstar research analyst Lamont says: “You are looking for a theme that is going to change the world and allow you to profit as the theme develops.”

DEI Programs Under Attack: Equities News

DEI programs are under attack. Here’s how investors who value diversity can fight back

Link: https://bit.ly/3WA4SiY

Recently, DEI (diversity, equity, inclusion) practices have become controversial in some conservative circles, especially on college campuses. Now, a number of companies are getting involved. For example, Tractor Supply Company, a retailer that caters mostly to rural American shoppers, abandoned all of its diversity programs.

Tractor Supply Company bowed to pressure from its customers who felt the company disappointed them by having diversity programs. Tractor Supply took a number of actions to eliminate those programs. For example, they no longer track ESG (environmental, social, governance), and DEI criteria, or submit data to the Human Rights Campaign.

In addition, Tractor Supply will no longer sponsor “nonbusiness activities” such as pride festivals or voting campaigns. Finally, they intend to “withdraw their carbon emission goals and focus on land and water conservation efforts.”

According to CNN, they took these actions less than a month after a right-wing commentator, Robby Starbuck, attacked the company on X (i.e., Twitter) for its LGBTQ stance and DEI hiring proposals. Starbuck asked customers to boycott the company and complain to corporate leadership.

The backlash against DEI is real

It’s not just Tractor Supply that eliminated its DEI programs. Dozens of other companies reduced or eliminated their DEI teams, while others changed the descriptions of DEI initiatives in their annual reports. This occurred as a result of threats from some conservative politicians and activist shareholders.

Some companies watered-down the language (one company changed the term, “diverse leaders,” to “leaders), while another cut the words, “diversity and inclusion.” A few corporations, because of potential legal ramifications, no longer mention the word, “race,” in their annual report, or in their programs.

The backlash against DEI is a more recent phenomenon. After George Floyd was murdered in May 2020, “the chief diversity officer role “was the hottest position in America,” Kevin Clayton, senior vice president, head of social impact and equity for the Cleveland Cavaliers, told Axios. “Companies were hiring these positions out of guilt.”

Now some companies are cutting back DEI staff and programs, and even cut programs designed to support women or people of color. It’s not only online attacks that resulted in these companies to pull back their DEI initiatives, but also a flood of lawsuits.

Vote with your pocketbooks

In the face of some companies pulling back or cutting their DEI teams, many others have maintained or even strengthened their policies. For readers who want to invest in companies and mutual funds with strong DEI initiatives, there are ways to help change corporate culture.

One of the most effective ways for investors to make a difference is to vote with their pocketbooks. Typically, that means directing investments to asset managers who reflect their values, which may include diversity, equity, and inclusion policies, as well as environmental, social, and governance programs, and how a corporation treats its workers.

In addition, when voting to approve board members, you can invest with asset managers and corporations with strict rules about board diversity.

Tesla CEO Elon Musk, as well as Pershing Square Capital Management CEO and billionaire Bill Ackman, have publicly criticized DEI programs. However, at a closed-door meeting in May, 2024, several executives, including those at the Wall Street Journal, pushed back against Ackman’s DEI comments.

Nevertheless, some large companies cut or eliminated their DEI teams, including…

Major corporations who continue to support DEI initiatives

Many, if not most, companies have not made any changes to their DEI initiatives. You can find out how your company or fund is doing by reading a corporation’s annual report, or by looking at their Diversity and Inclusive Index (D&I Index), which measures the diversity of a company’s workforce. The D&I Index can be found by doing an internet search.

For investors who want to support DEI efforts, there are companies who are fully committed to making sure DEI efforts are represented in the workplace. Forbes Magazine, for the 7th consecutive year, has ranked “America’s Best Employers for Diversity 2024.”

Forbes partnered with the market research firm, Statista, to survey over 170,000 people working for corporations with at least 1,000 U.S. employees. Those who were surveyed were asked to anonymously rate their own employers.

Notable companies in the top five of the Forbes list include…If interested, you can view the full list and report or download it on the Forbes website.

Mutual funds and ETFs that support DEI

A number of mutual funds and ETFs invest specifically in companies that have good practices for women and minorities. Here is a brief list:

· Impax Ellevate Global Women’s Leadership Fund , which invests specifically in companies that have good practices for women.

· Impact Shares NAACP Minority Empowerment ETF, an ETF aimed at empowering minorities.

· Calvert US Large-Cap Diversity, Equity and Inclusion Index.

Note: For more information about these funds, or any other mutual fund or ETF, an excellent source is Morningstar, which also strongly supports DEI initiatives.

Conclusion

Many investors want to see diversity reflected in their investments, and they can do so through mutual funds, ETFs, or individual stocks. This is one way to help to change corporate culture, while also investing in financial products that reflect your values and beliefs.

How to Protect Workers from the Heat: Equities News

Protecting workers from the heat: Juley Fulcher of Public Citizen on OSHA’s new rule

LINK: https://bit.ly/4f8hTHH

Not a day goes by this summer that we don’t hear about a heat-related death, often from children left in hot cars or unprepared hikers taking walks in 100-plus degree weather. Along with these unfortunate tragedies, many outdoor employees are required to work outside during heat waves — without permission to take water or rest breaks.

Even many inside workers get sick when an over-heated air conditioner breaks or is unable to cool an entire building.

The Biden administration recently proposed a first-ever federal regulation to protect workers from extreme heat conditions. Although this climate-related rule, covering an estimated 35 million workers, won’t be finalized until 2026, it is designed to reduce the number of deaths, illnesses and injuries suffered by outdoor and indoor workers.

Equities.com had the privilege of speaking to Juley Fulcher about this rule. She is a health and safety advocate for Public Citizen, a consumer and worker protection advocacy organization with over half a million members throughout the country.

Equities.com: What is the goal of this worker-protection federal regulation?

Juley Fulcher: The idea behind this rule is to have simple protocols and procedures put in place that can protect workers and help keep them safe from any heat illness or injury. It is designed to protect workers from heat stress, which has a dramatic impact on the body, including heat exhaustion, fainting, heat stroke, cardiac arrest and kidney disease. When heat stress isn’t kept in check, it can quickly lead to fatalities.

EQ: Is this really the ‘first-ever’ heat protection regulation issued by the Occupational Safety and Health Administration (OSHA)?

JF: Yes. A heat protection rule was first recommended 50 years ago by the National Institute of Occupational Safety and Health, a division of the Center for Disease Control and Prevention (CDC), but there have never been efforts to develop it until now.

EQ: Why has the need for a heat-protection regulation been ignored for 50 years?

JF: Unfortunately, OSHA is a very small regulatory agency. Though it was created by Congress, OSHA doesn’t have the personnel to work on developing more than one or two rules at a time. It usually takes seven or eight years from start to finish to put a rule in place. Public Citizen initially petitioned OSHA for a heat stress standard in 2011. At the time, it was turned down because they had other priorities. We, along with 100 other organizations, petitioned OSHA again in 2018. The petition was granted in 2021 and OSHA began the long process of developing the rule.

EQ: Is there anyone against these worker protection rules?

JF: There are industry groups that argue against any worker standard, claiming it will cost them money. In reality, that’s not the case. It will actually save money for employers. In addition to the costs of absenteeism, turnover, accident damage and increased workers compensation insurance costs, heat stress can greatly reduce worker productivity. Right now, the U.S. economy is losing nearly $100 billion a year because of the failure to put simple protections in place for workers.

EQ: What companies have heat-related policies?

JF: We found that many smaller businesses have protected their workers and put in policies with help from experts on the effects of heat on workers. These companies have stepped up to the plate, such as putting in fans or portable air conditioning units to help workers, giving them plenty of water and cool-down breaks, and responding quickly when workers show signs of heat illness. However, it’s been harder to get some larger corporations to put in place adequate protocols, especially farm worker and construction employers. That’s why we’re so happy with this new proposed rule. We think it will save lives.

EQ: Is there any political pressure against protecting workers?

JF: The main political opposition comes from a general anti-regulation mindset that often springs from conservative principles incorporating the mantra that less regulation is necessary for business growth. That mindset is about blocking all regulations with little regard for worker or consumer protection. We’ve seen that in a couple of states such as Florida and Texas.

EQ: What do you think of Texas and Florida blocking water and rest breaks?

JF: It’s monstrous. Florida specifically banned localities from creating standards that protect workers from heat stress. They went even further to say exactly what could not be required of employers. For example, in Miami-Dade County, employers cannot be required to provide rest breaks, or water, or any form of onsite first aid, or an emergency response plan. The Florida legislation says that even the state government is not allowed to create heat rules for the next two years. The bill passed by the Texas legislature says that only the state government can create regulations for employers, but not the local governments. The Texas legislation is broader than the Florida legislation, covering a lot more than just workplace heat protections, but it did specifically state that employers could not be required to provide rest breaks.

EQ: Besides the farming and construction industry, are there other groups against worker protection?

JF: One of the biggest players opposing workplace rules is the Chamber of Commerce. They played a big role in lobbying the Florida legislature and governor, as well as pushing really hard against the heat rule at the federal level.

EQ: Is this new heat-related rule going to be law?

JF: This proposed rule is the first time we’ve seen something written on paper from OSHA. Now they have to go through a review process that includes public comment and hearings, which is an OSHA requirement. We are happy with the proposed rule as it is written. There are still a couple more years to go before it becomes a final rule. Also, remember if the administration changes, they could be antagonistic to any workplace protection standards, or even shelve or postpone this new heat rule. For now, however, we’re thrilled that something is being done.

EQ: Is there anything that individuals can do to help?

JF: It’s important for people to be educated on these issues. It impacts people who are at work and just doing their job. It also helps to educate employers about heat stress and what it can do to the body.

EQ: What else should people know?

JF: We’ve seen dramatic increases in global annual temperatures, and extraordinary heat waves, which are getting longer and hotter and occurring more often. Many people don’t realize that a heat wave is measured not by how hot it gets during the day, but how hot it remains at night. If you’re working all day in the heat, at night you need a cool place to rest. Many workers don’t have adequate air conditioning at home, or don’t run the AC because of the high cost. That means they are unable to fully recover overnight in order to handle the extreme heat the next day.

EQ: Any final thoughts?

JF: While this new rule won’t take place until 2026 or even later, many workers will suffer, die and experience chronic kidney injuries. Many people don’t know that farm workers experience heat fatalities at 35 times the rate of any other kind of work. We’ve been working very hard to try to get Congress to pass legislation that will allow OSHA to put an interim heat standard in place until the rule is passed — the Asuncion Valdivia Heat Illness, Injury and Fatality Prevention Act. We hope that Congress will do something until the heat-stress rule is finalized.

MarketWatch: My interview with Billionaire Investor Jim Rogers

LINK TO ARTICLE: https://bit.ly/4f4pGX3

Opinion: Global stock investor Jim Rogers: ‘I’m waiting for something to go wrong.’

‘Probably by the end of this year or next year, the bear market will have resumed in the U.S.,’ Quantum Fund co-founder says

Jim Rogers, international investor, author and financial commentator, describes the current U.S. stock market environment as showing all the signs of an aging bull, not a raging one.

Rogers has seen this before. In fact, he’s seen and invested in all types of markets over a career spanning 60 years. Rogers rose to fame in the 1970s as the co-founder with George Soros of the Quantum Fund, which gained 4,200% over the next 10 years while the S&P 500 rose about 50%.

In a recent interview from Singapore, his base since 2007, Rogers revealed his reasons why the U.S. bull market for stocks may be nearing an end, why bear markets are actually healthy for the stock market, and what you can do now both to protect your portfolio and position it for profits.

MarketWatch: What are you doing with your money with regard to U.S. stocks right now?

Rogers: I have a lot of cash. I’m waiting for something to go wrong, but I am not selling short at the moment. I don’t call that bearish. I am neutral.

MarketWatch: What could go wrong?

Rogers: If you look at the U.S. market, a lot of new investors are coming in and talking about how easy it is to make money in the stock market. You see some stocks that go up every day, but fewer and fewer stocks are going up. Some are going up a lot, but most are not. You see market breadth declining. These are the things that happen before the end of bull markets. Again, I’m not selling short yet —- but these are the signs that develop when a bull market is coming to an end.

MarketWatch: Do you expect the U.S. stock market to crash?

Rogers: First, I differentiate between a crash and a bear market. The world has always had bear markets and will again. But bear markets often end in a crash. I certainly anticipate a bear market. The next bear market has to be very bad because debt has skyrocketed everywhere including in the U.S. Pick a country, including countries that didn’t have debt before such as Germany and Japan. Everyone has very, very high debt. So the next bear market has to be bad, and bear markets end in a selling climax, or a crash as you put it. I hope we live long enough to see many bear markets.

MarketWatch: Why do you want to see many bear markets?

Rogers: They clean out the system, which nobody likes because it costs them money. But economic recessions or bear markets clean out excesses. That’s the way the system has always worked. Some people get overconfident or overextended and along comes a bear market or recession and cleans out the system. Cleaning out the excesses has always been good for the system — unless you’re the one getting cleaned out.

MarketWatch: What is your forecast for U.S. stocks over the next few months?

Rogers: Some people are good at market timing, but I am not one of those people. I am not a good short-term trader. But what I suspect is that probably by the end of this year or next year, the bear market will have resumed in the U.S. It’s already the longest period in American history without a bear market. We’re overdue.

MarketWatch: How should people protect their investments?

Rogers: The only way to protect yourself is to invest in what you know about. Everyone knows a lot about something, and that’s where you should focus. If I said you could only have 25 investments in your entire life, you would be very careful, and be a good investor. Many people might say that is boring. If you want to be a good investor, be boring. Stay with what you know. And don’t go down to the bar on Saturday night and tell everyone about the latest hot stock.

We’ve had the longest bull market in American history. Politicians in Washington say, ‘Don’t worry, we’ve solved the problem.’ But I know that’s a lie. I know that’s wrong. I’m just saying be careful because gigantic debts are building up. If you can add or subtract, you know there is no way America can solve its debt problem. It’s a good time to be an old American, but not a good time to be a young American. I have two daughters, and the problems they will face in their lifetime will be enormous.

MarketWatch: What do you say to your daughters about how they should invest for their future?

Rogers: It’s hard to teach young people because they know it all (laughter). I certainly show them history. In 1924, the U.K. was the richest, most powerful country in the world. There was no No. 2. Fifty years later, the U.K. was bankrupt. They couldn’t pay their bills. This happened within 50 years — going from No. 1 to bankrupt. People say this cannot happen to America. Well, it’s happened often in world history, so be very careful, and be worried. Be aware of what has happened in the past, because it will happen again.

Investors want advisers who will give them emotional as well as financial support

BY MICHAEL SINCEREJULY 5, 2024•5 MIN READ

LINK: https://bit.ly/4bvYRrS

In the past, investors were usually focused solely on investment returns, i.e., trying to beat the S&P 500 or other indexes. In today’s world, however, financial advisers must not only outperform the S&P 500 but help support overwhelmed investors as they try to navigate past uncertain financial environments.

This means that advisers must keep investors calm when the stock market is volatile but also reduce investor fears — not only the fear of losing money, but also the fear of missing out on the latest hot investment (i.e., FOMO).

What behavior researchers have learned

Equities News spoke with Morningstar behavioral researchers Samantha Lamas and Danielle Labotka on how the job of financial advisors has changed — and what modern investors expect from them. Lamas and Labotka, with Ryan O. Murphy, were authors of the Morningstar research report, “Navigating the Client Lifecycle in Financial Advice,” (June, 2024).

Samantha Lamas

A key finding of their research is the huge role that emotions play in hiring, firing or blaming advisers when investments go south. “There are a lot of gaps with what investors are expecting from their advisers,” Lamas said. “Those gaps can be filled with a stronger emotional connection with investors.”

Labotka added that investors who feel they can trust their advisers to reach their financial goals were more likely to retain them. “Emotions have always been an issue with investors when it comes to financial goals, or being worried about whether they can retire. People believe advisers can do much more than just handle their finances.”

Information overload

Because of the internet, people have much more information at their disposal than in the past. Unfortunately, there is also the risk of information overload.

“We have all these trading apps, which allow you to quickly make decisions,” Lamas says. “Before, you had to make a call or go to someone’s office. Now, there are so many potential pitfalls when investing. Many people are leaning on advisers to help them sort through a lot of data and programs.”

“It’s difficult for many investors to make good decisions when there is so much noise out there. Many people rely on advisers to help structure their investments, act as a sounding board and make sense of all of that information coming at them.”

One of the problems, both researchers say, is that investors have access to so many trading tools. This causes some people to chase after returns, and trade even more. One of the roles of advisers is to help reduce the desire to trade, what some have called a “gambling instinct.” That is why many advisers must not only manage money and expectations, but also act as “behavioral coaches.”

“When the market is volatile,” Lamas says, “it’s easy for investors to get overly emotional. That is when the adviser must give behavioral guidance.”

Danielle Labotka

Labotka agreed: “We did a study on why people chase after the returns of alternative investments such as cryptocurrencies. Some people get excited when everyone is talking about a certain investment, and they don’t want to miss out on a meme stock or cryptocurrency. It’s easy to make mistakes in this emotional environment. One of the roles of financial advisers is to help investors control their emotions.”

One way that some advisers deal with overtrading is by giving these clients a small sum of money to “play” with. This allows clients to invest in trendy but risky financial products such as cryptocurrencies, but without affecting diversification formulas. “Don’t put all of your eggs in one basket,” Labotka noted, “but here’s one egg that you can play around with.”

More than stock pickers

“Our research shows that financial advisers are being asked to do more than just stock picking,” Lamas says. “Honestly, we think this is a great thing for advisers because it sets them apart from robo-advisers. A chatbot can’t give you peace of mind when the market is volatile, at least not now, but you never know what will happen in the future.”

Labotka explained that “financial advisers must know clients better than clients know themselves. They have to understand what their goals and needs are, which can take a long time if they want to get it right.”

She added that advisers must also point out potential pitfalls while also helping clients recognize behavior that may be damaging to their portfolio. “In many ways, a financial adviser also has to be a mind reader.”

It’s also important that advisers don’t overpromise potential returns. “Overpromising is a big red flag,” Labotka warns. She says the last thing an adviser wants to do is make false promises, or fail to help the client reach their financial goals.

Not only must advisers outperform the indexes, but many modern investors want more personalized guidance, and may even need some “handholding” during difficult times, which could be a volatile market environment, or a change in a client’s personal finances. It’s normal for investors to feel nervous and afraid at times, and that’s when professional advisers can help.

When markets get volatile again

It’s surprising, but they cite research that showed that when the market is underperforming such as during a bear market, or during the 2008 – 2009 Great Recession, most people didn’t fire their advisers. “We will have to see if people will still stick with their advisers when the market is less forgiving,” Labotka says.

They confirm that no one can predict how investors will react when the market struggles in the future, especially since returns have been so excellent for so long. “Many advisers have long recognized their clients are emotional beings, and imperfect, because we are human,” Labotka points out.

It’s the adviser’s job to keep clients calm during the rough times and curb their enthusiasm during the good times.

“I believe that investors can look at the research and feel empowered. They should not only receive financial expertise from their advisers but also receive emotional support,” Lamas said. “If an adviser isn’t providing that, then find someone else who will.”

Fake titanium scandal alerts investors to issues with sanctions and supply chains

Fake Titanium Scandal Affects Supply Chain

Line: https://www.equities.com/impact-investing/fake-titanium-scandal-alerts-investors-to-issues-with-sanctions-and-supply-chains/

Economic sanctions are a frequently-used tool in foreign policy designed to target certain individuals, groups and countries. The goal of these sanctions is to pressure governments into changing bad behavior, hopefully without affecting the overall population.

The biggest problem with targeted economic sanctions, however, is that sometimes there are unintended consequences. As investors, it is important to pay attention when sanctions are implemented and to determine if any of these unintended consequences affect your investments.

Unintended consequences

A good example of unexpected consequences occurred recently when it was discovered that counterfeit titanium was sold to Boeing and Airbus using fake documents. Commercially-pure titanium is an alloy that is used by the aerospace industry in engines, wings, the fuselage, undercarriage and landing gears. Titanium is a unique alloy that can withstand high temperatures, one of the reasons that it is highly desirable, especially in the aerospace industry.

Previously, the most dominant player in the titanium market was Russia, which is now the third-largest producer after China and Japan. Before economic sanctions went into effect against Russia, it was the second-largest producer.

As a result of the sanctions, many countries around the world have scrambled to find titanium to meet a growing demand for this alloy.

Fake titanium

The fake titanium was first discovered by Spirit AeroSystems, which noticed small holes in the titanium from corrosion. After a thorough investigation, they realized that the bogus titanium was used in Boeing’s 737 Max and 787 Dreamliner jets, and the Airbus A220. Spirit AeroSystems reported their findings to Boeing and Airbus.

Boeing BA - $184.31 1.11 (0.599%)

and Airbus EADSY - 1.27 (3.588%) voluntarily disclosed to the FAA that one of their foreign distributors “falsified or provided incorrect records.” In response, the FAA issued a bulletin to airplane suppliers to be on the lookout for any potentially falsified records. The FAA is also conducting their own investigation. They are also looking for ways to “prevent unauthorized parts from entering the supply chain.” Jetstar via Wikimedia

Boeing claimed that the titanium was linked to a small group of suppliers. They conducted tests on the metal and in a statement said, “We are removing any affected parts on airplanes prior to delivery.” Boeing also cut ties with any supplier connected to the fake titanium documents.

Airbus replied in a statement, “Numerous tests have been performed on parts coming from the same source of supply. They show that A220’s airworthiness remains intact.”

Boeing and Airbus are cooperating with the FAA investigation, which includes doing internal investigations of their supply chains to find how this happened. Boeing and Airbus are also searching for other legitimate sources for titanium, all of which takes time and costs money.

How sanctions can backfire

Although a necessary tool to control rogue nations and bad actors, the use of sanctions can sometimes backfire, as may have happened with titanium. Sanctions have adversely affected the airline industry both in Russia, Europe and the United States.

After Russia invaded Ukraine on Feb. 24, 2022, the European Union, United States, and Canada implemented sanctions against Russia, including excluding Russian aircraft from their airspace. They also halted the supply of parts, technical support and maintenance to Russia.

Unfortunately for Europe, their decades-long titanium arrangement with Russia was disrupted when the sanctions began. Boeing and Airbus have also been searching for non-Russian titanium suppliers. Unless the U.S., Canada, or Europe can increase domestic production of titanium (and that won’t happen quickly), the supply chain problems will continue.

A 2023 article in the “Journal of Travel Research” found that that “the negative consequences of sanctions spill over much more into airlines than other publicly traded aviation-related companies, with differential effects on each examined region and a greater impact on larger firms than small firms.”

As a result of the sanctions, Russia tried to minimize the effects of the sanctions by importing engines and spare parts from other countries including Singapore, Turkey and Central Asia. This was not only economically costly to Russia but is also a safety hazard.

What investors should do

It’s important to recognize that supply chain management is a key facet of ESG investing. Alert portfolio managers will be looking at these issues and find ways to avoid getting caught on the wrong side of an economic sanction’s blowback.

It is up to the authorities to create strong rules to prevent fake parts or metals from entering the supply chain. It is up to mutual fund managers, however, to be cautious about investing in companies that are experiencing turbulence as a result of the sanctions.

As investors, you may want to find out if your mutual fund manager is talking about supply chain issues and what they are doing to address it. Some managers may resist buying airline stocks that have been adversely affected by supply chain issues. Others may see it as a buying opportunity. Most important, it’s an issue that needs to discussed.

Although Boeing and Airbus are working hard to solve the fake titanium scandal, it would not be surprising to see other cracks in the supply chain. Because there is an increased need for airplanes, and an inability to get the necessary parts, bad actors may take advantage as they did with the falsified titanium documents.

Because of the disruption in the supply chain, Boeing may be unable to produce and deliver as many Dreamliner jets as they anticipated. Obviously, this will directly affect their stock price, and not in a good way.

Bottom line: It is essential for fund managers to understand how multinational companies manage their supply chains. If they don’t, supply chain incidents like this may keep popping up, playing havoc with not only consumer safety, but a company’s stock price.

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Investors want advisers who will give them emotional as well as financial support

Investors want advisers who will give them emotional as well as financial support

What behavior researchers have learned

Information overload

More than stock pickers

When markets get volatile again

Fake titanium scandal alerts investors to issues with sanctions and supply chains

Unintended consequences