#freetochoose

Boycott Goodyear?

As we said at the time, we criticized certain politicians that pushed to boycott Goya Foods when it’s CEO endorsed Trump. Equally Trump shouldn’t be pushing a boycott on Goodyear based on its political bias.

Just let people decide whether it bothers them or not. We are sick of individuals/groups ganging up on others to boycott anything. Our history of this stance can be seen here. Two wrongs don’t make a right.

We are quite sure Goodyear will face a backlash, much like Gillette. Self inflicted wound thanks to capitalism. At present the share price has remained muted.

The irresponsibility of socially responsible investing

United Nations Sustainable Development Logo

Socially Responsible Investment (SRI) has been heavily pushed by members of the Australian Council of Superannuation Investors (ACSI) for a while now. Apart from cynically cashing in on the generally higher fees generated by these “woke” funds, the returns have been nothing much to write home about. As Milton Friedman once said, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.

If we look at YTD, 1 or 10-year performance all of the SRI portfolios as indicated by published performance (listed on their websites) of local ACSI members, they have “underperformed” the benchmark index. One outperformed in the 5-year category. Hardly anything to crow about. So as much as they might feel warm and fuzzy for turning these funds into virtue-signalling investment vehicles, the outcomes for the monies entrusted to them is far from ideal. While investors should bear ultimate responsibility for where they deploy retirement funds, do they realise how much money they are torching by believing in this nonsense?

So why do these funds try to bully top-performing companies to conform to their irrelevant ideals which on the face of it do not appear to be working? If one reads through the fine print, many superannuation administrators pat themselves on the back that they are aligning portfolios to the United Nations Sustainable Development Goals (SDGs). If one wants to champion best in class ethics, the UN is the last place anyone should look. Just look at the unethical scandal that occurred at UNAIDS. 

It doesn’t take a rocket scientist to work out what these SDGs are – eliminating hunger, wiping out poverty, promoting gender equality, good health, clean water and sanitation, affordable clean energy etc. All wonderful things in and of themselves, but surely if the market agrees with them,  shouldn’t share prices reflect that?

Friedman spoke of free-market economics, “Well, first of all, tell me: Is there some society you know that doesn’t run on greed? You think Russia doesn’t run on greed? You think China doesn’t run on greed? What is greed? Of course, none of us are greedy, it’s only the other fellow who’s greedy. The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus [including the UN]. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, the only cases in recorded history, are where they have had capitalism and largely free trade. If you want to know where the masses are worse off, worst off, it’s exactly in the kinds of societies that depart from that. So that the record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system.

In Australia,  it would seem that many high performing companies, that aren’t ‘compliant as they should be‘, are being pressured to increase diversity, women on boards and all manner of meaningless benchmarks preached by the ACSI and its members.

Take the 30% Club which pushes to have 30% women on boards. While this started in the UK in 2010, it has spread across multiple jurisdictions including Australia. The 30% Club emphatically quotes from a McKinsey study,  “Companies in the top quartile for gender diversity on their executive teams are 21% more likely to experience above-average profitability than companies in the fourth quartile.” What this study doesn’t say is that the bottom quartile of companies maybe just poorly run, in spite of the genitalia of the board.

Don’t mistake the most important point to be made. If a board is best served by all women, you won’t hear a peep from investors if they can produce the best results. As soon as we start to try to enforce gender quotas, performance becomes predicated on chromosomes rather than capability. What next? Ensure fair representation of LGBT on boards? Religions? Races? Disabilities? Where does it stop when all that matters is ability that produces performance?

Take a look at the disaster that has befallen PG&E in recent times. In the interests of pandering to all these irrelevant SDGs, it can tell you the exact breakdown of the diversity of its workforce but can’t tell you the status of much of its infrastructure, some which have been directly responsible for the devastating wildfires in California. The company was forced into Chapter 11 bankruptcy. Did diversity help shareholders? If one’s house is on fire, do we worry about identity? Or who has the skillsets to put out the blaze the fastest? QED.

Yet our woke investors keep pushing these trends. IFM Investors waxes lyrical about its climate change, 30% Club and carbon disclosure project. Good for it. It has a choice. It should live by the sword and die by it. If that is what it wishes to focus on why not allow the free market to; a) decide whether superannuation holders want to deploy funds in such a manner and b) let corporates decide if SRI is good for their businesses.

Yet, the latest push by these socialist fund administrators is to ensure that companies conform to the ‘Modern Slavery Act.’ Are these people for real? Who are they to try to enforce federal law? Talk about self-imposed authority. It is a safe bet that 99%+ corporates listed on the ASX behave are compliant in this regard because if not the punitive outcomes will be severe.

Moreover, if some of these funds own stocks like Tesla in their international portfolios, perhaps they might consider such a hip and trendy investment has an indirect connection to child-slave labour in DR Congo where 70% of the world’s cobalt is mined to go into the Li-ion batteries.

There is one absolute truth in finance. In good times, any mug CEO can be successful. It is only when markets turn sour that the “quality” of decent management is truly appreciated in how they successfully manage to mitigate risk in an ugly downturn. In a difficult market climate, only the fittest survive and if companies have strayed off the reservation to appeal to investors, it will soon become self-evident in the results.

As we stare at the precipice of a potentially deep global recession, the previous paragraph will be all that matters. Because those corporates too busy hitting diversity targets, installing genderless bathrooms and ensuring they have double-checked all employees have complied with Earth Hour will be slaughtered when markets take a pounding.

These SDG focused funds will soon see that they are part of one giant herd and as performance starts to suffer in this crowded trade, the stampede toward the exit will reveal just how irresponsible the push to ram through such irrelevant metrics at the very companies who caved in was.

As a contrarian investor, the best investments will be in exactly those companies that shun(ned) this foolhardy exercise and forged a path in the spirit of Milton Friedman. Afterall they understood what it really means to be “free to choose.” So back up the truck in tobacco, mining and fossil fuel stocks on any pullback. After all, mean reversion will see these stocks outperform if nothing else.

Don’t forget Harvey Norman (HVN). How could it be that the company is worth 4x the combined value of Myer and David Jones, the latter two businesses focused on pleasing the United Nations rather than customers?  Hmmm.

Isn’t that the ultimate ready reckoner for these SDG funds? The market is always right. If the performance of the funds deployed isn’t making the grade, don’t attempt to force the best of breed to comply to your self imposed standards. Embrace companies that follow their lead. Not the other way around. It begs the question, what on earth are people who should believe in free markets doing to thwart it functioning efficiently?

Perhaps investors have the clearest indication of socialist activism by the very requirement to join the club. “ACSI drives strong ESG performance in companies in which our members invest because ESG creates long-term value…We use our collective impact to influence companies and financial markets in the interests of our members as long-term investors…Commitment to these beliefs is a pre-requisite for membership of ACSI.

Never has it been a more sound decision to set up an SMSF.

Let’s hope the Feds don’t take the same biases in investigations

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Here we go again. The slippery slope of ‘diversity’ which does everything else other than promote inclusivity because by its very nature it is all about singling out exclusivity. The Australian Federal Police (AFP) brazenly states in its recruitment campaign that they want to get to 50/50 women. Of course there is no issue with hiring women. No ifs or buts. If you are a male, your chances of joking the AFP will be diminished no matter how qualified you might be. What has gender got to do with work performance, let alone the desire to ‘protect and serve’? In most police forces around the world the split is 70/30 men/women. Maybe it is just reflective of individual choices in careers rather than women being selectively discouraged?

The AFP wrote in response to their post,

There’s been a lot of commentary on the fact that we’re targeting women with this recruitment. We’d like to clarify a few things.

In the AFP, women currently comprise 22% of sworn police and 13.5% of protective security officers. Our goal is to increase this proportion to 35% in both streams by 2021.

Today’s ‘special measure’ recruitment action is designed to supplement our current recruitment process – we already have a pool of suitable male and female candidates who applied recently.

This action we’re taking will provide us with additional female candidates. It’s not going to displace existing recruitment pools and it will require applicants to meet all the existing gateways.

Under Section 7D of the Sex Discrimination Act, the special measures we’re taking to achieve substantive equality between men and women in this organisation are legal.”

This lame excuse is yet another spineless rolling over to pander to political correctness. If. 20 candidates apply for 10 positions and there are 10 men and 10 women, wouldn’t it be best to hire 10 women if they were better qualified for ability than the 10 men? Or vice versa? So hire 5 extremely qualified women and 5 inept males just to keep a balance?

Last month CM spoke of the same garbage ‘diversity’ argument in the army.

Recruiters at the ADF have been told they must hire women or face relocation if they don’t comply. The recruiters say there are no jobs available for men in the in the infantry as a rifleman or artilleryman. But these positions are marked as ‘recruit immediately’ if a female applies. If a 50kg woman is in the artillery a 43.2kg M-107 shell is over 80% of her weight. An 80kg man would be lifting the same shells at around half of his weight. This is basic physics.

The West Australian newspaper reported one recruiter who said, “This is political correctness gone mad. I don’t care if it is a man or a woman – I just want to get the best person for the job.”

Yet the political correctness is promoted from the top. Defence chief, Air Chief Marshal Mark Binskin, stressed the importance of diversity for the ADF. “A diverse workforce is all about capability. The greater our diversity, the greater the range of ideas and insights to challenge the accepted norm, assess the risks, see them from a different perspective, and develop creative solutions.”

So once again we are told to view this nonsense as completely acceptable. That the AFP puts gender above ability. Ability and passion are all that matters. Shame on the AFP for having a blonde white woman instead of one from a coloured background for maximum virtue signaling mileage. For all of the AFP’s expertise in forensic science it is an embarrassment to see them use a most flawed identikit for recruitment.

So what is next after the 50/50 target is hit? After all the AFP seeks to match society. Surely what follows is balance in sexual orientation, faith, race and other irrelevant aspects which should be irrelevant to job performance – all in the name of diversity – what a joke. Let men and women chose the AFP of their own volition and take the best of the crop.

Welcome to the nanny state.