The Inspired Economist

Even a year gone since the failure of Lehman, fundamental questions remain regarding the core underlying assumptions of our financial system. Though currently derivatives trading and black boxes appear out of favour, what will replace them in terms of helpful and productive uses of capital still has yet to be determined. This question was what the Conference on Social Capital Market’s, or SoCap09 tried to give some structure to; while the trend towards sustainable investments and long-term ROI seems to have taken the place of actively managed funds seeking 20x returns.

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What if you call your HR department or brokerage firm and discover you don’t have SRI options available with your 401(k)?  Does that mean you can’t be a socially responsible investor?  Of course not.  If you own shares in a company, you have partial ownership and certain privileges.  Corporations mail out their annual reports containing proxy statements and voting forms.  With our votes, we have the ability to help shape sustainable business in corporate America.  We can be shareholder advocates.

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When you disagree with a company’s sustainable or lack of sustainable business practices, what do you do?  You contact the company.  You sign a petition.  You boycott their products.  You inspired others to “vote with their feet” or “vote with their dollars.”  You pride yourself in the fact that you don’t shop at Walmart or eat at McDonalds.  You are using your “consumer dollars” to send a strong message to corporate America, but what about your “investing dollars”?  When it comes to 401(k)s, mutual funds and the stock market, do you know where your money goes?

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A bridge is about to open up that will make things easier but safer for people who want make their investments consistent with their values.

Just like a bridge makes traveling between two islands easier, the new rating system to be unveiled at Socap09 will be like taking a train instead of having to paddle through choppy waters.

The bridge, called GIIRS, is being built for people who are trying to make sure their investments have a positive social and environmental impact while they also try to earn a financial return. It’s a tool that makes it easier, safer and clearer for those investors who want to make a difference.

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Market Facilitation in Ecosystem Services; Contemporary Developing Cases in the UK

Is there reason to believe that there maybe profit to be made by investing in eco investments while conserving the environment?

There does exist some scepticism about the market’s involvement in green initiatives. Even though research conducted by Frost & Sullivan about the telecom industry, which is yet to be published, next month (but was mentioned in The Guardian in late April) apparently shows that there is no measurable link between a company’s share price and investments in green initiatives. However, if pursued they could reflect an improved brand value for a company with an environmental focus. Read the rest of this entry »

Think Globally - Act Locally.

Green Municipal Bonds offer the opportunity to rescue the economy and the environment.  Local governments are needlessly watching their economies disintegrate, waiting and begging for handouts from Washington D.C., while all along the power to save their economies and help the environment lies in their hands - Green Municipal Bonds.

Traditional Municipal Bonds are debts issued by local governments to pay for schools, hospitals, mass transit, and many other projects that benefit local communities.  Citizens vote to approve a bond investment, agree to pay a property or sales tax to fund the bond measure, and the bonds are then sold to investors to raise the capital for the project.  Municipal Bonds are very similar to U.S. Government Treasury Bonds.  Both offer investors relatively safe investment vehicles with special tax advantages.

Green Municipal Bonds, are similar to their traditional cousins, they offer relatively safe investments with special tax advantages.  However, their are several differences that make Green Municipal Bonds far superior for the taxpayer, investor, and issuing local governments. Read the rest of this entry »

In a wide-ranging interview with “Nightly Business Report” on Jan. 22, Berkshire Hathaway chairman Warren Buffett addressed the economy, credit crisis, government stimulus bills, the Madoff scandal and his own investing strategy.

“Well we’ve had to get the credit system partially fixed in order for the economy to have a chance of starting to turn around. But there’s no magic bullet on this,” he said. “They’re going to throw everything from the government they can in. As I said, the Treasury is going all in, the Fed and they have to and that isn’t necessarily going to produce anything dramatic in the short term at all. Over time the American economy is going to work fine.”

Several times during the interview, Buffet spoke about devoting every resource to fixing the economy.

“All you know is you throw everything at it and whether it’s more effective if you’re fighting a fire to be concentrating the water flow on this part or that part. You’re going to use every weapon you have in fighting it. And people, they do not know exactly what the effects are,” he said. “Economists like to talk about it, but in the end they’ve been very, very wrong and most of them in recent years on this. We don’t know the perfect answers on it.” Read the rest of this entry »

Warren Buffett, the chairman of Berkshire Hathaway says that President Obama’s #1 job is to fix is the economy but even though we have “got the right person in the operating room, but it doesn’t mean the patient is going to leave the hospital tomorrow.”

In an exclusive interview with PBS’s Nightly Business Report, Warren Buffett tells anchor Susie Gharib, that America was in an “economic Pearl harbor” last September, that went for a nosedive after October 1st  2008.

According to Buffett, America’s credit system must be partially fixed in order for the economy to have a chance of starting to turn around. But whether a fiscal stimulus is going to do this, or whether tax cuts will provide the answer, nobody seems to really know.  Certainly not the economists! Buffett believes that when it comes to economics you can’t just do one thing and where the balance is struck on that will be a political question.

PBS airs a fascinating interview with America’s economic guru, Warren Buffett tonight to commemorate the 30th anniversary of Nightly Business Report.  Buffett shares his views on the newly inaugurated President Obama, the recession, his company Berkshire Hathaway, the Madoff scandal and his investing principles vis-a-vis a gloomy and uncertain economic outlook.

Make sure you tune into Nightly Business Report tonight – January 22nd 2008 at your local PBS station. Check here for local listings.

If you miss the interview for some reason, then check back here tomorrow for a link to the interview online.

Image credit: Fickr (Peter Duhon)

Bernard Madoff was arrested December 12, 2008 for an alleged $50 billion investor fraud and released on $10 million bail. While the press heralds this as the biggest ponzi scheme in history, it’s a pittance compared to the real estate schemes that have created the present financial crisis.

Like Madoff’s scheme, the house market became dependent on a steady price increase. Buyers were willing to pay high prices with the expectation that they could later sell for a profit.

Eventually, without substantial inflation, houses had to become unaffordable. House prices had reached levels that often required most of a household’s income. Subprimes were just a frantic attempt to continue this pyramid. Like every ponzi scheme, some means must be found to get more money from new “investors” to payoff old.

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The economy is in crisis, unemployment is on the rise, and there is a general feeling of fear in the market.  Where some see despair, Warren Buffett sees opportunity. 

In a recent Op-Piece in the New York Times, Mr. Buffett explains his reasons for investing in US Equities and urges others to do the same.  He encourages investors to “be fearful when others are greedy, and be greedy when others are fearful.”  Warren may be speaking from the perspective of a patriot, but he is also a pretty darn savvy investor, consistently ranking among the richest people in the world.  He acknowledges that “people have a right to be wary of highly leveraged entities or businesses in weak competitive positions.  But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.”

If Warren’s betting on the US Economy, deal me in. 

Check out the rest of the article, on top of being an incredible investor, he is also a witty writer.  It is well worth the read. 

Photo Credit: By Photo Credit: One Trick Pony in FlickR’s via Flickr’s Media Commons