Dr. Jonathan Tiemann
Barron’s, the Dow Jones business weekly, published its annual investor survey of America’s most respected large companies this week. I was one of 112 investors responding to the survey.
It’s important to note that the survey asked what companies we respect. I chose to interpret the question narrowly, recognizing that not every successful enterprise — and not even every enterprise that seems likely to deliver an attractive return on capital — is deserving of respect. Here’s how Vito Racanelli, the Barron’s journalist, under whose byline the results of the survey have appeared for the past several years, quoted me in his report on the survey: “Business is a human enterprise. What is most admirable in business is running a successful enterprise honestly, without cutting corners. As soon as you begin to be an apologist or say things that are untrue or only narrowly true, you run into trouble.”
Unfortunately, it’s impossible to build a well-structured, well-diversified portfolio entirely of stocks of companies deserving of respect in the sense I had in mind. There’s just too much routine mendacity in the business world. But that doesn’t mean that we have to give a pass to every executive that cuts a few too many corners.
By Dr. Jonathan Tiemann
This February, a group calling itself the Climate Leadership Council published a paper titled, “The Conservative Case for Carbon Dividends.” The paper’s eight authors constitute sort of a blue-ribbon panel of thoughtful conservatives. They include former senior Republican officials (James A. Baker III, George Schultz, Henry Paulson), prominent economists (Martin Feldstein and N. Gregory Mankiw, who also served in Republican administrations), business leaders (Thomas Stephenson of Sequoia Capital and Rob Walton, a member of the Wal-Mart founding family and board), and the CEO of the Climate Leadership Council, Ted Halstead. The paper begins with a forthright acknowledgement of the seriousness of climate change as an issue. The paper’s main proposal is to impose a tax, initially $40 per ton, on carbon dioxide emissions, using the proceeds to pay every American an annual “carbon dividend,” which they estimate would initially amount to about $2,000 for a family of four. While we would all pay the tax indirectly because taxes generally find their way into consumer prices, the idea is those that choose to make our lives less carbon-intensive would come out ahead, while those that continued to lead carbon-intensive lives would be net payers. The proposal has the merit of articulating a coherent policy approach to greenhouse gas emissions, using a price mechanism to decentralize the day-to-day consumption choices and long-term investment choices, which consumers and businesses must make to effect substantial reductions in those emissions.
The Climate Leadership Council is an interesting group. They’re an […]
By Dr. Jonathan Tiemann, February 11, 2017
On Friday, February 3, 2017, a group of business leaders convened at the White House with the President, members of his family, and his ever-watchful Vice President, presumably to lobby for policies conducive to the profitability of their businesses. The financial markets advanced, as though relieved that the President had chosen to take a break from erecting immigration and trade barriers, which most of the industrialists and financiers oppose, to concentrate on their agenda. Wall Street seems to take for granted that that agenda includes massive tax cuts for corporations and wealthy individuals, along with rollbacks of regulations they regard as either costly or annoying.
In remarks earlier in the week, the President had promised to “do a number on Dodd-Frank,” presumably meaning that he intended to spearhead a drive to roll back some large portion of the banking and financial services regulations the Government has imposed under the Dodd-Frank financial reform law, which Congress enacted in 2010 as a response to the economic peril and dislocation of the financial crisis of 2007-2009. The President mused during his Friday meeting that many of his friends had complained they couldn’t expand their businesses because they can’t get banks to lend them the money they need, because of Dodd-Frank.
While Dodd-Frank is of interest to a broad range of financial services firms and customers, the brokerage industry has also been lobbying the Administration to take action to weaken the so-called “Fiduciary Rule,” a newly-enacted Labor Department rule […]
By Dr. Jonathan Tiemann, January 24, 2017
Presidents, especially new ones, make headlines, and the current holder of that office is generating his through a peculiar combination of outlandish statements and high-level meetings with business leaders. Today (January 24) the President summoned to the White House executives from the major US automakers, ostensibly to urge, or perhaps cajole, them to repatriate much of the production they are currently doing outside the US, especially in Mexico.
On the White House driveway after the meeting, CEOs Mary Barra of GM and Mark Fields of Ford both described the session as encouraging. Sergio Marchionne of Fiat Chrysler lurked near the camera, but did not offer a comment.
The Administration may imagine — and certainly wants us to imagine — that the result of their meeting will be to encourage the automakers to invest billions to re-establish manufacturing capacity and jobs in the US. The upbeat reaction from Ms. Barra and Mr. Fields might seem to reinforce that impression. But on CNBC this morning, Ed Conard, former managing partner of Bain Capital had a different view of why Ford’s and GM’s executives and investors might have liked today’s meeting:
“I think they think they’re going to be able to raise prices on cars, ’cause they’re not going to add a lot of capacity, so the more we restrict imports, we bump up against capacity in the US and the better off they’re going to be, so I’m not surprised that their stocks are rallying in the face […]
By Dr. Jonathan Tiemann, January 20, 2017
With a new Administration comes a new Cabinet, so the US Senate spent most of its time this week in hearings with Cabinet nominees on whom the Constitution requires them to provide their advice and consent. On January 19, the Senate Finance Committee interviewed the new Treasury Secretary-designate, Steven Mnuchin. The hearing was among the longest of the current round of Senate Committee confirmation hearings. It also provided a bit of a window onto the legislative sausage-making process. On two issues in particular — the profit Mr. Mnuchin made as a key investor in OneWest, a bank he reorganized from the husk of the failed mortgage lender IndyMac, and his directorship of an offshore entity in connection with his time as a hedge fund manager — both the Senators and Mr. Mnuchin offered statements that were narrowly true, but obscured important points that were not central to the message they wished to convey to the American people. Mr. Mnuchin deflected the main thrust of the Senators’ critique on those two matters, but failed to resolve questions about his commitment to public service.
Mr. Mnuchin arrived at the hearing prepared to discuss the OneWest matter. Critics of his nomination have described OneWest as a foreclosure mill, arguing that Mr. Mnuchin profited as OneWest foreclosed on mortgage borrowers, some of whom had made only the tiniest technical errors in keeping up on their payments. The fact that with a handlebar moustache, a dark cloak, and a […]
Stagnant incomes, underemployment, and job insecurity are key reasons so many voters in Europe and America are now willing to embrace candidates outside of the mainstream. But the now stultifying level of private debt, and the accompanying impact on growth, is an equally important reason.
In a special 132-page report published in August 2015 entitled “ENERGY DARWINISM II: Why a Low Carbon Future Doesn’t Have to Cost the Earth,” Citigroup, one of the world’s largest financial insitutions, reported that it had studied the financial impacts and feasibility of whether we could afford to address climate change. It found that, in fact, opting to address climate change and do what it takes to convert our economy to one using 100% clean energy and greatly increased efficiency, is not only feasible, it would save our economy $1.8 Trillion in energy costs over the long run out from a total tab that will run in excess of $190 Trillion. The authors write:
We believe that that solution does exist. The incremental costs of following a low carbon path are in context limited and seem affordable, the ‘return’ on that investment is acceptable and moreover the likely avoided liabilities are enormous. Given that all things being equal cleaner air has to be preferable to pollution, a very strong “Why would you not?” argument begins to develop.
Comparing what it called the “Action” scenario — which is investing in clean energy and converting our economy and our technologies to eliminate our use of fossil fuels — to the business-as-usual “Inaction” scenario, the report found that on top of the relatively minor energy cost savings that would result, there would […]
Today, I’m calling on the Department of Labor to update the rules and requirements that retirement advisors put the best interests of their clients above their own financial interests. It’s a very simple principle: You want to give financial advice, you’ve got to put your client’s interests first.
– President Barack Obama, February 23, 2015
We are thrilled with this major step forward proposed by President Obama to correct some of the abuse that can happen when individuals seek financial advice from certain types of brokers and financial planners who are not Registered Investment Advisors (RIAs) (like Tiemann Investment Advisors is, who are held to a high fiduciary standard). Such individuals receive compensation from commissions, fees and a range of marketing benefits paid behind the scenes by the financial companies whose products the brokers sell. These brokers do not have a fiduciary obligation to put the interests of their client first and while some will consider their client’s best interests, a substantial number will sell investment products to their clients based of the size of the commission they—the broker—receives. Unfortunately, the bigger the commission, typically the worse the product. The new rule, described in more detail below by this U.S. Department of Labor Fact Sheet, is estimated to potentially protect and save middle-class investors billions of dollars every year once it is passed and in effect, although this will likely take until […]
For many investors, mutual fund fees are among the largest hidden costs of investing. They can be confusing, too. Fund companies can charge investors a variety of fees, and according to this guidance from the U.S. Securities and Exchange Commission, some fund companies may not be characterizing their expenses correctly. This should be a little alarming to those investors who think they have a handle on what the fees they are paying for holding mutual funds. The problem lies in the murkiness of fee reporting by these funds, which are required to account for fees differently, depending upon what type of fee it is. If it is a shareholder and record-keeping fee, it is called a “sub-accounting fee.” If it was a fee that pays for activities that result in a sale of mutual fund shares, those are considered “distribution fees.”
According to “U.S. regulator warns mutual funds on mischaracterising fees,” a Reuters article published January 6, 2016, “Mutual funds may be misdirecting fees, which has the potential to hurt investors’ returns, the U.S. Securities and Exchange Commission said in guidance it released on Wednesday, after examining some mutual funds, investment advisers, broker-dealers, and transfer agents.”
In particular, the SEC raised questions as to whether payments characterized as sub-accounting fees where actually “used to pay for activities that are primarily intended to result in the sale of mutual fund shares.”
The SEC has been examining how mutual funds are handling certain fees but, in its recent guidance, […]
We are about three weeks away from the next Republican candidates' debate, but I'm still stuck on one item from the last debate. Toward the end, the moderators cited a Treasury Department proposal to replace the image of Alexander Hamilton on the ten-dollar bill with that of a woman, and asked the candidates which woman they would choose for that honor. When Senator Cruz's turn came, he prefaced his answer by saying he would prefer to keep Hamilton on the ten, and instead replace the portrait of Andrew Jackson on the twenty.
Sen. Cruz's defense of Hamilton seemed bizarre, given his stated positions on a variety of issues. Hamilton, after all, believed in a strong Federal government and a strong central bank (the type of bank that Jackson killed). He was the architect of the Compromise of 1790, under which Congress assumed the Revolutionary War debt of the states, rescheduling them where necessary – a bailout, if you will.
Hamilton also believed in a strong national economic policy. In his 1791 Report on Manufactures, he advocated major public infrastructure investments, along with other measures explicitly intended to promote the development of a manufacturing economy. In arguing both for assuming the states' debts and for setting up a strong central bank, Hamilton urged Congress to make a credible commitment to make timely payment of principal and interest on the public debt. This "funded debt," Hamilton felt, could serve as a monetary base in an economy desperately short on hard currency. The […]
- Page 1 of 4