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True or false?
As a result of Wal-mart's packaging reduction initiative, General Mills changed the shape of its Hamburger Helper noodle making it slightly flatter, enabling Hamburger Helper to minimize its package size by 20%, subsequently saving
890,000 pounds (that's 445 tons) of paper fiber every year, and taking 500 trucks off the road annually.
Click here for the answer!
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| SOCIALLY RESPONSIBLE vs TRADITIONAL INVESTING
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What do I give up?Often the first question that comes up in a discussion about socially responsible investing (SRI) is the question of returns. How have returns been for SRI versus a worldwide market index of the largest companies on earth like the Morgan Stanley Capital International World (MSCI World) Index? And what about the smaller emerging markets like Argentina, Brazil, Chile, China, Czech Republic, Egypt, India, Malaysia, and the all the rest? How has SRI done versus traditional investing in emerging markets?
Well, fortunately there are organizations in the world that keep track of the above statisics, and Blue Haven Capital tracked down some of these groups and asked those very questions.
SRI Worldwide vs Traditional Worldwide:
The DJSI World (Dow Jones Sustainability Index World) was created in August 1999 and "...captures the top 10% based on long-term economic, environmental, and social criteria out of the biggest 2500 companies worldwide." It is frequently compared to the MSCI World (Morgan Stanley Capital International World) index.
Since its inception in 1999, the DJSI World Index has outperformed the MSCI World Index 38.21% versus 35.33% on a total return basis.
SRI Emerging Markets vs Traditional Emerging Markets:
Emerging markets (defined as the stock market of an economically developing country) are the newest markets in the world and they too have the ability to be screened for socially responsible investing. Dimensional Fund Advisors offers the Emerging Markets Social Core Equity Portfolio which is a no load index fund consisting of over 1400 companies from 17 different emerging market countries. The fund was created August 2006, and as of January 31, 2008 had outperformed the MSCI Emerging Markets Index 32.16% versus 29.71% on a total return basis.
As the worldwide and emerging markets index results show, socially responsible investing often performs as well, and even slightly better, than traditional investing.
Dimensional Funds are not offered directly to individual investors and Blue Haven Capital is one of a select group of fee-only advisors able to offer this fund family to clients.
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| COMMUNITY SUPPORTED AGRICULTURE
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Locally grown foods
According to the Worldwatch Institute, the average food item consumed in the United States travels between 1500 and 2500 miles to get to your dinner plate. That distance is 25% greater than in 1980, which has caused renewed interest in Community Supported Agriculture, or CSA. CSA is not a new concept and has been popular in the United States for over 20 years. It has been popular in Japan, Europe, and parts of South America for close to 40 years. The idea is simple: those individuals in a community who have an interest in fresh, locally grown farm products "buy into" a local farming operation. Over the winter, the farm sells shares in its anticipated harvests to interested shareholders, and those shareholders then come weekly or biweekly to the farm throughout the spring, summer, and fall and collect what the farm has produced. It is a terrific way for the consumer to get fresh, locally grown and harvested food, and it is a great way for the farmer to relieve himself of the burden of marketing and selling his crops. For more information on CSAs, and to find one in your area, click here. If you would like a funny, easy to read book about a couple who tried to go one year eating only food grown or raised within 100 miles of their house, see " The 100 Mile Diet" book and website. |
| AUCTION RATE SECURITIES: AN OVERVIEW
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Failed auctions, lack of liquidity
The
auction rate securities market is the latest financial market to make
the news. Auction rate securities are debt instruments that are issued
with a 25 to 30 year maturity, but often have 7, 28, or 35 day interest
rate resets which are set from Dutch auctions. For years they had been
used as cash alternatives by high net worth individuals and
corporations because their rates were slightly higher than money market
rates. Also, there had never been any question of a holder's ability to
sell the security into the auction environment when the holder needed
the cash.
Well, times have changed. Suddenly, there are fewer
buyers for the securities, which means fewer opportunities for holders
to sell their floating rate instruments. When an auction "fails", it
means that there are more sellers than buyers, and that the reset rate
will go to a specified "fail" rate which was pre-determined when the
bonds were issued. In some cases, the "fail" rate is 20%. Previous to 2007-2008, the last
batch of failed auctions occured in 2002, and there was talk of it
happening again as recently as 2005.
What caused the sudden lack
of demand for auction rate securities? Well, the troubles probably
began in 2005 when the large accounting firms began recommending to
their corporate clients that they reclassify these instruments from
cash equivalents to short term investments (see WSJ March 24, 2005).
Lately, the credit worthiness of some of the insurers of auction rate
securities has been called into question, and to add insult to injury,
many of the banks that provide liquidity to the auction rate securities
market have far less liquidity due to the housing debacle and subprime
mortgage market mess.
One bright note: Money market funds are
NOT legally allowed to invest in auction rate securities. Money market
funds are obligated to buy instruments which have maturities of 397
days or less, and technically the auction rate securities have
maturities of 25 to 30 years.
We have heard many of the
brokerage firms in the nation telling their retail clients that the
auction rate securities market is worth investing in right now. We
disagree for two reasons. First, the institutional market is currently
a net seller and we worry that the brokerage firms are simply
accomodating their institutional clients at the expense of their retail
clients. Second, auction rates have come back to the 8% area recently
and since a purchaser does not know whether he is buying a 7 day
instrument or a 30 year instrument at that 8% level, we think the
risk/reward is skewed terribly. Moreover, the high interest rates that municipalities and others must pay on these floating rate bonds will quickly become unaffordable. Due to issuers' deteriorating credit quality, we expect this market to get worse before it gets better and we recommend staying out of auction rates securities.
The mantra "It's a liquidity problem, not a credit problem", is misleading at best. No municipality, hospital, or university in the United States can afford to pay 8% to as high as 20% on its debt for anything other than a short period of time.
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| THE "RESPONSIBLE (K)" ROLLOVER OPTION
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Socially Responsible 401(k) rollover options
We are often asked if there is a socially responsible rollover option available for those who are changing jobs or retiring. Absolutely there are options...and these days with more confusion than ever in the marketplace, it makes sense to have someone with experience help you. We would welcome the opportunity to show people how to maintain a well diversified yet socially responsible portfolio that is constructed to get the same returns that a non SRI portfolio gets. Why not get competitive returns, sensible diversification, AND a socially responsible portfolio all in one? |
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Blue Haven Capital is a registered investment advisor focusing on socially responsible investment management for individuals, private foundations, and public charities. If you know an individual or group who might be interested in our services, please forward this email to them!
Best Regards,
Donald Cummings
Blue Haven Capital LLC
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