Ethical Investing Dilemmas, late 2009, Part 1

“It’s 11:00.  Do you know what your money is doing?”

This post begins a running theme for this blog:  The Ethical Dimension of Investing.

To whom do you lend?  And what, exactly, do you really “own”?

Did you own the S&P 500 last year?  Ever stop and think how much of that was “invested” in the very same financial companies which have so egregiously failed (in many senses of the world), but which subsequently repaid themselves with public money, outrageous fees, and legislative legerdemain?  Did they repay you?  I did, and they didn’t. I don’t want to be a part of that again!

When you want to “buy a bond”, or a CD, or put “money in the bank”, does it matter who gets the money, or is one’s job simply to choose a secure institution with a reasonable (preferably above average?) rate of return?

I think more is required of an investment than simply “security of principal and a reasonable rate of return”.  I want to know that my money is being put to a use that I can agree with.  I’m tolerant enough not to insist on it, but I think you should too.  It’s hopeless to expect perfection.  But I don’t want to be bankrolling some venture which history will someday judge the modern equivalent of the South Sea Bubble or TulipMania.  I suppose it’s okay to relieve willing fools of their money in a zero-sum game, but a fair amount of “investment” activity is downright destructive. Especially when the willing fools get bailouts at my expense!!!

Indeed, a lot of speculation which appears to be “zero-sum” is, in truth, necessarily negative-sum.  Because even if money just changes hands without an overall gain or loss, nevertheless time is wasted which could have been put to better use.

This is a general introduction. The next post in this series will delve into specifics from my perspective.  But for now I want to mention Move Your Money, which provides a provocative (if perhaps hyperbolic) illustration of the issue!

7 Responses to “Ethical Investing Dilemmas, late 2009, Part 1”

  1. patientrenter says:

    Wisdom Seeker,

    I just saw your reference to this blog over at Calculated Risk. It’s late and I cannot read or comment now, but I took a quick glance at the posts you have up here and I share a lot of your thoughts (although less articulately than you). I look forward to returning and growing my understanding by reading and sharing on this blog.

    Great work!

  2. Woolsey says:

    I also popped over from CR, and live in the East Bay. Same dilemma – where to invest. It seems to me that some portion of an individual’s investment and planning should be directed at low probability/high consequence futures – hyperinflation, Mad Max, etc. But, how do we assess the probabilities and make the allocations.

    Best wishes for your blog

  3. Nanoo-Nanoo says:

    I too popped over from CR. Thanks for the opportunity to talk about this.

    I’m using the very last independent bank in my state, the other we use was bought by a regional 3 years ago, albeit a small one. Unlike larger states, we don’t have a bank/branch and many options on every block. Any failure here will result in a big earthquake. This state and its people are historically conservative, not into bling, not into conspicuous consumption. Still, this area did not escape speculative building of CRE, RRE and in RRE it was high end.

    What scares me to death is that decades of earnings, savings were hijacked. Those funds used in ways I couldn’t even imagine and now worthless. Its in our pension and extended to robbery of SS. I never played the market because I didn’t understand it except that it was an insiders game. I also didn’t want to die with a ticker-tape in my hand.

    Some of us, lived below our means, didn’t want to be uber-wealthy but comfortable, not famous, or to seek attention/envy by our lifestyle. We’re gonna be and are collateral damage, we have no protection or the ability to hedge against what is coming.

    So in your coming blog post, which I hope you will continue to link at CR; I hope you will provide some solutions. AS I have stated before, should a TBTF buy these 2 banks, I will pull out my paltry funds as I refuse to capitalize them. I am aware it makes no tangible difference, except it makes me feel better.

  4. Thanks for the feedback, all!

    Nanoo, have you looked at credit unions (not necessarily local) as an alternative to the big banks?

    One alternative, if you cannot keep your money in an independent bank, might be to suffer the larger banks with just your checking $$ (for which it still helps to have a branch nearby) while moving the rest of your savings to other institutions, that you can believe in.

    But one of the larger worries about the big banks wiping out the local banks, is that there won’t be locally-savvy lenders willing to bootstrap small entrepreneurial businesses. Which are the job-creating engine of the economy. Part of the national malaise of the past decade (plus) may in fact be that we have too many large banks, and not enough small ones!

    Part of me wants to semi-retire and start a bank somewheres, where it could really be useful and doesn’t need to be larger… but I’m not enough of a people person (yet).

  5. IRA says:

    Thank you so much, there aren’t enough posts on this… keep up the good work

  6. I do not normally respond to messages, but on this matter. WoW! ‘