From:                              David McClenon <dwm_42@hotmail.com>

Sent:                               Saturday, July 11, 2015 1:32 PM

To:                                   Chuck McClenon

Cc:                                   Lee Mcclenon

Subject:                          Re: Investments Working Group

 

Relative to how the funds should be invested.  

Personally, I think it is important to separate the way the money is given away from how it is earned.  By investing it in any way other than to make the most for the fund, decreases that which can be used to further the funds objectives.

 

Secondly, investing any of the money in companies that either "do good" or that we think "represents the goals of Walter" deprive the Trustees of their right to make similar decisions.  Walter established a pattern of investing in the bluest of blue chips without regard to objectives of these large companies.  Risk avoidance seemed to be his objective.

 

That being said, perhaps with the concurrence of the Trustees, some investments could be made as Chuck suggested in  companies that may or may not prosper, but further the goals of the fund.  Again I think this is probably a poor policy since once it is started, how do we or future trustees manage such investments? 

(Yes, they are not making any money, but the potential is there that they might; and even if they never make money, they are doing things that the fund encourages.)  How do you manage such thinking?

Dave

 

ps: This thinking is the basic story many brokers use for every stock that they want to sell.  The stocks are called "story stocks"  If the story is good enough, they sell themselves.


Sent from my iPad


On Jul 10, 2015, at 7:16 PM, Chuck McClenon <cmcc@utexas.edu> wrote:

L

 

Our holdings in either fund are about one third in mutuals, two thirds in specific stocks.  The Morgan Stanley site is very slow right now, hanging as I write this.   So I’ll try to remember to pull the holdings tomorrow.  

 

I favor a strategy of investing at least somewhat in things or technologies which express out hopes and beliefs.  Causes we want to promote, like alternative sources of energy.  I don’t like the negative approach of “nothing warlike” but I do like betting on good candidates  of things which might be very good.  They should be subject to some “blue chip” test — not investing in cold fusion, but in at least  some working prototype, and a business plan likely to work.  And I think part of the role of an Investments committee is to look at these, screen these, and then come back to the board and say, “this is not a sure thing, but do we want to take a chance on it?”

 

I also agree with the  your last few paragraph.  If we believe in prison reform, we should not invest in privatized prisons.  There are some places obviously wrong to go.  Meanwhile the tobacco companies hide themselves under names like Altria, selling a lot of consumer products and not merely tobacco.  We don’t run from them screaming that they have 5% in tobacco, or 45% in tobacco, but there is some recognition there.  Likewise we look at Shell or Exxon, either  of which say they are investing in research in alternative sources — which is true — but we can make the judgment call and say we want to invest directly in the alternative sources, rather than their choice of indirect investment

 

 

chuck

 

1We are not blind to it in pursuit of profit.  On Jul 4, 2015, at 10:50 AM, Lee Mcclenon <lmcclenon@gmail.com> wrote:

 

What kinds of things are we currently invested in? Mostly individual stocks? Some mutual funds? I'm realizing that I'm not sure of our baseline. 

 

I agree that it is reasonable to choose some moderately aggressive strategy. Not trying to strike it rich, but willing to take on slightly more risk (than the risk already inherent in investing in almost anything). One of the board members of the nonprofit I work for wants all of the organization's long term reserves (hundreds of thousands of dollars) to be in certificates of deposits, which in this market will never beat inflation. Lets not do that. 

 

If we are willing to take a little risk in the name of growth, can we also take a little risk in the name of morality and alignment with the political moment? I don't think we should move our money out of every industry that is morally questionable, like apple or nike or google. I do think that we should think seriously about avoiding one particular industry, which is fossil fuel extraction and processing. 

 

This fund hopes to advance "the improvement of the economic, social, and industrial condition of the people of the United States and of the world". I believe that investing in the fossil fuel industry is currently contrary to that goal. There is very little legitmate skepticism about climate change that is not funded by fossil fuel industries. The remaining questions are "how big will we allow this problem to be?" and "what will be the ultimate impacts?". As climate change advances the people most likely to suffer the consequences are those who are already at a special disadvantage. People who already cannot afford to put food on the table will be even more hungry when droughts cause food prices to rise. The number of people who suffer from the violence and displacement caused by warfare will only grow as water resources shrink. 

 

I recognize that divestment likely will do little to the bottom line in the account books of Exxon or Shell. Thats why I would not suggest divestment if there were not already a robust political movement to do so. Even though I'm not a fan of tobacco companies, I don't think it is strategically useful for us to sever ties with them. Fossil fuel divestment however is reaching its political ripeness. Hundreds of millions of dollars have been moved by institutions as diverse as colleges, religious institutions, private foundations, city governments and small family funds like ours. By joining together to move the money these groups are making a statement to revoke their support for the fossil fuel companies that have lobbied and lobbied and lobbied to block any kind of comprehensive climate treaty and continually sue to continue polluting at the risk of upsetting the delicate planetary balance. The rising masses of people using actions like divestment to take a strong stance on climate issues leaves me more hopeful that something may come out of the Paris climate negotiations this December. 

 

Bob has said that he doesn't agree with tree huggers trying to "save the world" because the big rock we live on frankly doesn't need saving. I agree. This is not about mother earth any more than preventing nuclear was was. Mitigating climate change is about steering us off the course towards enormous suffering and undoing decades of positive development for millions of people. 

 

--Lee

 

One last question: If the dedicated purpose of our fund was to reform prison conditions and rehabilitate ex-inmates, would it be moral or even effective to gain the money for our activities by investing in private prisons, that benefit from increasing prison populations? 

 

On Sat, Jun 27, 2015 at 4:20 PM, David McClenon <dwm_42@hotmail.com> wrote:

More thoughts:
Within reason it probably does not matter. I question if the current investments are "within reason"
Chuck, your broker probably could serve as an excellent adviser.  The fund's total assets while impressive  relative to the initial investment by Walter are not so impressive as to merit the attention of great time by a financial advisor. 
We Just need to avoid being dumb.

On the other hand if the fund survives for many decades, small  efficiencies will add up.

Suspect Mark Hudson is well aware of potential pitfalls.  You aleady have a relationship with him which is worth more than limited research on the committee's part.

Dave

> Subject: Re: Investments Working Group
> From: cmcc@utexas.edu
> Date: Wed, 24 Jun 2015 21:02:18 -0500
> CC: dwm_42@hotmail.com
> To: lmcclenon@gmail.com


>
> Right! Those seem to be the questions.
>
> My own take on “blue chip stocks”, is that traditionally it means well-capitalized companies which pay dividends on a regular basis. Not some investment which might suddenly grow and hit it rich, but neither is it bonds which pay set premiums but never grow in face value. My broker Mark Hudson (who is also the fund’s broker at present, but we can agree to change that) looks for growth opportunities, sometimes aggressive, but as a general rule insists that there is some income stream. Otherwise, you may be investing in swampland, or, as my other grandfather did, buying shares in citrus groves in Florida. (David’s other grandparents actually had good land in Florida)/ These days there are plenty of high tech opportunities, in electronics, software, biotech, etc., where we think we understand the wave, but can’t tell if a particular surfer will catch it. We don’t jump into crowd-funding. But even if we agree, "no hare-brain schemes considered”, there’s a lot of room to consider how conservative or aggressive to be. Dave’s response mentions high-cap and mid-caps, which essentially means, fair-sized going businesses, not start-ups.
>
> Dave and I have talked previously about how conservative or aggressive we should be. A middle-aged investor, saving for retirement, has a timeframe, an estimated remaining life, in which they want to be assured of an income stream, and will be conservative enough that they do not outlive their means. The individual may or may not be trying to save out resources to pass on to family, but whatever the goal target for savings to pass on, the current calculus is the same. Will this current balance still have what we need to live this year when we need it?
>
> But the potential lifetime of the fund is indeterminate. David, Chuck and Kathy will die, but the fund can go on on without us, Or the Fund runs out of Funds while we are yet alive. The ambition of the Fund is lost, but as individuals we are alive and free to do our own thing. For the Fund to go broke “before its time” is not a catastrophe. We can dare to be somewhat more aggressive. If we choose to invest in an index jellyfish, we shouldn’t choose a middle-of-the-road Dow Jones or S&P jellyfish, but a more aggressive one. Some growth targeted one.
>
> Grandma McClenon (Ruth) was concerned about the social implications of investments. Some of their own investments (although I don’t think any of the Fund’s) were put into Pax Fund, a mutual fund which avoided war industries and tended in other ways. It underperformed. I suspect that one could choose a few specific industries to stay away from, follow market advice on all other things, and do alright. Very occasionally, divestment achieves its political goal, thru the moral suasion. But mostly, as Paul would say, money is fungible. It doesn’t matter where it comes from. You can get it from somewhere else. If one gets into the mentality of rejecting more and more industries, as CALPER (is that its acronym?) has done, they’re biting off their nose to spite their face. Or some other saying.
>
> Dave, I don’t know enough about index funds, how they typically work. what their charges are, or what indexes one could follow. What can you tell?
>
> chuck
>
> > On Jun 23, 2015, at 9:07 PM, Lee Mcclenon <lmcclenon@gmail.com> wrote:
> >
> > Hello!
> >
> > I suppose we're the investments working group for the WHMF. We've had this conversation on the table for a while now, so I'm sending this email to crack it back open at least a little.
> >
> > The central question is, I think: What should we and (possibly shouldn't we) be investing in?
> >
> > The sub questions I've heard come up are:
> >
> > 1. Walter stipulated that we should be invested in "blue chip" stocks. Since that is sort of an antiquated term or idea, how do we conceive of our risk/return preferences for our investments.
> >
> > 2. Seeing as we are a fund that is trying to do social good, should we guide our investments in any way to be in line with the long term goals of the fund?
> >
> > Does that pretty much cover it? I figure lets get the ball rolling via email a bit and when we have some thoughts out there, we can move to a phone conversation.
> >
> > Lee
> >
> >
>