9/16/2011 4:58 PM ET|
Shunning megabanks pays off big
Last summer, the 'socially responsible' Appleseed fund began barring the stocks of too-big-to-fail banks, on ethical grounds. For shareholders, it's been a blessing.
Early last summer, as the Dodd-Frank financial reform bill moved through Congress, Adam Strauss looked at what was going on and was disgusted.
Strauss is co-manager, with his brother Joshua, of the "socially responsible" Appleseed (APPLX) mutual fund, based in Chicago. And they were so appalled at the way the big banks were fixing the system in their favor, once again, that the brothers made a bold move.
They announced that they were barring the stocks of too-big-to-fail banks from their fund -- on ethical grounds.
In other words, they were going to start treating some of America's biggest and most famous financial institutions as they do casino operators or cigarette makers.
No Goldman Sachs Group (GS, news). No JPMorgan Chase (JPM, news). No Citigroup (C, news), Morgan Stanley (MS, news) or Bank of America (BAC, news). It wouldn't matter if any of the stocks looked like good values. It wouldn't matter how much these banks were making in profits. Henceforward, Appleseed wouldn't touch them.
How's that turning out?
Ha! It's saved their investors millions of dollars.
Since the Appleseed Fund announced the new rule, on July 8, 2010, those five bank stocks have plunged by an average of 33%.
They're down nearly 40% since the start of this year.
Meanwhile, Appleseed has defied the market and is actually ahead so far in 2011.
So-called "socially responsible" or "ethical" investing is usually thought of in terms of sacrifice: You pass up the chance to invest in, say, tobacco companies or weapons manufacturers, in return for a clear conscience.
But avoiding the too-big-to-fail banks has been the move that keeps on giving. The rest of the mutual-fund industry has been bleeding red ink because of these banks.
The Strauss brothers, when I caught up with them, admitted this move had been about as good for their fund as their other big decision -- to hold an astonishing 17% of their money in gold bullion.
The fund is tiny, with about $180 million under management. Their company, Pekin Singer Strauss Asset Management, manages about $900 million.
Appleseed had already avoided investing in tobacco, alcohol and gambling companies; weapons makers; and the stocks of companies that harm the environment. What was the reason for avoiding the big banks?
"There are major ethical issues involved" in these banks, Adam Strauss says. In the aftermath of the financial crisis, and the toothless Dodd-Frank reforms, the banks continue to enjoy "privatized profits and socialized losses," he says. Furthermore, they are taking on "obscene" amounts of risk, which will get dumped on the rest of us -- again -- if they go wrong.
As for those "reforms"? What reforms? "They've just moved from the mortgage market to the derivatives market" since 2008, he says.
Consider: Financial derivatives were one of the big causes of the great crash. Yet the amount of these derivatives held by U.S. banks actually rose by 13% last year to an unbelievable $244 trillion. Yes, trillion. (The figures come from the U.S. Office of the Comptroller of the Currency). That's 17 times the size of the entire U.S. economy.
What happens if these "weapons of financial mass destruction" explode? Who will end up paying the bills?
Take a wild guess.
"You've got to break them up," Adam Strauss says of the big banks. "You've got to bring back Glass-Steagall. And you have to put a cap on the size of the banks."
The Appleseed Fund is up 1.7% so far this year -- while the Standard & Poor's 500 Index ($INX) is down nearly 5.4%. The fund has had a terrific record since launching in late 2006: It's up 40%, while the S&P is barely level, even including dividends. And that's even though Appleseed can't invest in those wonderfully profitable and defensive "sin" stocks, like distillers and cigarette makers.
One of the Strauss brothers' best calls was to get out of the banks in late 2007. That's why Appleseed fell only 18% in 2008, while the Wall Street averages fell by more than twice as much.
So what are the Strauss brothers buying now? Apart from their socially responsible rules, they have a very broad remit: They can basically go anywhere and invest in almost anything. They pursue a cautious value approach: The first rule is to preserve capital.
They're holding a couple of big-cap names these days: pharmaceuticals giant Novartis (NVS, news) and Staples (SPLS, news), the office-supply chain. But their most intriguing focus is Tokyo. They're holding 14% of the fund in Japanese equities, where Josh Strauss says he is finding "unbelievable" bargains. (But they are hedging their exposure to the yen, which they expect to fall.)
Add that to their two other big positions -- lots of gold bullion, and no big banks -- and you have a fund that really does go against the grain. One to watch.
This article was reported by Brett Arends for MarketWatch.
VIDEO ON MSN MONEY
Quite frankly, I don't really care about Appleseed's 'ethical' angle. But what I DO like is that by doing this, they've proven what the rest of us already know:
1) these corrupt companies aren't the symptom of a bad economy, they'e part of the problem.
2) there ARE ways around these clowns - you can invest your money and stand a better chance at it doing well.
3) the American public can do just fine without the sleazy SOB's who run these slimey corporations.
Suck it, Goldman Sachs, Citigroup and the rest of your scumbag ilk!
"You've got to break them up," Adam Strauss says of the big banks. "You've got to bring back Glass-Steagall, and you have to put a cap on the size of the banks." What a refreshing thought and an absolute VOICE OF FISCAL SANITY
I can't want to see BOA fail. They are the biggest scammers and crooks around.
After 17 years of being fed up with the mismanagement of BOA, I decided to close my accounts. So, I go to the branch to close them. I transferred all of my savings money into my checking account. I showed up and met with the personal banker and told her what and why. After having to listen to her for 15 minutes as to why I should keep my accounts there, I told her thank you, but I wasn't interested in a checking account with a zero balance in it just sitting there for them to make up a fee to charge me (and overdraft it). So, she pulled up her computer and "ok, I will withdraw and close out these two accounts." She told me there was some extra interest she had to account for (something like 16 cents). She writes down the amount on a withdrawl slip, fills out the other information. I sign it and she takes it to the teller. I get my bank check and I leave.
Two weeks later, I get a statement from BOA showing that I had an OVERDRAFT TRANSFER from my credit card to my checking account for $25.00 the EVENING AFTER I had my accounts closed. So, what happened?
The <insert appropriate descriptive verb> WITHDREW and MADE OUT the bank check for ONE PENNY more than what was in my account. I'm sorry, you don't make that "accidental" mistake. She then took it to a TELLER who VERIFIED AND ALLOWED the withdraw to happen and drafted the BANK CHECK. She then SIGNED IT, VERIFIED it and gave it to me. That left me with a NEGATIVE BALANCE of <.01> in my account, thus causing my overdraft protection to kick in (for the first time) to advance $25.00 to the account to cover the shortfall. This is done on a credit card. An overdraft is considered... (drum roll, please). YES, LADIES AND GENTLEMEN, a >>CASH ADVANCE<< which means there is a Cash Advance FEE, the Interest Rate is something in the 20% range, and it is accrued IMMEDIATELY from the moment of the cash advance (there is no grace period on Cash Advances).
Bunch of YOU-KNOW-WHAT full of YOU-KNOW-WHAT from the greediest PIGS this world has ever seen. And don't even BEGIN to tell me it was an accident. The personal Banker FILLED out the amount (I'm sorry, you can't ACCIDENTALLY read .07 cents as .08 cents) then the TELLER initiated the withdrawl looking at the slip and the amount in the account and ALLOWED it to happen, then the manager SIGNED AND APPROVED the check. THREE people reviewed this check and ALLOWED the BANK to overdraft my account.
And when they tell me they're sorry and they are human and made a mistake, I will remind them of the no tolerance they have for people who make mistakes on their end.
Bunch of PIG FILLED you-know-what.
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
[BRIEFING.COM] The S&P 500 ended this week with a bang, roaring to a new all-time high on the back of stronger-than-expected economic data, influential leadership, and an ongoing appreciation for the Fed's monetary policy support.
The bullish bias was evident in premarket action as the S&P futures pointed to a higher start without the benefit of any definitive news catalyst. Stocks indeed benefited from a blast of buying interest at the opening bell on this ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|