Do A Person's Private Investments Matter?

[MannyGoldstein]

If a politician or candidate invested his or her own money in something awful - say, a mutual fund that focused on investments in companies that fund the opressors in Darfur - would this be an issue for you? Do a politician's investments tell us anything about them? Or is it 'just business'?

[Stinky The Clown]

1. I don't think there is a correct binary answer

That's not to sy that one's investments can't be co opted for political gain of one's opponents.

[GeorgeGist]

Can you name such a Mutual Fund?

[Tempest]

3. There are a few

There was a Barclay's mutual fund that invested in blood diamonds until it was shut down.

I'm sure there are some invested in oil companies doing business in Sudan.

[A HERETIC I AM]

16. There are none.

The statement in the OP is

a mutual fund that focused on investments in companies that fund the opressors in Darfur

You could spend a month looking at every single Mutual Fund out there and i guarantee you won't find one that fits that description. Not a single one and there are well over 10,000 mutual funds available.

As far as Mutual Funds that have oil companies in their portfolios, sure there are. Thousands. But do they "fund the opressors (sic) in Darfur"? I think that statement is a bit of a stretch.

http://answers.google.com/answers/threadview?id=1044

On edit to add that there are indeed Africa specific mutual funds and some of them include companies that do business in The Sudan but i stand by my statement above, that there are no Sudan specific mutual funds. There is no stock market in Sudan and damned few if any companies based there that are publicly traded on any of the large exchanges in the world.

[Tempest]

25. Nice strawman

"but i stand by my statement above, that there are no Sudan specific mutual funds"

No one made that claim, you did.

There are mutual funds which have stock in oil companies that are doing business with the government of Sudan.



I guess some people have short memories.

www.iht.com/articles/2007/03/15/business/bananas.php

[A HERETIC I AM]

26. Yeah, like i said, there are thousands of mutual funds that have

oil companies in their portfolios. The quote from the OP i cited asked if respondents would be bothered if their candidate invested in (for instance) "a mutual fund that focused on investments in companies that fund the opressors in Darfur"

Another poster asked "Can you name such a fund" and YOU STATED

There are a few
There was a Barclay's mutual fund that invested in blood diamonds until it was shut down.
I'm sure there are some invested in oil companies doing business in Sudan.
Alert

(bold emphasis mine)

There are a few? Name them. Your claim that there was a Barclays "until it was shut down" does NOT MEAN there is currently a mutual fund that fits the description in the OP. I am very curious which Barclays fund you are referring to.

No one made that claim, you did.

No, you did by saying "There are a few".

BP, Exxon Mobil, Amoco, Chevron, Texaco, Royal Dutch Shell and other similar oil companies that have international operations happen to be held in literally thousands of mutual funds. To suggest that these companies "fund the oppressors in Darfur" is, as i said above, a bit of a (actually, a HUGE) stretch.

BTW, talk about a strawman, what is the point of linking an article about Chiquita's affairs in Columbia? It has nothing to do with the question asked by the Original Post and the article does not mention any particular person as being an investor in Chiquita. Sort of a non-sequiter, isnt it?

[Tempest]

2. It would depend on whether they are aware of the investments

People don't know what companies are being invested in with mutual funds for the most part.

You turn your money over to a manager and they do the wheeling and dealing for you. You can ask to stay out of certain companies and industries, but the cost of the fund maintenance goes up substantially.

[A HERETIC I AM]

18. Actually, you can't ask to stay out of certain companies when you buy a Mutual Fund..

You can ask to stay out of certain companies and industries, but the cost of the fund maintenance goes up substantially.

If you buy shares in a Mutual Fund, you get what you get in the portfolio. Individual shareholders of MF's have NO SAY in what the managers buy and sell. None. You can not purchase shares in say Growth Fund of America and then ask that the shares YOU receive have no allocation in Altria or Exxon Mobil or BP or any other company. It doesn't work that way. You can most certainly screen mutual funds for holdings you don't like but the individual investor is not going to sway the fund manager to invest or divest in a particular way.

Regarding your 1st sentence, the only reason people don't know what companies are being invested in inside the mutual funds they own is because they don't read the Prospectus or the quarterly or annual reports. All that info is easily found in information a shareholder is required by law to receive.

[Tempest]

24. I said that

But it costs you a lot more in fees.

And yes, there are socially responsible mutual funds but most people aren't willing to do the legwork to find them.

[A HERETIC I AM]

28. What costs you more in fees?

Doing a screen for companies you don't like? It doesn't cost you a dime and you can do it on the internet. A Mutual Fund family isn't going to charge you more and if you are referring to a managed account that has a portfolio of mutual funds, there is no increase in fees in that case either. You just select a managed portfolio that is socially conscious, if you can find one, and you can, you just have to shop around.

If you are interested in a fund family that promotes itself as 100% "Socially conscious" check out the Domini Funds http://www.domini.com/domini-funds/index.htm But even with a fund family like that, if you want to get really picky, you could find fault with some of their holdings.

[MADem]

4. It depends. If you are invested in a fund that has some "questionable" holdings, but all in all is

just a pedestrian investment, well, that's one thing. You can't always pick out the flies from the stew. If a preponderance of the fund is inoffensive, sometimes that is the best one can do.

If, however, you knowingly, deliberately, go out of your way to invest solely in, say, a company that makes "Clubbed Baby Seal Soup," well, that's a bit more deliberate. You know what you're doing, you know the consequences, and you just don't care.

[Joe Chi Minh]

5. Not if they can do a vast amount of good as a result of their wealth

in the absurdly venal political circus of US election campaigns - like Edwards. What do you think, Manny?

[MannyGoldstein]

7. Here

http://www.thirdworldtraveler.com/Herman%20/BanalityEvil_Herman.html

[Joe Chi Minh]

10. Who would you favour over Edwards?

Personally, I wouldn't buy ANY shares on principle, as long as the shareholders, CEOs and directors hold the country to ransom.

The great curse of our capitalist economies in THE US and UK is that they are what economist Will Hutton calls 'rentier' economies, i.e without the kinds of checks Germany and France have in place. Infinite greed rules. If corporations don't make ever higher profits, they will be taken over - and they can only do that to the detriment of the mass of the people - the country's material and social infrastructure. Outsourcing, the lot.

[MannyGoldstein]

11. Of Those Running?

I'm gravitating towards Obama - to date, I have no evidence that he is other than an honest guy, and he seems savvy enough to know the ropes but not yet (I hope) so jaded that he'd simply continue the 27 year war on the Middle Class.

But I need to spend some more time studying the candidates.

OK, I shared - your turn.

[Joe Chi Minh]

12. Ideally, Kuchinich. It could even happen if a catastrophe is precipitated by your leaders.

Or someone of Denis's persuasion.

However, on the face of it, a more gradual move towrds Socialism with John Edwards in the Oval Office seems a more realistic option at this juncture. I'd like to see Denis as his VP, though it doesn't sound likely now.

I wouldn't choose Obama in a fit with my leg up. He seems to me have the hallmarks of a trimmer, a triangulator, an appeaser of the most power-drunk Republicans. He seems to think you can sup with the devil with a short spoon. He would be putty in their hands.

I'd prefer Hillary by far. And I'd prefer Edwards and Kucinich to her by a long way.

[AndyTiedye]

14. It Is Not as Though the Banks Are Behaving All That Well Either

So where do you put your money?

Municipal bonds are nice, they help fund our cities, and they are also tax-exempt.
Being totally invested in bonds seems like a risky strategy though, especially now
with inflation on the rise.

Banks are not exactly the best of corporate citizens, and who knows what they
will decide to fund with your money. (And you have the same inflation risk).

If we decide that all corporations are equally bad, then instead of rewarding the
good ones and punishing the bad ones (withour business and our investments)
we are in a position of trying to avoid them all, and you can't really do that.

What sort of checks do France and Germany impose?

[Joe Chi Minh]

20. Well, I don't remember too much of his book, The State We're In, but I know he wrote that the banks

in Germany, for one, tried to understand the needs of the local businesses, in order to best help them - evidently taking the long-term view. They're not seen simply as a milch cow for the first and biggest predator to plunder.

Also, in a general way, both Germany and France (Scandinavia, it goes without saying) exercise a greater degree of protectionism and would be less prone to outsource work abroad (the UK is completely outside the pale). Both pay far more in taxes and educate their people better in order to obtain a more skilled workforce.

Also, I believe in both countries, a representative or representatives of the workforce have a place on the Board of Directors, and
I believe there are schemes for workers be given a stake in their company.

The stress levels of the American and British, corporatist 'jungle' free-for-all, would be absent, and absenteeism from the workplace much lower. Better hours, a shorter working week, and longer paid holidays, a tax-funded, national health service, heavy investment in public transport infrastructure - all these and other things no doubt as well, would contribute to their higher levels of productivity. The UK has one of the worst of the developed world, and I feel sure the US would not be far behind.

So the CEOs and major shareholders of the large corporations are not the vast, enslaving oligarchies that they are under Anglo-American capitalism.

I agree about serious investment, though. By far the biggest profits would be made by the worst, most psychopathic corporations - which, of course includes the banks.

[Exultant Democracy]

19. Spot on n/t

[Nite Owl]

6. Maybe

If it is a mutual fund people, even polititians (remember they aren't all that bright) likely don't read about what is in the fund and have managers or brokers selling these things to them. There could be a benefit of the doubt with something like this. Now if they were heavily invested in a company like Haliburtin which is common knowledge what they do that would be another thing altogether.

[Cameron27]

8. It's reprehensible for a politician to invest in

a company that promotes off-shore tax shelters for the very very wealthy. If they know about the investments that your talking about, then that's even worse.

[frazzled]

9. It depends

For instance, my mother inherited a small number of shares of Exxon stock when her mother, a poor immigrant to this country who worked her bones off her whole life and loved to gamble on anything--from horses to stocks--passed away. That stock has become very valuable over the years, splitting time and again and accruing in value. And now my mother can't even sell it if she wants to: it would push her social security income into a higher taxable bracket, in addition to steep capital gains taxes. She simply can't afford to sell it. Does she know Exxon sucks? Absolutely. She's a real "no-blood-for-oil" believer. But she is sitting on this stock and justifies it by saying she's getting "rich" off of them.

If my mother were a wealthy person, and especially one with a public profile, I would tell her to get rid of it. The accountant would offset it with some tax shelter scheme anyway. Poorer and middle class people don't have these kinds of choices.

We have a retirement fund in which we have a portion of the funds invested in "social responsibility" stock. But you can't put all your eggs in one basket. I don't really follow what's in the other parts of the fund. Probably some real shit. But I'm not Ralph Nader: I don't go around making my living by talking about corporations. He should not have any shitty stock.

It's sort of like illicit sex: it's okay to have as long as you're not a pompous hypocrite selling the snake-oil of "family values" to everyone else.

[AndyTiedye]

13. Shareholder Activism

If you hold stock in a company that is doing questionable things, read the proxy statements.

Often there are shareholder proposals to force the company to behave in a more socially-responsible manner.

There are frequently proposals to limit executive compensation.

Look for these in your proxy statements and vote for them!

We should probably have a section on DU for this.

[A HERETIC I AM]

17. In case you arent aware, there is a "Personal Finance and Investing group" forum.

http://www.democraticunderground.com/discuss/duboard.php?az=show_topics&forum=327

[AndyTiedye]

22. Just Signed Up

[Joe Chi Minh]

21. Sounds very good.

[A HERETIC I AM]

15. A couple points about your moms stock position you might not be aware of....

You state;

That stock has become very valuable over the years, splitting time and again and accruing in value. And now my mother can't even sell it if she wants to: it would push her social security income into a higher taxable bracket, in addition to steep capital gains taxes. She simply can't afford to sell it

You may have a misunderstanding here. Regarding the Capital Gains tax she would have to pay, it depends on which bracket she is currently in. Her Social Security income only becomes taxable if her total Modified Adjusted Gross Income, (MAGI) defined by IRS publication 915, ( http://www.irs.gov/publications/p915/ar02.html#d0e792 ) exceeds $25,000 if she is single, head of household or widowed. You should bear in mind that MAGI is figured using half of her Social Security income as a starting point, then add all the other income she has such as a pension, taxable income from other investments, etc. If she has tax free income that is added also (Municipal Bond interest payments, for example)

It can get complicated but with a little patience, and a reading of the IRS website's pertinent publications, your mother may find she might not have to pay that much in taxes on the sale of shares. The capital gains tax rate might be as low as 5%. Also, she could sell shares over time of course, and spread the gains out over the course of several years. If she has any other investments that she has had a loss on, she can offset the gains from the sale of her Exxon shares with the sale of securities that she has lost on, dollar for dollar. In other words, if she bought - say - Sprint in late 1999 at $50.00/share and sold on Monday at the open @ $21.70, she has the $28.30 difference as a loss. If on Tuesday she sold Exxon shares and had a $28.30 gain, it would be a wash and would have no effect on her tax bracket.

Googling the term "Long Term Capital Gains" gave this site as a top result:
http://www.bankrate.com/brm/itax/tips/20010305a.asp?caret=1

As far as your remark about "some tax shelter scheme" and "Poorer and middle class people don't have these kinds of choices." That is not true. If your mother has a sizable position in her Exxon stock, she could set up a Charitable Remainder Trust
( http://www.investorwords.com/830/charitable_remainder_trust.html ) and gift the shares to the trust. The fair market value of the shares gifted is a tax deduction, she can still receive the dividend payments and the charity will have the benefit of the value of the shares at the termination of the trust. This is by no means a strategy reserved for the wealthy and it might be something she could look into if, for instance, she has the desire to have her Church or some other local or national charity benefit from these securities. There are a number of other strategies available to her as well and a qualified and licensed investment professional can spell out those options. Just because she has big gains on this position does not mean "she simply can't afford to sell it."

There is an old saying; "Nobody ever went broke taking profits"

[frazzled]

23. Thanks for the advice ...

My mother has both a financial advisor and accountant, and she's quite savvy about these things. And she has mentioned setting up a trust, but is not interested in the the idea. Her goal is to will all her assets to us "children," at which point the clock gets set back to zero apparently. (You can tell I neither know anything nor care about investments or money in general). We could then sell without the huge capital gains. And I believe those gains are far more than the example you gave--by many orders of magnitude. She inherited this stock some thirty years ago. And you know what the intervening years have done for the oil companies.

She does not need the money for anything now. They still live in their (paid off) home, and receive both my father and mother's SS, plus dividends from their investments. They are in their eighties and nineties. If a nursing home situation were to arise, of course, that would be different. But apparently a previous (small) sale of stock led (in her mind) to some deleterious tax liabilities. She is very proud that her hard-working mother's little bit of investment turned over the years into a rather hefty hypothetical nest egg.

[A HERETIC I AM]

30. Her "Cost Basis" for Exxon Mobil purchased or inherited 30 years ago would be

$3.35/share when adjusted for splits.

http://bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=xom&close_date=7%2F15%2F77&x=30&y=19

Look to the right under the mountain chart and you will see the split adjusted price. That chart is from July 15, 1977.

The point about when the "clock gets set back to zero" has to do with what is called a "Stepped up cost basis". You are correct in thinking that the capital gains will be lower for you and your siblings because the cost basis of the inherited stock steps up to the share price on the day of the decedents death (or shortly thereafter) and in that case, if you were to sell the shares, you would have zero capital gains.

Regarding her reluctance to setting up a trust, i would strongly suggest you talk to an attorney that deals with probate and estate law in your state. If you parent have substantial financial assets, simply having a will may not make passing on those assets to her children as simple as she hopes, depending on where you live. If she has a Financial Adviser and an accountant, I would assume they have discussed this issue with your parents. If they haven't, they should.

[TeamJordan23]

27. It seems as though most active politicians invest in blind trusts to avoid conflicts of interest. nt

[illinoisprogressive]

29. the person investing should be involved with who and what they invest in.

If they knowingly invest into something awful than that is one thing. If the broker had invested in several companies and the person did not know that is another. However I would question why they were not aware of what was being invested.