Friday, February 23, 2018

If you own these mutual funds and ETFs, you own guns...















CNBC recently noted that:

"Major funds invested in gun stocks include the Vanguard Total Stock Market ETF, iShares Russell 2000 ETF and Schwab U.S. Broad Market ETF."

They went on to state that:

"Last week's mass killing of 17 people at a public high school in Parkland, Florida, has caused some major pension funds and institutions to investigate the extent of their investments in gun makers.

Some of Wall Street's largest exchange-traded funds are currently invested in American Outdoor Brands — formerly Smith & Wesson — and Sturm, Ruger & Co., designers, makers and retailers of firearms for domestic buyers.



Fierce scrutiny has pushed New Jersey state lawmakers to restrict the state's public pensions from investing in the stocks of gun manufacturers, while the world's largest asset manager, BlackRock, said it would 'engage' with (gun) companies on their response to the shooting." 

We have come to expect large investment funds, like Blackrock, to issue self serving statements about their ownership of gun manufacturers. This is the "we are investors, not statesmen or policy makers" claim. It is false. Blackrock and others are deeply involved in every policy issue of consequence, from debates on taxing carried interest to discussions concerning financial reform. They are involved in the gun control debate, too, through their PAC and campaign contributions, as we stated in 2012, following the Newtown shooting.

You will recall that the CEO of Blackrock recently wrote that:

"Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth."

It looks like Mr. Fink and company may be succumbing to the very pressure they warn others about. (Far be it for me to give any more free advice to Blackrock, a firm we helped when we developed the first targeted Mortgage-backed Security pool backed by loans from Black financial institutions and Blackrock put our investments in a portfolio they managed for Washington Gas Light.) Or, it may be that your perspective depends upon just how true you are to your purpose: "Many faith based pension funds and other socially responsible investors do not invest in firms like American Outdoor Brands and Sturm, Ruger & Co. specifically because they do not want to profit from human bloodshed. Blackrock is empowered to make the same choice, but wants to "engage" instead.

Of course.... 

Their children may not face the same risks yours do.

Thursday, February 22, 2018

Cryptocurrency regulation is a job for Treasury | American Banker

As Congress considers new rules for digital currencies, lawmakers should consider putting responsibility in the hands of the Treasury Department, given its role in handling traditional currency. 

https://www.americanbanker.com/opinion/cryptocurrency-regulation-is-a-job-for-treasury

Tuesday, February 20, 2018

Forget Bitcoin, Let’s Talk about Food Safety by Hongcheng Chen, Impact Investment Analyst, Creative Investment Research

The "Killer" Blockchain Application?

On February 14, four witnesses (an analyst in Cybersecurity Policy from the Congressional Research Service, the director of NIST's  Information Technology Laboratory, the vice president of food safety of Walmart, the vice president of blockchain technologies of IBM and the Associate Clinical Professor of Benjamin N. Cardozo School of Law) showed up in 2318 Rayburn House Office Building, to testify about blockchain technology before the Subcommittee on Oversight and Subcommittee on Research and Technology. The witnesses answered questions from members of the two subcommittees.

Summary

I attended this hearing and below are my summarized findings, in case you didn’t have the time to attend this mind-blowing hearing.

Mr. Chris A. Jaikaran, analyst in Cybersecurity Policy, covered blockchain applications in cryptocurrencies, healthcare, identity management, and supply chain management. He discussed certain pitfalls of the technology.

Dr. Charles H. Romine, the director of NIST's Information Technology Laboratory, talked about NIST’s research and activities related to the blockchain in cryptography, quantum computing, and discussed blockchain standardization.

Mr. Gennaro “Jerry” Cuomo, Vice President of blockchain technologies at IBM, urged Congress and the Trump Administration to encourage innovation and implied that blockchain is ready for implementation in business and government.

Mr. Frank Yiannas, Vice President of Food Safety at Walmart, talked about how to use blockchain technology to enhance food traceability and transparency in industry.

Mr. Aaron Wright, associate clinical professor and Co-Director of the Blockchain Project at Benjamin N. Cardozo School of Law, talked about the application of blockchain in the private sector and government, and suggested that Congress create a National Blockchain Commission to ensure that continuous research, development and innovation will occur nationwide.

Looking across the hearing, I think using blockchain to address food safety issues should be the priority, since this is intimately related to everyday health and life.

It Is Difficult to Trace A Contamination Source

“Being able to track how food and food ingredients flow from farm to table can be a very difficult, labor intensive and lengthy task.”  Mr. Yiannas noted the complexity of tracking how food and food ingredients move through the food industry.

The reason is that many companies still rely on paper-based systems. Even if they digitize the paper, it is still be stored in separate, hard to access systems.

He recalled the 2006 E. coli outbreak linked to bagged spinach in United States. Clearly, any delay in tracing the source of the contamination in this situation could be just as lethal as the poisonous food and seriously destructive to both society and the economy.

Fortunately, most of consumers were warned, and most dodged that bullet. That was not the case for regulators and for the spinach industry, however. Regulators spent weeks tracing the source of the contamination. They had to comb through separate system to get the complete dataset. What’s worse was the dark cloud hanging over the spinach industry. It took a long time before they won back the trust of consumers.

Blockchain Can Be the Remedy

Blockchain, an open, distributed and decentralized ledger that can record and share data between two parties in a complex network permanently, transparently and effectively, may be the remedy to these types of food industry issues. With blockchain technology, production information for each food and food ingredient, such as where it is grown, harvested, processed and packaged, can be recorded in a shared, verifiable database, giving us precise food traceability.

Let’s look at the spinach example. Using blockchain technology, regulators would not need to integrate disperse databases to be able to trace the cause of the food-borne illnesses. They could do so in seconds, saving lives, time and money. Furthermore, grocery stores could quickly discard contaminated spinach once the source of the outbreak is determined, thereby avoiding consumers’ negative impressions. As a result, the entire spinach industry would avoid a large reduction in sales and production.

Food traceability will lead to food transparency as an increasing number of consumers nowadays hold high expectations. They expect to know everything about their food: where it is grown, whether it is organically farmed, and which producer processes it, not only in supermarkets, but also in  restaurants. Food transparency will ultimately become a competitive edge for whoever adopts blockchain technology. It will eliminate the anonymity, bring accountability and enhance consumers' trust and confidence in the food industry.

Four Key Parties to Realize the Ultimate Goal

According to my analysis, four parties will benefit from the adoption of blockchain in the food industry:

·         Producers. Blockchain technology will help one determine the origin of damaged or contaminated  food very fast and will save consumer's trust in food producers. This, in turn, guards against  economic loss. In an outbreak of food-borne illness, all producers of the contaminated food type are on the suspect list. Currently, it takes a long time for regulators to identify the source of the contaminated food and the guilty producers. As common sense protection, customers lose trust and confidence in all relevant food and producers, and for a long time, eventually causing a decline in the productions and sales of that particular type of food. Blockchain may eliminate this.

·       Retailers. Blockchain technology will shorten the time needed to trace-back. Uncontaminated vegetable and fruit can be on sale again in a shorter period of time. This protects all retailers from a vast and unpredictable loss. Grocery stores and supermarkets are seriously and directly affected whenever there is a foodborne illness outbreak. They have to pull every relevant food from the shelves before the investigation is completed and source determined. Vegetable and fruit will start to rot if they are stored for a long time and thus can’t not be put back on shelves even if they are verified to be uncontaminated.

·       Consumers. Identifying the contamination source rapidly and effectively will help consumers who are undergoing medical treatment. Information like the type of chemical substance or bacteria will allow consumers to get the right treatment right away. This will save lives. In certain cases, finding the guilty producers will also enable consumers to quickly obtain reimbursement for medical costs.

·       Regulators. Blockchain will make the regulator’s job easier than before, help them mitigate the cost of lives, money and human resources, while maintaining strong authority. Regulators are under  considerable pressure when a food related public health incident occurs. Whether they are able to trace the contamination source in time and set plans accordingly directly influences the spread of the illness outbreak. Doing so quickly both protects the public and enhances the authority of regulators.

From my perspective, the ultimate goal of blockchain in the food industry is to establish an effective mechanism to promote the food traceability and transparency. To build that mechanism, producers need to input relevant data into the shared database based on blockchain to maintain accountability. Retailers need to manage that database effectively to ensure all data on all food on sale are traceable and accessible, and consumers have to be able to access the database to obtain details about the food they buy. Regulators need to monitor the database intently in order to be able to timely identify an illness source in case of a public health incident.


Eventually, it is my belief that blockchain technology, combined with a complete regulatory mechanism, will increase accountability, democracy and public safety in the food industry.

Saturday, February 17, 2018

Regulators at Senate Bitcoin Hearing Missed Opportunity to Protect Public

We noted, with interest, testimony before the Senate Banking Committee on Tuesday, February 6th concerning cryptocurrencies. The heads of the Commodity Futures Trading Commission and the Securities and Exchange Commission, J. Christopher Giancarlo and Jay Clayton, respectively, testified about cryptocurrencies.
Their comments focused on fraud in the initial coin offering marketplace. An initial coin offering uses crowdfunding to issue cryptocurrency, which is then used as capital for a startup. Blockchain is a new technology used to structure cryptocurrencies like bitcoin. It is believed to have a structure in which falsification is extremely difficult relative to conventional centralized-management systems and is expected to be applied to a wide variety of fields.
Of course, this hearing was not about protecting the public: It was about turf. The SEC does not have direct authority over cryptocurrencies or ICOs. Congress will probably explicitly give the agency direct authority to regulate cryptocurrency exchanges, however.
Given the SEC’s track record of failing to actually protect the public, this does not bode well for blockchain technology. The agency is likely to apply a heavy-handed approach that favors large financial institutions and discourages small innovators from any use of blockchain technology.  
However, both agency heads, with their focus on using bitcoin, missed the real opportunity to protect the public – blockchain.
Creative Investment Research launched a survey to collect opinions on the most appropriate applications for blockchain technology. The survey was posted to blockchain software mailing lists, like the one for Hyperledger, which describes itself as “an open-source collaborative effort created to advance cross-industry blockchain technologies.” We also posted the survey to various blockchain-related MeetUp, LinkedIn and Facebook groups on Jan. 19.
The response was very good, resulting in an appropriate, statistically significant sample and results. By statistically significant, we mean that survey answers probably cannot, at the 95 percent level, be attributed to chance. The survey recently closed.
We will be releasing additional insight from the survey over the next few days, but the results are clear. Most blockchain developers and aficionados, according to our survey, do not believe cryptocurrency is the “killer app” for blockchain.
In answering the question “what are the most appropriate applications for blockchain technology?”, survey respondents selected “establishing and safeguarding digital identity” and “establishing ownership rights” as the two top uses. Using blockchain for digital currency fell in the bottom half of appropriate uses.
Markets will, as they always do, figure out a way around any restrictions you throw at them. We continue to believe that the nature of blockchain is such that this technology, not regulators, will win in the long term. 
We have long believed that capital market regulators in other regions of the world will, at some point, enhance their ability to access capital using internet-based tools. Thus, the competitive advantage with respect to capital access is available to any country with significant economic potential and a modest communications infrastructure.

Monday, February 5, 2018

Dow down 1,500 points. Black unemployment reported at 7.7%.

As we noted on 12/30/17 when we released our 2018 Economic Forecast, "We anticipate the following: 1. Interest rates. Increasing. 2. Market volatility. We expect a major spike. 3. Bitcoin. Gaining traction, especially in light of increased traditional market volatility. 4. Equity returns. Lower than 2017. 5. Black Unemployment. Black unemployment falls at the end of a sustained period of domestic economic growth and falls with a decline in immigration. This is counterbalanced, however, by increasing racism in general and specifically negative, anti-Black racial attitudes. Given an increase in the latter, we expect Black unemployment to increase toward the end of 2018, despite positive headwinds from reduced immigration." Black unemployment was reported at 7.7%. The Dow is down 1,500 points. For more, see: forecast2018.eventbrite.com  

Impact Investing Forum - Hilton West Palm Beach, West Palm Beach, FL- April 22-24, 2018

Impact Investing Forum- Hilton West Palm Beach, West Palm Beach, FL- April 22-24, 2018

www.opalgroup.net/trk/iifb1825.html

The Impact Investing Forum will look at many of the asset classes that encompass this space. We invite you to join us and meet top influencers, experienced investors, money managers, and service providers that are leading the charge in this ever growing space. Themes of defining impact investing, portfolio construction, asset class opportunities, and the role of the investor are just a few of the stimulating topics to be covered at this event.

Exclusive discount for readers of this blog - get 15% off. Discount Code: CIIF2018

Sunday, February 4, 2018

Black Unemployment Jumps to 7.7%


Five days after the trump administration proclaimed that "African-American unemployment stands at the lowest rate ever recorded,” the US Department of Labor reported on Friday that Black unemployment for the month of January jumped to 7.7%.

As we noted on 12/30/17 in our Fully Adjusted Return Economic Forecast summary,

"Black unemployment falls at the end of a sustained period of domestic economic growth and falls with a decline in immigration. This is counterbalanced, however, by increasing racism in general and specifically negative, anti-Black racial attitudes. Given an increase in the latter, we expect Black unemployment to increase toward the end of 2018, despite positive headwinds from reduced immigration."

Note that our June 11, 2016 Fully Adjusted Return Election Forecast also correctly predicted Donald Trump's win, and can be found at: https://www.linkedin.com/pulse/why-trump-win-william-michael-cunningham-am-mba/

For the full 2018 Economic forecast, please join us at 6 pm on February 13, 2018 (1/9/2018). RSVP at https://forecast2018.eventbrite.com

Also see: Why Janet Yellen is wrong on Black unemployment, published on July 17, 2015, at https://www.linkedin.com/pulse/why-janet-yellen-wrong-black-unemployment-cunningham-am-mba/