By Catherine Austin Fitts
It is a misty morning in Venice, Italy. The air smells of the ocean – of sea lanes and trade routes to distant lands.
I am staying at a hotel that is a former abbey – an ancient refectory of the Discalced Carmelite Brothers – near the train station. Leaving breakfast, I passed the courtyard and found myself here for a moment of reflection, admiring an unspeakably beautiful palm tree.
I can only imagine how the original seed came to be planted in Venice.
Once again, I am reminded of how beautiful the Earth is. At such times, I recite Wordsworth:
“Therefore am I still
A lover of the meadows and the woods
And mountains; and of all that we behold
From this green earth; of all the mighty world
Of eye, and ear,—both what they half create,
And what perceive; well pleased to recognise
In nature and the language of the sense
The anchor of my purest thoughts, the nurse,
The guide, the guardian of my heart, and soul
Of all my moral being.”
~ William Wordsworth, Lines from Tintern Abbey
I’m off to Trento by train into the Alps and our discussion of screening and then the workshop on the Pistis Sophia.
“Shares of two major prison stocks dropped sharply Thursday after a report the U.S. Justice Department will end the use of private prisons…Corrections Corp. of America and GEO both briefly plunged more than 40 percent in midday trade.” ~CNBC, August 18, 2016
By Catherine Austin Fitts
This week on The Solari Report, I will present the theme of our 3rd Quarter Wrap Up: Investment Screening – Can We Filter for Productive Companies?
In the 2nd Quarter Wrap Up, I took an in-depth look at productivity growth, Productivity, Prosperity & the Popsicle Index, arguing that labor productivity has stalled in part because human productivity has been debased broadly. Now I shall look at the screening practices of the investment industry, particularly in regards to environmental, social and governance issues, and explore whether we can screen for companies that deliver fundamental productivity – both labor (in the workplace) and human (throughout our lives) productivity. As the debt financed growth model comes to an end, companies that depend on (i) cheap government debt for contracts and purchases or on (ii) central bank largessee for cheap capital may be less attractive than companies with products and services that serve real market demand and add demonstrable value to the wider economy.
A useful example is the recent U.S. Department of Justice announcement that they were not going to renew Bureau of Prisons contracts with private prison companies. As I have argued for years (See Building a New Investment Strategy and Dillon Read & Co and the Aristocracy of Stock Profits) it is not economic to put millions of non-violent offenders in prison at an annual all-in cost of approximately $150,000 + per prisoner (GAO, 1996). This cost is particularly high for prisoners who commit only minor offenses that should not be criminal felonies in the first place, and even higher for private prison companies to run prisons that government employees can run better and more cheaply when all liabilities are taken into consideration. Now we are in a budget squeeze and voters are balking at a private prison industrial complex that is inhuman both to enforcement targets and taxpayers. So the government cannot justify spending billions of dollars on a function that is not economically productive.
Institutional and retail investors want to invest in companies with a productive future – not in companies with balloons that could shrink or collapse as budget cutters target newly unaffordable crony capitalism. Remember the prestigious money manager who invested $1 billion in Fannie Mae equities in the Spring of 2008 only to watch their investment collapse months later when Fannie Mae was taken over by the Federal government? So, now is a good time to think about how we screen for productive companies that create enduring economic value for shareholders, employees, customers and the wider economy.
It’s the last week of the month, so no Money & Markets this week. I will address your questions for Ask Catherine next week.
For Let’s Go to the Movies, check out The Corporation, a documentary that explores the rise of the dominant institution of our day. It includes interviews with Ray Anderson whose efforts to build a global company that had a positive impact on the environment will inspire you with the possibilities for all of us.
Talk to you Thursday!
Related Solari Audio Seminar
By Jason Worth
(Note: If not specified otherwise, any quotations in this book review refer to text by the author from the book being reviewed.)
The Precariat: The Dangerous New Class is a sociological study of a large and emerging class of downtrodden and exploited laborers worldwide. It is written by Guy Standing, a professor at the University of London.
The Precariat takes its name from the merging of the words Precarious and Proletariat. I think it is beautiful word in its ability to convey a number of complex concepts so succinctly. Anyone who has read Marxist literature probably recalls that in the Marxist view of the Capitalist system, the Proletariat was an exploited working class toiling away in depressing and dirty factories for low wages. Although their life was difficult, they managed. In part, they managed because industrialization had not yet led to computerized automation, so their labor input was still very much needed by their capitalist employers. As depressing as their factory work may have been, it at least provided a reliable income upon which to live, even if it didn’t lead to excess for savings, vacations or luxuries. And, the Proletariat of the Industrial era still lived in a more communal-oriented society, and could therefore fall back on certain protections that style of life afforded. Wives were generally more available to look after their young children, grown children looked after and provided for their elders, and neighbors or communities came to the aid of families who had fallen on hard times and needed assistance beyond their family unit.
But take that scenario of the toiling poor and fast forward a few generations. Things are much different now. Life for the working poor is more precarious. Job security, and hence income stability, are non-existent. Today, the working poor drift from job opportunity to job opportunity, not because they are unable to hold a single job for long periods of time, but because the economies around them have evolved to the point at which labor is a commodity to be called up and deployed as needed, and furloughed or terminated when no longer convenient for the employer. They also may not be able to hold onto the job because migrant workers, either legal or more commonly illegal, are willing to step into their position for less pay. And globalization has made it very convenient for employers to terminate jobs in the pursuit of profits, as entire factories and office functions can now be shipped to lower cost countries such as Mexico, India and China. These were developments with which the Proletariat largely did not have to contend.