The Art of Using Other People’s Money to Make Yourself Look Virtuous

Suppose your extended family hires somebody to manage its retirement money. They tell the manager his only job is to manage the investments wisely. “This is our retirement money. Be careful with it. Try to make it grow as much as possible. Without taking stupid risks.”

He invests your money in many stocks and bonds. And he does a fairly good job. But in one report he declares he sold all your investments in tobacco companies. And in Coca Cola and snack companies. And in McDonalds. “The products from these companies are bad for our health,” he tells you. “My son has diabetes. My aunt has lung cancer. I just cannot bear to invest in these companies.”

Suppose in the next report he says “I’ve sold all your stocks and bonds from oil and gas companies and pipeline companies. Because they deal with fossil fuels that contribute to global warming. I am a big-time green guy. It is sinful to me to invest in those companies.”

At your next family meeting, Uncle Fred confronts the manager, saying, “Where the hell do you get off? You are using our money to make your political statements. Your job is to grow our retirement assets. Period. We did not hire you to express yourself with our money.”

Do you think maybe Uncle Fred makes a good point?

A lot of politicians do just what that manager does. They use other people’s money to grandstand and to champion causes in ways that make them look good.

Take New York City’s pension funds. The pols have withdrawn $5 billion from stocks and bonds of oil and gas companies. And from stocks of other companies in the big fossil fuel industry. The pols of San Francisco, Berkeley, Madison, and many other cities have done the same.

There is a village near me whose mayor dumped oil and gas stocks from the village’s pension fund. Why? Because he is a passionate anti-fossil fuel guy.

Meanwhile, managers of investments for many companies and pension funds have followed suit. They caved to pressure from green activists who campaign to “Keep it in the ground.”

I’m with Uncle Fred. Where the hell do the pols get off? Their job is supposed to be to manage other people’s retirement monies to get the best return. It is not their job to use those monies to express their political and environmental wishes.

A lot of studies show that such shenanigans reduce the returns of pension investments. Because they take the pension funds out of a large and profitable sector of the economy.

Uncle Fred’s main point is that “This money is ours. Not yours. Express yourself with your money.”

From Tom…as in Morgan.                 

Tom Morgan writes about political, financial, and other subjects from his home in upstate New York. You can write to Tom at tomasinmorgan@yahoo.com. You can read more of his writing at tomasinmorgan.com