Your Financial News Roundup
June 7, 2023
1. Economy: New data shows Americans’ main concerns revolve around inflation and the economy; dockworkers skipping work at West Coast ports will likely drive up consumer costs temporarily.
2. Tech: Meta fights plans that would make it pay news outlets for using their content; while the SEC sues both Binance and Coinbase.
3. World: The U.S. is helping to broker a diplomatic deal with Israel and Saudi Arabia; and Russians continue to flee their country in droves.
Personal Finance Concept [Part 6/8]: Socially Responsible Investing
❎ The Voters Have Spoken: A new national poll found 26% of Americans believe price increases/ inflation is the most important issue facing the country today, followed by the economy and jobs (21%), guns/school safety (21%), crime and drugs (18%), and immigration (17%). Meanwhile, a majority of those who identify as middle class and working class feel the country is off-track and their financial situations are worsening. (Yahoo! News)
Our Take: The poll results indicate there is growing apprehension about rising costs of living. While the unemployment rate is low, inflation has been straining people’s finances, causing many to feel financially insecure.
😤 Unrest on the Docks: Labor talks between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) have deteriorated in the last few days. Talks over pay, safety, and automation have gone on for over a year — leading dock workers to skip work in several key West Coast ports, including Los Angeles and Long Beach. These protests are creating processing backlogs and supply chain issues that could lead to increased prices for consumers in the near-term. (Today)
Our Take: Issues at the ports of Los Angeles and Long Beach were one small cog in the larger COVID-induced supply chain backlogs. However, the West Coast ports face increasing competition from other locations, such as those those near the Panama Canal and along the Gulf of Mexico. Continued disruptions can cause a ripple effect on the retail supply chain as shippers consider alternatives.
🏃🏽 Pay for News!: To reverse the decline in local news providers, a proposed California law is requiring online platforms to pay publishers for their content. Tech giant Meta threatened to remove news content in California if the law passes, as it fights similar proposals across the U.S. and abroad. The company played the same game with Australia after the government passed a similar law in 2021. But, the threats rang hollow as both Facebook and Google eventually forged deals with Australian media companies. (Reuters)
Our Take: The explosive growth of tech platforms like Meta and Google can be partially attributed to news outlets granting them free access to their content. Publishers wanted more exposure and profits, but these tech platforms won out while local news outlets suffered. Now, Meta and Google are reluctant to fix the resulting damage.
🧑🏽⚖️ Here We Go Again: This week, the SEC (and 10 state regulators) sued Coinbase, claiming it failed to registered as a securities broker and exchange. Coinbase countered, stating there is no process to register, the rules are unclear, and they have repeatedly met with the SEC to register but to no avail. Coinbase filed for its IPO in 2021, which required SEC approval. Currently, Congress is considering a bill to regulate crypto and end the SEC’s fiasco. (BBC)
Our Take: Perpetual crypto fan and slightly intimidating elf, Gary Gensler, is once again overcompensating for his missteps over the FTX debacle. Sam Bankman-Fried, CEO of FTX, was the 2nd-largest Biden campaign donor and had met with Gensler in several private meetings that would set U.S. crypto law. His recent actions attempt to repair the SEC’s reputation, but the accusations rest on unsettled laws — harming the U.S. competitiveness in the crypto space.
✌🏾BFFs for Peace: Secretary of State, Antony Blinken, spoke at a pro-Israel lobbyist event, sharing that normalizing ties between Saudi Arabia and Israel is a key U.S. goal. Israel wants to better relations with its Arab neighbors to increase collaboration within the region. Blinken will be in Saudi Arabia this week to work on the deal. But the Saudis believe recognizing Israel should come with Israel’s agreement to a 2-state solution and to leave Arab lands — complicating terms for a deal. Since 2020, a growing number of Islamic countries have agreed to recognize Israel through the “Abraham Accords.” (AlJazeera)
Our Take: Launched by President Trump, the Abraham Accords have increased the number of Arab countries that recognize Israel, fostering stability within the region. These deals bring mutual economic growth and cultural exchange that could make the region resemble the E.U.
🇷🇺 Russians Leave in Masses: Since Russia’s invasion of Ukraine, hundreds of thousands of Russians have fled their country in protest or for safety. Migrations jumped higher after Putin called for mobilization in September, implying most men could get drafted into the army. To avoid getting forced to fight, more people are racing to leave the country, especially to nearby countries like Georgia and Kazakhstan. A Putin spokesperson denied Russians were fleeing, but the Interior Ministry shared that passport applications rose 40% in 2022. (BBC)
Our Take: Given that many of those who are leaving are younger, more educated, and wealthier than those who stay, their departure may have broad economic consequences on the country.
Finance Concept of the Week
The Investor’s Playbook [Part 6/8]: Socially Responsible Investing
Investment Strategies for Financial Success
Socially responsible investing (SRI) combines financial goals with social and environmental impact. With this approach, investors prioritize both competitive returns and aligning their values with societal outcomes.
There are 2 main approaches: negative screening and positive screening. With the former, investors exclude companies or industries that have poor social and environmental policies, such as oil, weapons, and tobacco. With the latter, investors focus on companies that benefit society, like decarbonization, health, and financial inclusion.
- Positive Impact: Socially responsible investors directly align their portfolios with their values and support companies that prioritize sustainability, ethical practices, and social responsibility. Among Millennials and Gen Z, societal issues are frequently top of mind.
- Market Demand: More and more consumers are showing support for sustainable businesses. A 2021 global report from The Economist Intelligence Unit showed a staggering 71% increase in online searches for sustainable goods over the past 5 years. Meanwhile, 66% of respondents consider sustainability when making purchases.
- Access to Innovation: Companies that focus on social responsibility tend to leverage emerging tech and innovative solutions. As you invest in these types of companies, you may get exposure to cutting-edge tech and sectors.
- Performance Variability: You may underperform the broader markets if you exclude companies or industries experiencing strong performance. For example, funds that exclude fossil fuel producers or the entire energy sector may have faced challenges due to energy stocks outperforming recently. This lack of exposure to specific industries can also result in imbalances in other sectors, such as technology, which may be underperforming.
- Potential Greenwashing: Greenwashing is the practice of companies purposefully misleading consumers to think their products or services are more sustainable or socially responsible than they actually are. You will need to carefully vet the authenticity and credibility of companies you invest in.
- Value Alignment Not Guaranteed: Excluding certain industries does not guarantee that your portfolio is 100% aligned with your values. For example, if you invest in a mutual fund focused on climate, that doesn’t guarantee every company in the portfolio follows responsible carbon emissions practices.
Tips and Tricks
- Clarify your values. Start by identifying social or environmental issues you care about, such as climate change, human rights, diversity and inclusion, and/or sustainable agriculture.
- Set the criteria for your investments. This will make it easier for you to identify which companies align with your values. For example, you may consider the company’s track record of addressing sustainability or if they have any human rights violations.
- Look into socially responsible mutual funds and ETFs. If you do not have the time or knowledge to handpick individual stocks, look into mutual funds and ETFs designed specifically around socially responsible investing. For example, the iShares Global Clean Energy ETF (ICLN) invests in companies focused on clean energy.
- Measure the impact beyond financial returns. Consider exploring tools and resources that measure the social and environmental outcomes of your investment portfolio. This can help you assess if your investments are making a positive impact.
SRI is best for investors who want to integrate their moral values into their investment decisions to foster positive social change. Unlike traditional investors who primarily focus on minimizing risks and maximizing profits, socially responsible investors prioritize putting their money toward worthy causes.
Tip of the Week
💸 Financial well-being goes beyond numbers. Take care of yourself physically and mentally, whether it’s regularly exercising, practice mindfulness, spending time with family and friends, etc.
Personal Finance Resources
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