The Quarterly Review: The Economy
By Dale Wannen
The last time the Fed raised interest rates in June 2006, Facebook had one-tenth the users of Myspace and James Blunt’s You’re Beautiful was at the top of the song charts. Seems like a long time ago. If we go beyond 2006, recently Bank of England chief economist Andy Haldane found when he went digging through the historical records that interest rates are lower today than they were when Julius Caesar or Alexander the Great were around. Or lower than at any time since the ancient Sumerians made the first loans, payable in either silver or grain, back in 3000 B.C. The case for the Fed ripping off the band aid and beginning the process of raising rates needs to be done sooner than later. Pre-crash, money market rates were close to paying 5%. One of the added spooks to this festive time of year could include the stock market. Returns for this quarter for the S&P came in at -6.9%. For the year, the S&P 500 is down 6.74%. Though unbeknownst to many, the Chinese stock market was roaring along with a surge 150% in the previous 12 months – quickly jolted this past quarter as their markets saw a decline of 40%. Despite this volatility, with about 325 million new middle class individuals emerging by 2030, it is hard to turn a blind eye to such increased consumption that is going to take place.
You may have smelled one of these in your neighborhoods. Panera Bread (PNRA) operates bakery/cafes across the US with 1,880 locations. The once 1 store St. Louis -based company was founded in 1981, then titled Au Bon Pain Co., when the first location was opened in Missouri. Panera was the first in its industry to post calorie information voluntarily at all company-owned cafés, something that competitors have been fearful taking on. Way back in 2006, the fact that every Panera Bread offered free Wi-Fi was pretty revolutionary. In 2014, they announced a commitment to remove all artificial colors, sweeteners, flavors and preservatives from its menu by the end of 2016. Since September 2014, Panera’s stock is up approximately 19%. Shares of McDonald’s are up 3.5% during this same time period.
Education: The Divestment Movement
We all know when Leo speaks people listen. Hollywood actor Leonardo DiCaprio did, in fact, speak recently and joined more than 400 institutions and 2,000 individuals who have promised to divest from fossil fuels. “Climate change is severely impacting the health of our planet and all of its inhabitants,” said DiCaprio, announcing his promise to divest on behalf of himself and Leonardo DiCaprio Foundation, which supports conservation projects. The number of divestments from the fossil fuel industry has grown 50-fold in just one year and represents $2.6 trillion in assets. Calculations have shown that somewhere between 30 to 60 percent of the share value of fossil fuel companies could be lost as they hold onto stranded assets.
You Go, Sisters!
The Congregation of Benedictine Sisters in Boerne, Texas, filed a shareholder proposal this month that asked McDonald’s to ban all of its meat suppliers from using the drugs on animals to help them grow or for disease prevention. The CDC estimates at least 2 million Americans contract antibiotic-resistant infections every year, and that 23,000 die as a result.
CRA Fund and Local Impact
Long before all of these new trendy Impact investing vehicles came to the market, the definition of investing in this manner was known as community investing. In the late 70s, the Community Development Act was designed to encourage commercial banks to help meet the needs of borrowers in their communities. Enter 2015 and a fund titled the CRA Qualified Investment fund (CRATX) fits this mold. This fixed-income investment seeks to provide a high level of current income with preservation of capital and investments that will be deemed to be qualified under the Community Reinvestment Act. One example of the community investments is San Jose’s popular Almaden Apartments where 100% of the 144 units are restricted to residents with incomes at or below 60% of area median income.
Dale Wannen is President of Sustainvest Asset Management, a Petaluma-based investment firm that focuses on sustainable and responsible investing.