Friday, February 18, 2022

This week's interesting finds

Charlie Munger Expects Index Funds to Change the World—and Not in a Good Way 

Mr. Munger, the billionaire vice chairman of Berkshire Hathaway Inc Warren Buffett’s business partner, said the rise of index funds like those run by Mr. Fink’s BlackRock Inc. has resulted in an “enormous transfer” of the power to sway corporate decision making. That shift will “change the world,” he said, and not for the better.

“We have a new bunch of emperors, and they’re the people who vote the shares in the index funds,” Mr. Munger, 98 years old, said at the annual meeting of Daily Journal Corp. , a publishing company he has chaired since the 1970s. “I think the world of Larry Fink, but I’m not sure I want him to be my emperor.”

The surging popularity of index funds has made their managers the biggest investors in most large stocks. The firms, including BlackRock, have sought to wield that power in ways that have at times made corporate executives uncomfortable. Investment managers have had more sway over important company decisions, including takeovers, the fates of executives and plans for long-term sustainability.

Facing Texas pushback, BlackRock says it backs fossil fuels 

At the risk of being dropped from Texas pension funds, BlackRock Inc has ramped up its message that the world's largest asset manager is a friend of the oil and gas industries. As a large and long-term investor in fossil fuel companies, "we want to see these companies succeed and prosper," BlackRock executives wrote in a letter that a spokesman confirmed was sent at the start of the year to officials, trade groups and others in energy-rich Texas.

Although the message is consistent with its other statements, the emphasis is new after years in which BlackRock has stressed its efforts to take climate change and other environmental, social and governance (ESG) issues into account in its investment and proxy voting decisions. 

In Texas, new legislation requires the state's comptroller, Glenn Hegar, to draw up a list of financial companies that boycott fossil fuels. Those firms could then be barred from state pension funds like the $197 billion Teacher Retirement System of Texas, which has about $2.5 billion with BlackRock.   


Canada, a country that relies heavily on immigration to grow its labor force, has set an ambitious plan to bring in more than 1.3 million newcomers over the next three years to support its post-pandemic growth. 

Trudeau’s government aims to add more than 431,000 permanent residents this year, 447,000 in 2023 and 451,000 in 2024, according to the 2022-24 Immigration Levels Plan released on Monday. Figures for this year and 2023 have been revised higher from earlier targets of 411,000 and 421,000, respectively. 

Immigration had been one of the main drivers of Canada’s economy, and accounts for almost all of the nation’s employment growth. Last year, Canada welcomed more than 405,000 newcomers, the largest single-year increase in its history.  

The $22 Billion Wager: DraftKings and Others Are Reaching for a Piece of the Sports-Gambling Prize.

Bookmakers have always been busy on Super Bowl Sunday, but this year will be a bonanza like never before. Bettors are on track to wager $7.6 billion on the game, up 78% from last year, and it’s not because the office pool is getting bigger. 

Legal sports gambling has now spread to 30 states and Washington, D.C.—home to more than 130 million. In the four years that it has been legal, both the amount of money bet on sports and the amount counted as revenue by gambling companies have risen nearly 1,000%, to $57 billion and $4.3 billion, respectively, according to the American Gaming Association, or AGA. 

Gambling companies spent $725 million on television ads in 2021, three times as much as on cereal ads, according to Nielsen. Such levels of spending, in addition to giveaways to bettors, mean that these companies could report losses for years, until consolidation winnows the field and a few winners emerge. DraftKings has said that online sports betting could be a $22 billion to $36 billion market when it matures, up from around $4 billion today.

An Interesting Take

As fiduciaries, we are charged with attempting to protect and grow your capital. Inside Edge is a small collection of things the Investment team comes across on a weekly basis that could have investment implications. The links below deal with politics, however are not meant as political statements. They are included because the actions and policies they address could have material investment implications. These implications could range from the flow of deposits out of the banking system to the demand for precious metals to the weakness of a currency relative to immigration patterns into a country - all things that could impact the investment environment. As fiduciaries we are paying attention to these government actions and trying to think through what they can mean for the future.

"Just Watch Me"

- Justin Trudeau's Ceausescu Moment