What Does the Buzz Mean for Markets

Article originally posted here by Ronald Blue Trust

by Ron Blue

The meteoric rise and fall of stocks like GameStop and other favorites on Reddit captured everyone’s attention earlier this year. No one imagined that mostly amateur investors could drive a beleaguered retailer’s stock price up more than 1,000% in a week, without any notable reason for renewed optimism in the company’s prospects. The stock soared as large crowds of mostly individual investors rallied around the idea of fighting back against Wall Street by purchasing stocks that hedge funds had placed large bearish bets on. Incredibly, these individuals succeeded in causing some hedge funds to exit their bearish positions at large losses, which fueled the rally further. (This event is known as a short squeeze.)

As GameStop surged, the S&P 500 sold off while hedge funds de-risked their portfolios and concern grew that this manic investor behavior might indicate a broader stock market bubble. However, within a couple of days GameStop’s stock price retreated, almost as quickly as it rose, and the stock market rebounded.

While the speed and size of the speculative rally that GameStop (and other stocks) briefly enjoyed were unprecedented, we do not believe this or other “micro bubbles” should concern long-term investors. More specifically, we don’t believe the surge in speculative trading activity by individuals pose a systemic risk to the financial system. Instead, we believe the GameStop scenario is symptomatic of two things: the current macroeconomic environment and technological innovation.

The macro backdrop is characterized by high debt levels, which are restraining economic growth. Slower growth has driven interest rates down, and lower interest rates have caused valuations of financial assets (like stocks and bonds) to increase. Consequently, the future returns for almost every asset class are below long-term averages. Additionally, because ownership of financial assets is uneven, wealth inequality was exacerbated by the surge in asset prices. This combination of lower prospective future returns and wealth inequality set the stage for opportunistic risk-taking.

When the virus came along it made matters worse by shutting down businesses and spreading the economic pain in a more acute and uneven way. As the government distributed relief checks, consumer savings actually increased–something we’ve not seen before in a recession. Fiscal stimulus has helped stocks go higher, lending credibility to the belief that stocks (or “stonks” as many jest) only go up. Although we know that is a flawed perspective, it is the fuel driving participation of some investing crowds today.

At the same time, technology has increasingly equalized access to financial markets. Trading fees have gone to zero, in many cases, removing one of the hurdles to frequent trading. Fractional share trading has given even the smallest traders access to expensive investments. Trading apps like Robinhood have socialized day trading and empowered the masses to feel comfortable making investment decisions. Social forums like Reddit, where the GameStop narrative germinated, serve as breeding grounds for pile-on investors.

The powerful combination of this technological and macro environment created the opportunity that culminated in the dramatic rise and fall of GameStop. There’s no doubt that pockets of irrational exuberance will continue to exist in the market and play out in unpredictable ways. However, we don’t believe these events threaten the larger market structure.

In the days ahead, investors will face many opportunities to abandon their well-reasoned investment plans in favor of speculative reward. We believe investors should remain vigilant and focused on a disciplined investing approach that is time-tested and reflects their own financial goals. Suitable investment opportunities remain for those who pay heed to valuations, diversify for various economic outcomes, and maintain an appropriate level of market exposure.

[ Photo by energepic.com from Pexels ]

What is Christian ESG investing?

 Photo by  Thomas Richter  on  Unsplash

Photo by Thomas Richter on Unsplash

by Chris McAlpin

“When the righteous prosper, the city rejoices…” Proverbs 11:10

ESG (Environmental, Social, & Governance) Investing is rising in popularity. This may be due to the investment industry driving the ideas, the consumer seeking to blend their values and investments, or an overall growing social conscience especially when it comes to money. Regardless of the reasoning, this is growing beyond a fad and for good reason.

So, what is ESG investing and its little brother Impact Investing? Then what is Christian ESG investing, why is this important, and how do you implement it? There are a lot of questions, a little confusion, and at times a well-earned suspicion of the investment industry. In short, ESG investing is aligning your investments with a set of values. For the Christian investor, ESG investing is following Biblical guidelines to align your investments with your faith. These definitions are for individual security selection and should not be confused with a full investment method. A further explanation is needed…

What is Christian ESG investing and why is this important.

The basic Investopedia definition of ESG Investing is: “Environmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.”[1] Socially responsible investing is similar and was the precursor to ESG, now falling under that umbrella along with sustainable investing and impact investing.

Typically, there is either negative or positive screening. A negative screen seeks to remove companies from an investment group based on certain criteria (for example, removing a company due to environmental abuses, their social stances, or a leadership vs. employee rights issue). A positive screen includes companies that “do good” work based on the investor’s criteria (for example, including a solar or wind farm company, a water purification lab, or micro-financing bank).

Currently, ESG investing is as broad as the sky is wide in the United States, and there are a lot of “lipstick on a pig” investments with nothing more than an ESG label. In the last 5 years, interest in this space has grown as well as investment options. However, the definition has grown opaque.

Yet, the Christian seeking a clear foundation has a source to turn to: the Bible. God’s word gives us great instructions in this space. Even if we disagree on some topics, there are foundational verses that we can all agree on.

Our working definition of Christian ESG investing is investment selection guidelines utilizing Biblical environmental, social, and governance criteria to screen potential investments.

  • Environmental: Genesis 1:26 “Then God said, ‘Let Us make man in Our image, according to Our likeness; and let them rule over the fish of the sea and over the birds of the sky and over the cattle and over all the earth, and over every creeping thing that creeps on the earth.” We are stewards of the earth. God put us in charge. We see this clearly in His word, in history, and our own experience. We see the cause and effect of our individual and collective actions. Because we are stewards, we have the full authority to act and the responsibility for the results of our actions. As stewards on behalf of God and co-creators with God, we should explore, innovate, and build throughout His creation. Yet, while we do this, while we dream and build big, we should care for the environment, conserve the land, protect animals, and restore what is damaged. And within our investments we should do this with the wisdom and common sense that God has given us; trusting and working within His design for creation by supporting companies that at least do no harm to, repair the damage done to, and/or enhance the environment around us.  

  • Social: Genesis 1:27 “God created man in His own image, in the image of God He created him; male and female He created them.” Each person is made God’s image. This is magnificent, wonderful, and mysterious. Therefore, all people should be respected, encouraged, and given an opportunity. Each of us has authority and responsibility as an image-bearer. We answer to the Original, as we represent Him. In investing this means that we should at least exclude companies that harm people. We should not invest in companies whose actions, products, or services lead to slavery, addiction, death (of the born or unborn), abuse, or entrapment. Recognizing that people are made in God’s image also causes us to see the good work that is done. This broadens our definition of Impact Investing to include what many may consider mundane. For example, a building supply company helps build the community around them. A carpenter, a roofer, a painter, and plumber build a house that someone makes a home. This is valuable and good work ordained by God.  We believe that this also supports the idea that a free economy is the best system for growth and innovation because we can trust people as image-bearers of God to create goods and services that are valuable to others, provide jobs for workers, and profit for the owners. This builds upon itself as investment risk may be rewarded with returns.

  • Governance: Romans 13:1, 4 “Every person is to be in subjection to the governing authorities. For there is no authority except from God and those which exist are established by God…for it is a minister of God to you for good.” Governments, businesses, and community leaders are put in place by God. When you look into history and maybe your own experiences, this can be a controversial statement because there have been some unbelievably wicked leaders in history and that still exist today. Therefore, how can we understand this verse in the context of investing? First, the Bible clearly states that God puts leaders—both good and bad—in charge. He did this for our good and His purposes. We must realize that His big picture is far too big for us to fully understand. If we challenge God’s authority to put leaders in place, we assume His role which will only lead to our heart-ache. However, He allows us to participate in the process. This is one of the great blessings of the United States. We vote for our government leaders. We can leave a company if we don’t like its direction, by not working there or selling its stock. And we can work within our communities as leaders or to properly challenge the leadership. In investments and the economy, our rule of law is enormously valuable. By this, we govern the creation of goods and services, define and protect the value of ownership, and seek to create stable markets to invest within. The leadership that God puts in place lead and allow for the creation of so much of the good that we have in life. Therefore, as investors, we should seek governance that best reflects God’s design. And by doing this we often find some of what we believe to be the best investments.

How do we effectively deploy Christian ESG investing?

When discussing the “how” we must remember that the Bible is a 2000-3000 year-old book. It is still God’s word and applies to us today. But it was written in an agrarian and a small market society. There were no corporations or financial markets as we know them today. Therefore, we apply the truth of God’s word, understanding the truth in the context that it is written, and applying that truth to the financial markets that we live in today. It is not always easy… So, we believe that we should hold our faith strongly, but hold these “rules” lightly, meaning that we are not rigid, legalistic, or condemning in applying these Biblical screens.  

Along with good screening, we wanted to demonstrate the Christian ESG investments could be profitable (this is, after all, the primary reason for investing). Therefore, we asked the investment team at WealthShield to build an Index demonstrating the potential performance of these investments. The results are outlined in this paper, FAITH-BASED INVESTING INDEX.

In this Index, the team starts with 500 of the largest US publicly traded companies and applies a negative “S and G” screen provided by the Biblically Responsible Investment Institute (briinstitute.com/screens.htm). This screen removes companies whose products and services we believe are harmful to people, as defined by the Bible so that we:

  1. Defend justice and mercy for the defenseless.

  2. Defend justice and mercy for the poor.

  3. Have compassion for those addicted to or engaged in alternative and harmful lifestyles.

  4. Protect the institution of marriage and the family.

  5. Search for and include companies that are recognized for philanthropy, leadership, ethics, citizenship, and other exemplary activity.

Note: For testing purposes, we wanted as much historical data as possible, in this case, data dating to the year 2000 was available from BRII. However, environmental (E) screening was not. Therefore, for our clients’ investments in the future, we intend to apply an additional screen provided by Inspire Insight (inspireinsight.com) which gives us an environmental screen and an overall Impact Score regarding ESG.

In this Index, we also wanted to demonstrate the potential results of our rules-based investment methodology. We believe that we honor God with excellent money management as much as investment selection, so we should chase great results. Our rules-based approach was developed by WealthShield and is outlined in this series of whitepapers that you can find here:

–    The Investment Framework: Market Valuations – VALUE MATTERS

–    The Investment Framework: Market Sentiment – THE TREND IS YOUR FRIEND

–    The Investment Framework: Economic Growth – IT’S THE ECONOMY…

In short, this is a data-driven investment approach where we use math and measurements to help us make decisions and align our clients’ investments with “what’s going up.” Sounds simple huh? In reality, it is a little more difficult and risks of losing still exist, but we believe that we can align our investments with companies that do good work, that do not harm people or the environment and apply proprietary investment methods to seek great results. Our goal is to honor God and serve people by helping them reach their financial goals and live fulfilled lives while chasing Jesus Christ.

What is money, really?

Article originally posted here by Medium

by Jimmy Song

One of my favorite stories in the Bible is in Acts 1. Jesus has been with the apostles for over 3 years. He’s also spent about 40 days with them after rising from the dead. He’s about to go up to heaven and leave them. They have one question they ask and the question is:

So when they had come together, they asked him, “Lord, will you at this time restore the kingdom to Israel?” — Acts 1:6

After three years of miracles, direct teaching and witnessing Jesus rise from the dead, they still didn’t quite get what the kingdom of God was all about. For them, establishment of Israel was the Old Testament prophesy that He had not yet fulfilled. The Messiah was supposed to restore Israel and while they’d all seen the miracles, they hadn’t gotten the message that Jesus fulfilled that prophesy in a way that they didn’t expect. The kingdom He restored was one that was much broader than a political kingdom. His kingdom would be a restoration of humanity as a whole.

Blind Spots in our Education

You can forgive them for their ignorance in this matter. Jewish teaching at the time, and to some degree today, believed that a Messiah would restore the nation of Israel and that’s what these Jewish followers of Jesus grew up learning. They didn’t have the benefit of the perspective we have today of seeing Christ change civilization forever.

I bring this story up not to make fun of the apostles, but as a reminder that everyone has blind spots. Like those apostles, there are certain ways of thinking about things that are entrenched in us. Some of those perspectives are just wrong, and to correct them is often a Herculean effort.

One of those things is money and the economy. Our tendency is to think that we understand them based on what we’ve been told. Money is what the government decides. The economy must be managed centrally. The people in charge know what’s likely to happen and we must do what they say to avoid disaster.

We think we understand because we work with money all the time. We use it to buy stuff, we earn it by working, we invest it and have lots of interactions with money, which makes us think that we understand it. Much like the apostles and Jesus, we’ve spent a lot of time with money, but that does not necessarily mean we really understand it.

Conviction Conflation

What’s particularly dangerous is that many assumptions about money and economics sneak into our worldview and get conflated with our Christian convictions. We think that our convictions on how the economy works has the same moral force as the law written on our hearts or the convictions we have as Christians.

This is particularly dangerous with money because money is where the rubber meets the road as far as actual expression of Christian convictions is concerned. We don’t just love others. Loving others often requires sacrifice, or allocation of resources we are put in charge of.

How we view money has infected how we look at the gospel.

Worse, many people use the gospel as a way to convince others of non-gospel convictions. Just about everything has used Christianity as a justification for behavior or beliefs that simply aren’t the gospel. Chattel slavery, socialism and wars of conquest were all argued as Christian when they clearly were not.

Money and Economics

That’s unfortunately the position we’re finding ourselves in the money and economics realm. There are those that tell us what Christians should believe, not from critical examination of the Bible, but from convictions from an ideology outside the gospel.

This is false teaching and we must be very careful about such claims.

In particular, there’s a tendency to view current norms as somehow right or correct. There have been many norms throughout history that we would find horrifying today and vice versa. One of those things is our current monetary system.

Our church forefathers would be horrified by the current system and their analysis morally of monetary systems, particularly ones controlled by a central authority, is well documented.

The current monetary system is a cesspool of theft, corruption and cronyism. I’m not exaggerating. I’ve made the argument in my book about how the system of central bank backed fiat money is theft at its core. The ability of Central Banks, and really all the member banks of a central bank to issue credit without anything backing it, is ultimately theft from all other holders of the currency.

But if you doubt me, start with this. What is money supposed to be? What is it supposed to represent? What is inflation? Exploring any of these topics in depth will naturally lead to questioning the morality of the current system. Much of the wealth of the United States, for example, is based on a dollar dominance that’s neither earned nor fair.

Getting Out of the Cesspool

So what are Christians to do? How should we think about not just the money, but the very monetary system that we were born into?

If the current system is morally wrong, it is our moral duty to work to change it. William Wilberforce did this with chattel slavery by fighting against it until England abolished slavery. Perhaps we’re not quite ready to go on a moral crusade just yet, but there is a way to start exploring alternatives.

Much like the apostles who thought the Messiah would politically restore Israel, we find ourselves in the position of finding that our money isn’t anything like what we thought it was. Our assumptions around the current monetary system are being proven wrong, so we should be looking at alternate explanations. There’s a digital alternative in Bitcoin. As Christians and as investors, exploring this alternative is a good thing.

What is Stewardship?

Article originally posted here by Denver Institute for Faith & Work

by Ryan Tafilowski

My favorite gift last Christmas was a pack of thermal socks. It’s funny how things change. I can still remember how I felt as a child upon opening a “present” from my grandmother comprised of a sweater and socks. Ten-year-old boys are not known for their self-awareness, so it’s a good thing my sweet old grandmother wasn’t there when I opened it. Looking back, I was angry, sure, but there was a lot more going on: a cocktail of resentment, embarrassment, and disappointment. But the dominant emotion, I now realize, was confusion. Why would anyone give socks and sweaters as a gift?

You may remember an iconic scene from A Christmas Story, where a humiliated Ralphie reluctantly models a pink bunny suit gifted to him by Aunt Clara. He’s clearly traumatized by the event; he’s ridiculed by his brother and all but disowned by his father. “You’ll only wear it when Aunt Clara visits,” his mother assures him. 

No Strings Attached?

Aside from the petulant entitlement of suburban kids, what do Ralphie and I have in common? We both had fundamentally misunderstood the nature of gift. It’s not our fault, exactly. Western societies like ours have been conditioned to define “gift” very differently than did ancient cultures, including the cultures inhabited by Jesus and Paul. Jacques Derrida, one of the major players in the postmodern philosophy known as deconstruction, argued that, by definition, a gift must come with no strings attached:

For there to be a gift, there must be no reciprocity, return, exchange, countergift, or debt. If the other gives me back or owes me or has to give me back what I give him or her, there will not have been a gift, whether this restitution is immediate or whether it is programmed by a complex calculation of a long-term deferral or difference.[1]

That likely sounds natural enough to us, but here’s the problem: from the perspective of the biblical writers, it’s exactly backwards.

As the Bible understands them, gifts do come with strings attached. That’s the whole point. The Greek word for “gift” is charis, which, as it happens, is also the word for “grace.” But that doesn’t mean that grace is free. Now, I can hear Protestant alarm bells ringing, so let me clarify. When the Apostle Paul says “it is by charis that you have been saved” (Ephesians 2:8), he does mean that God has done something for us that we could not have done for ourselves and that we couldn’t possibly earn. God’s grace is superabundant in the sheer magnitude of the gift, Jesus Christ himself (the gift whom Paul describes as “inexpressible” in 2 Corinthians 9:15); it is singular in that it is extended to us solely out of divine love and at divine initiative; it is incongruous in that it is offered to undeserving recipients who cannot — and are not required to — meet a standard of worthiness in order to receive it; and it is unconditioned in that God gives it to us without regard for our status or virtue.[2]

When the New Testament uses the language of “gift,” it means all this and much more; but one thing that it absolutely does not mean is “something I can do whatever I want with.” In the biblical imagination, gift-giving both presupposes and creates an enduring relationship of mutuality in which the giving party expects a reciprocal, although not necessarily proportionate, return from the receiving party. Gifts create obligations in the most basic sense of that word: ties that bind two people together.

To put it simply, God does not give us gifts primarily for our own personal enjoyment or to do with whatever we please; he gives us gifts with the expectation that we’ll use them for his purposes. My grandmother expects me to wear my Christmas socks, just as Aunt Clara expects Ralphie to wear his bunny suit. The gift is as much about the giver as it is about the recipient. The entire notion of gift is only intelligible within the context of a world where God has already decided not only to share his life with his creatures, but also to deputize them in the governance of the world he made, which is the very story Genesis 1-2 is telling. In the context of this story, gifts are something for which human beings are accountable.

A Lesson in Kingdom Economics

Jesus often expressed this same idea through his parables. The stories Jesus told have many recurring characters — the shepherd, the farmer, the merchant — but some of his most challenging teachings center on the oikonomos, the steward (e.g., Matthew 25:14-30; Luke 12:42-48; Luke 16:1-8). The oikonomos was a servant or a slave entrusted with the administration of a master’s oikos (household), the root of our English word “economy.” (And if you’ve ever wondered why high schools used to offer courses in “home economics,” this is why.) The oikonomos was almost always a slave, but this was a position of immense influence and agency. When we think of a steward, we shouldn’t imagine a butler or a waiter; we should be thinking of someone like Joseph, who had been fully authorized to manage the affairs of Potiphar’s estate (Genesis 39:1-6). A steward was a powerful person, but only insofar as they exercised the power of the master. At the end of the day, the master could always ask for an accounting of what had been done with his wealth.

Perhaps now we’re in a position to explore one of Jesus’s most famous — and most infamously misunderstood — teachings: the so-called Parable of the Talents, in which three stewards are entrusted with varying degrees of venture capital by the master of the house (Matthew 25:14-30). This story has been subject to a particular kind of abuse in the Faith and Work movement: Jesus, so this interpretation goes, wants us to be “five-talent people” who go out, do great things for God, and maximize return on investment (sometimes understood explicitly in monetary terms). But if we read the parable carefully, we’ll notice that the sheer volume of return isn’t really the point at all. The two “good and faithful” servants — one of whom made another five talents while the other made a return of only two — receive identical commendations from the master: “You have been faithful over a little; I will set you over much. Enter into the joy of your master.”

But what of the third oikonomos, the one whom the master upbraids as “wicked and lazy”? What is the master so fired up about? After all, the third servant didn’t lose the initial investment. The problem with the third oikonomos is that he wasn’t an oikonomos at all: charged with investing his talent, he buries it in the ground instead. One gets the sense that the master would have preferred that the steward risk the talent and lose it in some precarious venture rather than simply bury it. Why is the master disappointed? Because it wasn’t really about the money in the first place. It was about the relationship. The master gifts the steward as a gesture of trust and partnership — just as God gifts humans in Genesis 1 and 2 — with the expectation that the steward will use these lavish gifts to contribute to the flourishing of the world. But the wicked and slothful servant is not up to the challenge of a fully human life. In the words of Frederick Buechner, he “plays it safe with his life, living as carefully as he can without really living at all.”[3]

Stewards of Varied Grace

“As each has received a gift,” says Peter, “use it to serve one another, as good stewards of God’s varied grace” (1 Peter 4:10). Notice how fluently Peter speaks the language the divine economy — gift, stewardship, grace. Each of us has something singular to offer to the household of God, a unique way in which we’ve been graced so that we can turn around and grace the world.

Notice, too, a point that is perfectly obvious and yet perfectly easy to overlook: gifts are meant to be used. Aunt Clara wants you to wear the bunny suit. And that’s because it was never really about the bunny suit; it was about the delight the giver takes in the recipient, the trust placed in the receiver of the gift, and the relationship that binds giver and receiver together. When it comes to Kingdom Economics, the only currency that matters in the end is grace and the only return that matters in the end is love: “All things in this world are gifts of God, presented to us so that we can know God more easily and make a return of love more readily.”[4]

For free resources on faith, business, calling and investing, visit denverinstitute.org.

[1] Jacques Derrida, Given Time, vol. 1: Counterfeit Money, trans. Peggy Kamuf (Chicago: University of Chicago Press, 1992), 12. Emphasis in the original.

[2] See here John M. G. Barclay, Paul and the Gift (Grand Rapids, MI: Eerdmans, 2015), especially 70–75 and 565–67.

[3] See Frederick Buechner, “The Gates of Pain,” in A Crazy, Holy Grace: The Healing Power of Pain and Memory (Grand Rapids, MI: Zondervan, 2017).[4] Ignatius Loyola, “The First Principle and Foundation,” in David Fleming, SJ, Spiritual Exercises of St. Ignatius: A Literal Translation and a Contemporary Reading, 2nd ed. (Brighton, MA: Institute of Jesuit Sources, 1978).

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