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Some Fund Managers Let Their Political Biases Show When Picking Stocks

FYI: Some mutual-fund managers are biased toward stocks of companies run by executives with similar political views—and it hurts their performance.
Regards,
Ted
https://www.wsj.com/articles/some-fund-managers-let-their-political-biases-show-when-picking-stocks-1494209283

Comments

  • A Democrat investing in solar stocks ora Republican investing in oil stocks that I get (one will be right in a given year) but the article talks about agreeing with management and outside of investing in Ben and Jerry's or the Koch brothers that really seems unlikely to me and I have the impression that CEO's tend not to advertise their Political views as reactions to that could adversely affect stock price
  • If true, an argument for the American Funds selection committee approach or something similar.
  • Everyone has biases. Like I wish managers had a morality bias and don't own WFC. Biases make a market. Bias for Tech stocks vs not, just as one example.

    Someone could start an "Evil Doers" fund maybe. Little different than VICEX. This fund would invest in companies profiting from other people's misery. I can think of a few companies for this fund - EVILX.
  • Well, the Koch brothers would be a great holding for EVILX, that's for sure.
  • What about the biases embedded in the market itself? This idea that an index fund is some objective device controlled by divine providence and immune to politics is frankly absurd. It represents the collective biases of every investor. Sometimes that collective bias leads to mania--2000 dot.com bubble--or panic--2008 crash--that hardly represents some form of rationality. And some of those biases embedded in the market are politically oriented--see the recent Trump bump. No one is objective, and the difference between the dismal science of economics and hard natural sciences like physics and chemistry is that natural laws can be tested repeatedly with the exact same results each time and when there is a variance scientists strive as hard as possible to isolate the cause of that variance, i.e., quantum mechanics for instance as opposed to Newtonian physics. Isolating and explaining the variance in the human heart when it comes to the market, politics or economics is much more difficult and may in fact be impossible. Let's be honest--many of these finance studies are problematic at best and intentionally misleading at worst. The one constant, the only constant, is cost and that's why indexing makes sense, not because it is more objective about politics.
  • Very simply, greed drives markets. Airlines are Exhibit A. People step onto airplanes and become cattle. ZERO personal space. Overworked crew. American lately announced they'll squeeze-out 2 more inches of legroom in a new delivery of some jets. Why? To cram more seats into the fuselage. Just watch: we'll be paying for basic air and for the use of toilets, next. But for government regulators and the Congress, this is just fine and dandy. There's been no interference. So I fly, these days, as seldom as I can.
    Gordon Gecko: "Greed is good."

    1st Timothy 6:9-10:
    [9] But those who desire to be rich fall into temptation, into a snare, into many senseless and hurtful desires that plunge men into ruin and destruction.
    [10] For the love of money is the root of all evils...

    And I submit that one does not need to be a believer in anything, in order to see the sense that makes.
  • edited May 2017
    @LewisBraham. Index investing IS momentum investing. However, we are not supposed to do momentum investing, because it is hard to time the market movements. However, index fund have to be held forever. Go figure.

    Please don't buy FANG stocks because they go up. Buy an index funds which is heavily in FANG stocks which will keep buying them for you as they go up. But wait, buy the index funds so FANg stocks go up. No, wait...

    Don't use technical analysis to buy markets that go up. That you see is very hard to do. Because you have to figure out when to sell. With index funds you never have to do that. Bear markets are so much easier to ride out when you are indexing because you are paying low ERs. And by the way Financial Advisors will charge you 1% and explain this to you very well.
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