Aftermath of the Japan Tsunami

The Japan Tsunami was not the event that triggered a sell-off.  Last Friday, the day after the Tsunami hit, was a relatively calm trading day.  What did bring down the markets were concerns over the nuclear power plants.  People are afraid of Chernobyl Japanese style.  Uranium stocks have been  hammered massively, while solar stocks have jumped nicely.

The setback in the Japanese economy will have some effect, but I do think the market is somewhat overreacting to the events.  Keep your eyes peeled for a nice drop in your favourite stocks and pick them up at a nice price after the dust settles.

USCCB Socially Responsible Investment Guidelines - Part 4: Reducing Arms Production

The third area covered by the investment policies of the USCCB is "Reducing Arms Production".

Every country has a right and obligation to defend itself.  This right inevitably leads to the purchase of weapons.  Are weapons in themselves evil?  No.  They are merely tools.  So, why does the Church have this category altogether?  It is not so much concerned about the Church's stance on the morality of weapons, than its stance on the disproportionate amount of money spent on the military.  In 2010, the budget of the US Department of Defense was upwards of $500 billion dollars!  That is larger than the market capitalization of any company in the world!  Imagine dissolving a bit less than 2 Apples (the company) tomorrow, and taking all the shareholder value and putting it into military spending.  That would only last 1 year in the US.  What would happen if only 10% of that budget ($50 billion) was put to improving the lives of the poor?

Canadians are in a better position.  Our military spending is dwarfed by the US military spending, at roughly $20 billion per year.  Still, that is not a small number.  Imagine dissolving Rogers Communications...Let's look a little more closely.

The 2 sub-categories under this area are:

1. Production and Sale of Weapons
2. Antipersonnel Landmines

Production and Sale of Weapons

The USCCB's stance on the production or sale of weapons is twofold.  First, it will not invest in any company that derives its revenue primarily from the production of weapons.  Second, it will not invest in any company that develops weapons that is contrary to the Church's teaching on war, that is, weapons of indiscriminate, mass destruction.

A few of the larger defense contractors in the US include Lockheed Martin (Ticker: LMT), Northrop Grumman (Ticker: NOC) and Raytheon (Ticker: RTN).  Government expenditure in each of these companies are in the magnitude of billions of dollars.  Even without doing much research, it is not far fetched to think that these companies are major supplies of weapons or weapons related products.  Typically, you can find out a lot about a company's products in its Yahoo Finance profile page.  That would be a place with which I would start my research.  Just reading the Lockheed Martin profile page was enough to turn me away from that company.

The first was easy to detect; the second, not so much.  Companies that develop weapons of mass destruction would likely not advertise that they're doing such work.  It's best to avoid all companies that develop or manufacture arms.

Antipersonnel Landmines

The use of landmines is similar to weapons of mass destruction.  The device will not care whether a soldier or a 4-year old boy steps on it, it will activate when anyone steps on it.  Indiscriminate landmines have since been banned by the Ottawa Treaty.  They're really just a specialized form of weapons.  So, if you already avoided arms manufacturers, you'd be pretty safe.

Conclusion

Conclusion is simple: avoid defense contractors and avoid weapons manufacturers.  If you do get into aerospace companies, be very vigilant as some are also involved with building fighter jets or components for them.  I'm not saying these are necessarily bad, but you would need to investigate and make a judgment call.  Better to stay away than to be ignorant.

USCCB Socially Responsible Investment Guidelines - Part 3: Promoting Human Dignity

The second area covered by the investment policies of the USCCB is "Promoting Human Dignity".  This follows the first category of "Protecting Human Life".  It is not sufficient for us to protect human life, we must recognize that humanity is made in the image of God, and that we have a special dignity above all other creatures.

The 5 sub-categories under this area are:

1. Human Rights
2. Racial Discrimination
3. Gender Discrimination
4. Access to Pharmaceuticals
5. Curbing Pornography

Human Rights

Human rights sounds almost like a no-brainer.  Of course, we need to promote adoption of human rights, correct?  Absolutely!  Everyone has the right to life, religion, freedom of speech, etc.  We should not, for example, invest in a company that uses sweatshops, which denies its employees of their most basic needs.  Most operations in the developed world will be very respectful of human rights.  However, we need to cautious of American companies with operations in developing countries, to ensure that they operate under the same standards as they would in the West.  Examples of these companies that have bad international practices include Walmart (Ticker: WMT) and The Gap (Ticker: GPS).

On the other hand, the issue in the developed world is not so much the violation of human rights, but the protection of "rights" that should not be treated as human rights.  In the past decade or so, the homosexual agenda has made headway in most western countries.  Same-sex marriage is now a reality in Canada and a number of US states.  In Canada, there is now a bill (Bill C-389) going to the Senate right now to add "gender identity" to the Canada Human Rights Act.  Essentially, if this bill is passed, it means that, for example, employers cannot discriminate based on gender identity.  So, if a transvestite comes for an interview for a teacher position at an elementary school, the school board cannot discriminate based on his "gender identity".  These progressions are a deconstruction of the society that Christianity had built in the past 2 millennia.  We should avoid investing in companies that promote this deconstruction.  In my post on Apple (Ticker: AAPL), I talked about how it was rated highly by the Human Right's Campaign, a pro-homosexual group.  This would be a good place to start your research.  Remember, if this group rates a company highly, that's a BAD thing!

Racial Discrimination, Gender Discrimination, and Access to Pharmaceuticals

I am putting racial discrimination, gender discrimination, and access to pharmaceuticals into one group.  Chances are if you dig up some dirt in the human rights category, you will also see issues in these categories as well.  If a company treats that workers like trash and provide horrible and dangerous working conditions, I don't think they would, for example, provide them with excellent access to pharmaceuticals.  These go hand-in-hand.  There's not much else to say, except: don't invest in companies that adopts these reproachable behaviour.

A good way to start your research is googling, "[company name] ethical issues".

Curbing Pornography
Here, I quote the USCCB investment policy regarding pornography, "The USCCB will not invest in a company that derives a significant portion of its revenues from products or services intended exclusively to appeal to a prurient interest in sex or to incite sexual excitement. These would include, but not be limited to, sexually explicit (X-rated) films, videos, publications, and software; topless bars and strip clubs; and sexually oriented telephone and Internet services."

The obvious companies in violation include Playboy (Ticker: PLA).  A less evident company is American Apparel (Ticker: APP).  If you haven't seen their ads before, just google, "American Apparel ads" and select images; you'll understand what I'm saying very quickly.  Although it sells very normal clothing, the advertisements are close to soft-core pornography, and the sad part is they are targeted towards the younger segments of the population.  Although the company probably passes the USCCB test, because it sells morally neutral clothing.  Yet, there is something wrong with investing in a company like such, because it essentially does what all pornography do.  That is, it reduces the subject (the female models in this case) into an object.

Other companies to avoid would be media companies that produce distasteful films, magazines, services, etc. A majority of these companies are smaller-sized, privately owned companies.  So, you may not need to worry so much.  Do keep an eye open though.

Conclusion

In the category of promoting human dignity, there is one question that you need to ask, "Does the company treat human beings as though they were human beings?"  The company should not exploit their employees to increase profits; they should not discriminate; they should not treat or portray people as though they were objects.  Even if their products or services were benign, but the image they portray does any of the above, I would still rather not invest in them.  Of course, it's all a balancing act.  A lot of great companies will indeed violate some of the principles discussed above.  You would need to make a judgment call on your investment decisions.