CBC TV: Kevin O'Leary, Eco-preneur or Guru of Greed?

Last night I saw Kevin O'Leary, the CBC's new guru of greed. He may one day be to finance, what Don Cherry is to hockey. He is on a show called the "Lang and O'Leary Exchange". As it says in his bio on CBC, "O'Leary is opinionated, ruthless, he hungers for big deals and loves to take control. Yet he made his millions helping children learn how to read." Isn't that sweet? He also calls himself an "Eco-preneur", because his company "Englobe" saves the environment. Well if he's an ecopreneur, I'm a skeptopreneur.*

Kevin was speaking about the proposed US regulations that will prevent banks from creating another financial crisis, and he proclaimed that Obama's regulations are going to destroy the only thing that is actually making money any more. According to Kevin our only way to wealth is by using ever more complicated investment "strategies" (I call them PWDs, or Pacts with the Devil). Kevin also says about Obama "Somebody has to stop him!!!". Kevin wants to see the American banking CEO's left alone, because "They are greedy people, and greed is good!!!" and "They are my kind of people."

Apparently, Kevin is no longer the kind of people who make their millions helping little children learn to read.

Does this seem right? You take a pile of money, and double it just by swapping things around and playing with the figures. Forget about lending money to businesses and homeowners when you have this kind of return on investment available.

Personally I think the banking CEO's have now completely lost their minds. I heard one of them, in front of a senate inquiry tell this story to explain the financial crisis. He said "My daughter called me from school, she was worried because she heard there was a financial crisis. She said 'Daddy, everybody says there's a financial crisis. What's a financial crisis?' and I told her 'A financial crisis is something that happens every five to seven years'".

I have no idea why a banking CEO found it necessary to tell this childish story to a senate inquiry, or actually why the CEO himself would be worth tens of millions a year, when he is incapable of running a bank that does not collapse every few years, and thinks financial crashes as normal. He doesn't even seem to be interested in why they happen or how to stop them. Apparently he makes money no matter what. Then the inquiry had to listen to a CEO who explained how they were cutting secretary's salaries to make the bank run better. I don't want them to cut secretaries' salaries, I want them to cut the CEO's salaries. And cut the million dollar bonuses.

So apparently we don't make money with hard work, with thrift or saving any more. The way to riches is with accounting tricks, Ponzi schemes, golden parachutes, bailouts and a call upon the power of "Greed". Is that really the way to prosperity? Even if we don't think so now, put Kevin O'Leary on TV for a while, and some Canadians are going to believe him.

Footnote
* About "Environmental" companies like O'Leary's Englobe, and why this raises red flags for me. About ten years ago I invested in a company called "Phillips Environmental", which was in the same business as Englobe, getting rid of waste, toxic stuff etc., with an emphasis on re-use of chemicals. It did sound promising, and they did a lot of business, because there is so much demand for the service. A nice clean way to get rid of every kind of hazardous toxic waste, with no liability for the customer. Unfortunately, in this business, the customers rarely ask questions once the waste is gone. If the customers don't care, then who does? The owners of the waste removal company are the only ones who care whether they live up to their promises. This is an unusual ethical challenge. Phillips succumbed to the temptation, and started dumping their toxic waste illegally, and got caught. I luckily had gotten out early, because I know somebody in the environmental movement. When I told her of my "green" investment, she said "I don't think so". She had been asking questions about Phillips Environmental, and they were blocking her from finding out what they were up to. Now I don't think I would ever trust an environmental company led by someone who says "greed is good", and "greedy people are my kind of people". I would be more likely to start an investigation.

Some Ideas on Ethical Investing

Ethical investing for some people is an oxymoron, but not for me.

Years ago I saw an article in a financial section of a newspaper that argued the only way to invest money profitably was amorally (without regard to ethics), and then suggested if you wanted to ease your conscience, give some of your gains to charity. My feeling is that this argument mindless nonsense. First there is no guarantee that investing in something unethical is going to make money, any more than investing ethically will lose money. If we could predict the future that way, we might all be rich and evil. (Can it actually be true that all rich people are evil?) Let's take an example of a classical "bad boy" investment, tobacco companies. You invest in a tobacco company, then make a lot of money (the basic assumption of investing in evil), and take part of that money to give to anti-tobacco charities. Now your conscience is clear, I suppose, as you attempt to shoot yourself in the financial foot. Sorry, this is just a ridiculous situation to illustrate the contradictions of the "evil investing/nice charity" school of thought.

But to address the fears of new investors, who are somewhat idealistic in their ethics. Often their concerns go far beyond avoiding tobacco, alcohol and armaments industries. They seem to challenge the entire idea of any company being truly ethical. How would you know, for example that a wind turbine investment isn't hiring slave child labour in China to make blades for the turbines? How do you know they aren't killing bats with the blades as they spin in the wind? How can you be sure that they aren't cheating on their taxes? Well, seriously I don't know, and really I cannot account for every single act of every employee of any company.

Ethical investing comes down to this important question. Do you believe that there is any good anywhere in our entire economic system? For people who deny there is any good in the economic system, are you doing that as just a rationalisation because you want to convince yourself that investing unethically is OK? Because I don't agree.

When it comes to making investment, there are varying degrees of buying into a certain industry. For example buying shares in an armaments company could make you money in times of war, but lose money in times of peace. Thus you are basically betting on, and profiting from human misery. But if you buy a bond with an armaments company, you do not make any more or less money during a war, and so are profiting less from human misery. And there is even a way to bet on peace, by "shorting" the armaments company stock, you make money when the war profiteers lose, and vice versa. That almost makes it the opposite of an unethical investment doesn't it? Meaning it could be way to profit from peace.

There are far worse ways to invest money than looking for ethical investment. For example, the popular method of investing in any "hot" stock, meaning a stock that has recently had a sudden price increase. Usually these investors chase the hot stocks and buy with the intent to protect their investment by selling if it drops a certain amount. This is a recipe for losing money. (Buy high sell low) Not always of course, but stock chasers do have a dismal record on the average.

It is generally a more profitable strategy to think ahead about how world needs to go in the future, given what we know about population increases, limited oil supplies, environmental degradation etc. Choose a stock that is going to help answer those problems in the long term, and stick with it through highs and lows. I don't see any worse financial return with this strategy than in chasing hot investments to make a quick buck.