Spring 2015
Well, it's been forever since I've written anything on this blog, and it's time to start up again. It's now April and I'm more than a little behind. I am not behind, however, in following how my investments are doing. They seem to be on a bit of a roller coaster.
So far 2015 has had many ups and downs in the stock market. As I am writing today, the market is way, WAY down. Like around 1% on the S&P 500 in just one day. Why? Greece is having continuing financial problems. The Chinese regulatory commission is frowning on borrowing to bet on the stock market. (Imagine that!) Here in the USA, there is a growing concern about inflation. And maybe Kim Kardashian dyed her hair another color.
Personally sometimes it seems to me that just the wind blowing the right ( or the wrong) way can influence the way the market moves. Overall the S&P is up 1.12% for 2015. Not exactly an awe-inspiring amount 3 and half months into the year, but as I have written before, I'm in it for the long haul.
Recently Uncle Bob and I were discussing how to pick stocks. It isn't easy and there are many schools of thought. I think knowing a few basic concepts is the best way to make a decision for the long haul. But there are A LOT of concepts involved, and as much as I wish anyone held a crystal ball for selections, well that just isn't the case.
So my next article will have one of these classic song titles:
- A : Take the Money and Run
- B: Let It Be
- C: Who Do You Love
- D: You Can't Always Get What You Want
Silly, I know. I hope to get this next article done before Lewis and I go on vacation, but if I don't , I WILL be back!!
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While I am cautious about making single stock recommendations to anyone, I will share what drove me to pick the select few my husband and I own. It comes down to the title of a classic rock song by Bo Diddley, entitled "Who Do You Love?"
The "Who Do You Love?" reference was going to be relative to buying stocks: if you understand what a company does and like it, you know what you're buying. An educated consumer is better off. Right? This is nothing more than opinion, but enthusiasm goes a long way. I was going to use an example of a purchase I have done pretty well with overall. Certainly liking what we own encourages me to 'hold' for the long term, which is one of my objectives.
Which brings me one of my favorite picks-- Walt Disney (DIS). If you know me, you know I LOVE Disney World. Some might even say I am somewhat obsessed! And let me clarify: those people would be right! I have a Disney-themed powder room in my home, "Under the Sea" plays on my iPod, and we have a so-called 'Mickey Jar' that all our spare change gets poured into to go toward future Disney World trips. No joke. I've lost count of the number of times we have been to WDW. We always stay at Disney hotels, eat in Disney restaurants, and shop in Disney stores. I love to be literally immersed in the magic, wonder and charm that is Disney.
And the stock?? Bear in mind I am not here to sell it, and it is at a record high so tread lightly and do your homework before buying ANYTHING!! That's not what this is about, but read on: Disney is one of the 30 stocks that make up the Dow Jones Industrial Average Index. Its stock pays about a 1% yield, not huge but not too shabby, either. Cash dividends are at $1.15 per share. Stock analysts consider Disney a 'buy.' In the 2015 2nd-yearly-quarter estimates of earnings-per-share, Disney beat its projected goal by close to 10%. The Thomson-Reuters Detailed Stock Report gives Disney a score of 9 out of 10, placing it within the top 15% of stocks they have scored. Their S&P star rating is 4 out of 5 stars. The stock has a fairly low price-to-earnings (P/E) ratio, making it a halfway decent deal. It's a well run company-- it makes money and that is, after all, the goal of pretty much every corporation. And every investor.
All this points to a solid company with potential to make even more money! As a shareholder I have been delighted! Zip-a-dee-doo-dah!!
To clarify, we own a very small quantity of Disney as an individual stock (and undoubtedly have more hidden away in various mutual funds in IRAs and 401Ks; if you have mutual funds you own it too, most likely). But my enchantment with Disney as a company took a big hit last week. While we're not investors who exactly make CEOs stand up and take notice, I still have a few opinions to share about some of Disney's business practices. The ones I am appalled by as an American.
Those business practices come down to one very important element: the people who work for Disney, and in this particular case, those who work for Disney World (the self-proclaimed happiest place on Earth!). Disney World is run exceptionally well-- everything is pretty much perfect from gardens to rest rooms. The employees of Disney World are the very people who create magic for people like me-- visitors who want to escape the real world for a few days.
These 'cast members' run the show: they're the people who hear the theme of "It's a Small World" over and over and OVER again for hours while loading boatloads of sweaty tourists for a mini-cruise, who swelter in heavy full-body and head covering costumes on 90 degree days, who scrape gobs of spit-out bubble gum from the parks' pavement continuously, who answer inane questions all day about how Fast Passes work, who scoop the rhino poop at Animal Kingdom, and who-- oh yes-- manage the data systems for the whole shebang.
On June 3rd, 2015 the NY Times printed an article highlighting what I view as an ethical scandal. They reported that in October 2014, around 250 employees of WDW who managed the data systems were handed pink slips and told their jobs were going to be given to Indian immigrants holding temporary H-1B visas. To add to this, these same employees losing their jobs were asked to train their replacements until their final day of work in January 2015. Talk about going from depressing to just plain humiliating. I also cannot fathom what it must have been like for the Indian immigrants, knowing what their presence meant to their 'mentors'.
Seriously?? A company that makes movies where villains are often portrayed as greedy, boastful, callous, cruel, selfish and arrogant actually made a decision to 'reorganize' in this way? Isn't that kind of-- well, hypocritical?? I may be naive, but if you sell idealism as a hot commodity, maybe you should be ready to conduct business by the same standard.
To clarify, this isn't a only Disney issue. If you look at the companies who most hire H-1B workers, Disney is not even remotely a contender for this type of practice. They just happen to be a company I love, so I feel like I've been smacked in the face. Companies Tata Consultancy Services and Infosys Technologies led the way hiring H-1B recipients in 2013. This has become the acceptable way business is conducted in America. If we just all turn and look the other way, maybe it won't really matter. Until our own job is eliminated.
Associate Professor of Public Policy Ronil Hira of Howard University testified before the Judiciary Committee of the U.S. Senate in March 2015 about bringing workers with temporary visas into the US from other countries. How this practice affects American workers isn't pretty. These workers are mostly brought in for one reason and one reason only: to cut corporate costs.
So in the situations where a company can cut costs to increase profits, not only do many qualified American get displaced from their jobs, but the people coming here to work are not getting full compensation. They're exploited. The employers of these workers holds the visa, not the employee. Overall, only 2% of these immigrant workers are granted green cards. These workers are used simply to outsource jobs rather than help them become US citizens. A typical tech worker in India makes $6,000 a year, which makes even a substantially cut American salary look really good. There are all kinds of loop-holes for getting around the law that requires people with H-1B visas to be paid the 'prevailing wage' for their jobs. In his testimony Dr. Hira states, "Simply put, the H-1B program has become a cheap labor program."
This is a big deal for American workers. To quote Professor Hira's report, "The scale of this damage is large and its effects long lasting, adversely impacting: the careers of hundreds of thousands of American workers; future generations of students; and, America's future capacity to innovate." It increases the divide between the rich and poor in our nation, and shrinks the middle class even more. So much for America spreading her "golden wings" to "sail on freedom's wind," as so movingly sung in EPCOT's American Showcase.
Again, Disney is a mere drop in the bucket in the number of American companies who do this kind of business. According to Professor Hira, often times the only way anyone finds out about these wide-spread business practices is through whistle-blowers. But most of the time the whistle-blowers are retaliated against by their employers, so they are reluctant to come forward.
In the case of the Disney workers who were fired, they agreed to be interviewed by the NY Times only if they could remain anonymous. The fear of not being able to find a job in their field is so intense that they will not directly say anything unflattering about Disney.
We all shudder when we hear movie characters like 1987's Wall Street's Gordon Gekko make statements like, "Greed, for lack of a better word, is good." It sounds so smarmy when uttered by fictional evil villains who will do anything to accomplish their goals. Yet reality is, often times greed does drive businesses to make money. Greed builds the equity in our retirement portfolios, even if we are unaware of some unethical practices being used by the companies that comprise our investments. We want our savings to make us money, we want businesses to succeed. So where do we as capitalist society draw the line?
We draw the line by following the letter of the law which already exists!! In Dr. Hira's testimony to the Senate, he reports that the law for hiring foreign workers is perfectly clear: that it will not harm American workers. The U.S. Department of Labor rules state that, "the hiring of a foreign worker will not adversely affect wages and working conditions of U.S. workers comparably employed." (8 U.S. Code 1182) Dr. Hira goes on to state that approximately 120,000 new foreign workers are admitted annually, but not for their "unique or specialized skills" (meaning there are no Americans to do their job here in the USA) as the law clearly states. They are hired to replace American workers at a much lower rate of pay.
In response to the NY Times article and the subsequent negative publicity, a Disney spokesperson argued that Disney has "created almost 30,000 new jobs in the U.S. over the past decade." My response to that is, so what? While that's truly wonderful, it doesn't erase the fact that 250 workers were fired for the simple reason that the company could get the same job done for a whole lot less money. Kind of like how the evil step-mother could get Cinderella to do all the cleaning and grunt work for nothing, while she and her daughters lived high on the hog. Yuck. It also doesn't erase the fact that those 30,000 people can be replaced at any time by some desperate souls willing to travel halfway around the globe if Disney decides to save a few bucks.
Ironically, Good Morning America featured a story about the business practices of billionaire Sir Richard Branson, founder of Virgin Group on the morning of June 11, 2015. I say ironically because ABC-- the network from which GMA is broadcast, is owned by the Walt Disney Company. The report explained Branson's business approach with his employees, which is to create a work atmosphere where people know they are a valued part of a business team. One example of this is that he offers generous maternity and paternity leave for new parents. The gist of the news article was that happy employees are productive employees. Loyalty to the company they work for has been shown to increase productivity. This seemed to be of great interest of the GMA reporters.
And why shouldn't it be-- they know the very company they work for recently fired loyal employees for no other reason than to save a relatively small amount of money. The story of the Disney tech people who suddenly lost their jobs must have caused nothing short of a tremor throughout the entire company. Job security must be a serious worry for these people. I don't see this business model as a morale builder for Disney cast members. I don't see this as a tactic to increase loyalty or productivity. And in perfectly selfish terms, I don't see this as a boon to me as a stockholder or future customer planning to spend hard-earned money at Disney World. It's bad for business.
The question still remains: who do I love?? Do I still love Disney? The short answer is yes. Without a doubt. I am not in love with some of their business practices. While I don't want to throw out the baby with the bath water, I do want the magic-creating cast members to matter to the company I love. I want the whole idealized Disney dream to be true and not just an illusion, sappy as it sounds. One of Richard Branson's 5 rules for good business is this: "Your employees are your best asset. Happy employees make for happy customers." Executives of Disney, take note. We all know what happens to Disney villains. And at the moment, you have a grumpy customer here.
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What's Love Got To Do With It?
Well, maybe love-- or at least hope-- has EVERYTHING to do with it. Continuing where I left off yesterday, I have composed a letter to various executives at the Walt Disney Company. This letter will be sent, and while I don't expect an enthusiastic reply, I do hope it makes a difference. It certainly will NOT make a difference if I keep it to myself!
Anyway, without further ado, here is my letter:
Dear _______,
I could not start this letter without first stating that I am a Disney fan of epic proportion. I've lost count of the number of times our family has been to Disney World. It is truly one of my very favorite places on the planet. We went to Disney World after the horror of nearly losing one of our children, and I can honestly say that experience helped in my healing process. My family has always stayed at Disney hotels, eaten in Disney restaurants, and shopped in Disney stores. I love to be literally immersed in the magic, wonder and charm that is Disney.
While we're not huge investors who may make executives at Disney stand up and take notice, my husband and I do own Disney stock. I was appalled as a stock holder to hear of the recent firing of 250 data systems workers at Disney World so they could be replaced by immigrants on H-1B visas. A company that makes movies where villains are portrayed as greedy, boastful, callous, cruel, selfish and arrogant made a decision to 'reorganize' in this way? This is unethical and hypocritical.
I believe if Disney sells idealism as a hot commodity, its business practices should reflect the same values. Disney asks us to dream, to imagine. All too well I can imagine the horror these tech workers felt upon hearing that not only were they fired, but they had to train their replacements.
The U.S. Department of Labor rules state that, "the hiring of a foreign worker will not adversely affect wages and working conditions of U.S. workers comparably employed." (8 U.S. Code 1182) Yet business tactics such Disney's have done just that: harmed the wages and working conditions of those 250 workers. It seems quite obvious that the Indian immigrants were hired to replace existing Disney World workers at a much lower rate of pay. Not only is this unethical as I stated before, but also appears to be illegal.
This is unacceptable for me as a stock holder. It is unacceptable to me that the Disney board of directors granted CEO Robert Iger a 35% increase for his compensation this year to a whopping $46,500,000 while simultaneously firing a group of people who make a drop in the bucket in comparison. This is the kind of business practice that increases the divide between the rich and poor of our nation, and shrinks the middle class even more.
This is the kind of business that crushes the American dream. So much for America spreading her "golden wings" to "sail on freedom's wind," as so movingly sung in EPCOT's American Showcase. When that attraction gets 'refurbished for my future enjoyment', will there be a new segment on how Disney outsources jobs of cast members so the company can exploit foreign workers to save a few bucks? Somehow I doubt it.
Walt Disney himself once said, "You can design and create the most wonderful place in the world. But it takes people to make the dream a reality." For me, this translates into the very people who create the magic-- the people who run the rides, sell the tickets, drive the buses, wear the costumes, program the computers, and clean the messes in the self-proclaimed 'happiest place on Earth.' These are the cast members of Disney World. They are the foundation of the parks, they are what makes Disney World run like clockwork and feel like no other place on Earth.
One of Sir Richard Branson's 5 rules for good business is this: "Your employees are your best asset. Happy employees make for happy customers." It would seem Richard Branson knows a thing or two about running a business, as evidenced by his enormous success. Job security should not be a serious worry for people who do their jobs diligently and well.
Yet the story of the Disney tech people who suddenly lost their jobs must have caused nothing short of a tremor throughout the entire company. I don't see it as a morale builder for Disney cast members. I don't see this as a tactic to increase loyalty or productivity. And relative to my own self-interest, I don't see this as a boon to me as a stockholder or future customer planning to spend hard-earned money at Disney World. It's bad for business.
Again-- I am an investor in the Walt Disney Company. I carefully chose the stock and company because I believed it would make money for me. It has lived up to my expectations so far. But I also picked the stock because I love all that Disney represents. About the Disney Company, Walt himself once said, "Virtue triumphs over wickedness in our fables. Tyrannical bullies are routed or conquered by our good little people, human or animal. Basic morality is always deeply implicit in our screen legends."
Basic morality is in essence the trademark of Mr. Disney's name and the Walt Disney Company: that good overcomes evil, hard work and honesty matter, and daring to dream can really change the world. Yes, it's idealistic. But I am a customer, and this is what I expect from Disney as a company.
I am not at all pleased, and would like to see that the 250 people who were terminated have their jobs offered back to them.
Sincerely,
Cindy Crowell-Doom
So anyway, there it is. As always, your comments are important! And yes, I will eventually get back to the main point of this blog, which is investing.
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I do swear to God that I am really and truly doing research about making investments. I promise I am investigating ways to pick stocks and mutual funds, and I promise to pass any and all of what I find onto you. But I must admit the ethical aspects of investing and business do fascinate me. So yes, I am digressing again!
This morning while perusing a few online business articles, I came across this gem from Fortune magazine: "Top CEOs Make More Than 300 Times the Average Worker." This article was written in response to a report from the Economic Policy Institute released on Father's Day.
So of course me being me, I had to check this out. The gist? Adjusted for inflation, over the past 36 years CEOs have seen an increase of almost 1000% in pay, while most of us in the USA saw a pay raise of 11% over the same period of time.
According to this article, back in 1965 the ratio was considerably different than it is today: for every dollar a worker made, the CEOs made $20.
So what's happened over the past half century?
Read more about it at http://fortune.com/2015/06/22/ceo-vs-worker-pay/
Feel free to comment!
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