Dearest Rachel –
Of all the topics I could discuss with you that you have left behind and find meaningless from where you are, there’s nothing that has less impact upon you as the subject of money and investments. I always find myself thinking of your perspective as that of Saint Peter in some old joke, who, after having allowed a fellow to bring back to heaven one thing he considered important in his life, saw him return with a suitcase full of gold bars. Incredulous, heaven’s legendary gatekeeper asked the fellow, “All that effort, and you brought back pavement?”
However, as unimportant as it is to you now, money – more specifically, the use of it – was always something that was done with mutual agreement. Any major expenditure either of us wanted to make would be done after conferring with the other – even when I would wave off your requests for permission, reminding you that it was your money (or rather, your parents’ money) to do with as you saw fit, you would always counter that it was our money now, and repeat your request for my blessing. Any changes to our investment strategies would be done together as we sat side-by-side in our broker’s office, bouncing our ideas off of him and vice versa.
Now, I hardly need to remind how, when each of us were growing up, we both found the topic of investment to be something of a dry and boring subject. It wasn’t until we had some real skin in the game that any of the nitty-gritty of the process was of any interest. Even then, as “buy and hold” investors, it wasn’t something that we chose to dwell on very often. We’d discuss these preferences with our broker, make our selections, and let the companies we’d put our money into do their thing. Anything beyond that was out of our hands; we had to trust that the folks running their companies knew their business, and were well aware of their responsibilities to their shareholders (including ourselves), and would do right by us – or at least, as right as they could, given their industry and the economic conditions.
We did, of course, have a few maxims to guide us in our selection of companies to place our money on. One of these was one I picked up from my dad (but I’m sure has been axiomatic since long before his day): if you like the company, you’ll like the stock. The logic is that, if a company makes a product or offers a service you appreciate and purchase, you’re probably not alone. As a member of its customer base – and quite likely, knowing others equally appreciative of what they have to sell – you are personally aware that there is demand for what they have to offer, and people willing to pay for it. Thus, you can be reasonably certain that it will be a going concern for some time to come. If you’re aware of a growing demand for what they sell, or the stock offers a reasonable payback to the shareholders in the form of dividends, all the better, depending on whether you want it to grow or provide income for yourself, respectively.
Granted, this leaves a blind spot for certain industries and markets. Many thriving businesses aren’t exactly customer-facing; they sell to other businesses rather than the public at large. There are others that sell to a sector of the public that we just never belonged to, and wouldn’t personally be aware of how well they were doing. So, we would also rely on our broker to make recommendations, in order to keep our portfolio reasonably diversified. This letter is going to be about one of those recommendations, actually, and my concerns with it, given the current consumer climate.
You see, there was another axiom we relied upon in terms of investment, based on a statement attributed to H. L. Menken: “No one ever went broke underestimating the intelligence of the American people.” If people are going to stupidly buy something worthless (or at least overvalued), one might as well be on the side of those selling that worthless thing, and share in the profits. If, as they say in the gambling industry (and what is investment, after all, but a glorified – and legal – form of gambling, albeit one that greases the wheels of the entirety of capitalist society?), “the house always wins,” then it would be wise to bet on the house (which is why we have a casino stock in our portfolio). That sort of thing.
So when you received your inheritance, we made for our broker to offer our suggestions, and get his in turn, as to where to best invest it. Among other companies we would have never considered, he mentioned a company that dealt in high-end women’s exercise apparel: Lululemon. Its clientele appeared to be those with a bit too much time and money on their hands, but if they could produce a pair of yoga pants for a few bucks and have someone cheerfully plunk down a C-note for them, who were we to object to having a piece of that action? I wasn’t terribly impressed with their leadership – it may have been apocryphal, but if the story about their name being a troll against Asian people and their pronunciation difficulties was even plausible, that suggested a certain mean streak in their founder that might be considered distasteful – but, as Emperor Vespasian put it, money doesn’t smell.
And the company has done very well, and very well by us. In fact, it was one of the leading stock in our portfolio that caused it to almost double in size from when you received it until just before your accident, when I determined we had reached our goal toward generational self-sufficiency. And even though many of our gains have evaporated in the conditions of the last couple of years, we’re still outperforming the market, so there’s that.
However…
It’s one thing for investments to be losing value due to an overall malaise in the market; it’s something else entirely to cripple one’s own stock through stupidity. As I said, we tried to invest against the idiots, but when the idiots are running the companies, well… what do you do then?
I’ve told you already about the issues happening with Disney, which has apparently learned next to nothing in the intervening year since (and continues to pay the price for it; honestly, you’d think an entertainment company would try to give the public what they want as opposed to cramming something down their collective throats, but here we are, and here they continue to be). Over the last month or two, several other companies have apparently decided that their customers will accept any decision they make, no matter how outrageous, and have also suffered for it. By making a female impersonator (I hesitate to call him – and I refuse to name him, as he gets enough publicity as it is – a ‘trans woman,’ as he appears to have no intention of going through with the surgery to actually try to turn himself into a woman) a spokesperson, a certain beer company (one of the allegedly manliest of beverages) has subjected itself to such a backlash that it appears that “to budlight” may soon become synonymous with “to boycott.” Likewise, one of those big-box stores has quite literally made themselves a target by appearing to endorse dressing boys in girls’ outfits (particularly swimwear) specially designed to, ah, conceal certain differences in their anatomy in the interests of trans children’s right. Even though their clientele tends toward the liberal side, this seems to have been a bridge too far (although now that they’ve made token efforts to walk this back, those on the opposite side of said bridge are getting mad at them in turn). And it’s likely to get that much worse over the course of the next month; funny how we just finish with Memorial Day and move straight (well, okay, that was a poor choice of words) into Pride Month. Shows what we as a society value, I suppose – or at least, what our corporate overlords value.
By contrast, Lululemon’s offense is relatively minor. Sure, it’s got a corporate culture that’s primarily ‘woke’ (at this point, who doesn’t?), but since that’s its core clientele, that’s justifiable; it might even be a selling point (which, theoretically, is the reason corporations would wade into politics in the first place, that they think their customers want them to take a stand. Many are starting to find out otherwise now, it would seem, although whether they actually learn this is another question entirely), but that’s not what has people riled up. Rather, it would appear that an employee and an assistant manager were fired for chasing a group of shoplifters – or maybe looters, I don’t know where the line is drawn between them – out of the store and calling the police on them.
Now, I understand having a policy of not having your employees directly confronting thieves; you never know who’s packing heat or not. Merchandise isn’t worth dying for, I can agree. But the story I read suggests that Lululemon was concerned about it looking bad for the company if they were to call the police, despite the location having been struck more than a dozen times previously. You can only pretend for so long that ‘everything is fine’; and besides, this only encourages this sort of activity to continue. And to summarily fire these employees for a first offense (even after they must have let this go on so many times before) seems at least to be over-reacting by the corporation. So, there seems to be rumbles of a possible boycott because of this. Between this and the loss in inventory, I’m starting to wonder about our (my?) position here.
Now, I never owned stock in AB-Imbev, and what we had of Disney or Target is small enough to be negligible. But this is a company we had a fairly substantial investment in, not least because it grew so well over the past four years. But I figured that I should let you know – like I always used to do – that I’m checking in as to whether this is worth hanging on to.
Postscript – After talking it over (and discovering that the return on the shares were an incredible 150% over the past four years – who knew selling overpriced yoga pants could be so lucrative?), our broker, while not altogether certain that the company was likely to be the next to suffer a budlighting, agreed to sell of all but a handful of shares and invest them in a manufacturing concern that’s going gangbusters (and we already had shares in the portfolio, so we’re just spreading the cost basis out). If nothing else, he shared my opinion that we’d had a good run, and there was nothing wrong with collecting our winnings at the counter. We’ll see if this turns out to be a wise move soon enough.
Until then, honey, keep an eye on us, and wish us luck. We’re going to need it.
Letters to Rachel 