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Monday, June 21, 2010

Christian Financial Planning

OK. I know. I'm playing with fire. But this blog is intended to be controversial and challenging. And what could be more controversial and challenging than scrutinizing religion and money?
I especially love "Christian financial planning", because Christ was quite clear on His financial plan: sell everything and give it to the poor. (But then do the newly enriched poor have to do the same? That's true trickle down!) And then there's Jesus' analogy of a camel trying to go through the eye of a needle having better odds than a rich man attempting to enter Heaven. Not being a Biblical literalist- since I can't read Hebrew, Aramaic or Greek -from everything else I've read about him, I think Jesus was referring to attachment to or obsession with or love of money (or any other ego attachments for that matter) not just the mere possession of it. With no attachment to material wealth, one would indeed gain more happiness relieving suffering by giving than from clinging to wealth. Hence the camel metaphor. Some suspect a mistranslation, that instead of "camel" (kamilos) the word was "rope" (kamelos). The metaphor still gets the idea across as neither object is easy to push through the eye of a needle. So why would a Christian financial planner encourage clients' attachment to wealth and thus prevent their entry into Heaven?
Well, here's where the split in rationalization occurs. "Christian" is meant to imply "hey, you can trust me!". But then, every Christian Financial Planning website I've reviewed reverts to mostly Old Testament "Biblical financial principles", (which I won't get into). That way they don't have to deal with Christ's rather simple wealth resdistribution plan for which their services would be unnecessary. Does that seem contradictory to anyone else?

Wednesday, June 9, 2010

Myth: Banks are the safest place for your money

I hate to even go here because it sounds so crazy. 81 banks have failed so far this year (see Failed Banks). To put that number in perspective, it's almost 1/3 of bank failures since 2000 according to But here's the crazy part: Although the FDIC will tell us how many banks are on their watch list (775, last time I checked) they won't tell us the names of those banks, for fear of creating a self-fulfilling prophecy by freaking out depositors who will then take all their money out. The FDIC apparently would rather freak us out even more by secretly seizing our bank. Which we first find out about in the morning paper and all we can do then is spew coffee all over it.
What can we do now, though? Of indicators for bank weakness, the best is the "net charge-off rate", which is the percent of a bank's loans that the bank has given up on collecting. I can't take credit for any of this. See the excellent article at Bank.
How do you figure that out? Enter [drum roll] The Texas Ratio! According to Andy Obermueller's excellent article at the above link:
"The Texas ratio is determined by dividing the bank's non-performing assets by its tangible common equity and loan-loss reserves. Tangible common is equity capital less goodwill and intangibles. As the ratio approaches 1.0, the bank's risk of failure rises. Every bank that has failed in the second quarter has had a Texas ratio of greater than 0.90. In fact the average was about 5.0."

So here's what you've really been waiting to find out; the list of Oregon and Washington banks with risky "Texas" ratios (what's up with Washington banks??):

Oregon Banks
1.91 Albina Community Bank Portland
1.62 MBank Gresham
1.23 Bank of the Cascades Bend
1.16 LibertyBank Eugene
1.02 Home Valley Bank Cave Junction
0.97 Pacific West Bank West Linn

Washington Banks
3.13 Washington First International Bank Seattle
2.58 HomeStreet Bank Seattle
2.58 Seattle Bank Seattle
2.47 North County Bank Arlington
2.33 First Sound Bank Seattle
2.13 Shoreline Bank Shoreline
1.98 Regal Financial Bank Seattle
1.78 AmericanWest Bank Spokane
1.72 The Cowlitz Bank Longview
1.56 Viking Bank Seattle
1.46 Sterling Savings Bank Spokane
1.33 The Bank of Washington Lynnwood
1.20 First Heritage Bank Snohomish
1.16 Mountain Pacific Bank Everett
1.12 Business Bank Burlington
1.07 Bank of Whitman Colfax
1.04 Prime Pacific Bank, National Assn Lynnwood
0.99 Eastside Commercial Bank Bellevue
0.90 Cascade Bank Everett

Friday, June 4, 2010

What are "Socially Responsible" and "Sustainable" Investing?

One of the best online discussions of this issue that I've found is at:
But the most common catch-phrase (which Parnassus Investments has branded) is "Doing well by doing good". For long-term investors, SRI & sustainable investing should pay off better than short-term attempts to game all the systems in which business is done, whether legal, regulatory, environmental, social, ethical or other systems, because eventually such gaming will catch up to the perpetrators. Need I say "BP"?
Having said that, you may be willing to sacrifice higher investment returns and/or incur higher management expenses to be sure your most important principles are honored. For example, CrueltyFree purports to be a website directory of companies that don't harm animals to develop, test & manufacture their goods. This makes sense to me because people who in their minds can turn animals into objects probably do the same with their customers.
Still, how do you tell what's SRI and what isn't? Last time I checked, over 90% of Fortune 500 companies were included in so-called Socially Responsible Mutual fund portfolios. I'm sympathetic; the sheer cost of deeply screening companies for portfolio selection- if "perfect" -would price any SRI fund manager out of the market.
Thankfully, the Internet has become the great equalizer. Virtually anyone can drill down into the inner workings of just about any corporation.
But what criteria do you use? I like William McDonough's three simple principles that by now we should have learned from nature (he's author of "Cradle to Cradle"):
1. Waste Equals Food. All materials used by living beings in nature are constantly returned to the earth and used as food [raw materials] for other living systems.
2. Rely on Solar Income. Nature does not mine from the past. Current solar energy powers the whole system. By mining from the past (coal, oil, gas) and stealing from the future (ocean dumping, depleting fisheries, heating the atmosphere) we are proving to ourselves that our lifestyles will be scaled back, sooner than later, whether we choose that or it is forced upon us.
3. Respect Diversity. An intricate web of relationships among millions of diverse organisms provides stability to ecosystems so that they do not collapse when calamities occur.
These may seem like kumbaya, warm & fuzzy ideals to some folks. But what they really are are admonitions, sober warnings about how the real world works. Anyone, any society, any corporation trying to get around these rules will ultimately fail miserably.
So, in terms of where to invest, I think the rare company that is diligently trying to follow these three principles will do very well in the long term. Hey, what do you know. My company does.