Postcards: Why Your Vote Doesn’t Matter

Plus, the great yogurt standoff of 2024 in the Florida Republic. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ Forwarded this email? [Subscribe here]() for more You are a free subscriber to Postcards from the Florida Republic. To upgrade to paid and receive the daily Republic Risk Letter, [subscribe here](. --------------------------------------------------------------- [Postcards: Why Your Vote Doesn’t Matter]( Plus, the great yogurt standoff of 2024 in the Florida Republic. [Garrett {NAME}]( Feb 21   [READ IN APP](   Dear Fellow Expat: Last night, a major standoff went down in the Florida Republic. A 3’10” munchkin stood at the open freezer door. “Who ate the Chocolate Chip bars?” my daughter asked, peering into the boxes. She took one of the remaining two yogurt “popsicles” in the box and ran to her mother. “Did you eat one of those treats?” she asked. Her mother denied it. I’d just entered the room. Quickly, I told her: “I ate one of them.” And before she asked why, I answered, “I bought them at the store and brought them home.” Ah… a sudden realization: So that’s where all of these magical deserts come from.  With that, what felt like a Quinten Tarantino-style Mexican standoff over frozen yogurt and ice cream began. Once they appear in the freezer… who gets to eat them? “Well,” she said. “You know… I have a treat every night… after dinner.” My wife was now worried an argument would break out. And I replied simply: “You have money. If you want me to buy you a box of those bars, give me $6, and I’ll put your name on the box in the freezer.” She did something I half-expected. She nodded.  But then, her face changed. She sat beside my wife and said, “There’s one left in that box.” Then, she did this…  Two fingers to the eyes and everything… The most valuable commodity in the house isn’t gold coins. It’s Yasso Greek yogurt bars. But it’s not the only game in town…  Add ETFs to the List of Economic Coffin Nails I’ve always argued that the problems that fueled the 2008 Financial Crisis and [our massive cost of living crisis today]( accelerated over six decisions in 1993. - Monetary Policy: The Fed began Inflation Targeting (which is QE) - Fiscal Policy: A Congressional law fueled the vast divide between CEO pay and the rest of America - Housing Policy: Andrew Cuomo joined the HUD and later forced bad investments by Fannie Mae and Freddie Mac. - Supply Policy: They put Al Gore in charge of regulation analysis, which created more red tape and bureaucracy. - Banking Policy: Robert Rubin ran the Treasury Department, aided the passage of insane laws, took over Citigroup, helped run the bank and economy into the ground](. (He also should have faced a deeper investigation, but he was politically aligned.) But there’s one often overlooked factor... How Passive Investing Helped Screw Us In 1993, [we witnessed the creation of the first exchange-traded fund (ETF)]( - a basket of stocks that aims to replicate an index sector or performance of an underlying commodity. As I noted, this is a form of “passive investment” - similar to the rise of mutual funds. Today, there are trillions of dollars locked up in ETFs. But the last decade has seen an exponential rise in ETFs of sectors that just flat-out stink. What happens is that a group like BlackRock, Soros Fund Management, State Street, Vanguard, or another alternative asset manager creates an ETF around, say, the electric vehicle sector.  Oh, the ETF has shares of Tesla (TSLA), to be sure… but it also has crappy names like Rivian (RIVN), ChargePoint (CHPT), and other unprofitable companies trading at outrageous multiples. As I noted, they don’t care if the stocks go up or down. They collect management fees from investors (pension funds, universities, other institutions, and retail investors) just for creating and allocating the ETF. They also make money by lending the shares to short-sellers and collecting fees on this trading. But I left one last thing out that I should have mentioned because this is an essential part of the ETF conversation moving forward. Many people say that ETFs are the investor’s money… and that we shouldn’t be worried about these assets' concentration in these large companies' hands. Here’s my message: Who gives a damn about the investors’ money? Because it’s clear that BlackRock doesn’t. What do they want? Power. And how do they get the power? Through the one thing that matters almost as much as the price. That’s the voting rights of the shares held in the ETF. If you buy a stock - you have a vote as an investor. When you buy an ETF? You’re not guaranteed that vote. This is why BlackRock, Soros Fund Management, and Vanguard are worrisome. They can effect change at the board level - without caring if the stock goes up or down or left or right. They can “change behaviors” around businesses. They can push ESG, DEI, and whatever else they want… Why Power Matters About two years ago, people finally woke up to this. But it was essentially too late. BlackRock did get a handful of bad PR events - especially when they started bragging about their ability to force companies to change their board of directors to meet their social directives… It took the warning of 19 state Attorney Generals in late 2022 to warn BlackRock about antitrust concerns linked to the company's neverending Zero-Carbon push. The argument was simple: If you fire people on corporate boards because they don’t follow BlackRock’s carbon initiatives, you are likely breaching your fiduciary duty to shareholders. And that’s exactly right. Facing criticism, BlackRock created a program that claimed it would allow its investors to take part in “proxy” votes - the elections at shareholder meetings that set policies and appointed leadership. BlackRock replied that there couldn’t be a breach of fiduciary duty or antitrust violation if they gave their retail investors a voice in these proxy votes. After all, more than three million retail ETF investors are in its bloc. “Now they’ll have a voice,” the argument goes. But it’s all a ruse. While there’s an oligopoly in the ETF space (and across the passive investment space), there’s a duopoly at the proxy advisory level. A proxy advisory firm provides research and voting recommendations to shareholders on issues requiring shareholder votes, such as corporate governance and executive compensation. There are only two of them: Glass Lewis and Institutional Shareholder Services, or ISS. You’d be shocked to find out that both advisories - which build BlackRock’s recommendations for change at the board - heavily support ESG initiatives. And ISS has a Catholic faith-based policy that heavily supports diversity quotas, emissions reductions, and racial equity auditing. So, when the voting options are created… the only options these proxy firms put out align with these policies. Vanguard and State Street - the other two major players in this ETF space - also heavily lean into these programs. When a proxy comes up, many different things are up for a vote. They might include a change in CEO compensation, ESG emissions, and other elements in the business itself. And while retail investors can vote on a company-aligned package, they can’t separate certain issues. Not all investors agree with everything that happens at the corporate level. You don’t get to say, “Pay the CEO less money… but don’t worry about emissions.” You have to vote on a package. And you’ll get a company option, a proxy recommendation from a group like ISS (which will include ESG), or an abstention. Meanwhile, there is plenty of lobbying to the institutions with larger stakes than the retail investors to support the proxy version - that aligns with BlackRock or Vanguard’s missions. This is all a political and legal ruse; they keep the power… What’s interesting about this is that it has created an entire backdoor to public policy over the last three decades. Rather than relying on Congress to pass laws around corporate policies, government agencies were doing so. When that started getting held up in the courts (because these actions were overreach and largely unconstitutional), we started to see this shift. BlackRock and Vanguard can now change social policies at the board level and within these votes. The question is whether they are violating their fiduciary duty to maximize shareholder value (the return and performance). As we know… they don’t give a damn about that. Ending this practice will take a serious, multi-state lawsuit and an obvious antitrust case. But since the goals tend to align with the “Narrative” and very progressive causes… don’t expect that to happen any time soon. That’s how far we’ve come from [just a simple ETF]( that tracked the performance of the S&P 500 in 1993. Stay positive, Garrett {NAME} Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. Under company rules, editors and writers cannot recommend their positions. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.   [Like]( [Comment]( [Restack](   © 2024 Garrett {NAME} 548 Market Street PMB 72296, San Francisco, CA 94104 [Unsubscribe]() [Get the app]( writing]()