Saturday, April 24, 2004

John Kerry's investments 

The current issue of Business Week has a little "gotcha" article on John Kerry's investments:

John Kerry has had tough words on the Presidential campaign trail for "Benedict Arnold CEOs" who export U.S. jobs. But according to the May, 2003, financial disclosure form he's required to file with the U.S. Senate every year, the Democratic candidate has stock in several multinationals that have outsourced work overseas -- General Electric (GE ), Procter & Gamble (PG ), and Verizon (VZ ), among others.

Business Week, like most media, delights in uncovering supposed hypocrisy of this sort. Not surprisingly, the Kerry campaign says that the investments are all in a blind trust over which Kerry has no control, and in any case he is going to hammer companies that outsource, as he defines it:

"It's a silly comparison," says Kerry senior adviser Michael Meehan. "Senator Kerry has a plan to crack down on companies who send jobs overseas."

I think that Business Week's article is banal: anybody that holds a reasonably diversified portfolio of common stocks -- or mutual funds that hold common stocks -- is going to own the shares of many companies that "outsource." We didn't have to wait for Kerry's disclosure statement to know that. And Kerry's defense -- that the shares are in a blind trust -- is ridiculous for the same reason. It would be almost impossible to own a diversified portfolio of public companies without investing in companies that outsource, and which, by Kerry's definition, are led by Benedict Arnold CEOs. One needn't know the particular companies in the portfolio to know that most of them outsource at least some of their production.

Of course, Kerry could avoid the risk that his blind trust will, heaven forfend, cause him to profit from outsourcing by structuring the trust so that it is permitted to invest only in debt securities. Then there would be no chance that he might turn a buck on the back of American labor. True, his rate of return would be roughly half that of equities, but that's the point, isn't it? We outsource certain functions because it is more profitable to do so. If you want to avoid benefiting from outsourcing, you have to take your return in the form of interest, rather than a share of the profits. Kerry wants to have his cake and eat it too.

As with Autogate, I am not big on picking apart these petty hypocricies. I wonder, though, why Kerry didn't do more to spare himself this sort of grief before the campaign began in earnest. Presumably, he could have influenced the trusts to move his assets into Treasuries last year. Why didn't he do it?


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