Burning Down the House, Volume II
“My home state is in a stranglehold of flames.”
That’s how I described the fires raging in the Golden State, not last week, but some 11 months ago in this column. And if you’ve been following the news over the past several weeks, you know that the raging wildfires aren’t just in California, but also in Oregon and Washington, where dozens have died and where tens of thousands of acres have burned.
Now, the blue skies of my beloved Southern California have taken on an eerie, jack-o’-lantern-like glow that not only can be seen, but that also can be felt with every deep breath.
Yet, why does this keep happening, and what is the reason for these increasingly devastating disasters?
Unfortunately, the situation less than a year ago is basically the same as it is today, with the exception of the fact that COVID-19 is compounding the overall ability for our first responders to do what they do best in battling these blazes.
As I thought about this issue once again, I realized that what I wrote 11 months ago was still applicable today. In the article “Burning Down the House,” I wrote the following:
The latest round of fires this season have come after last year’s disastrous fire season, which included the Woolsey fire, one of the most destructive blazes in the state’s history and one that caused devastating damage to property in and around the Malibu area.
Well, add yet another year to that tally, only this one will undoubtedly be much worse. But again, why are the fires getting increasingly worse? I continue:
According to scientists, the main answer is that California is just hotter and drier than it’s ever been. “The temperatures have just been almost inexorably warmer all the time,” said UCLA climate scientist Daniel Swain in a Los Angeles Times interview last year. Fires “burn more intensely if the fuels are extremely dry,” added Swain. The logical combination of hotter and drier weather with fast-moving winds is a prescription for fire danger. Hence, the state is literally burning down.
Now, the hotter climate is one thing, and it certainly has been a very hot summer this year, particularly over the past couple of weeks. Yet, what continues to inflame me is the dysfunctional political climate in the state that has really failed to address this situation properly.
Last year, the political climate was fleshed out beautifully in an op-ed in the Wall Street Journal by Holman Jenkins, titled, “Revolutionary California.”
According to Jenkins, “The wildfire crisis is ultimately the product of state politics controlled by interest groups whose agenda has drifted out of any cognizable relationship with the daily well-being of the state’s average citizen.”
In support of his thesis, Jenkins offers up the following assessment:
“Because California accounts for less than 1% of global emissions, nothing it does will make a difference to climate, but its ratepayers shell out billions for wind and solar that might be better spent on fireproofing. A generation of ill-judged environmental activism has all but ended forest management in favor of letting dead trees and underbrush build up because it’s more ‘natural.’ At the same time, residents resist any natural or planned fires that would consume this tinder before it gives rise to conflagrations…”
As I wrote last year:
I am not surprised that poor government policy is partially responsible for exacerbating the damage caused by the fires. Government nearly always makes things worse. Yet I am also aware that when you add hotter temperatures, drier vegetation and high winds into a biome, well, nature gives you fires — and nature really doesn’t care about government policies.
In my opinion, if we want to ameliorate the destructive damage done by the increasingly devastating seasonal fires in California, Oregon, Washington, Utah and other western states, we must approach the situation with reason applied to reality. We certainly cannot ignore the reality of hotter temperatures, and the pernicious effects that come with it, on our environment.
Does this mean we have to take action to fight climate change?
I am no expert on that complex issue, and it is an issue where, unfortunately, politics render one’s rational vision opaque. Yet, what is all too apparent is we need to better manage fire-prone areas and make sure we remove dry foliage and excess fire fuel. We also need to be more mindful of overbuilding homes and commercial properties that lie in the most dangerous fire areas.
Finally, I think what I wrote on this situation last year as a possible beginning of a resolution to this massive problem is even more applicable right now:
I think that a great way to start tackling this issue is to employ some rational political courage by the state’s citizenry by demanding smarter action. Even better, if that action can be undertaken by private enterprise and not impeded by government, it will likely have a more impactful outcome.
I know that this issue is far bigger than just voicing an opinion about the need for more courage and smarter action. However, it only takes a spark to set a wildfire raging — and it only takes the spark of a rational voice to set aflame societal solutions.
ETF Talk: Accessing American Real Estate Investment Trusts
(Note: Fourth in a series on post-pandemic boom ETFs)
To put it mildly, the overall performance of real estate investment trusts (REITs) this year has been less than stellar.
So far, in 2020, the overall sector has lost 13.6%, which is considerable, especially when we take into account that the S&P 500’s loss for the same period was just 5%. When REITs are aggregated by sector, the losses are even more startling.
Not surprisingly, the REITs that have done the worst are in the industries that were the hardest hit by the COVID-19 pandemic. Shopping malls, hotels, office buildings and others such services were forced to close, and the inflow of money in the form of rent payments began to slowly dry up.
Other REITs, such as technology, or ones that do not depend on human-to-human contact, have done much better. For instance, tech-oriented REITs in the S&P 500 have, on average, produced a return of 11% over the past year. Similarly, the Federal Reserve’s decision to cut interest rates to zero for the considerable future is another positive signal for at least part of the sector.
Thus, while the recent step backward in the REIT market can be seen as an opening for investors, it is crucial that real-estate-focused investors sail into the sheltered harbor of less-risky REITs to decrease the possibility of being dashed against the shore of the weaker parts of this sector.
Thankfully, an exchange-traded fund (ETF) called the iShares Residential Real Estate Capped ETF (NYSEARCA: REZ) tracks a market-cap-weighted index of U.S. residential, health care and self-storage REITs. At the same time, despite the “residential” label in this ETF’s name, a great deal of its portfolio falls outside this moniker. Indeed, much of the portfolio is composed of self-storage, health care and senior care companies.
Some of this fund’s top holdings include Public Storage (NYSE:PSA), Welltower, Inc. (NYSE: WELL), AvalonBay Communities, Inc. (NYSE: AVB), Equity Residential (NYSE: EQR), Ventas, Inc. (NYSE: VTR), Sun Communities, Inc. (NYSE: SUI), Extra Space Storage Inc. (NYSE:EXR) and Invitation Homes Inc. (NYSE: INVH).
This fund’s performance has begun to recover after falling due to the ongoing COVID-19 pandemic. As of Sept. 11, REZ has been up 1% over the past month and 4.28% for the past three months. As of Sept. 15, it is currently is down 18.85% year to date.
Chart courtesy of www.stockcharts.com
The fund has amassed $379.65 million in assets under management and has an expense ratio of 0.48%. Income investors should like its current dividend yield of 3.30%.
In short, while REZ does provide an investor with a chance to tap into American real estate, this kind of ETF may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.
As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.
In case you missed it…
Wrong Doesn’t Mean Evil
Today I am proud to present a guest editorial by my friend, writer, filmmaker and intellectual activist Stewart Wade Margolis. Stewart has been my very good friend and fellow advocate for reason since our days together at UCLA. He’s also been a guest on my podcast, Way of the Renaissance Man. In this short essay, Stewart warns against falling into the trap of demonizing your ideological enemies and failing to make the effort to see that there are values-based reasons why people support their side. You may think they are wrong — and they may well be wrong — but they are not evil. And to believe that they are is not just a mistake, but a prescription for societal destruction. I loved this essay, so much in fact that I asked Stewart for permission to present it to you. He graciously agreed, and that means I get the privilege of sharing his thoughts with you.
Wrong Doesn’t Mean Evil
By Stewart Wade Margolis
A great deal has been written lately about the rise in partisanship and tribalism. But even so, all too often, I see people falling into the trap of demonizing their ideological enemies, assuming that anyone on the “other side” is not just mistaken, but corrupt, bad — even evil. They cannot understand how any good person could possibly support X or believe Y. Some of this is just a failure of empathy or the desire to even try to understand where someone else is coming from. But a large part of the problem is that our ideological camps come as package deals. Of course, you can be someone who supports a woman’s right to choose, and also believes in free markets (I am such a person), but you won’t find a comfortable home in either of the prevailing ideological camps. Since virtually everyone demands that you choose sides, what is the average person to do?
For me — and for a lot of people I know — neither side is truly a good fit. But we’re told we have to pick a side. And once you pick, you’re expected to toe the party line. I think people might be less prone to demonizing the other side if they recognized that a lot depends on which part of the package deal you focus on.
Conservatives I know simply can’t imagine how anyone could align themselves with progressives. They focus on the leftists who are nihilists, communists — or just plain crazy — and they don’t see how any good person could end up in this camp. But most of the liberals I know dismiss those elements as fringe and focus on the issues that concern their daily life: the freedom to love whomever you choose, reproductive freedom, an end to the war on drugs and police reform. If these issues are important to you — as they are to me — it’s not that hard to see how one could end up on this side.
Similarly, liberals I know find it incomprehensible that any good person could support Trump or the conservatives. They focus on the apparent racism, misogyny, homophobia as well as the lies and the anti-science attitude and they are horrified. But most of the conservatives I know are intelligent and educated. They are not racist, homophobic, or misogynistic. They are focused on the fact that Trump seems to be pro-America, pro-business and anti all the worst elements of the crazy left. They don’t necessarily like or approve of the way Trump conducts himself, but they believe that the core values of the nation are under attack, and they like that Trump seems to “fight back.”
I am profoundly pro-America, not in a my-country-right-or-wrong way, but because in its founding, America was the first country to lay out a system that protects individual rights. It did so imperfectly, but it was still a profound leap forward for humanity. So, if I were to focus on this aspect alone, I, too, might end up supporting Trump. After decades of our intellectuals denigrating America, it’s not surprising that “Make America Great Again” would resonate with people.
My point is not to try to convince you to change sides. My goal is to make you see that there are values-based reasons (that you could relate to, if you made the effort) for people to support their side. You may think they are wrong — and they may well BE wrong — but they are not evil. And to believe that they are is not just a mistake, but a surefire way to keep America on the road to destruction.
This is well-trod historical territory. Do you like how this worked out for Weimar Germany? It’s not too late to return to a world where we debate ideas, with the understanding that the other party is also trying to figure out the right path. I know that right now this seems like an impossible, utopian ideal. But I don’t think it is. The first step: dump the package deal. You don’t have to buy into it. Vote how you think is best, but don’t kid yourself that one side or the other is all good or all bad.
But is that really the case? It’s tempting to think the opposite when so many people espouse utter nonsense on social media. And it’s easy to think the “other side” is evil when they viciously attack you on the internet. But the internet is not real life, and when I think about the discussions I’ve had in person with people I disagree with, I don’t think I’ve ever come to the conclusion that I was dealing with an evil person. I’ve talked with a lot of profoundly WRONG people, but if I took the time, I could almost always see where their beliefs came from. Often it was a place of fear, other times of wishful thinking or some other kind of mistaken premise. Almost never did their mistakes come from true evil, from a desire to destroy — at least not entirely. Nihilism does exist, but I think it usually co-exists with other, better, impulses.
The world today, with its 24-hour news cycle and social media, tends to amplify our awareness of all that is wrong in the world. It’s easy to become cynical. But if the majority (or even a substantial minority) of people are evil, not just mistaken but fundamentally bad, then humanity is doomed. If that were the case, though, I don’t see how we ever would have left the caves, much less created the modern world. The fact that progress happens, that we are orders of magnitude better off than people just a few generations ago, demonstrates that there IS a lot of good in the world.
Ayn Rand wrote about the “benevolent universe” premise. This is the idea that reality is a place where human flourishing is possible. As part of this premise, I think it makes sense to recognize that most humans are values-seekers. They want to do good, to be happy and successful. They might not have the right ideas on how to accomplish this (in fact, centuries of bad philosophy mean that most don’t), but their motivation is essentially positive. Demonizing those who disagree with you negates this premise. It also tends to make you angry and hostile, which is not a great way to win friends and influence people. You’re far more likely to change someone’s mind if you treat them with respect and recognize your shared goals and values.
Stewart Wade Margolis is a writer, filmmaker and intellectual activist who champions the virtue of rationality. You can find out more about him at https://stewartwadefilms.wordpress.com/.
Embrace the Rub
“If you are irritated by every rub, how will your mirror be polished?”
When I was a lad, I had a martial arts instructor tell me that if it was “easy,” it wouldn’t be worth learning. I’ve never forgotten that lesson. In fact, I’ve consistently engaged in activities that are hard to master (piano, motorcycle racing, horsemanship, etc.) because it is in the struggle that one finds meaning. This sublime skirmish will teach you more about yourself than anything else, because not only will it reveal your character, it also will hone your mind and sharpen your will better than any whetstone. So, don’t be bothered by every rub; it’s part of becoming polished.
Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.