For the U.S. to win the hypersonic arms race against Russia and China will not be easy. We must use all of the knowledge available to us, and utilizing the tech companies from Silicon Valley will help us immensely. These companies have the capabilities to develop new ideas and have trained experts that can catapult our defense systems into the atmosphere, surpassing all other countries.

Martin Blumberg, Melville, N.Y.

To the Editor:

I have no doubt that China’s ambition is to dominate the world, both commercially and militarily. Given that its people have no control of their autocratic government, there is nothing to prevent President Xi Jinping from employing all of the country’s assets—both military and commercial—to achieve this goal. We need to do the same for our own security.

Since we are a free society, I suspect there will be considerable opposition to this, especially due to our government’s past proclivity to spy on its own citizens in the name of national security. However, there is a difference between external- and internal-facing security, which our tech companies generally have resisted.

Perhaps our government can obtain more cooperation from the technology sector through increased consultation, rather than secretly demanding compliance on national-security grounds. That win/win approach would make me more comfortable—and perhaps make others more comfortable, as well.

Dennis W. Pinion, Arnold, Calif.

To the Editor:

The tech companies should work with the Department of Defense, especially in systems and technology that are of national-security concern. National security should not be an area that the tech companies shy away from. They elect not to participate because they have that right. It is ironic that they aren’t willing to support the setup that gives them that freedom. Hopefully, their approach doesn’t become the standard in Silicon Valley.

Benjamin Gingerich, Arcola, Ill.

Handling Market Stress

To the Editor:

Daren Fonda’s feature was very timely and useful. I would argue, though, that most individual investors are unlikely to use “psychometric” software or other sophisticated tools to help them through a market crash or a correction. I would suggest that investors develop their own itemized “gut-check list” on how to handle themselves and their portfolio in times of market stress. Here’s my top four:

1) Never ever be in the position of a forced seller. Using margin or having to raise cash for other immediate needs like paying taxes or making a large purchase may require you to liquidate into a declining market, and you will lock in your losses.

2) Rebalance your portfolio regularly and lock in gains. No investment goes up forever, and selling too soon for a gain is better than watching all your paper gains evaporate in a down market. Additionally, by regularly taking some profits off the table, you will probably do better on a total-return basis if there is a correction.

3) Be an income investor and watch your dividends. Historically, the bulk of market returns have come from dividends, which are much easier to predict than capital gains. Whether your portfolio is up or down 5% to 10%, your dividend income is unlikely to be affected, and the cash will still hit your portfolio on the pay date, correction or not.

4) Keep a healthy cushion of cash in your portfolio. Having hard cash that can be tactically deployed will allow you to take advantage of opportunities that often present in times of market corrections.

I. Al Djindil, Alpha Mode Capital

ESG and Calpers

To the Editor:

Thank you for “ESG Investing Suffers Setback in California.” I applaud the rank-and-file of the California Public Employees’ Retirement System, or Calpers, for rejecting the ESG [environmental, social, and corporate governance] board candidate in favor of one who wants their fund to make the maximum return. I will be on the lookout to avoid mutual funds under the spell of ESG advocates. Articles like yours are why I subscribe to Barron’s.

Bill Hestir, Seneca, S.C.

To the Editor:

Vito J. Racanelli perpetuates an increasingly common misunderstanding by conflating ESG integration for the purpose of properly evaluating investment risks with social or ethical investing practices.

Even as the elements of what constitute E, S, and G are still being debated, the idea of ESG integration, in line with the CFA Institute’s definition, is to take into consideration, in a systematic and consistent manner, any relevant and material environmental, social, and governance risks or opportunities. The consideration of ESG issues in investment analysis is intended to complement—not substitute for—traditional fundamental analysis that might otherwise ignore or overlook such risks or opportunities.

On the other hand, ethical or social investing relies primarily on screening out or excluding companies from investment portfolios for reasons including ethical, religious, and social, as well as other strongly held beliefs, such as environmental concerns or involvement on the part of companies in specific business activities. These may include production or manufacturing of tobacco, firearms, alcohol, or even fossil fuels, to mention a few.

In the case of Calpers, with its long-term pension liabilities, ignoring environmental risks due to climate change that are projected to have greater impacts sooner, for example, could potentially further serve to exacerbate the retirement fund’s already underfunded status.

Henry Shilling, Sustainable Research and Analysis, New York

V ito J. Racanelli responds:

A crucial problem, as I noted in the column and as Shilling concedes, is the lack of common ESG investing standards. Most investors don’t know this. There are studies that support ESG and studies that don’t. What we know is that a woefully underfunded Calpers missed $3 billion in returns, due to ESG investing.

Comments? E-mail us at editors@barrons.com



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