Morningstar Magazine - August/September 2018 - 14

Dispatches

out a way to sell me a ticket without my having
to stand in the rain?"
When I got back to Chicago, I was given a report,
"The Deutsches Museum of Munich," a typed
manuscript written by Waldemar Kaempffert1
and addressed to Mr. Julius Rosenwald, president
of the Museum of Science and Industry.
It was dated Feb. 1, 1929, when the Chicago
museum was in its planning stage. In this report,
Kaempffert noted "an inadequate vestibule
for the reception of hundreds who seek refuge in
the Deutsches Museum from the rain."

Sears signaled another top when it built the
Sears Tower (now, called the Willis Tower).
Construction on the grandiose 110-story building
began in 1970-the year that tiny Walmart WMT
had its IPO.

Federal Budget
FY 2017 ($Billion)

% of Total Budget

1,077

Social Security

939

Interest

263

Subtotal

2,279

Defense

585

Other Agencies

600

3,464

Healthcare
The Museum Indicator

The great Deutsches Museum is a monument
to German science that was the best in the world
in 1908. How could the Germans not find
the money to fix the ticket office in 90 years?
My theory is that Germany has operated as a
welfare state, and in a welfare state, entitlement
programs such as healthcare and pensions,
plus interest on its national debt, eat up all the
money. Museums don't have the political
constituency to make capital expenditures, so
improvements don't get made.
American museums, such as the Museum
of Science and Industry, are supported by private
philanthropy, which has been a reliable
funding source. The museum has built indoor
parking and state-of-the-art ticket selling.
A tip to investors, whether you're investing in
bonds or stocks: Watch out for grandiose projects.
When Germany decided to build the Deutsches
Museum, Germany was the leading country
in the world in technology, industry, political
stability, and military power. In 1908, the museum
project was a top indicator. Twenty years later,
Germany was defeated and bankrupt, and
the 20 years after that (1929-1949) were disasters
for Germany and all of Europe.
When Rosenwald decided to build the Museum
of Science and Industry, U.S. industry was
supreme, and his company, Sears Roebuck, ruled

SEC Takes Stance
on Advisor Conduct
New rules package
aims to raise standards.

retail. The decision to build was made in 1929.
The museum was opened in 1933, in the depths of
the Great Depression.

Total

POLICY

Source: Morningstar.

Looking forward, our federal budget is dominated
by healthcare and Social Security. These
expenditures will grow every year. A third giant
expenditure will be interest on the national
debt. The current debt is $20 trillion, and in 10
years, it will be $30 trillion. At 3% interest,
the annual expenditure on $30 trillion debt is $1
trillion, which means that interest will be almost as
big as healthcare and Social Security.
This means that all other government programs
will be continually squeezed, as the big three
devour all the money. The chance of funding any
important new program is very unlikely. K
Ralph Wanger, CFA, ran Columbia Acorn Funds from 1970
to 2003.

Aron Szapiro

Many of us probably have fiduciary rule whiplash.
On March 15, the 5th U.S. Circuit Court of
Appeals struck down the Department of Labor's
wide-ranging rules package, known as the
fiduciary rule, which would have dramatically
changed the way the DOL regulated advisors. The
Trump administration was widely assumed
to be planning further changes, but after four
district courts upheld the rule, the circuit court's
decision came as a bit of a shock.
But the saga of government efforts to provide
more muscular regulation of financial advice
continued anyway. On April 18, SEC commissioners
weighed in, voting four to one to release the
SEC's rules package, which aims to raise standards
for advisors. Although the SEC has had the
authority to write these kinds of regulations since
2010, earlier efforts petered out in 2013 before the
DOL took on its fiduciary rule project.
Before we dive into the SEC's rule, it is important
to note that it is still a proposal. The DOL
changed its final rule from its initial proposal, and
we can expect the SEC to make some adjustments.
Every commissioner who voted for it voiced
concerns with some aspects of the 1,000-page
package and expressed a desire to push for
changes and clarifications before voting to pass
a final rule. To complicate matters, commissioner
Michael Piwowar stepped down July 7, so
the five-member commission will look different

1 Waldemar Kaempffert was the famous science editor for The New York Times from 1927 to 1956. The Museum of Science and Industry hired him to be its director, but he had a fight with the
board and went back to New York.

Morningstar August/September 2018

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