Mormonism's Market Value

[Arcturus]

*Disclaimer: Very long post, but I think this is a worthwhile discussion.

I posted this on the NOM thread about the Mormon WikiLeaks (hereafter referred to as MWL) $32b here, but wanted to fit this into its own thread with the hope of spurring more discussion. Because I don’t think people are getting the picture of how tremendously rich the church (edit) might be.

I don’t want to give too many personal details here because I don’t want my identity to be inferred. But I am in academia and a broad label I would attach to myself is “financial economics” researcher. I love studying how big funds like Vanguard and Blackrock affect the corporate governance of companies and the value they add to capital markets. I am well acquainted with the public data that was used in the recent Mormon WikiLeaks $32b report. I’m listening to the most recent MS podcast episode where Dehlin interviews Ryan McKnight, and although Ryan touched on the point that the church is likely worth $400-500b, I’m disappointed that more wasn’t put into this possibility.

But here’s my (informed) speculation regarding how much Mormonism could be worth. My number is at least $400 billion. I’ll provide you with my reasoning and simple math and suggest some heavy questions to ponder.

Foundational assumption: the money in the 13 funds in the MWL report are solely owned by the church and the capital is owned by the church (they’re not investing other folks’ money for them). (Edit) The fact that none of the funds in the MWL report are registered with the SEC as "investment advisors" disallows you from just tossing out this assumption. Even if LDS Philanthropies is ultimately behind a lot of these funds, people have still donated the $ to the church and it's effectively the church's at this point.

Here’s some background on 13F reports. If you own at least $100m of Section 13(f) securities (i.e., publicly tradable stock), then you are required to file on a calendar-quarter basis all of your individual stock positions that are at least $200,000 in value, or any stock position where you hold more than 10,000 of the common shares outstanding of the company. There are web sites you can go to and look at the 13 funds and actually look at what specific companies they have ownership in. But an important thing to note about 13F reports is that they (a) report only relatively large equity positions, (b) the 13F does not report a single fund’s entire equity portfolio (only reportable positions), and (c) the holdings that hit schedule 13F are largely considered to be “actively managed” equity positions (i.e., stock picking, stock betting, potentially acting as a shareholder activist (think Carl Icahn) in the company). In other words, only risky stock investments generally hit the 13F and someone with a pure indexing strategy will generally have no need to file those positions with the SEC (huge index funds might be so large that their indexed positions get picked up by 13f reporting requirements, such as Vanguard, Fidelity, Blackrock, etc.; but otherwise, the probability of the church's indexed position being reportable on schedule 13f is extremely low).

What does this mean? I think it’s a safe assumption to make that the church is extremely sophisticated in the realm of investment expertise and they are very conservative (for instance, they don’t take out debt). It would be ludicrous for them to be “actively” managing the majority of their equity portfolio. In other words, it would make sense to me that they are taking an index approach with most of their stock investments and the $32b that came up on the MWL report constitutes the areas where they’re playing with risk. So let’s just say that the $32b represents 20% of their entire stock portfolio (I would bet it’s closer to 10% or less). This 20% will ultimately result in a more conservative estimate on my end of how much the church is actually worth.

$32b / 20% = $160 billion. That’s how much I would speculate the church holds in U.S. equities. This is not even considering foreign equity investment… Now let’s keep walking with the assumption that the church is conservative in its investment endeavors. Let’s say the church has invested between 20% and 30% of its wealth in the U.S. stock market, with the rest being in bonds, treasury securities, real estate, private enterprise (AG Reserves Inc., Bonneville Communications, etc.). So here is the estimated total market value of the church’s total wealth:

If the church invests 20% of its total wealth into U.S. equities - $160b / 20% = $800 billion
If the church invests 30% of its total wealth into U.S. equities - $160b / 30% = $533 billion
If the church invests 40% of its total wealth into U.S. equities - $160b / 40% = $400 billion

You should be able to get how I'm doing the math at this point and you can tweak with the numbers. For comparison, here is the current market capitalization (market value) of some of the largest companies in the U.S. (as of today (2018-06-05), per Yahoo Finance):

Apple - $949.59b
Amazon - $816.39b
Google - $797.42b
Microsoft - $783.3b
Exxon Mobil - $340.6b
Berkshire Hathaway - $469.55b
Walmart - $250.2b
General Electric - $118.94b
AT&T - $199.7b
Johnson & Johnson - $325.88b
JPMorgan Chase - $365.23b
Goldman Sachs - $86.11b

This is shocking to me, especially considering that the church has only averaged $40m of charitable giving annually over the last while. Given that there is 0 financial transparency in Mormonism, these numbers suggest that there is a high probability that some level of rent extraction is occurring in the Mormon church. The agency conflicts are staggering. Moreover, should America be subsidizing Mormonism to a large extent through its tax-exempt status? The tax discussion surrounding Mormonism and its corporate arms is a worthy discussion in and of itself. I'm not a tax expert, so I have no idea how Mormonism's for-profit endeavors can draw from tax-exempt funds without those funds becoming taxable. And you bet the church is employing some big time powerhouse legal folks to maximize their returns and avoid tax as much as possible.

Lastly, why the hell should poor Mormons in Africa pay tithing? Why the hell isn't the church constructing education facilities in 3rd world countries and getting into the micro loan business? Why the hell isn't the church dominating humanitarian efforts relative to other world religions?

How do I feel after considering all this information? Either the brethren are a bunch of zealots who are storing up for when the **** hits the fan or they've found themselves in a very lucrative enterprise and they're gonna keep it going... Knowing human nature, I just can't stop thinking about the latter notion.

Would love to hear thoughts on this and get any pointers if I'm off on my assumptions. Also, would love for any legal experts here to consider drafting a bill and sending it off to some liberal congress person for an investigation to open up against Mormonism. The tax-exempt nature of big religion needs to be considered in the U.S. That's just my opinion and I know I just opened up the door to political firestorm...

[Reuben]

This is great information, thanks.

I would go with the zealots explanation, personally. They might be planning to buy Missouri.

[1smartdodog]

I am far from a financial expert, but it seems religion in America can be a very lucrative business.

The thing that strikes me is how the church ignores its own preaching. If they employ faith like the tell members to do they would spend their money each year and rely on the Lord to provide for the next year

Maybe they have some vision of the future and they think they will need this horded stockpile. Maybe they just like being in control of so much wealth. Whatever the reason it is a massive chunk of change to sit on and do so little constructive work with it. Perhaps that is the real shame. So much potential and so little result.

[GoodBoy]

I really appreciate your educated view of this because it is Greek to most of us. Your estimate of the church's total "rainy day fund" depends on 1) the % of their holdings that they actively manage, and 2) the % of their holdings that is in foreign markets as opposed to domestic. I think you can assume that they are extremely conservative and smart about both of those things so your assumptions are probably close.

You, or someone with similar credentials, should write an article and submit it for publication stating exactly what you said here. You could do it anonymously if you need to.

Oh how I really want to ask the prophet publicly why he doesn't make the church's finances public.

I also want to see President Nelson listed as one of the richest men in America since he is technically the sole owner of all of that wealth.

[Red Ryder]

Your reasoning sounds good to me but as you pointed out we are just guessing here. I think the church will continue to have money forever at this point meaning they have enough assets to support their operations forever. 14.5 million members could stop paying tithes and the church could still pay their operating expenses with residual and business income. It won't implode based on lack of money.

I'm not a tax expert, so I have no idea how Mormonism's for-profit endeavors can draw from tax-exempt funds without those funds becoming taxable. And you bet the church is employing some big time powerhouse legal folks to maximize their returns and avoid tax as much as possible.

Its a matter of intercompany or arms length transactions they initiate. I'm on my phone right now which is having trouble pulling up the link but go to Citizens Audit.org and search for Property Reserve. Click on the latest 990 on file and scroll through the the expense details. You'll notice the non-profit entity shows parking lot maintenance fees, security fees, location administrative expenses (whatever that means), etc. Who do they pay these expenses to? Other businesses owned by the church? Businesses owned by family and relatives of the GA's? Who knows? See how his works?

The other thing to remember is that the church is a Global entity that can move money around maximizing tax laws to their benefit. One example exmos love to discuss is BYU funding that comes from Canada tithe payers. The laws there limit contribution revenue collected from passing through Canada's boarders but certain exemptions like funding education exist. So what happens? The church "donates" to BYU. See how this works? They move the money around within the laws of the land they operate in and exploit legal loopholes for maximin benefit. Now it's also important to understand that global Corporations do this all the time too.

[Arcturus]

Whatever the reason it is a massive chunk of change to sit on and do so little constructive work with it. Perhaps that is the real shame. So much potential and so little result.

I feel the same way. With that much money the church could really do some good in the world. It pains me that the church focuses on the hereafter rather than the today. I would love to see some inside financial information on the total costs for temple construction, maintenance, and renovation over the years.

[Arcturus]

You, or someone with similar credentials, should write an article and submit it for publication stating exactly what you said here. You could do it anonymously if you need to.

I'll consider it. What I'm at least planning on doing when my schedule opens up a little is dig into the data on these funds and examine their general investment strategy (momentum trading, activism, holding period, etc.) as well as the industries that they are concentrated in. Put it into a nice spreadsheet and send it over to MWL to see if they'd like to add it to their documentation.

[Arcturus]

Your reasoning sounds good to me but as you pointed out we are just guessing here. I think the church will continue to have money forever at this point meaning they have enough assets to support their operations forever. 14.5 million members could stop paying tithes and the church could still pay their operating expenses with residual and business income. It won't implode based on lack of money.

My DW pointed this out to me. It's a little discouraging to consider that if these wealth estimates are accurate, then the church is going to be financially secure for a long time independent of growth and contributions by the members. Why is this discouraging? Because they're likely never going to change the narrative and address the issues that are driving members out of the church in great number. There will likely always be an orthodox subset of true-blue Mormons who remember their death oaths in the temple and will never look at material that does not faithfully portray Mormonism.

The other thing to remember is that the church is a Global entity that can move money around maximizing tax laws to their benefit. One example exmos love to discuss is BYU funding that comes from Canada tithe payers. The laws there limit contribution revenue collected from passing through Canada's boarders but certain exemptions like funding education exist. So what happens? The church "donates" to BYU. See how this works? They move the money around within the laws of the land they operate in and exploit legal loopholes for maximin benefit. Now it's also important to understand that global Corporations do this all the time too.

In the game of income shifting the tax authorities are far outmatched. I'm sure the church plays this game hard core and employs the best and brightest to construct fully legal schemes to minimize their tax burden on the corporate side.

The sad thing is to consider how good the church could be if they devoted equal talent and attention to humanitarian aid as they do in their wealth management.

[Palerider]

Is it just me or does having the very worldly term "market value" associated with the organization that supposedly represents The Savior of mankind and His message....isn't there something just terribly incongruous with that?

I hope I don't step on anyone's temple toes but isn't the answer "We have sufficient for our NEEDS" when asked "have you any money"?

Does this BofM scripture remind anyone of temples and polygamy?

"And the angel spake unto me, saying: Behold the gold, and the silver, and the silks, and the scarlets, and the fine-twined linen, and the precious clothing, and the harlots, are the desires of this great and abominable church."

Just thinking here....

[wtfluff]

Would love to hear thoughts on this and get any pointers if I'm off on my assumptions.

My thoughts? As others have mentioned, I have absolutely no training to question any of your reasoning, but one of the first things that comes to mind: WOW. I mean, I'm surprised/not surprised. We've always know that LDS-Inc. is sitting on a boatload of cash, but 32 BILLION dollars, just to play the stock market? Double-You. Teee. Effffff. Plus a lot more explicitives...

My DW pointed this out to me. It's a little discouraging to consider that if these wealth estimates are accurate, then the church is going to be financially secure for a long time independent of growth and contributions by the members. Why is this discouraging? Because they're likely never going to change the narrative and address the issues that are driving members out of the church in great number.

This I don't know about. The leadership / entity it'self is obviously very into being greedy, so there is always the chance that when the see the free revenue stream of tithing dying off enough, they'll change their tune somehow to keep that stream intact.

[Mormorrisey]

Is it just me or does having the very worldly term "market value" associated with the organization that supposedly represents The Savior of mankind and His message....isn't there something just terribly incongruous with that?

I hope I don't step on anyone's temple toes but isn't the answer "We have sufficient for our NEEDS" when asked "have you any money"?

Does this BofM scripture remind anyone of temples and polygamy?

"And the angel spake unto me, saying: Behold the gold, and the silver, and the silks, and the scarlets, and the fine-twined linen, and the precious clothing, and the harlots, are the desires of this great and abominable church."

Just thinking here....

Bang on, my friend. That incongruity is what started me down this path of mine. Reading the New Testament Jesus and his message simply didn't jive with what the corporation was doing. You're not far off.

The problem with trying to figure out "Mormonism's market value" is the same as trying to figure out what the hell Inception was all about. The final number is so big, and the overall picture so complicated with real estate ventures, stock holdings, tithing revenue and equities, I don't think we'll ever know. All I know, it's a pretty big corporation that will last a LONG time, the "burn it down with truth"ers notwithstanding.

[Arcturus]

This I don't know about. The leadership / entity it'self is obviously very into being greedy, so there is always the chance that when the see the free revenue stream of tithing dying off enough, they'll change their tune somehow to keep that stream intact.

Just assume that the church's net worth is $200 billion. If they could get a return on their assets of just 6%, they'd be raking in $12 billion a year on that alone. I think that is beyond sufficient to cover their operating costs and more. So I think Mormonism is here to stay if these wealth estimates are close to correct.

[wtfluff]

This I don't know about. The leadership / entity it'self is obviously very into being greedy, so there is always the chance that when the see the free revenue stream of tithing dying off enough, they'll change their tune somehow to keep that stream intact.

Just assume that the church's net worth is $200 billion. If they could get a return on their assets of just 6%, they'd be raking in $12 billion a year on that alone. I think that is beyond sufficient to cover their operating costs and more. So I think Mormonism is here to stay if these wealth estimates are close to correct.

I completely agree. Loss of tithing revenue isn't going to "burn it down", but I wouldn't be at all surprised to see them change their tune to keep the tithing flowing.

[DPRoberts]

Great background on the significance of the 13f reports. Clarified some questions I had. I have a couple more just for starters.

What does this mean? I think it’s a safe assumption to make that the church is extremely sophisticated in the realm of investment expertise and they are very conservative (for instance, they don’t take out debt). It would be ludicrous for them to be “actively” managing the majority of their equity portfolio. In other words, it would make sense to me that they are taking an index approach with most of their stock investments and the $32b that came up on the MWL report constitutes the areas where they’re playing with risk. So let’s just say that the $32b represents 20% of their entire stock portfolio (I would bet it’s closer to 10% or less). This 20% will ultimately result in a more conservative estimate on my end of how much the church is actually worth.

$32b / 20% = $160 billion. That’s how much I would speculate the church holds in U.S. equities. This is not even considering foreign equity investment… Now let’s keep walking with the assumption that the church is conservative in its investment endeavors. Let’s say the church has invested between 20% and 30% of its wealth in the U.S. stock market, with the rest being in bonds, treasury securities, real estate, private enterprise (AG Reserves Inc., Bonneville Communications, etc.). So here is the estimated total market value of the church’s total wealth:

My thought when I read this was "black swan". I don't you if you have read any of Taleb' s books, but that could explain why an otherwise very conservative organization would take on high risk equities. Have you looked at the individual holdings and would they be consistent with a black swan strategy, i.e. big random upside potential? If so your 20% is probably high.

This is shocking to me, especially considering that the church has only averaged $40m of charitable giving annually over the last while. Given that there is 0 financial transparency in Mormonism, these numbers suggest that there is a high probability that some level of rent extraction is occurring in the Mormon church. The agency conflicts are staggering. Moreover, should America be subsidizing Mormonism to a large extent through its tax-exempt status? The tax discussion surrounding Mormonism and its corporate arms is a worthy discussion in and of itself. I'm not a tax expert, so I have no idea how Mormonism's for-profit endeavors can draw from tax-exempt funds without those funds becoming taxable. And you bet the church is employing some big time powerhouse legal folks to maximize their returns and avoid tax as much as possible.

Not sure what you mean by rent extraction or how that would apply to LDS Inc. Can you elaborate?

[Arcturus]

My thought when I read this was "black swan". I don't you if you have read any of Taleb' s books, but that could explain why an otherwise very conservative organization would take on high risk equities. Have you looked at the individual holdings and would they be consistent with a black swan strategy, i.e. big random upside potential? If so your 20% is probably high.

I love Taleb! That's what leads me to believe that the 13F holdings only represent maybe like 10-15% of the church's equity position. However, as you extrapolate from that point you see how the total wealth position of the church grows rapidly (if the $32b is only 10% of the church's equity holdings, then their total equity portfolio is at least $300 billion...). That doesn't make me feel good inside as you can imagine so I focused on a more conservative estimate (not entirely rational, but it becomes hard to believe at that point even though tried and proven financial wisdom in combination with the conservatism of Mormonism would suggest that their actively managed portion of their equity portfolio is less than 20%). But along the lines of Taleb, the financial wisdom highlighted in this podcast provides support for the idea that the church, as a (likely) long-term investor, would be big on index investing and would shy away from toying with stock market risk.

http://freakonomics.com/podcast/stupidest-money/

As for looking at their stock picking abilities, I intend to do that when my schedule opens up. However, I can only infer so much with quarterly data so at best I'll have some range estimates on how well they're picking winning stocks. Interestingly, Argyll Research appears to have filed their first 13F at the beginning of 2006 (just before the financial crisis) so it'd be interesting to estimate how much $ the church lost going into the recession, or possibly, how well they exploited it. And as for short positions (betting against a specific stock's performance), these positions aren't reportable on the 13F.

Not sure what you mean by rent extraction or how that would apply to LDS Inc. Can you elaborate?

Rent extraction is a fancy term that academics like to throw around. But a good summary of what it entails is stated clearly by Investopedia:

"Rent-seeking is an individual's or entity's use of company, organizational or individual resources to obtain economic gain without reciprocating any benefits to society through wealth creation. An example of rent-seeking is when a company lobbies the government for loan subsidies, grants or tariff protection. These activities do not create any benefit for society but merely redistribute resources from the taxpayers to the company."

[Red Ryder]

Arcturus, any good recommendations for an IRA contribution? Good mutual funds or something similar?

[foolmeonce]

I'm assuming that your estimated wealth calculations are based on securities only correct? Or are you including real estate and private business ownership as well?

[Arcturus]

Arcturus, any good recommendations for an IRA contribution? Good mutual funds or something similar?

Unfortunately I am not confident in my personal wealth management knowledge. I study big business and large institutional investors, and that knowledge doesn't necessarily transfer over into good advice I could offer you. But I think that podcast link to the freakonomics episode on investing is a great intro into that world. But good personal financial advice depends a lot on your age, background, risk tolerance, retirement goals, etc...

I'm assuming that your estimated wealth calculations are based on securities only correct? Or are you including real estate and private business ownership as well?

Good question foolmeonce. Based on my familiarity with schedule 13F filings and the church's likely conservative nature, I extrapolate what their potential total equity position is on the assumptions that the capital in the funds included in the MWL report contain only the church's cash and the equity positions reported on the schedule 13F for each fund represent more risky bets in the stock market. Then, in taking a guess at their total wealth I extrapolate further using their estimated total U.S. equity holdings. As far as what their total wealth consists of? Anything. Real estate, private business, private equity, venture capital, treasury securities, bonds, commodities, etc. I would be very comfortable assuming that the church is as diversified as any entity can be.

[EternityIsNow]

This is fascinating. Great post, I agree this topic needs some technical discussion. So here is some discussion.

I think it is only fair to point out that the church does not always operate like a rational business. The top leadership exerts complete control, and they do at times ignore expert opinion. A friend of mine has experienced that as a church consultant. So it is not surprising that many of their decisions suggest a contrarian approach to managing their affairs. They tend to oppose populist trends politically for example. I believe in part they need to do this to maintain the image that they are superior to the world around them. There is also evidence that top leaders at times make arbitrary decisions based on feelings and value systems from decades past.

Due to their successful religion business being so strangely managed, I would not make the grand assumption that the church regulates it's finances in a traditional way. That 32 billion could be the lions share of their cash assets. One reason I supect this might be true is the number 13. What are the odds that two companies are missing from this list, perhaps foreign investment companies. For the foreign share of the churches holdings. That would bring the total to 15. Giving each ordained Apostle top management responsibility for one of these investments. They could assign more senior apostles to the larger funds. And rely on diversification of inspiration to provide some protection against all the companies making bad stock picks. Splitting up the responsibility for directing the financial investments of the corporation would be very consistent with the way the church administers it's religion business. The way it divides responsibilities among the top leadership.

Here is another challenge to the speculative valuation. If you calculate out the probable savings rate of tithing and corporate profit revenues, I have a hard time coming up with hundreds of billions. The 32 billion though seems highly probable. That amount could easily have been saved up and accrued over the past few decades. Perhaps evaluating the limited historical information in these reports would give some insight into the source of funds, And the amounts being directed from tithing and business efforts. See if those amounts are consistent with probable revenues and surpluses.

Finally, we know nothing of their success rate. Perhaps you could calculate the probable growth rate of the holdings today. But we know nothing about their past holdings. Anyway that is my assumption, maybe there is public information available or someone could calculate their success rate over time. But my point is, for all we know they could have lost money in some years. That could be embarrassing if top leadership is approving investment strategies or even approving stock picks. Just a thought.

I think these points should be at least considered an any academic speculation of their net worth.

[Arcturus]

I think it is only fair to point out that the church does not always operate like a rational business.

These are all great points EternityIsNow. This speculation depends completely on a set of assumptions that could be wrong. I also scratch my head considering how they could have amassed hundreds of billions in only a few decades.

When was the last bankruptcy scare that the church went through?