If you ask a small retailer what is the secret to their success invariably the answer is positive cash flow. The company earns enough to pay its bills and the expenses of running the company. No cash = no sale. It is relatively simple. In the Conspiracy of Fools written by Kurt Eichenwald published by Broadway Books, NY, 2005, the senior management of Enron forgot that simple lesson. Enron was a gas distribution company which became a trading vessel which tried to commoditize increasing parts of everyday life. The problem was the senior people focused on the trading, used of debt and the larger bonus – rather than the companies they bought operationally made money. When you focus on the trading, rather than the operations, the solution is to be creative to find a way to make it work. If you focus on operations you focus on simple stuff – who pays the bills? what is our cash flow? when do you say no to ideas. On reading the book, one is impressed with the creativity of the dealmakers – they were bright, eager, worked long hours but rarely were told no, only get it done and you will be rewarded come bonus time.. They were rewarded with the get in done theory, and as long as it did not break the law but was okay to be well into the grey area. Over the years the grey area of what is legal or proper and what is not, the grey area moved from white to black as enriching yourself before the company was foremost.

Linking to dividend paying stocks, Enron was a dividend payer through the years of pipelines, became a growth stock which exploded and the pipeline company was reborn and if you own stock in Kinder Morgan you have done well and continue to do so. With dividend stocks, boring, vanilla and making money are the keys. Creativity is wonderful but not too much which loses track of the reason for the company to stay profitable and turn out dividends.

There are more questions than answers, till the next time – to raising questions