In War time, one of the objects of the opposing side is to target the movement of goods and services particularly infrastructure. If you can do that, it puts a damper of the production and movement of armaments. It is easier to say than do. An interesting book is called The Dambusters  by John Sweetman published by Time Warner, London, UK, 2003.  In 1955 a movie of the same name was made.

In WW II, the English were losing the war and spent long hours trying to slow down the Ruhr Valley which is similar to Pittsburg in the US – home to the steel mills. One method to do this was bomb the factories, but generally the area is very well protected. Then an idea came forth  why not destroy the dams which generate the electricity and flood the area? The British began to research the possibilities of trying to destroy a dam.

Similar to all ideas – in 1942 being tasked with the job, the first task was to gather information about which dams were vulnerable targets. After the identification, how to do the task? If you drop a bomb on a dam, assuming you were accurate what would the impact and how big a bomb must you drop? The bomb would be big, a bigger airplane would be needed to be built and the likelihood of success was limited. The reason is a better solution is to drop the bomb before the dam and have it exploded under water and beside the dam. How to do that was a mystery.

After many experiments, the conclusion was contact with the masonry underwater was essential. Have you ever go to the lake and picked up a stone to skip across the water? The idea was to drop a specialty bomb that would skip across the water to sink just before the dam and explode. In mid May of 1942, the report came out titled Spherical Bomb-Surface Torpedo. The plane would be in a fast glide travelling at 470 ft/sec and no higher than 26 feet above the surface. The bomb would bounce 4 times sink and blow up in the correct position to cause damage and the pressure of the water would add to the flow over the dam. In addition, since this is war and Germany was protecting the dams gunfire was to be navigated around.

By October running through many tests it was seen as possible. Engineers must “sell” the plan to higher commands to go from what is possible to probable to doable. In a country losing the war, what is possible takes a while to go to doable. In March of 1943. 617 Squadron was formed.

On May 17, the Lancaster bombers left England and flew to Germany to bomb the dams including Mohne and Sorpe Dams and smaller dams. Half the planes that left did not come back,for at war the enemy fires back. Dams were hit, rivers flooded, movement of materials stopped for 4 months and by October the dams were operational again. The dams continue to do their purpose to this day.

Linking to dividend paying stocks, in this instance a dam was bombed but dams have in the US (California) have almost collapsed from poor maintenance. If water is released from a dam, the water will play havoc downstream – that is a given and it is battle that utility companies must ensure does not happen on their watch. Once the dam is in place, the cost to generate electricity is minimal and long lasting and that is way investors like dams. Prices can rise over the years and cost remains relatively very low.

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

If you listen to the President, one takeaway that is true is the economy is performing well in terms of unemployment rates have fallen to the lowest level in 17 years and consumer confidence is near the highest in 17 years. The unemployment rate may be due to a natural shift in the demographics from the large baby boom generation to the next generation. The baby boom generation is retiring allowing more opportunities in the labor market to open up. However the reality is unemployment rates are down and that is a good thing.

In an article by April Joyner of Reuters one of the beneficiaries of the good trend is the home building industry. Presidents Clinton and Bush believed people living in a single family dwelling made a better society, the only thing they forgot was paying the bills where ever someone lives keeps society afloat. When too many people were in housing they could not afford, the housing market collapsed. Now days people still want to live in single family homes and demand is tight and growing. This leads us to the US housing industry – is it a good time to buy stocks which cater to the housing market?

There are a number of ways to invest – the home builders; the companies which distribute supplies – Home Depot and Lowes; the companies which make things to go into the home – appliances and such; often single family homes have a garage and driveway which means auto companies; you might look at where demand is growing fastest and look towards the utility companies because those bills are paid monthly and the list can go on.

The federal reserve has indicated it wishes to raise interest rates this year – higher rates would translate into higher mortgage costs for home buyers. Another cloud is last year’s tax bill which put a cap on deductions for state and local property taxes and lowered the amount of mortgage interest that can be deducted on tax returns.

The big companies to look at in the US housing market are Lennar, PulteGroup, D.R. Horton, Toll Brothers and NVR. Ideally, if you are investing in the home building industry – the ability to build from a starter home to luxury homes means not everyone will be affected by rising costs the same manner is a good thing. The S&P Composite 1500 Homebuilding Index has lagged the general market so there may be some good buys to be had as last year the Index was up nearly 75% on a yearly basis.

Linking to dividend paying stocks, in every industry there are very good choices and multiple ways to invest. Doing your homework on the companies and understanding what variables would send buy and sell signals is necessarily. An example is dividend company – does that company make a profit? can it pay its dividend? if yes then you do not have to do anything, but knowing alternatives is never a bad thing.

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

 

 

 

 

In many countries around the world there are stock markets, in North America we are bias towards New York but there are other stock markets. Often times, there are opportunities in the markets. It can be very difficult to change because in some countries the government and the largest companies are very intertwined. The government has over the years selected some companies to reach the scale needed to compete against world markets. In South Korea there are family run conglomerates that have long had the blessings of the government – the Hyundai and Samsung groups are the largest examples.

In an article distributed by Reuters, Elliot Management Corp is trying to change Hyundai Motor Group’s restructuring plan. Elliot does not believe the restructuring will add value and at the moment has let to what they feel are significant valuation discounts and underperformance.

Elliot Management owns 1.5% of the shares; Hyundai owns 30% and the state-run National Pension Service holds close to 10%. The odds are for management to win the vote.

Linking to dividend paying stocks, most of the time as long as the company is profitable and can pay dividends, most stockholders will vote for management’s proposals. If the company is losing money, stockholders will find alternatives and let others battle to see if the company can restructure and shares move upwards. In any shareholders vote, as a shareholder you have to believe the management will execute and hold the margins to be profitable. To go against management is often a long fight.

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

A number of years ago, Warren Buffett talked about investing in the things you know. He did not say, be curious and learn about the things you do not know. Over the years, Mr. Buffett has changed and owns less than 10% of Apple.

In an article by Noel Randewich of Reuters Apple Inc. is on the verge of becoming the first $1 trillion publicly listed US company. However Amazon is not far behind. Alphabet and Microsoft are in the $700 billion range. The valuation is stock price multiplied by the number of shares outstanding.

Apple has a $229 billion annual revenue and with its money that was offshore of the US but the President reduced taxes to bring it back has used $100 billion to buy back stock. The company still has $146 billion to buy back stock or increase dividends or both which is why if you do not own Apple directly, you should own them in a etf or mutual fund.

Linking to dividend paying stocks, we are all bias and if you remember that you can move on to other investments. Each of us due to how we generate an income know more about one sector of the economy or another. Who the public companies are in the business and how they are doing from your perspective. It is important to learn about other sectors for there is always opportunity in the market you just have to see it by being curious you will begin to know where to look to connect the dots.

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

 

 

The Total Money Makeover is a book by Dave Ramsey and the just of it is if you live debt free you will be wealthier. If you can pay your expenses and live on your income allowing for savings then you will get money working for you, rather than working to pay off the debt.

For 65% of Americans it is hard to do for they have an average of $15,654 on their credit cards. Similar to most people it did not start that way, but evolved over time and thanks to high credit card rates it is very difficult to pay down the debt. To pay it off, means living on less than your income and accumulating savings. Similar to most people, things comes up – home repairs. desiring new things; a keeping up with “the Jones” or your neighbors. There are a multiple of elements happening in your life.

One of reasons it is hard to pay off the debt is credit card companies are great marketers. They know if you pay by credit you tend to buy more. If you pay by cash, you buy less. Credit cards are the lifeblood of retailers and in our economy if people did not shop, the economy would fall apart. In the book Total Money Makeover, Mr. Ramsey notes Sears and Target received 40% of their income from credit card payments. You use their branded credit card, typically buy more and the retailer receives the money from interest payments.

Linking to dividend paying stocks, the above is one of the reasons to own shares in either MasterCard or VISA or both. Both stocks have risen and both pay dividends. MasterCard has a 40% ROI. With the economy seemingly to move towards more digital, credit cards are here to stay, although it is increasingly possible to use your debit card.

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

If you own dividend producing stocks, generally you have enough money not to worry about your next meal or two. It generally means savings and after you reached a particular amount to act like a pension, you may wish to look at other investments. As interest rates rise, as an investor that is a good thing, because if you can buy quality bonds that will have close to a 100% of being repaid (If you buy government bonds it is 100%) then you should consider moving money to the bonds and capturing the higher interest rate. Stocks tend to fluctuate in price, the main aspect with bonds is can they pay their principal back?

There are other investments, and you may be tempted by private placements. There are two concerns – the fees paid and how do you sell? Recently read about some private placements with fees of 40%, as an investor you would have to double your money just to break even. Private placements are done at a smaller scale outside of the stock market to raise money for a venture. When can you cash out? Often times they aimed at what is hot in the marketplace – if house prices are seemingly doubling, then buying land and building homes is the pitch. Just remember the land has to be zoned and usable for building homes. There are often large pieces of land seemingly available, the problem is the former use buried waste in the land and the land has to be cleaned first. It is expensive. If you are looking at investing in private placements look at the land or what the private placement would invest in before leaping. Would you live there or what to work there? By making appointments to look at the land, it gives you time to think about the investment – it most cases extra time is a very good thing to have and do. If you can hearing it is a limited short term thing – walk or run away.

Linking to dividend paying stocks, with these investments, the questions are easier. Does the company pay dividends? can it raise its dividend? why is it profitable enough to reinvest in the business and pay dividends? what is the outlook for the future? do you agree? If yes, then you can keep, it no look for alternatives.

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

 

If you watch the business channels and many people do, often times people discuss the price-to-earnings ratio or PE Ratio. Similar to all ratios, they are designed to help you evaluate or compare apples to apples. In a column by John Heinzl, he writes about PE ratios.

The PE Ratio is calculated by dividing the share price by the earnings, often times it is last year. Thus the term is trailing 12 months P/E.

What happens if you use last year’s earnings, the first concern it is a net earnings which means there could be one time considerations or non recurring items in the earnings. It means you need to look at the company’s earnings to see if there was one time expenses in their earnings.

The second consideration is looking backwards, while a very good indication the P/E does not reflect this year’s earnings outlook. Is the company expected to do better this year? does it have a history of raising it dividends? All stocks which earn a dividend have an analyst or more following them, what do they think?

It is important to note generally companies which are growing rapidly tend to have higher P/E Ratios, while slower growth companies have lower P/E Ratios.

Linking to dividend paying stocks, which looks easy sometimes is a little more complicated than at first glance. It is a good idea not to make your decisions based on one variable, but look at a number to be satisfied you have made a good decision.

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

 

Reread Confidence Men by Ron Suskind published by HarperCollins Publishers Ltd, NY, 2011. The book has 3 main themes – the financial collapse of 2008 and what to do about it; health care reform; and President Obama. When you compare President Obama’s time as the President to the existing President, you are will be reasonably happy so far there has been no crisis in the economy.  At least with President Obama he was able to draw upon the smartest people in the US and know when to take advice and when not to accept the bias of the advice. With President Trump as soon as fellow Presidents of companies tell him what to do he says yes do it. Tax cut for corporations lets do it, now companies can buy back billions of shares which helps existing shareholders (including me) but the deficit is going to be the concern of the next President.

In dealing with the banks, the most important asset they have is confidence. You deposit money, they lend it out and receive more back. The largest banks have a large trading system, primarily in debt or debt like instruments and as long as 99% of the people repay their loans, while you can live another day with money coming into the banks. In the banking crisis of 2008, when the value of mortgage backed securities dropped to almost nothing because too many bad loans – both based on faulty income abilities to pay increasing higher interest payments and declining home prices (when the mortgage amount is greater than the value of the home would you continue to pay?) what should the government do. If the banks sat on the money, the economy does not move because it is based on credit flows. Credit flows are based on confidence to repay loans and losing money means there is no confidence.

It is also true that risk management which is the most important job of the senior management was lapsed because the attitude was securitize the debt and sell it to someone else. What happens when no one buys? One can see there were many problems but remarkably few solutions. The banks are private institutions, does the government go and change management? take the bad debt and hope real estate values go up? what do you do and how do you encourage growth in the economy? While President Obama never got everything right, they made better decisions than other administrations would have or could have.

In terms of health care, a study in Dartmouth revealed not surprisingly if insurance companies or medicare pays more for a procedure, then eventually more of those procedures will be done whether the outcome is positive or not. The idea of health reform should be to reward procedures that make the outcome positive. The problem is hospitals and doctors who are rewarded by the procedures that make money and less about positive outcomes and they tend to have more influence on the health care than regular policy makers because they are seen as the experts. It takes a great deal of effort to affect health reform.

Linking to dividend paying stocks, when companies make money life as it should be is easy to see. When governments want to do reforms, uncertainty becomes an issue. Easy reforms are when procedures can change but companies can still make relative easy profits.

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

If you go back to last year, Apple continued to sell iphones in large numbers, had $250 billion in offshore accounts and paid a 36% corporate tax. Thanks to the tax cut, Apple continues to sell large numbers has brought or is being to bring its billions offshore back to the US and pays a lower corporate tax. Even if it did nothing better than last year, it would have beaten estimates. With the money, what did Apple do – it bought back $23.5 billion of stock back, increased its dividends and there is more to come. With less shares each remaining share is more valuable and with increased dividends shareholders receive greater cash for their holdings. There is nothing not to like, except for the big picture in the US.

In dealing with Apple, in an article by Stephen Nellis of Reuters, Apple sold 52.2 million iPhones which is along with Wall Street expectations but no longer the great numbers of the last couple of years. Apple spent money on buybacks and still has $145 million in the bank to do more. The revenue for Apple was 61.1 billion up from 52.9 billion of last year.The average selling price of an iPhone was $728 compared to Wall Street expectations of $748. Selling the iPhone X and iPhone 8 at a discount was the reason.

People continue to buy music as Apple Music, the App Store and iCloud posted 9.1 billion in revenues compared with expectations of $8.3 billion.

For the next couple of years as Apple continues to do what it was doing plus distribution of cash to shareholders, Apple will be considered to be a core stock holding. Maybe not a growth stock, but things can change.

Linking to dividend paying stocks, the tax cut the President gave to corporations has increased stock buybacks and dividend payments and as dividend buyers that is good thing for the companies. In a couple of years, they will have to do the really work of beating the competition instead of relying on the tax cuts, but for not it is a good thing.

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