In the world of mining, as an investor you are trying to make money from companies which tend to have proven assets in countries which can make getting the mineral out of the ground the easy part. To offset the risk, investors tend to follow the large institutions lead. In an article about Banro Mining Company, Niall McGee examined the risks involved for investors.

Banro is listed on the Toronto Stock Exchange, there is a large infrastructure for mining companies on the Toronto area. Any time metals begin to reach new highs, look to Toronto Stock Exchange for names of companies. Banro is gold mining company and in the fall of 2012, gold prices were still high they announced Blackrock had taken a 11% holding in their company and they were developing the gold region in the Democratic Republic of Congo. The DRC outside of the capital city, is not a very democratic country but it is blessed with many minerals in the ground, including gold which are world class projects. The gold content is high.

This year, the company has declared bankruptcy and the shareholders will own less of the company as it restructures. There is still gold, however in the DRC, the country has gone through a civil war, they have not built up infrastructure to facilitate gold mining, parts of country’s road have extra tolls from the local militia, and not surprisingly construction time lines in the gold producing sites have fallen backwards. There is still a very good resource in the ground.

If gold prices remain high, many of the barriers can be worked around, but when the price of the commodity such as gold falls, it puts a damper on forward movement. In the case of Banro, they had to seek money other than the equity markets and went for a preferred share offering. but it has not enough money to keep full steam ahead.

Linking to dividend paying stocks, one of the reasons you like them is their ability to make profits, pay their bills and have the ability to move into the equity markets for the correct reasons. The risk remains low. Dealing with junior companies the lesson to learn is they need to be overcapitalized in equity, rather than debt. If it is the reverse, then restructuring will be coming. To avoid risk, invest in the largest companies and wait till they buy the juniors.

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

At the end of January, many companies reported their past quarter results, one of the companies was Microsoft. The average computer runs on their software but that is not where they make their money. In an article by Dina Bass of Bloomberg News Microsoft noted their was growth in their cloud computing services called Azure sales doubled as businesses seek to run applications and store data on Microsoft’s data centers. In this case, Microsoft biggest competition is Amazon.

In the tax bill, recently signed by the President, companies take a charge for taxes on the money the company has in non  American accounts. Microsoft has $128 billion in non American accounts and took a charge of about $14 billion. This charge needs to be paid within 8 years.

In Cloud computing, Amazon is still the leader, however a year ago it was a leader of 40 to 1, not the margin is closer to 3 to 1. This is good news for Amazon’s competitors and Microsoft which had a goal of $20 billion in revenue per year has surpasses their goal. Now companies such as Microsoft are offering greater ability to analyze the data including artificial intelligence.

Linking to dividend paying stocks, if you think about the FAANG group, Microsoft is not in the group and for long time it did not deserve to be in the group. The company has changed and that is why the shares have more upward. The company still churns out profits, but lately has added the growth aspect to its appeal.  It may take a little while longer, but when companies have dependent products or services which can generate an ongoing profitable business, eventually they will also be where the cutting edge is to.

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

In a book called The Famine Plot by Tim Pat Coogan published by Palgrave MacMillanm NY, 2012 a picture of Ireland is painted. The picture of Ireland prior to the famine is a country divided by religion. In the north Catholics outnumber Protestants 2 to 1 and in the rest of the country Catholics outnumber Protestants 20 to 1. Generally Protestants looked towards England and since London ruled the country, appointing the people who ran the government, there was good reason to look towards England.

Governments try to regulate activities and sometimes what one hand does, the other one takes away. In Ireland during the famine, the Poor Law Extension Act was the law – it had 2 conflicting ideologies one those who owned Irish property should pay for Irish poverty; relief should not be given outside the workhouse walls. To provide relief outside the walls would be demoralizing and ruinous. It should be noted, it was hard to collect taxes and the military forces were used in the collection process.

In addition, the economy in England went into recession – wheat prices fell, railway shares fell, banks closed down and there was no money to send to Ireland. To add insult, the Poor Law shut down the Workhouses because the administrator had believed things had improved.

One of the solutions was to leave, and people did, but what country really wants poor, sick, half starved people? In 2018 not many. In 1848 even fewer – the Irish went to North America often because the landlords paid their passage; when they arrived in New York and Boston the reception was not welcoming. The usual arguments the new immigrants worked for lower wages than existing residents. However there was opportunity even if the opportunity meant living in slum like conditions for a time – it was better than staring in Ireland. Immigation saved landlord’s money. A pauper could be “shipped” out at least half what it cost to maintain the person in the workhouse of a year. Once a person left they almost never came back to live.

Linking to dividend paying stocks, as in most famines, the government is partly at fault for not doing enough to help people in need. There are and has been what should be the best approach and often times government officials become very stingy with the public purse when it comes to these situations. It is true the government often did not help enough, often times it sent conflicting rules. It was also a time when the economy needed to be changed one way or another, but that does not excuse the government. With dividend paying stocks, they tend to be the establishment and one can easily say they tend not to use the full extent of their resources to fix problems. Is it their job or do you just what dividends?

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

 

In a book called The Famine Plot by Tim Pat Coogan published by Palgrave MacMillanm NY, 2012 a picture of Ireland is painted. The picture of Ireland prior to the famine is a country divided by religion. In the north Catholics outnumber Protestants 2 to 1 and in the rest of the country Catholics outnumber Protestants 20 to 1. Generally Protestants looked towards England and since London ruled the country, appointing the people who ran the government, there was good reason to look towards England.

In viewing the infrastructure projects, more than one proposal was to build a railway lines, which allows greater movement of goods and people. This was rejected because the concern was railway construction required the ablest of laborers and the skill of the labor force was best for unskilled earthworks. (A short few years later, the railways of the American west would be built with Irish laborer from the east and Chinese labor from the west.)

In Ireland, there was no social security system which industrialized countries today have. Part of the solution to the ongoing famine was the Workhouse. The design followed the set up in England which the harsh conditions inside meant if a person could work they would rather than going to the workhouse. The problem in Ireland was there was no work for those who sought it. Prior to the workhouse, the Irish system of charity was based on individual generosity with the Church or Catholic Church playing the lead institutional role. When the system was being set up, it was expected 1% of the Irish would need relief, it turned out more than 3 million people were affected.

The workhouse was designed to be the last resort for the destitute only, Another aspect was the workhouse specifically outlawed outdoor relief. If a farmer had a bumper crop and want to donate, it was not allowed. The reason giving free food even to the starving was considered by officials to be demoralizing.

At the workhouse there was education, but the existing class structures should be preserved and paupers should be aware of their ordained station in life. The girls trained for household work, the boys as farm laborers. Now days we often look at education as giving people more opportunity, not less.

There were people trying to diversify the economy. For generations the Irish had depended upon the potato, but Ireland is surrounded by oceans and fish. Trying to increase the fishing trade was a challenge for there was a lack of boats, harbors and then the ability to process the fish. The Catholic Irish tended to eat meat and fish on Fridays or they did not look to the sea for food even though the sea is close by.

A group called the Quakers raised money to do soup kitchens. The difficulty was the Treasury demanded an increasing number of forms to be filled out correctly as deemed by the government. Despite the government, eventually at the peak of the famine more than 3 million people were fed daily.

Unfortunately in Irish religion, as time went on, a failing was they took the soup. Various religious groups offered soup. Some Protestant Evangelical groups believed that what the starving need was not food, but the Bible. If you ate from a Protestant group, they considered you had changed your religion to Protestant, you likely did not but the organizing group did.

Linking to dividend paying stocks, similar to giving food, there are other agendas involved and while it is great to help your fellow man, with dividend paying stocks the way to do it is continually earn a profit and pay the dividend. As a shareholder what you do with the dividends is your concern.

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

In a book called The Famine Plot by Tim Pat Coogan published by Palgrave MacMillanm NY, 2012 a picture of Ireland is painted. The picture of Ireland prior to the famine is a country divided by religion. In the north Catholics outnumber Protestants 2 to 1 and in the rest of the country Catholics outnumber Protestants 20 to 1. Generally Protestants looked towards England and since London ruled the country, appointing the people who ran the government, there was good reason to look towards England.

The second year of the potato blight and starvation in Ireland, the government changed and so did their responses. The new government stopped the importation of food from India (corn meal) and then the famine burned a number of terms into the Irish folk memory: coffin ships, emigration, food exports, starvation, landlords and evictions. In times of starvation for any county, people will begin to move. Some of it will be desired by the authorities – move to another country for greater opportunity; move to lessen the number of people which need to be help; and for some, but not all, move so landlords can increase other activities on their lands. In Ireland, since most of it was rural, animals replaced people. In the case of evictions, the military or troops went to the homes to evicte people and removed the roofs of their houses. In other cases, the eviction was the selling of the property – those who remember the fall in US house prices will recognize the double edge sword – selling in a bad market only benefits someone else (now days we called them Vulture funds).

Sometimes government edicts make life for the smaller companies much worse, in Ireland all landlords no matter the size had to pay 4 lbs for their rate; and the Gregory Clause denied relief to anyone who owned more than a quarter acre of land; as opposed to the great landowners who were in the Cabinet and making the regulations.

Government policy often has the Protestant virtues of thrift, hard work, self-reliance and charity for the deserving poor. However, when the government does the opposite had a bias towards Catholics, tended to have a view in general of the Irish of feckless, lazy, and wallowing in a mess of potatoes and priest-craft. In one sense, the politicians were reasonably happy famine was dealing with the Irish problem. A surplus and unwanted population was being disposed of. Remember the owners of the largest estates – 50,000 acres plus were making the rules and they half wanted greater change.

In recession people need to earn income and there are always government projects to be done. Infrastructure projects were considered a good thing to do and would help the local economy. If the proposal qualified for a 50% grant, then they were likely to be started and finished. If they had to be paid out of local taxes, then little work was done. In an effort to ensure of the prudent use of tax dollars, the proposal had to go through local group making a submission, the land surveyor, the Board of Works, to lord lieutenant and then the treasury to pay for work. The process takes time. The projects that were undertaken, were not the best projects and sometimes they were the classic – dig a hole and fill it in.

Linking to dividend paying stocks, when dealing with the government often being cynical helps you to analyze what the real motives of the government is. With dividend paying stocks, they have a history of good execution of their goods and services and this is what you expect to keep happening. The motive is to continually to earn a profit and reward its shareholders. If it is not doing that simple thing, look to alternatives

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

In a number of countries around the world, there have been famines, and the issue is not that they have occurred but what did the country supporting or main beneficiary of the country’s resources and income do to help lessen the famine? In the Bible, Old Testament Joseph had the foresight to load up the grain silos during the 7 years of abundance to have food to distribute during the 7 year famine. This passage illustrates famines are nothing new. One of the many countries which suffered a famine was Ireland in the years 1845 to 1852. While being a very pretty country with rolling green grass, Ireland was not a rich country and many people greatly supplemented their diets with potatoes. In 1845, the potatoes developed a fungus and began to rot. What happens next is the important lesson.

In a book called The Famine Plot by Tim Pat Coogan published by Palgrave MacMillanm NY, 2012 a picture of Ireland is painted. The picture of Ireland prior to the famine is a country divided by religion. In the north Catholics outnumber Protestants 2 to 1 and in the rest of the country Catholics outnumber Protestants 20 to 1. Generally Protestants looked towards England and since London ruled the country, appointing the people who ran the government, there was good reason to look towards England.

At the top is the viceroy and chief secretary, then 10,000 landlords many who were absentee landlords. About 3% could be considered as rich farmers and some 76% were cottage farmers and laborers. When famine struck many of the people both the English and Irish looked for leadership from London, the author believes it was simply not there.

At the time, the political theory debate was that poverty was a self-inflicted wound, incurred through bad habits. The morality debate was if a handout was given, it would stultifying initiative self-help among the lowest orders. The reality to do something was going to cost some money. The prevailing attitude of the day was the theory of Adam Smith and the Political Economy Club. The relief was to go through the workhouse which was deliberately made unattractive so that only the most destitute would approach these places for relief. The administrators frowned on outdoor relief because it may encourage people to stay home and procreate (have sex).  (have you ever heard the same expressions in the 21st Century?)

As the famine became worse, the issue was the people had no money to buy food. There was food being produced and exported for production of oxen, sheep, pigs, wheat and oats maintained their levels throughout the famine period. What the government did the first year of the potato blight is to import corn meal from India. Those in opposition were committed to laissez faire and insuring people did not become dependent on expenses from the government. Remember at the time, most of the people in Parliament were wealthy or owned large estates of land, there is a reason why the upper chamber is called the House of Lords.

Linking to dividend paying stocks, as investors you should have enough to ensure you have enough to eat, one method to do this is ensure your dividends enhances your income – regular or pension, then you do not have to worry. Similar to the people sitting in government your attitudes will reflect your investment decisions.

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

 

 

Happy Valentine’s Day. The gift today is learning so you can do actions which can reward your spouse, family and extended family.

Tobacco stocks over 20 years gave investors a total return of more than 1,800% making it the best performing stocks in the S&P 500.

According to David Berman the lessons all investors can learn are:

An unpopular stock is not a bad stock.

Similar to most people you likely have a opinion on smoking – good or bad. The objective in investing is to look at results. Through diversification, consolidation with rivals and steady price increases, tobacco companies have done very well. Altria reported a profit of nearly $5.8 billion in 2016 up from $4.2 billion in 2011. The current goal is to increase profits 7 to 9% a year.

Valuation matters

Amazon trades at a price to earnings ratio of 348%, Altria trades at 22.6 times profit. If and when the market goes down which stock will be affect more?

Dividends rule

Investors stick with tobacco stocks for the dividends: Altria has increased its dividends 51 times in 48 years and the quarterly payout has doubled since 2009.

Brands are moats

It is inexpensive to produce cigarettes, however it is very expensive to market them. Government regulations make it hard for newcomers. This means cigarette buyers keep buying the same brand.

Long term performance is what matters

There is always a short term negative about cigarettes. If the large tobacco companies have managed to deal with a $200 billion fine over 25 years and keep profitable, then the other concerns are important short term concerns but not long term which allows for continuing outstanding returns for the shareholders.

Linking to dividend paying stocks, cigarette companies are ideal because they fit into types of companies you are looking for to hold long term. Consistently profitable, able to raise prices, government helps to keep competition out and established companies are the go to. There are other companies in other industries that can fit the bill, but tobacco stocks are easy fit.

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

 

If you watch the Game of Thrones, you notice the plot lines and you may wonder where do the writers get their information to write? One place is likely The Children of Henry VIII written by Alison Weir, published by Ballantine Book, London, UK, 1996. The story starts with Henry VIII is a catholic, marries a women whose brother sits on the Spanish crown and is Pope. Henry wants a boy to have his family rule England, he tries but a girl is born – Mary. They try again a few miscarries and no more children. What is Henry to do? try again with another lady but who will give them permission? The sister’s brother – no. Henry breaks away from the church and tries with another lady and Elizabeth is born. He continues to try but no male and the divorce goes through. On his 4th wife a son is born and the dynasty can continue. Henry dies 10 years later and then the fun starts.

The protestants are in power and the Catholics want it back, the uncle assumes responsibility as the boy is only 10 years old. The uncle who is protestant plays off the negatives of being Catholic while he robs the treasury and takes former Catholic properties. The boy actually believes in the new religion which is good until he dies.

The next in line for power is Mary who is Catholic. After regaining the throne – she throws the protestants out and rules as a Catholic. The protestants who were thrown out still want power and when Mary dies put in Elizabeth I who rules England.

In between the family is the power struggle and in all power struggles everyone does the SWOT Strengths, Weaknesses, Opportunities, and Threats analysis. Religion is thrown in to rouse the masses who do not understand they are being used to gain or keep power in one family or another.

Linking to dividend paying stocks, it is wonderful if the shares you own are widely held and power is changed through a responsible and even manner. Watching or reading about power struggles is fascinating stuff, but it only matters to you if they will buy you out or increase the dividends as the fight goes on. Leave it to the books or magazines not your investments.

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

With government sometimes it does things which help industry, sometimes it does things which do not help industry. It really depends, prior to going to Davos, President Trump signed a regulation to place tariffs on imported solar panels. At the moment, 99% or thereabouts of solar panels are made in China. The President did this action to try to encourage US based solar manufacturers a better playing field or raise costs of imports allows the non imports to be priced in the same ballpark. The Solar Energy Association thinks it is counterproductive to raise rates on solar energy because they generate electricity which means the utilities do not have to burn fossil fuels.

Other association people do not believe the impact will be great because suppliers anticipated the tariffs and prices rose. The tariff is less severe than what the industry had was expecting which essentially means little changes.

The President has pushed the line America First so the solar industry regulators react to do something but not too extreme because the options just do not exist and even with the higher tariffs no manufacturer is going into business. The regulator maintained the existing 30% renewable energy tax credit, the recently tax bill recently cut corporate taxes and enhanced depreciation of solar investments. In reality the status quo will be maintained.

Linking to dividend paying stocks, as an investor you want the status quo to be maintained so your investments continue to earn profit and pay dividends. As a citizen you want reasonable opportunity in the marketplace understanding supply chains change over time. In this case of the solar panels, the government did something but not too much to change existing structures.

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