The future of the automobile company is in electric cars and no one is happier than environmentalists some but not all are those people is the world who tend to believe that corporate world is bad. The unfortunate thing for the environmentalists is the electric company is operated by a battery. The battery is a lithium-ion battery and one of its primary material is a metal called cobalt. Cobalt has one source in the world (alt’sugh more maybe found) and the country is called the Democratic Republic of Congo.

The Congo history in regards to Europe is in the 1880’s the major powers of the Europe decided each were going to a piece of Africa and the Congo went to Belgium. Similar to every country, people were sent to see if money could be made and sent back to the home country. Farming was tried, but moved to mining and some of the world’s biggest mines are found there. The country became independent and changed its name to Zaire and then changed its name to Democratic Republic of Congo. At the moment, the governance of the country is less democratic as civil war and corruption have been widespread.

Mining has been an economic source of income and the world’s mining industry pay private armies to protect its mines. The Congo is the primary supplier of cobalt with production of 123,000 tons.  There is likely an non official or grey area where cobalt is mined, some of the mining is with child labor and some controlled by various militias. Domestically it is complicated, but the metal is mined and world at the moment can overlook the internal happenings of the country.

Linking to dividend paying stocks, the supply chains while everyone would loved the people are well paid and have many of the same freedoms, the reality is usually less so. At some point you have to overlook or slowly work on those areas where you object to. It is difficult in a global economic portfolio. With your money you can make a difference or try to minimize the worst of the economic cycle, but overlooking the profit margins can mean less money in your bank account.

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

Only in the US, where in mid December Congress is trying to pass a tax bill which gives more corporations money does the President comment on a deal that he says is not good. In November the Justice Department sued AT&T, in the tax bill, the President has said every taxpayer is getting a “great deal” which if you listen to anyone outside the White House you will find many differing viewpoints. As investors you invest in corporations and if they get to keep more of their money, that is a good thing for your investments. AT&T says the Justice Department lawsuit is a big over the top, because they do not own any cable companies so there is no threat to cable companies. All cell phone companies wish to induce you to become the carrier of choice and then add on features to increase your bill. One of the many methods to increase the features is offer exclusive programming and that is why they need the cable company.

Linking to dividend paying stocks, cell companies are companies to own because they have subscribers and most of them will be loyal, they will continue to pay their bills to the company. The company needs to continually update its ability to make it easy to use the system. The company makes more money off of data than voice, so it needs to have channels to keep you loyal. When you evaluate the companies you want to know about churn ratios or people moving in and out of the service. In a pro corporate environment it is unusual for the President to get involved, but it is an unusual Presidency. Often the senior executives have gone to the lawmakers and determined what do they have to put on the table to allow the deal to go through.

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

On You Tube there are many videos and some you can learn from. One video is the CEO of Amazon Jeff Bezos who was interviewed at the Internet Association Gala on May 8th in Washington, DC.

Amazon started with books over the internet but has branched out over the past 22 years to a variety of other features and that is why the company’s stock remains a growth stock. The consumer side started with books and moved to hundreds of thousands of items; the company warehouses and distributes for 3rd Parties (from small business doing $100,000 in revenue to Nike); they tie the previous two to Amazon Prime which has 100 million subscribers; they do web and sever hosting and involved in the entertainment business.

Mr. Bezos talks about customer obsession which is trying to constantly try to figure out what customers want and will pay for. The customer obsession is different than other companies who can be competitor obsession (who is your competitor and what are they doing which works and how do you copy?); there is product obsession; business model obsession; technology obsession or how is the company centered.

The customer obsession has a number mirrors such as the company eager to invent or pioneer. It is not only important to listen to the customer but try to invent on behalf of the customers. The trick is the customer has to see the value and willing to change to do the invention. Some of the inventions will fail. The key is the company has to embrace and learn from the failures – Mr. Bezos says It is not invention or pioneering if you know the answer already. You have to start with the unknowns, sometimes the ideas need other things to make it work, but you keeping trying to make your customers life easier.

The third aspect of customer obsession and failure is think 3 to 5 years out or long term rather than the next quarter.

To do the customer obsession Amazon has 3 big ideas (in reality they are simple and obvious and Mr. Bezos says if they are not obvious there is something wrong. The ideas should have no time limit) The 3 big ideas for Amazon are low prices, fast service and vast selection. One can see how over time the directions of Amazon fit in.

In the interview, Mr. Bezos showed an example of how theses ideas link together. Amazon sells everything over the website, they ship to customers. Some of the products were wrapped tightly in packaging, Amazon really did not like and asked the manufacturers why the packaging? The real answer for display purposes so people could see the products at the store. Amazon has no stores, they asked for less packaging which cut costs which allowed customers faster delivery – it was easier to open. They also saved tons of packaging going to the waste facilities. Another example is solar panels – all the distribution/warehouses roofs will have solar panels – it saves money but generating electricity and is a cleaner source. That has been both cost savings and long term thinking.

Linking to dividend paying stocks, when you read the President message in the Annual Report the above is what you are looking for. At the core what do people come to work to make money in their company. What directions is the company headed? The President’s message will give you an idea of how the company should be doing. Look for the 3 big ideas of the company.

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

 

 

 

There is a documentary about Las Vegas called The Player and you can easily find it on You Tube. The title is The Player – Secrets of a Las Vegas Whale with Trish Regan 2017.

Millions of people go to Las Vegas for entertainment and to gamble. Most will lose something but they often are not going expecting to win. There are a few players who are professionals or can make large bets. The bigger the bets, the more they can win or lose and the big players are called Whales. If you are going to Vegas or any casino the best odds are in Baccarat and Blackjack. The worst odds are the Big 6 spin the wheel game but many will try.

There are rules which the Casinos follow:

if you win $1,000 the casino will comp you or give you feebees of $200 the next time you come.

If you win $200,000 the comp will be towards $80,000. The reality the cost of the plane to get you to Vegas and the exclusive hotel or housing will not cost $80,000.

To beat the Casino you will need to do a couple of things: one be good.

You will need to remember the longer you play, the greater the chance the house wins. The casinos are about math and what is the expectation a card comes up for you and the house, but there are inefficiencies in the system.

The reality is you are not playing the casino but the dealer and since he/she is human, they can make mistakes, as you will make a mistake. For a whale, there is built in advantage because often the Casino gives them up front spending money or $50,000 to start. If the player can get ahead, the odds are better for them. It will take a great deal of focus because the Casino will try to do things which make it harder for you. The Casino dealer will slow it down, they can change dealers, they will give you free drinks, people will typically gather around as the amount of money being bet gains in size.

If you look around the country you will see many more casinos than in the past – Vegas is still the number one place to go. Many of the smaller Casinos around the country are run by companies from Vegas and their strategy is for you bet there, and occasionally give you feebees or comps to come to Vegas to bet. As a gambler you have two tasks – one try not to make mistakes and know when to fold them and when to let it ride.

Linking to dividend paying stocks, there are fewer freebees or comp – maybe a light meal at the Annual Meeting, however the same strategies come in play. The idea is not to lose your money which leads to investing in profitable companies. If you follow the market, occasionally you will notice companies going out of favor for a variety of reasons. if you have done your homework it is possible to buy a low prices and wait as the price comes back (value investing) or searching for inefficiencies. The trick is you probably can not see them everyday. Take your time, stick to profitable companies and you can be better off in the future.

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

It is good to read autobiographies of people and a good one to read is Everything All at Once by Bill Nye – How to unleash your inner nerd tap into radical curiosity and solve any problem – published by Rodale distributed by Macmillian, NY, 2017. In the Bill who on TV is known as the Science Guy believes everyone was an inner nerd that can lead to being curious about a subject and then learn to find a solution. In theory due to the internet we can be as curious about subjects more than we ever could in the past. We only need to pick a subject and spend time learning and then move towards a solution, it sounds easy but it reality people seem not to know what is true and what is used to make money and what is false.

While researching your homework you will be both skeptical and deny. Skepticism is a discipline. It is a component of critical thinking that helps you to keep you from fooling yourself or allowing yourself to be fooled. Denial is like a lock on your tool kit that keeps you from thinking about ideas you do not like. What do you do with all the information you can find? Mr. Nye has 3 steps: First is the information specific? Second is it based on the simplest interpretation of the phenomenon? and Third Has it been independently verified? ask the question Prove it?

Specificity – a meaningful claim shuld be precise enough that we can agree on what we are talking about? If it passes can we test it?

Simple interpretation of the phenomenon is based on Occam’s razor which states a simple explanation for a phenomenon is more likely to be correct than a complicated one.

Matter of testability – is trying out the idea on relying on others for their expertise or everybody knows something you do not. In the testing phase you need to ask more questions:

Is it part of an ad or sponsored content?

Does it clearly benefit a specific person or company?

Does it have no obvious source at all?

Does it contradict thing you have heard before? You have raised the suspicious level?

Is it something you really want to be be true? If so you need to be extra careful?

Linking to dividend paying stocks, Mr. Nye offers you a method to evaluate the research and information you receive or research to make a decision. Normal life brings in opinions and ideas, some you like, some you reject and some you can money off. One of the easiest methods to make money is try not to lose it and start by investing in profitable companies. If the company pays a dividend and can consistent raise it, more money comes to you and over the long term you will be wealthier. If you use compound interest then do not change your strategies because the compounding is what will drive up those returns.

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

 

It is good to read autobiographies of people and a good one to read is Everything All at Once by Bill Nye – How to unleash your inner nerd tap into radical curiosity and solve any problem – published by Rodale distributed by Macmillian, NY, 2017. In the Bill who on TV is known as the Science Guy believes everyone was an inner nerd that can lead to being curious about a subject and then learn to find a solution. In theory due to the internet we can be as curious about subjects more than we ever could in the past. We only need to pick a subject and spend time learning and then move towards a solution, it sounds easy but it reality people seem not to know what is true and what is used to make money and what is false.

Science and what is nowdays called critical thinking takes discipline and diligence. What makes us humans to make a living is our ability to make predictions by finding patterns in nature and then to take advantage of them. Along the way to researching, you need to take heed of a simple phrase – Everyone you’ll meet, ever, knows something you don’t”. In the book, Mr. Nye uses the example of working for Sundstrand Data Control which makes most of the black boxes in airplanes, he and his team were trying to solve a problem but they were not quite working. His boss told him to go talk to the machinists who made the parts for input. They showed him their concerns or abilities and the result was a better instrument. The lesson Mr. Nye learned is many times the people with the best knowledge are no so obvious. In the above case, the machinists were steps away but in days before asking were miles away from solving the problems. Another example was watching a flight attendant dealing with an bad customer – the skills she used to calm the person down and be able to move on to her other functions required a great deal of expertise, being professional at a high standard and she showed them with ease.

A great teaching point was in high school physics class a teacher drew a titled ellipse and asked Mr. Nye to figure it out. Mr. Nye pondered it, and could not come up with a solution. The lesson the teacher was teaching him was to look at the problem differently. The secret was to step back and reasses the problem at hand, in this case the solution was to tilt his head to see. The lesson was about constraints – about what ideas to leave out and the ideas you can work with. Constraints can help you because you can not process everything. The issue is not defining the problem, the issue is why is the problem a problem in the first place?

Bill Nye’s Code of Conduct:

Be open and honest

Do not pretend you know what you do not know

Show the world as it is, rather than the way you wish it was

Respect facts, do not deny them just because you do not like them

Move forward only after you trust your design.

Linking to dividend paying stocks, generally we believe there are a number of great ways to invest in the markets and we will find a really easy way. The truth is getting compound interest to work for you rather than against you is the easiest way but it takes time to do. This is the reason why if you have credit card debt, you  will be paying for a long time, if you own the credit card companies you will be benefiting for a long time. It is hard to find a stock which has a 40% internatl rates of return consistently – credit cards have do this. In order to buy a stock, unless you work there are believe you have some insider knowledge, most of us have to do homework or testing hypothesis. If it works then you try – you can invest with real money or there are many software programs to track companies until you buy them.

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

 

 

According to Stephen Gandel of Bloomberg News one of the easy strategies of the past 10 years is not performing well. When a profitable company has excessive cash they have options – buy another company, reinvest within their own company, give a special dividend and or buy shares on the open market thus making the remaining shares more valuable. An easy strategy has been to invest in companies who bought more than 5% of their outstanding shares, had you done this, the portfolio would have beaten the index in 6 of the past nine years often by a wide margin. In 2013, the portfolio was up 40% while the index was up 13%.

Before you rush over to change your portfolio, it appears the strategy is not working well as the basket has declined this year. The primary reason is interest rates are moving upwards. However there is hope for an increase of buybacks. In President Trump’s tax plan the tax rate to repatriate money many corporations have outside of the US is scheduled to fall from 35% to 15% which will mean a tax savings of multiple millions for corporations. Unlike the sound bite from Washington which suggests the companies could raise pay packets for their employees, Wall Street firms believe share repurchase could rise to $600 billion which is up $100 billion from its current quarterly run rate. Will the strategy of buying companies who repurchase a minimum 5% of their shares continue to work we do know the President and Congress are trying to ensure it is viable strategy.

Linking to dividend paying stocks, no one does know, but we do know those companies are worth considering buying because they are profitable and are sitting on large sums of money in offshore accounts. As dividend buyers we do not have to question if this is a good thing or not, should the company be reinvesting in expanding or improving their business or paying dividend shareholders first. Our concern is year over year, is our dividend safe, if yes then you can continue to hold the company shares.

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

 

If you are a gardener you have a minor understanding of plants, but we continually learn from them. There is a book called The Secret Life of Plants by Peter Tompkins and Christopher Bird  published by HarperCollins Publishers, NY, 1973 reprinted in 2002. The introduction is lovely – Short of Aphrodite, there is nothing more lovelier on this plant than a flower, nor more essential than a plant. Without green plants we would not eat or breathe. The plants through the miracle of photosynthesis produce oxygen; most of the food we eat is plant-based.

No one has counted the roots of a tree, but a study of a single rye plant indicates a total of 13 million rootlets with a combined length of 380 miles. On the rootlets are fine hairs estimated to be 14 billion. The root is a water pump raising elements from root to leaf, evaporating and falling back to earth to act one more as the medium for this chain of life, The leaves of an ordinary sunflower will transpire in a day as much water as a man perspires. On a hot day a single birch tree can absorb as much as 400 quarts of water.

A climbing plant which needs a prop will creep toward the nearest support. Should this be shifted the vine, within a few hours, will change its course into the new direction. How does it know?  Is it chance that plants grow into special shapes to adapt to the insects which will pollinate them, luring these insects with special color and fragrance, rewarding them with their favorite nectar, devising extraordinary canals and floral machinery with which to ensnare a bee so as to release it through a trap door only when the pollination process is completed? The ingenuity of plants in devising forms of construction far exceeds that of human engineers. It is safe to suggest plants are complicated in the way they have developed to do what they do.

The book takes a turn to whether plants have souls which you may or may not want to ponder?

Plants start with soil, as any homeowner knows unless there is good soil to grow the lawn will not. If you add the waste of trees and animals to the land, the plants will grow. Unfortunately, most people try artificial chemical fertilizers and for a couple of years it does boost the productivity of the land, but within 5 years the land productivity goes down. The reason is the plants can not convert the chemicals or break them down. Ideally, the animal wastes from the corporate farms should be sprayed over land which has lost productivity from either single crops or land extensively sprayed. The problem is the waste has to travel to get from the corporate farm to where the land is needed. The other option which takes a year or two is rotate the use of lands. Different crops will bring the balance back to the soil and it will be healthy.

Healthy soil, properly composed with the right bacteria and earthworms, free from chemical fertilizers and pesticides produces strong healthy plants which naturally repel pests. Healthy plants make strong, healthy animals and strong, healthy human beings. Poor land grows poor food in terms of vitamins, minerals, enzymes and proteins. The food lack in nutrition produces sick people.

Linking to dividend paying stocks, while knowing about the effects of the chemical industry on the food we eat, it is very hard to change or make dramatic changes in the food industry. However you can learn from plants, whether it is the ones in your garden or reading how the plants adapt. If they can adapt, you can move towards companies that not only are profitable but try to keep the world in balance.

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

 

If you own a company in the commodity business which means the price of the underlying product is traded on markets and this means they go up and down, one of the most important pieces of information is if the price of the commodity how much does the company benefit? In an article about the oil industry by Shawn McCarthy and Jeff Lewis titled Back in the black: the new era of prudent oil, within the article is a quote by the CEO of a company called Crescent Point. They drill in the Bakken foundation and the CEO said for every $1 increase in the price of oil, their cash flow raises $65 million. With that figure you can now consider what is your outlook for the price of oil?

In the article, as the price of oil goes up and down so does what the company does or does not do. When prices are lower, the company reexamines its alternatives such as can we use video technology more? can we use solar panels on its wells? what costs can be cut? As the price increases to a reasonably stable level what opportunities can be taken advantage of? What lands are worth leasing and what prices do we walk away from?

Linking to dividend paying stocks, for all commodity companies they are driven by cash flow. It is easy to get involved with expensive projects when the price is high because the ability to gain financing is relatively easy. The trick is what happens if the price falls and when is cash flow a problem? If you are buying a commodity company how much extra cash flow will they have to meet your shareholder demands as well as running the company?

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