One of the most popular things to do on the internet is play games and games and gamers spend more money than movie goers going to the movies. Video games are played by many people and they spend long hours doing it. In the “old” days gamers either downloaded the game or bought the game and played to try to reach different levels. Eventually, they would play other people on the internet which meant there was friendly competition and some of the people you were playing against became friends.

For the companies from Sony to Electronic Arts as reported by Yuji Nakamura from Bloomberg News in an article called Gamers gripe over micro transactions, putting rally at risk. The companies are adding the ability to add digital goods and services. The game maybe free or almost free but people are spending thousands of dollars on extras such as changing the colors of the team to your favorite team; adding rare characters and special outfits. The model allows the players to spend as much as they want and keep spending as long as they like. The model adds higher and recurring profits. One of the biggest beneficiary is Tencent Holdings whose business is games with microtransactions.

There is always a danger in the model, how much can someone pay and if they do not pay is the game still enjoyable to participate? Sometimes the companies get it wrong and people move to different games.  The general rule seems to be micro transactions can enhance the game to the gamer but not give an unfair advantage to someone not paying the fees. In one game from Star Wars the micro transaction was the power of Darth Vader’s choke hold. Gamers hate the pay to win strategy and when they feel wrong the gamers know how to complain loudly.

Linking to dividend paying stocks, for profitable companies their outlook tends to the long-term and the customer being a repeat customer for life or a good part of it. Being shortsighted to drive up profits in any industry is possible, but will the company be in the same position next year?

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

At the end of the year, there are number of check lists which come into effect because an individual’s tax season runs from January 1 to December 31. As the season ends, hopefully you have made money (profits) and you begin to look for tax saving avenues. One thing to do is sell any losers to offset the gains you made. You will want to spend a few minutes on your portfolio and consider – when you bought your portfolio you did it right. You made decisions which you have lived with. Another question is knowing what you know (we are all smarter after the fact) would you do it again or make the same decisions. If you are similar to the mythical average person the answer is yes and no. For example tech companies were up over 50%, how much money was in that sector? Oil prices have come up a bit, how much was in that sector? It is easy to second guess yourself.

Linking to dividend paying stocks, if you first consideration was for the dividend and the dividend has been paid and the company remains profitable and expects to increase the dividend next year, then how much the stock has gone up or down may not be your biggest worry. Markets will move up and down or fluctuate that is all we know, but the past history suggests when the markets goes down, the stocks which first go back up as investors buy quality profitable stocks is dividend companies.

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

Double Identity in this instance is a movie staring Val Kilmer and Izavell Mhko which was released in 2010. If you watch the movie enjoy for its entertainment value, the backstory is based on the diamond trade and the levels DeBeers controls the cartel. Ever since Cecil Rhodes (Think the person behind Rhodes Scholarships) consolidated the diamond and gold industry in South Africa, the diamond industry has been run by the cartel. The cartel allows a limited number of diamonds to be sold and for many years it was relatively easy to run because the best diamonds came from South Africa. Nowdays diamonds are still mined in South Africa but also in Canada and parts of the the former Soviet Union. It is this setting where the fictional country wanted out of the cartel and found a willing retailer who wanted diamonds for less, mark them up and make even more money. The movie is a fictional account (we hope) of how far DeBeer agents and former special forces agents trying to stop the players in their tracks

Linking to dividend paying stocks, in the movie because it involved the use of murder to keep monopolies As investors you do not want to commit a murder just continually receive dividends from a profitable company. The only message from the movie is it takes a great deal of stress if you want to break up monopolies. It maybe exciting, it can be profitable but entrenched players want to keep the status quo. As an investor you like the status quo if it can enrich you.

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

The company which has been in the news likely more than most is Uber. The company Uber has a distinct advantage of cabs in any city. it does not own any physical assets. The cab companies own the cars or the medallions (taxi license) in order for the driver to be dispatched from a person who matches calls for service and where the cab is. In the Uber method cars driving by people  are connected to the net by their phone and the driver owns the vehicle, the driver  use the phone to be told of their locations and the location of clients. Equally important is the client can monitor the process of their phone and Uber takes a piece of everything the car drivers make.

In  a book called Wild Ride – Inside Uber’s quest for World Demoniation by Adam Lashinsky published by Portfolio/Penguin Books, NY, 2017, Mr. Lashing describes the evolution of the company. For a company like Uber to exist 3 major items had to be invented and be used. The three are email, easy access to capital and the harnessing of artificial intelligence. These three things are the building blocks of companies such as Uber. It is said, in most developed countries the amount of people which own smart phones is well more than 50%. Whether everyone needs a smart phone is not the question – it is do they use them? The difference between one start-up and another is often easy access to capital, all companies have ideas – are they great is a more difficult to answer.

In the late 1990’s the founders of Uber were wondering is it possible to use your cell phone to place an app on your phone for you to call a limo and be able to track it. It took a couple of years of playing with that question because the system was not there yet. It had parts such as every cell phone has GPS capabilities. The use of AI or artificial intelligence would come. The AI would do all the work from the dispatcher only on  your phone. Once in was possible Uber started with limo service which were used by venture capital groups in San Francisco and they started to see the what Uber could become. They brought money and the founder of Uber through his previous start ups was good at raising money from venture capital groups.

The AI developed over time which allowed the company to move from limo to cab service in urban areas. After seeing cabs, the model was used on other items such as Uber Eats and many others – some which worked and some that did not.

Linking to dividend paying stocks, it takes time before all the features are in place to make money and most people do not see it. They can see one aspect or maybe two but not the third. In every industry there are regulations which help protect the existing companies and companies similar to Uber fight the regulations to remove the barriers. If the regulations were not on the cab business, it is possible other groups would join in the fight to save the regulations. In many people’s eye the cab business needed a shake up and Uber was there to do it. For your investments you have to ask who would want to shake up your industry?

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

 

 

Las Vegas is known as a gambling city, the city in the middle of a desert was founded on legal gambling. It is also one of the most popular tourist attractions in the US. This foundation of gambling started with cards and dice but quickly evolved to sports betting. For most of professional sports time, the city has been seen as wrong for any major league to be associated with Las Vegas. In an article by Tim Dahlberg of the Associated News the number one sport of gambling the NFL is bringing the Oakland Raiders to play in Vegas. The Oakland Raiders broke ground for the  new $1.9 billion stadium will build for the team and Vegas Hotels will pay $700,000 million with the opening set for 2020. The stadium will be black and white or the Raiders colors.

The NHL set up a team called the Golden Knights and in their first year of operation have drawn well through season ticket holders and those that are visiting Vegas. Other sports which draw well in Vegas include WFC and  NASCAR, The problem was never the drawing of fans, but the perception of doing in a business in a city where they bet on sports and would someone go to measures to ensure their bets win.

Linking to dividend paying stocks, things evolve and change and that is why it is difficult for companies to consistency deliver excellent results. Every once in a while look at your investments and ask how has the company changed because of innovation and breaking down of taboos.

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

In mid November, AB Inv the world’s biggest brewer announced senior level personnel changes in an effort to stem a years long sales decline in the US. In a story by Reuters written by Philip Blenksinsop and Martine Geller – Budweiser is being shaken up.

Bud Light is still the number selling beer brand in the US, but US consumers are drinking wine and spirits move than beer. Budweiser has sold less beer and in the third quarter total beer sales were down 6.2%. The decline has been going on since 2014.

Craft beer – beer brewed by smaller brewers is no longer growing at double digit rates but it is estimated growth will continue at 6% according to analysts at Susquehanna.

One strategy AB Inv can do is buy craft brewers and they have acquired a dozen over the past couple of years. One must remember the brewery where Bud is brewed has economies of scale and access to all the distribution channels.

Linking to dividend paying stocks, on one hand it is good for society beer sales are down on the other hand large brewers having a beer is a good thing. All leaders of brands will experience market share increases and decreases. For Bud if it went up too much, the competition bureau would poke their noses into AB Inv business (as they are suppose to).  Market leaders have different challenges, in this case if Bud was to fall to number 2, then wholesale changes would be needed in the industry and it would be best to look to alternatives as you watch from the pub.

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

One of the concerns people in the health industry have is the growing obesity problem because an overweight person as they age will tend to have more health related problems or be more expenses to the system. We all know the baby boom generation is getting older and there are plenty of baby boomers who are overweight. How did we arrive at this destination? At some point we will be told of the high levels of salt, sugar and fat in our diets. Well this did not happen overnight and although there is always individual responsibility and we all have some level of discretion of how we spend our after tax money, the food giants played a role. In the book Salt Sugar Fat – How the Food Giants Hooked Us by Michael Moss, published by Signal part o the Penguin Group, New York, 2013.

The other aspect of the book is the selling of products. The food giants are successful in making profits, in returning a high return on investment dollars and not being concerned about the science, but the selling of the food products. Every year  thousands of new products are invented and they need shelf space. Most of these products will not last longer than 2 or 3 months, a few will be a success – selling $25 million in annual sales. One or two will break out and become a billion dollar product.  When that happens the concern will be to maximum profit and then lowering the costs of the ingredients while keeping the quality which made the consumers buy it in the first place, what typically happens is the fat, salt and sugar content goes up.

In terms of shelf space all the large food companies want to have the best shelf space possible – where it is easily reachable by the average consumer. The new products will go to the top or the bottom of the shelf partly because supermarkets want to sell proven winners. Partly because the food giants rent the space or pay higher rents than new companies can. In the convenience store particularly in areas of town where there are fewer grocery stores – the convenience food companies aim at small buyers but very regular buyers to make their money. The other dynamic is adults who miss meals because of their time commitments who want something to satisfy their cravings.

The biggest change in the processed food industry is with two income families with commuting times they do not have the time or make the effort to prepare meals from scratch. There was growth in convenience foods and the size of the serving. The growth of the convenience foods is highlighted by the Lunchables brand. In 1985, the people at Oscar Mayer were considering what to do about bologna sales? After doing focus groups, it was decided to focus on the lunch meal and in the 1950’s it was 2 slices of bread and bologna; now it was the parent’s did not have the time to do it. What to do now? after going through months of research it was decided to try the idea where the kids could make their own lunch. Then it was all the consideration of what should the meat look like? what should be in the tray? how long does the food last or stay fresh? would the kids eat it if their parents bought it? From a corporation point of view how do you combine all the ingredients in a cost effective manner and what should the price point of the product be? Many decisions go into a food product and that means many things could go wrong or be better. The Lunchables was successful and this led to other companies copying and extension themes.

In the senior levels of the food industry, while people know about the concerns of salt, sugar and fat the most important consideration is does the product sell and how do you protect your market share and try to grow it. Millions of dollars are at stake if the brand share falls. The marketing program is designed to push or edge you to make a decision on food and there are many choices. Why do you pick the one you did is continuing research and many hours of trying to understand the consumer. In many ways, the idea is to lead you on the right path.

Linking to dividend paying stocks, in the food industry the food giants have the built in advantage but the consumer makes the decision. The decision is highly influence by the companies from ensuring the item is on the correct place on the shelf, to the marketing dollars aimed at your decision, to what is inside to be a continuing repeat consumer. People change and over the years analysis of the data is to change from the general targeting to the very specific demographic targeting to ensure you become a repeat consumer. If you are an investor, you want the company to continue to focus on how to sell the products, as a consumer you want to know the food is good for you.

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

 

One of the concerns people in the health industry have is the growing obesity problem because an overweight person as they age will tend to have more health related problems or be more expenses to the system. We all know the baby boom generation is getting older and there are plenty of baby boomers who are overweight. How did we arrive at this destination? At some point we will be told of the high levels of salt, sugar and fat in our diets. Well this did not happen overnight and although there is always individual responsibility and we all have some level of discretion of how we spend our after tax money, the food giants played a role. In the book Salt Sugar Fat – How the Food Giants Hooked Us by Michael Moss, published by Signal part o the Penguin Group, New York, 2013. The food giants include: Pillbury, Nestle, Kraft, General Mills, Coca-Cola, General Mills, Cargill, Tate &Lyle, ADM. In the book and in the marketplace all the above companies compete against each other to be the leader in their products.

There are two aspects to the book – one aspect is how each human reacts to salt, sugar and fat in ways the Food Giants are understanding more and more each year. The food giants employ science professionals to understand how the body reacts and then try to ensure their processed foods capture the greatest sensations from the salt, sugar and fat.  In every diet, people need some salt, sugar and fat, the issue is how much? Products that are not so healthy for you were designed for you to eat more than one serving. When you read the notes on the side of the packaging about how much value the food gives you- is it for one serving or the whole box? There was an old commercial which used the tag line “betcha you can not eat one”

For most processed foods without the salt, sugar and fat ingredients the food would taste bland. Add them in and the food will be devoured. For each, realms of data are gathered and analyze to find the bliss pint or the precise amount of sugar or fat or salt that will send consumers over the moon and be repeat buyers. Researchers know each of the ingredients salt, sugar and fat do good things for the body and add to our enjoyment of eating. The researchers study where does the mouth and tongue signal the brain? The research indicates depending on how much you eat, the ingredients send very positive signals to the brain to eat and enjoy. The issue you is if you consume too much over a reasonable period of time you will have high blood pressure and a host of other health related problems.

In the 1950’s at many schools were home economics teachers who taught the value of preparing food from scratch, budgeting and a variety of other subjects. As the years went by, the school system removed those teachers so few were taught the skills at school. Somehow it was linked those skills should be taught at home. Many people learnt the skills much later in life after much trial and error, perhaps the home economics teachers should come back?

Linking to dividend paying stocks, in the giant food companies there are challenges for the consumer’s dollars on a weekly basis. What does the consumer spend at the grocery store and will they pick the brands at a margin that ensures the companies make profit. The use of fat, sugar and salt and through marketing dollars means the odds are stacked in favor of the company, but things change. With food giants, you will want to see how flexible in their decision making they are to the changes to the average consumer they are targeting. If decisions on new products take forever, it is time to look for alternatives.

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

 

If you watch You Tube there are multiple videos on lists and one of many is what School Districts do to make up for lack of state and local funding. Even though one of the major costs of schooling is teacher salaries and benefits, legislators often find it easy to cut funding to public schools. School and school boards then have to do something to make up for the money. Some of the solutions which have been implemented include:

cheating school test scores. Everyone wants our children to be the best educated they can and an incentive from states is the higher the student scores, the more funding the school receives. Taken to the logical conclusion, principals wish to have high scores for standardized tests. If the results are less than expected, schools cheat to push up the marks and get funding.

neglecting repairs – buildings eventually need to be repaired. The same as your home will need on going repairs. A fund should be available for the repairs, but most people do not and begin to put off the repairs. The first year is probably not going to do too much damage, but second and third and fourth and soon the minor repair is a major repair. Many school districts keep leaving in until a new school is needed.

advertisements – the school population of kids appeals to many companies and if the kids can be convinced of leaning towards a brand when they are young, by the time they are adults they will be loyal to the brand. Young people try multiple brands, adults tend to stick to the ones they are used to. Many schools have as many advertisements as you see in Times Square in New York. In Times Square there is a building which has no tenants but a great location and the ads pay for the maintenance of the building. Hopefully the schools receive good rates for the advertisements.

bus service fees – at one time bus service was available for children that lived greater than 3 miles from a school and was free. School boards are charging for the bus service.

renting school property outside of school hours – sometimes the local school allows for the parking lot to be rented out. It is harder now because of rules who can be on school property during the day, but if the school is looked at as asset, creative solutions can be used.

Linking to dividend paying stocks, if your company has land and buildings and you do not see on going repairs or a budget allocated to it, then you should be worried. It is easy to neglect the small things when money is tight, but they can develop in major costs. As a profit-making company, you expect your company to do all it can in terms of regular maintenance and not charging excessive fees. If it does, then it is time to seek alternatives.

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