Adoph Hitler at the end of the second world war died or we highly suspected he died under uncertainty – did he commit suicide? was he taken out of the bunker and died in a foreign country? We think we know, but there were doubts because the idea was to end the war and not worry about Hitler. In the years that passed, the general public wondered what kind of man was Hitler to bring Germany out of the recession; to overtake most of the countries in Europe and fight against those that could. In this situation information about Hitler slowly started coming out and as the years passed, people wanted more information. In the 1980’s forty years after the war, from somebody’s attic books or diaries were found – could they be Hitler’s private thoughts. It turned out they were fakes, however Robert Harris wrote a book about Selling Hitler published by faber and faber, London, UK, 1986.

When the diaries came out they were offered to the newspapers of the day and the owners and editors had to make a decision were they the real thing. If the diaries were the real thing, more newspapers would be sold because people were and likely still are interested. The end of the war had left uncertainty and the owners of the newspapers hired known Hitler experts to see if they believed it was the real thing. The book described the details of thinking about the big headlines and story and what if they were wrong.

Linking to dividend paying stocks, most things in life have a degree of uncertainty attached to them. The marriage vows are for better or worse, although everyone hopes for the better. Often times research will tell you one way or the other depending on the situation. The more we know, the more we find out the more you do not know, however a decision needs to be made. In the stock market, we have perfect information looking backwards and a degree of uncertainity looking forward. One way to reduce the uncertainity is to invest in profitable companies which pay a dividend. If they can not pay the dividend, it is a clear sign to find alternatives.

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

Around the first of June, Amazon shares broke though the $1,000 barrier which is great if you hold the stock. For many people $100 is a break through because the stock has to continue to be a growth stock and if we use the Amazon stock – the stock has to rise to $1,200 to make a 20% return. It could do that for over the past year, the stock is up 40%. The question one needs to ask is how much further does it go up?

There are a number of reasons why the stock should continue – if has the resources to do whatever it wants which can be a good thing. The stock is worth more than Wal-mart even though Wal-mart which is the biggest retailer in the world has sales 3 times larger than Amazon. Investors according to Spencer Soper of Bloomberg News put more value on Amazon’s web traffic and delivery network. Amazon is spending billions of dollars on research and development in an effort to make it the lowest cost delivery business. Amazon has many countries in the world to penetrate including China and India – home of a billion people each.

If you know someone that has Amazon Prime – the $99 a year subscription, it dominates the market. There are 80 million subscribers who pay for delivery discounts, music and video streaming, and photo storage. Amazon continues to push its way into all retailing categories. The incredible statistic with Amazon Prime is once someone subscribes to it, there is a 96% renewal rate every year. With a number 96% retention, Amazon is now offering Prime -lite to have everyone to try and get hooked on the service.

Amazon’s cloud-computing division of Amazon Web Services (AWS) has a global network of data centers and rents out space to many companies including the US government. The fees for AWS bring in $246.8 billion. At the moment Amazon is one of the best users of data to achieve the goals for everything it sells.

Another aspect is the FANG trade of Facebook, Amazon, Netflicks and Google plus add in Apple and you have 25% of the rise of the stock exchange and a recent study suggests 4% of the stocks typically make up the greatest percentage of the rise of the stock exchanges.

Linking to dividend paying stocks, while Amazon does not pay a dividend it is a stock which has transformed the economy. If you do not own it, if you own a index fund it should be in it. While Amazon keep going up, no one knows for the stock market to have perfect information is to look at what has happened. In all likelihood, Amazon will not lose that much before it continues climbing upwards.

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

During the Renaissance time in Europe, the center of the world was Rome for all of Europe was dominated by the Catholic Church. At the center of the Rome is the Pope and in the Renaissance times, they lived similar to very well paid Executives of today. The Popes and Cardinals received a very generous compensation scheme from being Cardinal of the region. The Church was seen as being close to God and people in general were not necessarily dissatisfied with the set up. The Pope lived well and was allowed to have mistresses and children. During the reign of Alexander VI, the Pope or Rodrigo Borgia used his children as help his papacy and to politically align the church against potential enemies. His son Cesare became a Cardinal as well as taking out rivals; his daughter Lucrezia has been the subject of many reports of what was not good with the Renaissance.  In a book called Lucrezia Borgia by Sarah Bradford, published by Viking 2004, the author tries to see the real Lucrenzia.

At that time, in history particularly among the lords of the land, daughters and nieces were used to cement relationships with other lords to ensure relative peace. However, just because Rodrigo became Pope it does not mean he automatically became part of the in crowd. Lucrezia’s third marriage since 12 years of age was to Alfonso d’Este who was the son of the ruler of the lands around Ferrara which is between Bologna and Venice. The d’Este had ruled Ferrara for over 900 years at the time of the marriage. The Borgia’s were first generation of Cardinal and was led by a very ambitious Pope from Spain. Alfonso’s father ensured his relatives who could have challenged him were dealt with and the two side negotiated a large dowry (a very large dowry from the Pope) to ensure the marriage would take place. It did and produced heirs for the family to rule until the 1600’s and one of the tourist attractions is the d’Este Castle, prior to an earthquake in 1570, Ferrara was known for its music and plays and the many churches in the city. When the Pope under the Papal States ruled the land, the treasures were sent to Rome.

Linking to dividend paying stocks, it seems on takeovers nothing has changed, one company which has existed for a period of time believes they are worth more than some upstart and the end result is raising the price of the stocks. Throwing more money into the deal is a time honored method of doing things.

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

 

Larry Sarbit of Sarbit Advisory Services recently wrote an article about rear-view investing. He was trying to answer the question how can the stock market go down or be flat for years, while the US GDP growth remain stable and climbing?  Warren Buffett answer is investors behave in very human ways. They get excited in bull markets and make the recurring mistake in looking in the rear-view mirror, regardless of overvaluation.

When they look in the rear-view mirror and see a lot of money having been made in the last few years, they plow in and push and push and push up prices. And when they look in the rear-view mirror, and see no money having been, they say this is a lousy place to be. From a speech in 2001.

Mr. Sarbit says the average investor buys recently posted great results, they buy stocks after great returns have already been achieved. Most do not participate in the capital appreciation of the stocks.

From Mr. Sarbit’s view is the market valuation is high and at some point there will be a correction.

Linking to dividend paying stocks, Mr. Buffett believes in buying great stocks after they have declined in value. Otherwise he watches a number of stocks and when they have declined in price, because of the insurance companies ability to generate cash he can then buy a large block of shares to see them increase in value because the companies are well run and have the capacity to return to better prices. Some of the companies will be near monopolies, but try not to pay too much. Good investors should look forward as well in the rear-view mirror to see the alternatives and opportunities should markets go up or down.

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

In January 1982, the US Government broke up AT&T to 7 companies with AT&T allowed to keep parts. By 1996 the S&P 500 telecommunications services was created and contained 14 companies. With mergers, the 2017 index has 3 Companies left in it AT&T, Verizon and Century Link.

BellSouth and AT&T merged. SBC Communications first bought Pacific Telesis, then Ameritech, it joined BellSouth to buy AT&T Wireless and then bought AT&T, however it took the name of AT&T.

Bell Atlantic bought NYNEX, then bought GTE and changed its name to Verizon. Since then it has acquired the wireless assets of Alltel.

US West bought QWest and after a merger with Century Telephone changed its name to CenturyLink.

Airtouch Communication was bought by Vodafone.

MCI and WorldCom merged then collapsed under accounting scandals.

Sprint merged with Nextel and was bought by Japan’s Softbank and left the index.

Frontier bought Global Crossing and Citizens Communication but has since left the index because of revenue problems.

Linking to dividend paying stocks, when AT&T was broken up, it was good for the economy because they had a monopoly on local phone service and did it well. If it had not broken up we might not have seen the rise of the cellphone and all the services which go into it as fast as it changing now. Along the way, with different demands and needs of services companies have changed, some are better than they were.  The point is when the Baby Bells were broken off who would have known only a few names would remain in the future.

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

 

 

Yesterday’s post was for every investor, one wonders what is better picking the market or index or individual stocks. In an article by Jeff Sommer of the New York Times News Service, he examined a study by Hendrik Bessembinder a finance professor at Arizona State University. What he found was most stocks on the stock exchange do not perform well, however 3 to 4% perform very well which lifts the indexes. The 4% included Exxon Mobil, Apple, GE, Microsoft and IBM – they accounted for all the net market returns from 1926 to 2015.

Adding to the data was an article from Bloomberg News by Sofia Horta e Costa titled S&P 500’s famous FANG trade has nothing on Chinese four-stock frenzy. The S&P FANG trade refers to Facebook, Amazon, Netflix and Google. In China four internet stocks account for half of the 22% rally Tencent, Alibaba, JD.com, and Baidu.

Hong Kong listed Tencent in mid May reported record sales on demand for games on its billion plus users WeChat and QQ; Alibaba first quarter revenue rose 60% faster than expected; JD.com posted its first quarterly profit as a public company; and Baidu is China’s biggest online-search provider.

Fund managers expected good things from all the companies going forward.

Linking to dividend paying stocks, to be in the 4% is where the money is made both from a long term and short term because losses are fewer. Stocks go up and down and over time they change some keep producing but most evolve to something else, as they evolve as an investor as long as you are receiving your dividend you can look for alternatives but take time in acting.

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

For every investor, one wonders what is better picking the market or index or individual stocks. In an article by Jeff Sommer of the New York Times News Service, he examined a study by Hendrik Bessembinder a finance professor at Arizona State University. What he found was most stocks on the stock exchange do not perform well, however 3 to 4% perform very well which lifts the indexes. The 4% included Exxon Mobil, Apple, GE, Microsoft and IBM – they accounted for all the net market returns from 1926 to 2015.

Mr. Bessembinder found the typical stock does not outperform Treasury bills.

The problem is in the 96% there are always some stocks that perform lottery size returns and who does not want to own one of them? Most stocks on the stock exchange are concept or raising money for potential. The potential does not always come, but it can.

Over the years some of the solutions are: if you buy a mutual fund or index fund, the most important aspect is what do they do with losers. In an index fund, the stock exchange typically changes the stocks included in the index a couple of times a year. The winners are put in, the losers come out which is why over time, index funds go up in value.

If you do not have an index fund, always ask what they do with losers? When do they sell? Most of the information is always about buying, but it is the selling which affects your money.

Linking to dividend paying stocks, the prime reason for buying these types of companies is they are profitable. When a company is profitable it will trade at higher multiples and if it is profitable it can pay the dividends. The dividends plus the long-term profitability helps you into the top 4%. The trick for the individual buying stocks is to try to understand when the best companies fall in price and then buy them and watch as they go back to where they belong.

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

There are many ways to look at the world, as it is, as it was and as it could be. If you look at the world as is was you need to find some very common elements which all societies need to live and evolve. A very interesting book is called Salt – A World History written by Mark Kurlansky published by Walker and Company, NY, 2002. For generations of people, the table salt which is found on many dining room  tables was one of the most important drivers of the world. Although salt is found almost everywhere in the world  for centuries salt was desperately searched for, traded for and fought for.

In San Francisco, the gold rush made California a state, the mining continued with Silver and the Comstock mines. To mine silver salt is needed to separate the minerals. San Francisco Bay has a marshland which is ideal to making salt. Pools were made with windmills pumping water from one pool to another, the water evaporates during the summer, the brine crystallizes and salt is the result. The process well-known from ancient times was beginning to be understood why it does what it does.

The science or chemistry was slowly beginning to be understood. Through looking for salt, people began to understand the earth or geology. In terms of chemistry, salt is sodium chloride. The ratio is 40% sodium (the positive) and 60% chloride (the negative). When you go to the supermarket, you might pick up a Birdseye product which uses refrigeration and vacuum processing which means we did not need salt for preserving. Although there are plenty of delicious tasting foods adding salt makes a better taste. The chemical industry breaks down the sodium and chloride to make the thousands of products which we use everyday. The Chemical industry needs relatively inexpensive hydro, raw material of salt, water and distribution channels to sell to other industries and one can easily see why high returns are made in the chemical industry.

Over the years, there has been much politics involved with salt including India and Gandhi, where the British ruled the country and had a monopoly on salt. Understanding the basic things in people’s lives is understanding geopolitics.

The two biggest producers of salt in the US are Morton’s and Cargill. One of Morton’s invention was to add magnesium carbonate to table salt which kept the salt from sticking together. If you buy salt to throw on the sidewalk or your driveway, the rocks stick together. (51% of the use of salt is used on the roads) However since 1911 the table salt does not. One of the places where the road salt for the northeast comes from is Great Inagua Island in the Bahamas where Morton’s harvests the sea on 30,000 acres; Morton has mines in Kansas (which has estimated life span of 250,000 years); Cargill has a mine near Detroit, Michigan and Avery Island in Louisiana which also the home of McIlhenry’s Tabasco sauce.

Linking to dividend paying stocks, history teaches us we changed over the years because now we take things for granted, which used to be life and death. To understand history is to understand the little things in life which are important, it is also to understand the movement of capital into those important elements. Follow the flow of capital, what is important today, it changes as prices change as technology changes. Some is better, some will be kept on a smaller basis, we are people.

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

 

There are many ways to look at the world, as it is, as it was and as it could be. If you look at the world as is was you need to find some very common elements which all societies need to live and evolve. A very interesting book is called Salt – A World History written by Mark Kurlansky published by Walker and Company, NY, 2002. For generations of people, the table salt which is found on many tables was one of the most important drivers of the world’s economy. Although salt is found almost everywhere in the world  for centuries salt was desperately searchd for, traded for and fought for.

In the book, there is descriptions of the making of cheese, to make cheese salt is needed. Those places in Italy and France which have the wonderful combination of dairy herds for milk or goat cheese plus salt mines to make the cheese. Over the years, the ability to make the cheese has made certain areas the expert places for great cheese. Think of Parmesan cheese and the aging of cheese. The aging of cheese is the slow absorption of salt. It takes one year before the wheels of the Parmigiano-Reggiano cheese to age, if it sits for 2 years the cheese is dry and too salty.

From the meat side of the dairy, salami, prosciutto were made, with salami being derived from the Latin verb to salt. Salt was needed for meat – salted hams from the Basques. Most of Europe was in religion catholic, the Pope decided on Fridays people can not eat meat from the land, but from the sea was good. The meat from the sea was fish – first it was sardines, herring and then cod. All the fish to be preserved needed salt although cod needed less salt. In geopolitical terms – the north had the fish, the south had the salt, salt works needed to be either acquired or built.

The book continues through the ages, but for brevity sakes, a jump will be made to salt in the US. After the War of Independence, the British ban on the sale of salt to the US  caused salt to rise from 50 cent a barrel to $8.00 a barrel. This resulted in American inguenity a Cape Cod carpenter named Reuben Sears invented a roof that slid open and shut on oak rollers, allowing sea salt to made efficiently from March until November. When it rained or in the evenings, the roof was closed, when the sun shone the roof was open. Cape Cod was soon the center of salt production in the US.

Away from the salt ocean, governors encouraged people to find salt mines and one of them was founded in Onondaga in upstate New York. Eventually, the Erie Canal was built to bring the salt to the city. We often think of buffalo in the west, but there was a Great Buffalo Lick on the northern bank of Great Kanawha in West Virgina for deer, buffalo, cows need salt. The salt production from this site, plus pigs from Ohio, Kentucky, and Indiana help make Cincinnati a major commercial center. in the 1830’s one third of all western hogs were packed in Cincinnati.

In the Civil War, salt production in the north was 12 million bushels, in the south was 2.365,00 million barrels. Armies need salt for medicine, in Napoleon’s retreat from Russia thousands died because salt was not available to treat minor wounds. Salt was needed for the soldiers as well as the livestock – the horses of the cavalry, the workhorses to hauled supplies and artillery and the herds of cattle to feed the men. In time, the Union recognized the salt advantage and part of the North’s strategy was to destroy the South’s salt works. Soon the price of a 200-pound of salt in the south went from 50 cents prior to the war to over $25.00 in 1863.

Linking to dividend paying stocks, your perspective on history begins to change reading these types of books. An everyday ingredient becomes scarce and what do people do? The price rises and with perspective, the South had an idea but poor execution in a long war, they were bound to lose. When you think of your investments, think about what are the basic building blocks and are there alternatives? In theory, given what we know today, it should be easier to find alternatives.

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