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 dining room 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 searched for, traded for and fought for.

If you think about the city of Salzburg, Austria you might think of Mozart, Castles, Churches, Palaces but you not likely to think what does Salzburg mean? It stands for Salt Town and because of the mountain of salt that is mined nearby, the city grew to the city it has become. The wealth of the city for the government was the salt which was mined and traded around Europe.

In thinking about the Roman Empire, most Italian cities were found close to salt works. In Rome they built a shallow pond to hold seawater until the sun evaporated it into salt crystals. The first of the great Rome roads, the Via Salaria or Salt Road was built to bring salt throughout Italy. Salt was sometimes paid as a salary for the soldier which is the origin for the word salary and the expression worth his salt. The Latin word sal became the French word solde, meaning pay, which is the origin of the word soldier.

To the Romans, salt was a necessary part of empire building and where ever they went they developed salt works. The Roman’s genius was administration not the inventing but the scale of the operation.

After the Romans fell, the next power center to evolve was centered in Venice. Originally they had salt works for the shape of Venice was different. The Italian mainland was 25 miles away and the area was known as the 7 Seas. Sometime after a series of floods and storms the landscape changed and Venice was forced to import salt. They made an important discovery – more money could be made buying and selling salt than producing it. The merchants of Venice were subsidized of salt landing in Venice from other areas. However, because of the policy of even though salt was expensive in Venice, the merchants could make up more on spice and grain trades.

The Venetian government took a profit from regulating its trade and during the 14th and 16th centuries when Venice was a leading port of grains and spices, between 30 and 50% of the tonnage of imports was salt. Where ever the merchants went, they tried to dominate the supply, control the salt works and acquire them if necessary. Venice manipulated markets by controlling production. Adding to their control was the Venetian navy patrolled the seas, stopped ships, inspected cargo and demanded licenses to make sure all commercial traffic was conforming with its regulations.

As long as the commercial traffic was the Mediterranean Sea, Venice controlled the salt trade, however when ships went around Africa and began to go to North American, Venice lost control the salt market. Other cities grew to cater to the trade shift.

Linking to dividend paying stocks, the Romans and the Venetians understood control of the raw materials or gain a monopoly on salt to profit. To have a monopoly took the use of the state’s resources for the greater good. It is no different today, if you find a monopoly or near monopoly enhanced by government (ie utilities) for a long time they will be good investments.

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 the dining room tables in the world was one of the most important drivers of the world economy. Although salt is found almost everywhere in the world which we know about, for centuries salt was desperately searched for, traded for and fought for. For millennia, salt represented wealth. One of the ways government’s of the day raised funds was a salt tax and one of the commodities which traders moved was salt.

Not so long ago, almost every family made preserves of food and meat for the winter, now we go to the supermarket, but if you begin to think how people lived, in order to keep vegetables and meat over the winter, salt was critical. This meant many governments put tax on the amount of salt that people used and it was one of the most important revenue sources they had. In China, the salt tax had been going on for centuries and in 81 BC, Emperor Zhaodi invited 60 of the wisest people in China to debate administrative policies – what emerged was a contest between Confucianism and legalism over the responsibilities of good government. On the Confucians side, the question was why must your Majesty use the word profit?  On the legal side, the question was not what was moral, but practical. If you want a government with the ability to defend its border, you need money. The debate ended in a draw, but the salt tax continued.

Throughout the centuries the debate by the government need for profits (revenues), the rights and obligations of nobility (wealthy people), aid to the poor, the importance of a balanced budget, the appropriate tax burden, the risk of anarchy and the dividing line between rule and tyranny have and continue to be unresolved issues.

Linking to dividend paying stocks, the issues and concerns of people do not change a great deal, the ebbs and flows all continue. In the case of the salt tax it was replaced by income tax for salt is available but a short time ago, salt was a factor in everyday life.

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

From the news pages of the newspaper, the President of Brazil is in trouble. A few months ago, the last President was forced out of office for corruption, the new President who has been in senior levels of government for years, seems to be an equal for corruption. The stories are one of owners of the biggest meat producers was taped by authorities for they had shorted the Brazil real (dollar) with inside information from pending government action. It seems bribes are a cost of doing business in Brazil and many organizations are getting caught with their hand in the cookie jar.

Whenever there is trouble in a country, the stock market is affected negatively. This leads to is the glass half full? Is this the time to get out, look at other alternatives or is this the time to buy. In an article by Paula Sambo of Bloomberg News, she has found investment managers who believe the time to buy is now.

The managers acknowledge President Michel Temer maybe on the way out, but looking at the economy of Brazil there are still solid, profitable companies that have operations based in Brazil but trade worldwide. A few years ago, Brazil was seen as host of the Olympics and there were problems with it, but they went on without too much difficulty. The country has a massive economy, large middle class, and many natural resources which means at some point the stock markets will go to normal. The Brazilian market before the allegations against the President was up 69% and the real was up 22%. The key is to do the research to what are the best companies in the country. The best always go up first and names such as Ambev (beer), Fibria Celulose (pulp and paper), Odontoprev (dental insurance), Ultrapar  (fuel distribution), Vale (iron ore), Petroleo Brasilerio (oil) were mentioned in the article.

Linking to dividend paying stocks, the key in investing in any downturn is to have done your homework to know which companies to buy, unless you wish to buy the index. If you are going to buy, look for profitable companies (which pay a dividend) and the shares are off because of the government concerns. The choice should be good and always buy the best companies at a lower price. The companies because they are profitable the share price will return to normal and then climb because they are profitable and for insurance you are collecting a dividend which adds to your total return.

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

Every active investor spends time listening or watching to news, what do the pundits think? Sometimes they are on the correct track, sometimes they talk myth and sometimes they are wrong. To continually fill the space at a relatively inexpensive cost, pundits will be used. The trick is to identify which is which.

Recently Scott Barlow writing in the Globe and Mail wrote about 3 investment myths:

1. Gold goes up in price because of Trump’s inconsistent policies. The inconsistent policies are a given with the new President, however gold has only been reacting to the US inflation adjusted bond yields. For gold prices, watch the federal reserve bank or fed, not the President.
2. The takeover of retail by online shopping trend is getting faster. While online shopping is popular and consistent, the old trend of people only going to shopping centers has changed to both. The pace of e-commerce sales growth itself has remained the same.
3. While many of us have cut the cords to Cable TV, John Malone of Liberty Media says that is ok because the cable industry is a connectivity business (internet) and video retailer (cell phones). Just about no one is cancelling their internet service and for more and more organizations, you need to be connected to access them, including government services. The cable companies – TV, internet and cell phone companies will continue to earn plenty of cash flow to pay high dividends.

Linking to dividend paying stocks, we hear change is the only constant and start to believe things are really changing. In the world of press reporters, when they have a great story, they need to have verified the sources three times. For many myths you will watch to see long-term statistical trends before you change everything which you have learnt. Are there many challenges, yes; do companies try to deal with them; yes. Do not throw the baby and the bath water, just the bath water.

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

In many homes there are gardens, most people like them for their color, for the ability to grow, the time spent doing it and sitting back and looking at the results. Unless you have a large garden, it does not take too much time in a week to do. It is also very possible to have many natural plants in your garden which means even less time to do and more time to watch. Recently Dale Jackson interviewed some investment managers and wrote an article Is it a weed or flower? Tend to your portfolio.

If you are a gardener, then it is possible to use the metaphor to link to investing. It is great to go to a garden center to buy more plants and plant them. You still must ensure they receive sunlight, have a good soil or nutrients and eventually the sun will shine everyday and the plants need watering. After the plants are in, not everyone will achieve peak performance there always is a laggard. You have the option to try to help it recover or replace it. Maybe the plant needs more sunshine, maybe you like the shape of it but the plant really likes shade and it is in the sun. There are many maybe, just like gardening, but you still do it.

Sometimes you will look at the individual plant and not look at the overall garden. If the overall garden is doing well, then maybe you are doing the right thing. In a diversified portfolio not all stocks perform the same, some are up, some are consistent and some might be down but not too much. If you bought a stock for the dividends and the dividends are being paid, but the stock is flat, it can still be a keeper. Perhaps in the next investment cycle it will be your best performer. The trick is therefore reviewing the basic fundamentals of the stock – cash flows, dividend payments, competition, etc. When they change, other alternatives are to be looked at and found.

Many natural plants have flowers, but in another person’s point of view they may be weeds. A weed is something you do not like. In some cases dandelion is a weed, but it produces a lovely yellow flower and then as it goes to seed, the lawn can be easily cut.

Linking to dividend paying stocks, in this case the link was gardening and weed or a flower? Whatever hobby or interest you have, you can use the metaphor to your investing in order for you to make a decision. The fundamentals are important, over time you learn what you like and do not like and when to make changes. The reality is a good investment held over time will increase in value; seemingly an investment that goes below what you paid for is a method to losing wealth and you want to try to avoid it. Whatever method you use, if you think a few years out similar to the garden your can enjoy the blooms.

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

Living in the northeast most of the time my concerns are about daily routine in life, but sometimes one wonders about the world, what are the best values in international stocks? Would you know the names or roughly what they do? Although the New York Stock Exchange is still the center of the universe (or for people in the northeast) it helps once in while to look abroad. Craig McGee with Lawrence Ullman of GMP Richardson use Bloomberg and the MSCI EAFE Index, the index tracks companies in Europe, Asia, Australia. In mid May these results were published but now in mid June you can determine if they did indeed rise in value.

Mr. McGee’s criteria was

over $ 1 billion in market cap trading on US exchange in the form of US depositary receipts.

earnings yield (forward 12-month earnings per share as a percentage of latest price

free cash flow yield (forward 12 month FCF as a percentage of latest price

return on equity

consensus earnings per share estimate revisions over the past 3 months

Company                Country    Mkt Cap   EPS   FCF  ROE  3m EPS   Dividend

($Bil)        Yield  Yield  %   Revision    Yield

Anglo American     Britian       17.3         30.8     14.0   17.9    16.7        0.0

China Pete & Chem  China       99.7          8.4      10.2     8.9      9.6          5.5

Vale                            Brazil        43.1         14.2     15.7    16.4     20.0         0.0

Rio Tinto                    Britian       72.0        10.9    12.1      20.2    19.6        6.5

YY Inc                         China            3.0         9.3       8.6      31.9     6.7          0.0

Ternium                     Lux               4.9         13.0      8.4     14.8      31.6       4.1

BHP Billiton PLC        Aust             87.7         8.4       13.4   13.2        9.9       5.3

Petroleo Brasil          Brazil            62.2        9.6      11.5      5.4       12.8       0.0

Teva Pharm                Israel            31.8       15.3     16.0    11.4        0.6       3.7

The other companies were Petroleo Brasileiro, Lukoil, Cemex SAB de CV, BHP Billiton Ltd, Posco .

Linking to dividend paying stocks, we are all bias for very good reasons. Most of our days are linked to what we routinely do. Understanding we are bias and that is ok, every once in while it is good to look towards the rest of the world who are doing something similar to what we are doing. In this case, the analyst looked at ADR receipts but it is just as easy to buy stocks in other countries. The larger your portfolio gets, then you have to be concerned about currency risks, however that is easily overcome. Investing in the best or first in class, whether is local, national or international is always a good idea.

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

Those of you who loved McDonald’s can remember the Big Mac jingle including 2 all beef patties, special sauce,…   Harvey Schachter (Harvey@harveyschachter.com) wrote an article titled The secret sauce of marketing can help craft your message. Everyone at some point will do some marketing. It is reasonably easy to see marketing which was done with the best intentions, but does not work. Something just does not work, however there are ads that seem to resonate to everyone. What should be done?

In Harvey’ s article he writes about Harry Mills a marketing consultant from New Zealand who was talking to a person with the last name of Sauce. Later, he started thinking about the name and how it applied to marketing as an acronym. He came up with S for simple; A for appealing, U for unexpected, C for credible, and E for emotional. Mr. Mills says the S and E are the most important because when marketing fails the weakness is the simplicity and because of that they can’t get an emotional response.

Mr. Mills wrote a book called Secret Sauce and there is more detail in it.

Simple messages have one central truth and are easy to grasp and picture.

Great example are proverbs from the bible and Aesop’s fables.

Appealing messages are different, valuable and personalized.

Give no more than 3 benefits which are the sizzle which sells the steak.

Unexpected messages are surprising, intriguing and seductive.

Seductive means to lower consumer defences to allow the message in.

Credible messages are trusted, transparent, and verifiable.

If you claim it, someone will check.

Emotional messages are warm, arousing and plot-driven.

The messages drive you to take an action.

Linking to dividend paying stocks, all organizations make a mistake along the way, however because of monopoly like positions, they can recover without giving away the store. It is expected the more profitable companies can use some of the best talent that exists because they pay their bills and the department have money to spend every year. All marketers are looking for new things to keep it fresh, to reach the channels where customers are and are tending to be. As an investor you are looking for a method to evaluate parts of the company besides the financials and marketing is one thing you look at what is the SAUCE of the company?

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

 

 

Isaac Newton is the man who from a young boy to adult man declared his mission in life was to discover the forces of nature. In a book Isaac Newton by James Gleick published by Vintage Books, NY, 2004 Mr. Newton’s life is examined. Mr. Gleick is a science writer and from that perspective Mr. Newton’s life emerges. There are many people who look to the skies or watch balls being thrown or apples drop, but very few do all the work that needs to actually describe it and be able to relate laws to it. Mr. Newton was born in 1643 to a farmer, but his father passed on early. His mother remarried and it was possible for Isaac to learn and eventually go to Cambridge because he was not going to much of a farmer. At Cambridge, the powers that be recognized his abilities and made him a professor which allowed him to go after his mission in life.

Isaac’s gift was when he looked at the world, he had an extra sense organ for peering into the frame or skeleton or wheels hidden beneath the surface of things. He sensed the understructure. His sight was enhanced by the geometry and calculus he had internalized. He made associations between seemingly disparate physical phenomena and across vast differences in scale. When he saw a tennis ball at Cambridge, he saw the invisible eddies in the air and linked them to the eddies he had watched as a child in the rock-filled stream of his boyhood.

Newton was the first person to imagine the properties of nature and give them names – mass, gravity and velocity. In his laws of motion 1. Every body perseveres in its state of rest or moving uniformly straight forward, except insofar as it is compelled to change its state by forces impressed. 2. A change in motion is proportional to the motive forces impressed and takes place along the straight line in which that force is impressed. 3. To any action there is always an opposite and equal reaction. In giving the laws he also said, there is more to do predictions to be computed and then verified. The method of science which everyone does – hypothesis, research, results, repeat, repeat, till the result happens or the hypothesis changes.

If Mr. Newton had remained at Cambridge he would have been celebrated for his scientific feats, however he was also interested in other things and in 1696 he was named Warden of the Mint with a salary of 500 lbs and a percentage of every pound coined. At this time, the Mint was redoing the coins in England which made him wealthy. For this wealth he redid the Royal Society as well as published more from his life’s work.

Linking to dividend paying stocks, most of us do not look at the stars and wonder how the laws of nature work, but we are glad someone does. In terms of investing, most of do not understand the daily ebbs and flows of the stock market, but we can easily invest in very good companies which make profits and pay dividends and over the years have greater wealth. The trick is buy and hold companies that are in business for a long time. The dividends can either be reinvested or go into your account to diversify your holdings and even the market goes up and down, your dividends can keep growing. Ensure most of your wealth is in profitable companies and this will limit your losses.

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

Home Capital is a company based in Toronto, Canada and was serving a particular group of home buyers – those that are self employed and new immigrants. Typically they do not have consistent earnings or a track record so the large banks tended not to give them a mortgage. Home Capital went after this market and had loan losses of less than .05 %, this made them a solid company. They had problems – they funded themselves by selling Guaranteed Income Certificates and their loans were a little higher than the competition. The problem came on renewal, now the people had a history of paying back their mortgages, the competition would take over their mortgages and give lower rates (the banks had less risk as the people build up a little equity in their homes). The churn rate meant Home Capital had to reach out to mortgage brokers to sell their mortgages. However for the past 20 years by the regular metrics of the stock investing, the company was highly rated.

Then a regulator said some of the mortgage brokers were less than perfect, not as bad as it was in 2008, but not what it should be. The company stopped doing business with the mortgage brokers and that should have been the end of the story for the business still had limited loan losses. Then something happen and confidence began to unravel in the bank business. The companies which distributed and help push the GICs put a hold on them and encouraged its customers not to buy them. The lack of GIC deposits lead to more money going out than in. The company had to go to an large institution to get a loan but it carried rates of nearly 20% on the first billion dollars or expensive money. Questions were asked why so expensive? and more money flowed out of the company. All of the above happened in a few weeks, in Feb the company was solid with a stock in the $30s and paying a dividend,  in March the stock slipped, in April the stock hit a low of $5.00 and no longer pays a dividend. A new President, Board of Directors and selling mortgages at a discount has kept the bank afloat.

Linking to dividend paying stocks, in the financial industry, the basic strength of the bank is confidence. Once that confidence goes, it does not matter what the previous numbers were, confidence is going. Similar to your reputation, it takes years to build up and a few moments to lose it. In the case of Home Capital, it paid a dividend and people were attached to the story and the company, but if you did not sell, you are hoping the assets are still worth $20 a share.

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