As an adult, most of the time when a book is desired, it comes from the adult section of the library or the book store. Recently time was spent in a public school with grade school books. One of those books was about Wheels and the pictures and the story was if you look closely at mechanical objects around you, they are not as complex as they look to be. The basic building blocks often are wheels. If you look towards the basic building blocks of machines, you can understand how they work and maybe even fix them.

Linking to dividend paying stocks, similar to everything else in this world, subjects can be complex. There are reasons for the complexity, but to understand is to bring back to the basic. How does the company make money? What is its margin? How consistent does it make money? As you understand how the company makes money and can it continue to make a profit, then investing becomes easier. There are basic building tools for every industry, with investing there are basic rules and one of them should be try not to lose money. One easy method to try not to lose money is to invest in companies which make money and continually raise their dividends.  Companies which make money are more valuable than ones that do not, and it is good to have a couple of measuring sticks – can the company raise its dividend? yes keep, no look for alternatives.

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

 

One of the most important countries because of its location between Russia and the Middle East is Turkey. The country has a long history and for generations controlled much of Middle Asia in the Ottoman Empire and people throughout the empire were known as Turks. Most people including me know a little about the region and a book such as Sons of the Conquerors – The Rise of the Turkic World by Hugh Pope published by Overlook Duckworth, NY, 2005 helps.

To understand the country of Turkey, even though the capital of Ankara is an old city, the dominant buildings belong to the military. In Turkey all males must join the army for a few years, then they are allowed to marry and begin what is a normal life. The military besides being one of the biggest employers of people; its people pay rock bottom prices to their bases, hotels and holiday camps; the military retirement fund controls one of the biggest holding companies in Turkey; the military budget is at least 10% of the budget (perhaps higher)  of the country and for the most part the elected politicians have little say in it. It is not surprising Generals run the country.

The books discusses other countries within the Turkic World and they have their strengths and some have oil and gas.

Linking to dividend paying stocks, every company has some underlying premise or strength which helps you understand the company and its directions. In the example of Turkey understand the long history of the military means you will begin to understand how it generally reacts to events. Consider what is the underlying strength of the companies you own? Does it still use that asset?

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

In early March one of the richest countries both in resources and people credit rating was downgraded to junk status by S&P. The country which was downgraded was South Africa and the status relies heavily on current President Jacob Zuma. In his years of being President, every year he becomes a little more corrupt. It started slowly, first the Presidential compounds became more lavish; then it was a select group of people who essentially do the work of government and collect its taxes which made his friends wealthy. However, in all governments there are usually bodies or people which can offer a different viewpoint and keeps the government reasonably honest. In late April, President Zuma crossed the line with regards to ousting his finance officials for delaying or not implementing his desire to be or live like a billionaire.

The new Finance Minister who previously had little administration authority in the Cabinet, was telling the press he did not think a downgrade was going to happen, cabinet had been purged of opponents before. It turns out Minister Malusi Gigaba either did not understand what the President has been or trying to do with the South African economy or was overly optimistic.  South Africa’s economy will be stories in the future.

Linking to dividend paying stocks, governance matters. Good administration matters. Any fool can loot a treasury, it takes ability to ensure it does not happen and the company makes a profit and can pay a dividend. When your annual report comes out watch for the top executives, how much pay did they receive and are they worth it?

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

 

In April many things happen, the weather is warmer and the early yearly events held in spring happen. In Kentucky, there is a special horse race; in basketball and hockey – playoffs start and in golf the Masters is held. Typically, spring is still a little cool to be outdoors all day, so watching sports is done. In thinking about the Masters which was held in Augusta, Georgia in early April, Cathal Kelly wrote about golf is not for the average person anymore. Golf started off as a playtime for the wealthy, but over the many years it changed to cater to the middle income plus could play. For a golf club to make money, it sold real estate around the course so technically one could walk from their home and play golf. Realistically, outside some errand golf shots, the golf course was similar to living beside a park – no development on it.

In the article Mr. Kelly says President Trump while campaigning had no time to golf, yet as President he makes time and he is helping make golf an elitist sport again. It seems odd, a President golfing once a week would make the sport less popular, but during the campaign his remarks about the former President golfing were less than flattering and often said as President he would have no time to golf. As President, something has changed or the perception of golf has changed. As candidate, the President said golf is something people do who have extra time on their hands, busy people do not do it or rarely golf.

Linking to dividend paying stocks, if a market moves from a general one to an elitist market, then the number of participants will be fewer. It also means those companies which were trying to mass sell to the public will fail because the public may watch some golf on TV, but not as much as they use to. If the market changes, the companies will  have to change – merge, consolidate or go out of business as it caters to fewer buyers. The advertisers will still wish to advertise because the members of the public that remain either to play or follow the game tend to have the disposable income the advertisers desire. People and markets change every year.

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

 

In late March. Peter Ashton of Recognia examined consumer stocks or the companies who products people use everyday. Ideally, the consumer stocks are defensive if the market declines because people still use their products.

The criteria he used was:

market capitalization of $ 10 billion or more

forward price earnings ratio of 27 or less

dividend at 2% and a dividend growth rate of 4% or more

beta of 0.75 or less which means the stock has 75% or less of the volatility of the overall market

Company                               Mkt Cap      BETA      P/E             Div Growth             Dividend

($ US Bil)                                         Rate (%)                  Yield (%)

Coca-Cola                             181.6             0.59         22.2                6.1                        3.4

Altria Group                        142.0             0.19         24.2                8.3                        3.3

Dr Pepper Snapple                17.8            0.46          22.0             10.4                        2.2

JM Smucker                            15.5            0.30           17.3               4.7                        2.2

PepsiCo                                 159.7             0.42          23.4                 7.1                       2.7

Kimberly Clark                      47.1             0.67          22.1                4.5                        2.8

The Hershey                            22.4           0.65            25.3                7.4                      2.2

Clorox                                        17.6           0.49            25.7               4.0                      2.3

Linking to dividend paying stocks, the above companies with products ranging from cola to cigarettes to chocolate are going to be bought and sold on a regular basis. For the most part whatever the economy, people will tend to buy the products. If you are doing the analysis you can change the variables and come up with even safer companies. Every year it is easier to do your homework and pick companies that will lose less money and more important will make money for you.

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

 

 

The nuclear industry is in chaos, one of the leading companies which built nuclear power plants has filed for bankruptcy – Westinghouse. Utilities are the end customer of the nuclear power plants for they only have a few methods to generate electricity – coal, oil, gas, water, and sun. The coal produced greater pollution, but is readily shippable; oil and natural gas at the moment are less expensive than coal so they are the favored option; water is only available in a few places and those places have long been dammed; solar is a great option as prices have fallen but it is seen as longer term solution; and nuclear while the cost to build the plant and the first kilowatt hour is expensive as the nuclear material works the costs fall to the lowest option.

Westinghouse Electric has been the go to company for nuclear for it seems generations and has been one of those leading edge tech companies. Now the nuclear plants under construction for SCANA Energy in South Carolina and Georgia Power which are both over budget and behind construction, there is a concern will they be built and at what cost? The executives at Westinghouse said they will focus on maintaining existing reactors and developing reactor designs, just not building new plants.

On another story, when electricity was invented by Edison he invented Direct Current (DC), George Westinghouse invented Alternating Current (AC).  The AC is much better to send over long distance for the DC loses the energy. Edison recognized this, but his solution was to try to make AC sound the worse and he tried to get death by electricity using AC currents. The reason was to beef up his holdings and then sell them profitably. In the end, AC current is what we use.

Linking to dividend paying stocks, our society puts great faith in technology and the leader in the nuclear was Westinghouse. Given the bankruptcy filing of Westinghouse, utilities may have to go all in towards green energy, which may be a good thing.

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

If you look to the sea either now or during the summer, hopefully you will see small waves lapping at the shore and enjoy a great day at the beach. If you happen to see a shipping container boat going through the waters you might think 95% of all goods are moved by ships. If you are a passenger on a ship, you might think this year more than 10 million people will be on ships going for cruises. All the above means we are connected to the seas and many people expect to be on the ocean everyday.

In the past, there were old stories about a rogue wave which is a wave which can reach 100 feet tall or the size of 10 story office building. The difference is eventually the wave will crest and fall against something, when it does, there is tremendous power in the wave. ( watch a few documentaries about tsunami’s and the affect on the land when it meets structures) We used to believe that a 100 foot wave occurred every 10,000 years or 5,000 years, but very few people saw it and would ever experience the waves. Watching the documentary Rogue Wave on the History Channel, it seems rogue waves are happening more often. Over the years there were many theories – the wind pushing the waves, and a current underneath the waves the energy would spike; depends on the ocean floor – underneath the water, the ocean is not flat – it has hills and valleys and plateaus and when the waves went over the plateaus it could cause a rogue wave (Bermuda triangle); another theory is where the great oceans meet – South Africa where the Atlantic and Indian Oceans or the tip of South America – the Pacific and Atlantic. In recent years, those who study the oceans are using satellites to understand waves. In turns out, the rogue waves are more frequent than had been imagined.

Linking to dividend paying stocks, the good news with the understanding rogue waves are more frequent is the insurance companies are demanding better ships to withstand the waves. Rarely do the rogue waves make it to shore, but ships will be all over the oceans so they need to be insured.  A couple of years ago, stock market investors were considering Black Swans as part of their investment strategies; in nature we have rogue waves to deal with. Things happen and we develop tools to help us understand and protect ourselves. For example, invest for the dividend and the capital gain will come as time marches on – more profitable stocks trade at higher multiples.

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

According to Reuters, the London Stock Exchange and German Stock Exchange were attempting to merge which would have created the largest stock exchange in Europe. Mergers of the companies would allow its largest companies greater access to capital, create efficiencies to lower costs and still make money. There could have many advantages and the two exchanges have been working to create a merger for this was their 5th try.

There is another bigger reason why the merger failed – Brexit. When the United Kingdom was in the EU, from an economic perspective the barriers between the countries fell allowing  goods and services could move anywhere in Europe. In the case of England or London which has a heavy concentration of financial services company, there is a special law which allows people and capital to move around Europe with very little barriers. The United Kingdom voted to come out of the European Union and one of the consequences is the barriers will rise. Of course it is the UK’s idea they will negotiate with individual countries to have similar agreements but that is years away. The EU has said, it is better to be in than out and there is a cost to being out.

The bigger concern is over the next few years supply chains for English speaking companies. For example, many American companies use England as their first stop and then use wholesalers and distributors to go throughout Europe. For over 40 years, this has been the normal and recommended method to do things, now something will change. In America, President Trump has talked about adding tariffs to come into the US and negotiate trade deals on a country to country basis. Something similar will happen in England.

Linking to dividend paying stocks, for countries to go individually or go in a group there are advantages and disadvantages to each method, but all countries can determine what is best for themselves. With the Brexit movement, you can see government actions have consequences. As a business, you can live with it or find alternatives, some will be less expensive.

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

Recently watched a movie called My War directed by Oxide Pang and released in 2016 and is dedicated to the Chinese volunteers who fought against the US in the Korean War in the 1950’s. Similar to war movies, the movie is based on a number of characters whom the audience follows for the couple of years the movie is based on. Similar to most movies, you begin to like one character or another otherwise you would find another movie and then the war starts – the two sides are killing each other – the US and Chinese soldiers are die and it is sad. However, as someone who lives in North America and seen movies about the same period of time, as an audience member I was emphasizing with the Chinese characters. When they defeated the Americans, was it good? The war eventually ended in a stalemate and North and South Korea were divided.

Linking to dividend paying stocks, as an investor putting your money to work for one company or another, you try to pick winners. Similar to who you work for, you are there therefore the company is better. If you worked for the competition, the competition would be better. We all pick sides, but in reality in the marketplace everyone is trying to do similar things, however because our money or our time is invested in one company or another we think them as better. In business as long as the companies stay in business, very few people die, but it is important to remember we all have biases. Every once in a while, do some analysis of the competition, are they really that bad? or would you consider investing in them?

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