In most elections around the world, one or more parties running will call for infrastructure to be built and it will create jobs. In areas around the world, including not far from where you live there are plenty of examples where it did not quite work out. For those of us in the north east, we have trails through the woods where trains ran for a time. In Brazil there are examples and Leonardo Guy of Reuters recently reported about train tracks in northeastern Brazil for the Transnordestina. The railway was going to be a job maker; it was going to replace the trucks moving the crops; it was going to bring relatively inexpensive fuel to the region; it was going to do a lot of things, but the railway after 10 years of building has cost $2.4 billion dollars and is only half done its 2000 mile journey.

The new government believes in P3 or private public partnership with the private paying the bill for new infrastructure. It is important to note, the private part always wants a monopoly for up to 30 or more years to ensure a good return on their investment and then the infrastructure can be owned by the government, but maybe they will need someone to run it afterwards? Can the railway be built, as long as there are commodities to ship profitably, there is still a need for a railway.

Linking to dividend paying stocks, there are many dividend companies which run public assets for a profit and the stocks pay dividends. The key is the monopoly like conditions and good management. The railway in Brazil highlights when the politicians call for infrastructure not everything should be built, but if the government is willing to hand over the treasury for good conditions and good management, private companies will embrace the government’s goals.

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

If you are seemingly a normal average person, you likely ate pizza at least once last year (probably more) and you may have asked what about the price of the shares of the companies? The shares of Domino’s Pizza were up 45% last year and Papa John’s International was up 60%. According to Leslie Patton writing for Bloomberg News the answer to the why is pizza is cheap, fast and increasingly very, very easy to get. Restaurants including the Pizza giants have embraced user-friendly mobile ordering apps where customers can order from Facebook, Twitter and Apple TV.  Besides the ease of order, the pizza chains have rewards programs and ensured that although the pizza at the supermarket maybe a little less, the fresh easy pizza taste better.

Same store sales are up at Domino’s and Papa John’s which means all the restaurant chains are trying to make it very easy to order their food. At the moment, they are not as good and easy as the pizza chains. Next time you order pizza, try to understand what they are doing to keep your patronage.

Linking to dividend paying stocks, going out for meals is an accepted practice with consumers but where do they go? the Pizza companies have embraced technology to make it easy for consumers to start with them. If people start with Pizza, many of them will end with pizza. As you look at your investments – what is the value added which keeps people coming back for unless it is monopoly there are alternatives.

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

In all areas where people are judged, there are lessons to learn from the superstars of the area. If you think of sports and Cristiano Ronaldo who was voted the best footballer in the world. If you want to learn from him start with situps – he does thousands of them a day. Most of the us only do situps when we actually sit up. In the financial world there are famous people such as Warren Buffett and George Soros. Recently John Reese in an article titled Emulating the Superstar highlighted a report titled Alternative Thinking: Superstar Investors written by AQR Capital Management. The report compared returns by superstar investors to portfolios with a small set of buy and sell signals that tracked the investing style of Mr. Buffett, Mr. Soros and others. The conclusion it managed to have results that were close to the real thing.

Factor and style investing are gaining prominence for example with Mr. Buffett you really do not know which stock he buys but he does tend to buy stocks in a particular pattern. Mr. Buffett favors companies that have a long-term competitive advantage in their industries, with earnings that are predictable. This will tend to mean Mr. Buffett rarely buys outside of these companies, but which ones?

One can examine for value, quality (strong balance sheet) low volatility (small stock price swings) and the performance of the market as a whole. You can also, look at 10 year periods for consistent earnings, higher than average return on equity; the ability to repay debt; and if you do invest in this fashion you will be reward over the long term.

Linking to dividend paying stocks, many of these long term investments are companies paying dividends because they generate profits every year. The longer they generate profits the higher they trade on the P/E Ratio and with the dividend the total return is healthy. Slow and steady backed by homework for all the right reasons is a good lesson.

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

In mid December, President elect Trump similar to most people when showed the costs of the F-35s concluded the costs are out of control! Unlike most people, when President elect Trump says it, the stock market listens and the stock price goes down. Bloomberg News reported in an article titled Trump attacks F-35s, deals blow to defence. In the era of national security and personal security, the defence department and related departments often get what it seemingly a free ride in their cost controls. The reality is the plane rather than just flying has to or is asked to have an increasingly number of variables which in turn make the planes more expensive. It is similar to the old story of people being blindfolded and touch an elephant – they all come to different conclusions and expect their conclusions to be correct and incorporated into the solution. In this case the elephant is the Republican Party and when they scream national security, there is a cost to it.

The Bloomberg News reported it seems President elect Trump is willing to attack the big US companies, although after he attacked Carrier, the company ended up with a reduced workforce and a $ 7 million dollar state grant. It could be the companies will have to roll with the punches to end up with more money in their pockets. The government is one of the great stability anchors in the economy for it pays the bills, however when President elect attack the big pharma companies, the stock went down on the slim possibility the price of drugs (or the patents will be reduced) would fall.

Bloomberg reported the costs of the F-35s has fallen but is still a sizable $379 billion cost. for Lockheed the F-35s account for 20% of sales and it needs sales to partners of the US for greater profitability. 600 additional airplanes have been preordered by Britian, Australia, Japan and Italy.

Linking to dividend paying stocks, although things may change and that is a possibility, when the President attacks companies or departments it is generally for a very good reason. The stock market will have to adapt to President elect Trump’s style does he attack in public and in private make deals that allows companies to continue on their normal style? We will find out shortly and in the meantime look out for President elect’s bad side.

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

 

In the Louvre after you made seen the Mona Lisa people will see a painting by Theodore Gericault titled The Raft of the Medusa. The painting is based on a real life venture and was and is the subject of many people examining the subject. One person who wrote a book about the subject is Jonathan Miles who wrote The Wreck of the Medusa published by Atlantic Monthly Press, NY, 2007. The story is the French were colonizing the country of Senegal and were sending a number of ships to do so. The lead ship the Medusa followed the coastline of Africa too close and wrecked on a reef. The ship was carrying 400 people and naturally there were not enough lifeboats, for it was not expected not to make the journey to Saint Louis. The time of the year, they wreck was storm season but also in 1816’s nobody had mapped the coastline of Africa, although people had reasonable ideas. The ship wreck in one of the worst places possible – the land was the edge of the Sahara Desert and all that it implies (think of the sand storms from the movies); the sun; lack of water; lack of vegetation and lack of proper clothing for the desert. There were many strikes against the spot the ship wrecked.

Some people managed to get on life boats and managed to land. They had to walk through the desert for 200 miles and were lucky to be alive at the time. The story of the raft is 150 people boarded and 10 people were rescued from the middle of the ocean 8 days later. The raft as the painting was not well put together to manage the ocean storms; nor to manage calm seas for there was little water (the old sailor expression water, water all you can see but not a drop to drink as the water is salt water) and little food. While people can live without food for a long while, it is the water which we can not live without. What do you do? how long would you suffer? what actions would you take to survive? These are age old questions and the stories are people went to the extreme of both living and not surviving.

Linking to dividend paying stocks, there are many age old questions that ask what would you do and hopefully you will never have to ask them. Most of us do not know for most of lack skills or “MacGyver ability to make something workable of simple things”; when many people were from the farming community if you did not have handyman skills it did not get done. On one hand that is a good thing on the other hand it often would be easier in our lives if we hand better handyman skills. However, if that is our biggest concern then you have done well. Fortunately when you are dealing with money, it is possible although rough to start out again – there are always opportunities which come forth if you have the patience and the ability to do research to take advantage of them when they happen.

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

When we look south of the border beyond Mexico we see Latin America and often we do not know much about them except for they supply raw materials in terms of people and resources for some of the countries operating in the US. We know from President elect Trump many millions of migrants move from south to America in search of better opportunities and higher wages, but we rarely wonder what is so bad they left behind? One of the books about the subject is The Heart that Bleeds Latin America Now by Alma Guillermoprieto published by Vintage Books, NY, 1995. Although the book is old the stories seem to remain the same – a wealthy and somewhat related upper families who control the government and the lower income population trying to make a living beyond subsistence. It also seems the only time the lower income people matter is election time then the upper income families divide the spoils of the government and whatever private sector income there is. Much of the private sector is still part of the feudal system which the rebels would like to destroy.

If you begin to link the countries together similar to other puzzles in the world, one will understand why the old war on drugs was bound to fail. In Bolivia coca crops are legal (the Spanish gave the mixture to the mine workers for generations in lieu of paying them well for the silver; in Columbia for a while the Columbian gangs did an excellent business plan to ensure money circulated in the areas the government did not service and could also provide protection for the Columbian gangs; in Panama once the money was put into the banking system it was concerned clean; or in other words depending on the country depends on how the government would want a war on drugs to succeed. Of course if American buyers would not buy then the system would have shut down. If you jump to 2016 is a possible truce between the rebels and the government in Columbia.

Linking to dividend paying stocks, for most consumer stocks as long as there is a good middle income in the country consumer staples can be sold and maybe that is all you need to worry about. The middle income and a growing middle income group in any country helps buy the consumer goods which keeps the economy moving. How well the economy is balanced between the rest of the population maybe not be something you can control. For you consumer companies operating beyond North America check out the growth of the middle income to determine how much growth you should expect.

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

One of the best performing stocks over the last decade is Altria formerly known as Phillip Morris or the cigarette company. The stock is up 228% versus the S&P 500 of 58%. If you add in dividends the gain rises to 455% and if you go back over 20 years the gain is 2,162%. It is hard not to own the company or have it as a significant portion in your portfolio.  In a recent article, David Berman examined the cigarette companies to see if they are still worth owning. There is the concern over cigarettes cause cancer; there is the concern that tobacco companies which essentially sell nicotine and it is addictive; but cigarettes are legal and people still smoke. The above combination is the ideal in business – people have brand loyalty and the continual purchase of cigarettes allows companies to raise prices on average 2 to 3% a year.

The competition of Altria is Reynolds American Inc which owns among over brands Camel the stock was risen 480% over 10 years. Reynolds recently bought Lorillard and BA Tobacco has offered $ 47 billion for the company.

Altria has raised its dividend 50 times over the past 47 years and currently distributes about 80% of its profit to shareholders. Since 2008 the company has doubled its quarterly dividend.

Linking to dividend paying stocks, if you just focus on results, owning cigarette companies where they make cigarettes for pennies and sell them for dollars; it is very hard not to own them. In investing there is always a philosophical considerations which is why in examining people’s portfolios you can generally tell where they are from or what business they are in (we tend to be local first). The companies are in the index funds, even if you do not own them directly, you will likely own the stocks indirectly, for proven performers you may want to own them directly.

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

 

 

One of the most studied and continued studied insect is the honey bee. Every since honey was discovered and tasted, people have been trying to figure out how honey is made and how they can eat it – similar to Winnie the Poo and the honey pot. It turns out the bee collects pollen while at the same time allowing flowering plants to pollenate or have sex. It is beneficial relationship and depending on where the beehive is will determine the taste of the honey. It is one of those local taste and global taste all in one. The beehive is ruled by the Queen who after becoming queen lays millions of eggs for bees to go out and bring back nectar. The average worker bee uses a combination of smell and dancing to determine and show where the great sites for pollen are and fly incredible distances between the beehive and the flowers. It is complex and simple all at the same time and we get honey from it.

In a book by Holley Bishop title Robbing the Bees published by Free Press, NY, 2005 outlines he journey from being fascinated to learning about bees to having beehives in the country to enjoying the bees. In turns out a great way to think about honey is the same thinking about wine. The taste of honey is reflected in the local flowers the bees gain access to and provides a distinctive taste to it. As wine tastes can savor the local nature of the wines, so can honey tasters. Think about the past and consider most did not have access to sugar, but they had a sweetener in honey which is the reason you find honey cakes and to drink – mead.

Linking to dividend paying stocks, the honey business has few barriers to entry – need some hives and one can learn how to harvest the honey for if you respect the bees and the fact over the years people have learned the best design to extract the honey from the beehive, it is possible to enjoy honey. To make a living at it, takes work to bottle the honey and sell it, but it is a local product and we expect bees to continue making honey for generations to come. For most of us we can learn from the honey bee and allow our investments to continue for years to come.

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

It is a new year and given the stock market was up in the wake of President elect Trump victory as well as commodity prices have risen, one can hope the economy will continue to grow. If it continues to grow we all make more money, along the way it would be nice to win lottery size gains, but for 99% of the people the slow and steady approach is the one to take. The reason is we do not know? We expect at the end of the year something similar to what we are waking up to, but we do not know. What we do know is many companies will still be operating and generating dividends and until the federal reserve bank interest rates are raised, dividends and those companies with reliable income streams will be valuable to hold on to or accumulate.

Julie Michaels of Morningstar examine conservative stocks with a reliable income stream in early December.

the following criteria were used:

5 year beta vs S&P 500

earnings variability (earnings per share variability in percentage terms around the 5 year EPS)

Price to trailing earnings

Price to Book

Dividend Yield

Expected Dividend Yield

A few others which are not recorded for space limitations

To narrow the list of all the dividend paying companies, she selected companies with a market capitalization of greater than $ 3 billion

Company                    Mkt Cap   Div                Beta     P/E    P/B   Qual Earn  Payout Based On

($ Bil)        Yield (%)                                        Surprise %  Trail Div and EPS

First Energy           13.857          4.4                 0.2      11.5     1.2                 17.1             50.9

Southern Co           47.343         4.6                  0.1      16.1    2.0                  4.2             73.3

Consol Edison        22.138          3.7                 0.0      18.7    1.6                  1.7              68.6

Duke Energy            52.614         4.5                0.1        16.1     1.3                 8.5               70.0

Deere & Co               31.552          2.4                0.8       20.7    4.2              170.6           49.4

Public Svc Ent          21.672         3.8               0.3         14.7    1.6                   9.0           55.7

AT&T                       242.446          5.0               2.8         14.1     2.0                  0.0           68.1

Everst Re                    8.661           2.4               0.5           9.2     1.1                  35.2           20.0

Garmin                        9.797          3.9               0.9          18.2     2.9                36.0           71.6

GM                              52.696          4.4               1.4            5.6     1.2                  17.5            24.1

The other companies on the list include

Archer Daniels, Kohl’s, People United Fncl; Western Digital and Teva Pharma

Linking to dividend paying stocks, if the year is better than last year, these companies are expected to continue doing all the things that make America great and continue to have a revenue stream to pay dividends. One might notice some of them are utilities and if you are paying to one of them, a good investment is to own stock in the utility. We all would like to have a lottery win and when times are bad for one group they are better for another and it is possible; on the other hand if you own slow and steady earnings and reinvest the dividends into more stock you will be wealthier with the combination dividends and capital gains with a low risk and high return ratio.

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