If you go into the old movies or collection of old movies – there are themes as Voyages to distant planets. In the 1965, a few years after President Kennedy told Americans we will be on the moon before the end of the decade. Space travel movies were made and one of the  Grade B movies made was Voyage to the Prehistoric Planet. The only reason for watching the movie was the leading star is Basil Rathbone. If the name sounds familiar he was the face of Sherlock Holmes for 15 movies. When you watch the Sherlock Holmes movies and then compare it to Voyage to the Prehistoric Planet, you might wonder why did he take the gig -need of money? In the Star Trek TV show which aired a year later in 1966, at least the communications and the ability to move to a planet were light years ahead of what was existing  thus suggesting what could be. In the Voyage to the Prehistoric Planet the communications were CB radios. The imagination level was left to a low budget and tight schedule or that was a distinct lack of it.

Linking to dividend paying stocks, the difference of quality between movies and what is good and what is produced can easily be seen on the movies. That is you challenge when looking at stocks on the market. They all have business plans, they all have Presidents, but many lack the ability to make profits on a year to year basis, let alone to pay some of the profits in dividends. We all can see the differences in the things we care about and it helps make up your personality and outlook on life. Bring the same attitude to the market and concentrate on the quality, it will save you money and more importantly the quality companies will grow over time and you will be wealthier.

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

The House of Rothschild for many reasons is in the news and one of the most famous reasons is it relied on quick information to gain great wealth after Wellington beat Napoleon at the Battle of Waterloo. The myth and the facts have intertwined for many years and many believe if only they could have inside information, they would be able to capitalize on the markets. The reality is always a little different, the facts are many years the Rothschild were bankers to governments. Prior to the 5 brothers setting up in different cities of Europe, when governments paid their debts they often moved physical gold from one place to another – there was a risk of that. The Rothschild changed the movement to a piece of paper which lowered the risk of gold movement – they just needed a very good and protected safekeeping system. Along the way, the family lent money to governments or where bankers to governments – every time there was a war – somebody had to pay for the war. Governments came to Rothschild and other bankers to receive loans – sometimes they paid back, sometimes they did not. When they were in debt too much, similar to most people you curse your bankers. However as times improve and money is paid back, then you banker is your friend.

In the movie the House of Rothschild made in 1934, there is a scene where Napoleon who came back for the second time was winning wars against much of Europe. In battles against Wellington and the English he was winning. The news from the battle ground was Napoleon was winning which meant there were more sellers than buyers of English gilts or bonds. Rothschild was buying. The war went on for weeks with Napoleon having the advantage  and Nathan Rothschild was using the resources of his bank to support the English gilt. When the battle turned, Nathan received word prior to the general public Wellington had won, this news sent up the English gilt to par and slightly above 100 where under normal conditions  the price would have been in the first place, the effect was to make Nathan the richest person in the world.  The myth is insider information, the reality is Nathan bought most of his position prior to receiving the news. When Nathan received the news he did not double down or triple down for he already held a very large position and he did not have the credit to but was relieved and financially saved.

If you use a modern example – the Big Short by Michael Lewis large amounts of money was made by a few firms shorting the price of mortgage backed securities (expecting the price to fall) For months, the few firms kept increasing its position, when prices fell large profits were made. The stress for the firms was when would the price fall in line with the firms thinking because on the other side of the trade the rest of the street and the world bond traders believed the bonds were safe investments.

Linking to dividend paying stocks, the reason the system works over time is your position of holding profitable companies increases overtime. Profitable companies invariably split their shares and they increase in value. The dividends which kept coming in become larger and overtime the position increases. When the price decreases you buy more, as the price increases you will be wealthier. The trick is to ensure you invest in a profitable stock that will be in business for many years. The myth of insider trading said because the solution was relatively simple, but complex and those that buy large positions before material changes are announced will be investigated and sometimes charged.

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

 

Traditionally in the summer, more paperbacks are read than through the winter, one of the authors which has enjoyed great sales in paperback is John Grisham. A number of his books were turned into movies and the subject matter filters the news for Mr. Grisham writes about the law, lawyers fees, tort cases and wining the lottery. In one of his recent books – The Litigators published by Dell, NY, 2012 the subject is about just about everyone’s favorite bad company – a big Pharm company and a drug. The nature of big Pharm companies is they spend millions of dollars on testing various drugs and invariably because people are individuals something could go wrong or a person dies. That is the risk, the reward is once a drug is discovered, after the first pill is produced the second one cost tenths of pennies, but it can be sold for dollars, something just below insurance companies and government regulators think is too high. The reward for the big pharm company is due to its distribution networks, the drug can be everywhere in days and the money will roll in. As long as the drug is deemed safe and is in fact safe, it is almost a license to print money. In the book the Litigators – a small law firm dreams of the millions from the big Pharm company; the big Pharm plays hardball and uses all the advantages money can and does provide. In addition the clients of the small law firm begin to dream of the money they will be getting. At first, the relatives begin to treat the clients in the manner in which they should be treated all the time. People are people and treat each other differently depending on how much money they think they have and how much they think they can get by inheritance. There are exceptions but as you look or really look at the economy you will see people surviving and maybe how much better their lives would be if they were doing better than survival. Winning the lottery or winning a law suit or turning 65 to collect pensions makes a difference.

Linking to dividend paying stocks, the longer you own the stocks, the more value they grow and the wealthier you will be. Savings and using the power of compound interest will give you opportunities that others will not have. The reason to use the dividend paying stocks is to enhance the things which make life valuable to you. The average person tries to do the right thing and in our life having savings and building your nest egg is difficult, for it takes time but once there is enough in the account, it begins to generate income without much effort and for you to enhance your life. Read the books, enjoy the suspense but try not to be in position where you only dream about the money.

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

On You Tube you can watch a British series called Hedge Fund Lions Den in which two firms try to gain money from asset managers. Institutional Asset Managers are companies who invest money for others, but they specialize in either very wealthy clients or pension funds. The advantage of pension funds is every pay day, people are contributing to their pensions and pension funds have a duty to invest the dollars for the pensioners. When many people deposit money into accounts, the asset managers go to the pension fund managers and ask for a share of the money to invest in different asset classes. When a pension fund is large it needs to diversify its funds into asset classes – stocks, bonds, futures, real estate, and any other asset which can provide a consistent return. In the case of trading futures, there are as many ideas as there are people and to a degree under the correct conditions they all can work – the issue the asset managers is which conditions and when do the theories translate into consistent returns. If you are small, the trades have to be very focused, the greater the dollar the more the fund looks like an index fund.

In the series – two individuals who believe they have the next best thing are trying to gain funds from the three asset managers. Then all the stresses of trying to be successful and being successful is the next stage. The series is all those elements of how money is allocated to managers and there should not be a real surprise. In the realm of alternative futures trading – how simple is what you do being described? How comfortable are the asset managers with the individuals? do you want to work with them? as well as their track record and why they believe their system is the one for the asset managers.

Linking to dividend paying stocks, if there is a tradable market there will be players. With stocks we know that buying profitable companies is less risk than buying non profitable companies because the highs and lows of the companies will be different. Often times having an emphasis on capital retention leads to capital gains. If you focus on capital gains, you may miss the easy capital gains. As a dividend stock buyer, this is what you want the easy capital gains as well as dividend for long term wealth creation. Learn from the hedge fund players, but unless you are in their ballpark concentrate on slow but steady.

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

 

The whole point of failing low interest rates is to spur demand for consumers to open their wallets and spend. Over the past year, the consumer stocks are up over 20%, are there any bargains left?

Peter Ashton of Recognia Inc looked at the sector and his selection was:

Companies that have demonstrated a stock price increase of at least 4% over the past 4 weeks or past month.

Companies with growing earnings – based on analyst projections of companies whose growth rates should be about 3%.

Since the idea is to look for bargains, the average P/E ratio for the sector is 29%, looking for P/E ratios of less than 20. The idea is they can approach the average.

Company                    Mkt Cap     Price Prefor        EPS Growth     Forward         Dividend

($ bil)          (4 weeks)  %          Rate %                 P/E  %              Yield %

General Motors        46.5                7.9                      16.0                     5.4                     4.9

Whirlpool                   14.3                14.6                     19.4                     12.8                   2.0

Goodyear Tire              7.2               13.4                     20.8                       7.3                    1.0

PulteGroup                   7.2                 8.5                     19.9                     13.1                     1.7

HarleyDavidson          9.3                 9.3                    5.5                          13.2                   2.6

Harman Interntl        5.7                 23.9                  8.5                          13.9                   1.3

Thor Industries          3.9                 13.6                   24.0                       16.7                   1.6

Brunswick                     4.4                  9.5                  18.8                        14.3                   1.2

Stanley Black & Dec   18.3                10.0                 11.8                        19.3                  1.8

Linking to dividend paying stocks, making over 20% on your investments is a great thing considering the bank account returns. Government policy of low interest rates is meant to stimulate the consumer and company spending, but economy really depends on the consumer. As consumer stocks go, so does the economy. If you owned basic consumer stocks you would be wealthier but doing the things you do during the summer. It is always possible to minimize risk, and have good returns when investing in profitable stocks.

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

If you want to do research, you might start with how do reporters do investigative reporting? One method is to review the books, the journalism students are given and one will similar to what Canadian students are given – Digging Deeper by Robert Cribbb, Dean Jobb, David McKie and Fred Vallance-Jones published by Oxford University Press, Oxford, England, 2006.

Tips on Financial Statements

Cash is king.    A company’s lifeblood is cash flow, not profit. It is a bad sign when cash flow is decreasing. An important metric is free cash flow – cash flow from operations minus property and equipment purchases.

Soft spots – The balance sheet tells a story about the company’s overall financial condition. You can find out whether a company’s debt is growing or whether it is having trouble collecting from customers. If the debt is increasing, can the company earn enough to pay the debt off? What is a sale?

It will not happen again (maybe) – Beware of costs labeled nonrecurring or unusual or one time. If they are there, check previous balance sheets to see if they are there? if they are what is the one time asset?

Forms from Securities Regulators

Public companies must file forms with the regulators. Only when they are out of place do they begin to raise alarm bells. When companies do file them, there are often in the business press.

Auditors and fees                                      Proxy Statement

Auditor’s Resignation                              8-K  (publication of material change)

Basic details of company’s business    10-K

Bios and salaries of key employees       PRE-  14-A

Company’s history                                      10-K

Executive Pay                                                 10-K

Financial statements                                 10-K

Fiscal year                                                      10-K

Former executives                                        10-K

Legal trouble                                                  10-K

Management changes                                  8-K

Merger agreements                                      8-K

Products                                                           10-K

Related party deals                                        Proxy and 10-K

SEC Lawsuits                                                http://www.sec.gov/litigation/litreleases/shtm/

Class action                                            http://securites.stanford.edu/companies.html                            click on index filings

Linking to dividend paying stocks, most of the time the only form you will be interested is the 10-K because it gives you information about the company and what it does. What material changes are occurring and if they matter. Changing an auditor is not necessarily a bad thing, but it could be depending on the reason. (one of the problems of the Bernie Madoff scam was a small office auditor for such complicated transactions. Many things in the securities business is a maybe. You do not how the stock will perform until it does; but you can lower the maybe to companies that have been profitable for a number of years and can consistently pay their dividends. One of the good things about major problems is you can see how the company has handled them in the past, likely their first reaction will the same in the future.

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

 

 

If you want to do research, you might start with how do reporters do investigative reporting? One method is to review the books, the journalism students are given and one will similar to what Canadian students are given – Digging Deeper by Robert Cribbb, Dean Jobb, David McKie and Fred Vallance-Jones published by Oxford University Press, Oxford, England, 2006.

Getting People to Talk – The Art of the Interview

No matter how good you are at searching through material, the simple and best answers come from people who have knowledge. Depending on why you are searching, people will give you information – but most senior level people have a wall that needs to be breached. For investigative interview

What to prepare: you need to understand your topic, the role your interviewee plays and much about the person as possible.

What to ask: content is what do you want to know. You will be probing into 3 categories personal, impersonal and abstract.

Personal is what details and role the person knows and what does it lead. Impersonal is what is important to a person but they are not directly involved. Abstract refers to concepts of the law or a scientific principle.

Your questions are a combination of close and open end statements. Close-ended help confirm the basic fasts. Open-ended allow a person to talk and under the correct circumstances people love to talk.

Where to do it: face to face is better than the phone.

How to act: listen well.

How to strategize: a story has a beginning, middle and end with some high and low points along the way. Be flexible and let the conversation go where it needs to go. If you are speaking to a senior level person remember they were likely coached 5 ways to say the same thing. First start with the basic facts so you both agree on something. Then you present your findings and ask and watch for their reaction. Try not to be judgmental and wrap up without thinking the person is the enemy.

Follow the Money

Most stories involve money, for many investigative reporting – part of the answer is why does the money matter? what does it say about the mythical average person living their life?

Public companies are public because they have to disclose their financial records to the public in annual reports and to the Securities and Exchange when they do something material. Every once in a while, private companies disclose things they really do want others to see. Much of public company information is a comparison to other years and how they make their money, what is the debt load; pay attention to special charges and sale of assets because they are suppose to one time elements. How much does the company rely on them? Cash or can and does the company pay its bills?

Private companies information primarily comes from court cases when they have to disclose information. Private companies details often come in court through estate, trust or divorce cases.

Do not forget the Securities Regulators have access to information that can be semi public. Legally companies have information to file or they can be deregulated.

Linking to dividend paying stocks, companies that make money on a consistent basis tend to have cleaner balance sheets than companies that stretch the grey area. The easier the balance sheet is to understand the less worry as an investor you have. In is similar to personal stories – those that have extra disposable income are under less stress than those who are closer to the line to meet their debts. Investing is about following the money and how does a company make money.

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

 

If you want to do research, you might start with how do reporters do investigative reporting? One method is to review the books, the journalism students are given and one will similar to what Canadian students are given – Digging Deeper by Robert Cribbb, Dean Jobb, David McKie and Fred Vallance-Jones published by Oxford University Press, Oxford, England, 2006.

Key Primary Sources

Websites  – what are you curious about?

Newspapers – give a picture of what is happening in the community

Magazines – every broad topic has a magazine, what do the senior people in the industry read?

Journals – all university professors have to publish, they publish in journals in their field. They write for those in the field which may mean you need to be familiar with the terms.

Theses – some universities programs to graduate the student needs to write a theses – many are on line, but if you are near university you can read them at the university library.

Books – libraries are filled with books, to help you and invariably someone has written a book on what you are curious about, if you are from a smaller library system you can borrow the book through inter library loans.

Radio and TV transcripts – the shows need content to fill the airways and the transcripts are available, sometimes on line.

Mailing lists – will help you determine who has information about what your are curious.

Blogs – anyone can write one and people tend to write for a reason.

Just remember all secondary sources need to be independently verified, but they are a great starting point.

Using Public Records

One complaint many people will have is completing paperwork for the government. The government collects a great deal of information and the good news is the information can be accessed. It may take a while but you will catch on to the forms.

Before you start with the government you have to ask 3 broad questions:

1. What level of government has jurisdiction over the issue – federal, state or municipal
2. What specific department would have the information? Does the issue cross departments?
3. How are the records maintained and released to the public?

The government requires information and that will lead to whether the person or the company is giving all the information they could?

Accessing Laws and Justice System Records

Whenever there is a law, there is someone breaking it and that information will become public if you know where to look. Law suits, bankruptcy, divorce courts provide information between people and companies.

Web searching

The internet does not make a stupid journalist smart, but it does make a smart journalist smarter, says journalist Julian Sher.

Try typing your name  – hopefully many things will come up but will they are be helpful or you need to narrow the search.

Phrase searching – most search engines are not good at use double quotation marks ”  Joe Smith”

Searching document titles – try title:”Joe Smith”

Domain and URL searches:   Every website address ends with a top-level domain suffix such as .com (businesses) or .mil (military sites) or .edu (Universities and colleges)

domain:edu AND “Joe Smith”

Format Searches  – consider a document’s format as a search option. Google Advanced lets you limit your search to PowerPoint presentations, Microsoft Excel spreadsheets, Adobe Acrobat files and others.

Finding experts – ProfNet (www.prnewswire.com)   is a quick way to reach into those who have expertise into your area of curiosity.

You can also try http://www.experts.com  (an international expert database) and many countries have databases for their home base experts.

In your search be open to new lines of inquiry, and each time you get a relevant document, consider not only what it tells you but where it might lead you.

Linking to dividend paying stocks, learning where to look takes time but can lead to information which will save you money. As an investor in a public company, you made it for a reason and it is worth going back to the reasons and an information search helps you determine if the reason still exists. Often times the easiest method is to keep it simple – how does the company make its money? is the company profitable? can it pay its dividend and are expectations for it to rise? If you can easily answer the questions your research is done and you can enjoy the other parts of your life.

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Most of the time as dividend investors there is need to do research but little to do investigative reporting because profitable stocks are followed by analysts. The investment banks have somebody following the company as well as forecasting what it should do and then when the results come in – as an investor you can compare. The bulk of the research is done for you and if the company has been paying a dividend for a long time, there should be more than one analyst following the company. That being said, it is recognized the investment bank analyst is not necessarily working for you, his or her company wishes to gain fees from transactions with the company – issuing shares, bonds, refinance, bridge loans on takeovers friendly or non-friendly, offering opinions on values to sell assets, etc. There is a duo role, which is the reason why there are very few sell recommendations.

If you want to do research, you might start with how do reporters do investigative reporting? One method is to review the books, the journalism students are given and one will similar to what Canadian students are given – Digging Deeper by Robert Cribbb, Dean Jobb, David McKie and Fred Vallance-Jones published by Oxford University Press, Oxford, England, 2006.

What Makes a Good Investigative Story?

Investigative stories can be about any topic imaginable but some work better than others.

The under-reported story  – small things add up; if it happens to one is it happening to more?

An injustice – if you uncover a real injustice it will always be well read.

Corruption or crime – is it small or large? price fixing which will affect share prices?

A faulty system or process  – every company and government has processes  do they always work?

A human element – a good investigative story has people at its core. Think of the movie Erin Brockvich and the effect the investigation had on the power company stock and bonds.

Something new – a story about a public figure and a financial scandal. Something widely believed but never proven.

A story appropriate for your audience – if nobody reads your information nobody benefits from it.

Where do Good Ideas Come From?

The beat – for reporters they tend to develop expertise in the area they are assigned and through the usual suspects on the beat they need to talk to ideas appear.

Clippings – daily news or news headlines – what could be enhanced upon?

Tipsters  – everyone knows something about something and once in a while they want to tell someone. It can lead to something more and the verification begins.

A hunch – sometimes a question or detail will bug you. You wonder why something happened or how something works. The movie the Pelican Brief was about that.

Documents – reports need to be filed in the public. Looking at them red flags can come up.

Databases – looking through them you can find something which analysis will send you in a different direction.

Friends and neighbors – the causal comment will send you on a direction. Often it is somebody in the field and they say I am not allowed to comment.

Direct observation – looking around the places you go

Advocacy organizations – they have their biases but they also tend to have valid background information.

Reviewing and Auditing the Idea

A great many factors have to be considered before you devote substantial energy and time to an investigation. Think about it – are you prepared to devote weeks to it?

Develop the Plan

If the answer to the above is go ahead – start the work and stay organized. Start work in the general public and then move to people with more expertise than you have.

Sometimes you have to cut your losses and move on. Other times you can keep going but remember your ethics – do not lie, steal or misrepresent yourself.

Linking to dividend paying stocks, unlike the journalism world, the investment world revolves around money. If you are researching to get into the market, the best thing to do is follow some companies and buy when the shares go into the price you are comfortable with. If you own the stock and have concerns which would affect the stock price the easiest thing to do is sell out hopefully at a higher price and move to the sideline or to different alternative. You are often not stuck holding the position because on the stock market you have a liquidity or a ready market in your favor.Being curious is a great thing to have in life, but remember the markets work on money and unless you are shorting a stock, often times the best solution is sell and move on.

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