When there is high volatility in the markets there is an opportunity, for a wide variety of reasons. If we use the example of oil prices, as they fell from over $100 a barrel and went down to $25 and now is trading near $50; many companies stocks and bonds went downwards. During the fall, the rating agencies would have downgraded some bonds which meant institutions holding the bonds had to sell. The price has gone to some form of normal which meant there were opportunities in the market. On Bond fund you can track is the Merrill Lynch US Fallen Angel High Yield Index.

In an article by Emma Orr of Bloomberg News, she notes the index has risen 17% this year well above normal and the experts are suggesting not to buy right now. in the example of the oil company, a company called Encana was investment grade, then a month later it was not, then it was investment grade again. There are many institutions which have in their bylaws they can not hold non investment grade or lower than A rated bonds, which is one of the reasons the price falls. Ideally they need to have AA and AAA rated bonds. Encana has bonds payable 6.5% due in 2034, the price went down to 55 cents on the dollar compared to 85 cents on the dollar, now it is properly trading at 103 cents on the dollar.

Bond companies likely made money on the trade, for Encana was not alone there were many companies that fell have since recovered.

Linking to dividend paying stocks, the reality of the stock and bond market is volatility can be your best friend to make money, if you have the ability (cash) and discipline to take advantage of it. When a commodity price falls, you need to get out or move to alternatives, as it rises you get back in and ride the increase. Owning dividend paying stocks helps ensures you have cash which you can reinvest or buy alternatives or hold cash. The lows of the market are when there is most panic, but unless the world collapses the markets will rise again. Dividend paying companies also help you figure out the alternatives to take advantage of given patience time frames.

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

When you think about supply and demand, the equation works terrific with commodity prices. The price of commodities are linked to the demand – the world economy slowdown which sent commodity prices down. David Stringer writing for Bloomberg News recently wrote the $ 149 billion pipeline to expand the world’s copper supply is running into trouble.

Trouble means there is an opportunity, for if supply does not go up and demand continues prices will rise. If prices rise, there are profits to be made, but not quite yet. In the world of copper mining, the mines are large and need banks to finance them (many world banks are not saying yes right now); the countries where the copper is to be found often goes through a variety of government administrations; technical obstacles get in the way and for some projects there is a lack of water and electricity to mine the copper.

In 2011 copper was trading on the London Metal Exchange at $10, 190 a ton; in January 2016 the price touched a low of $4,318 a ton. This year the price has increased to $4,600 or the price has been essentially flat. The largest companies Freeport-McMoRan, Codelco and BHP Billiton see a shortage from 2019. This year capital spending on copper related mines will be $41 billion down from $104 in 2013. As the price starts to rise the financing will rise to.

Linking to dividend paying stocks, the global miners own mines which they can produce copper at less than $4,000 a ton so they are not going out of business, they just slow down and try to revamp their mining practices. As the prices rise, the margins get larger and the banks which finance them have more breathing room so they will give the money. It is good to have on your list of companies to watch commodity companies because as the price goes up for them, the ripple effect in the economy means the world economy is doing better or more demand. If you follow the companies, as the price begin to rise, you can buy the best of the breed and make some easy money as the price of commodity rises and pays you a dividend along the way.

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

The stories of countries is the story of people who tried to seek out new opportunities in the land they live in and make it better. Sometimes the better is for them as opposed to someone else; sometimes the better is for the vision they believe in; and sometimes the better is for everyone. One of the tasks in looking at the history of any country is how to organize it and getting that right leads to an interesting book. In the book The Men Who United the States by Simon Winchester, published by HarperCollins, NY, 2013 the organization has followed classical eastern lines. The organization is wood, fire, earth, metal and water.

It is very possible to go to many parts with the book because the author easily finds interesting but forgotten episodes to make the history and reality come together. One of the notable people in the building of the railroad was Ted Judah. He was an engineer and was brought to California to the Sierra Nevada mountains to look at a potential pass through it. The pass is called Donner Pass and when Mr. Judah saw it he saw the potential – there would be a great amount of effort and resources both money and people to finish the pass but it would be constructed. When the railroad was being constructed in terms of logistics everything had to be brought in by boat. On the west coast from ships from the east coast and around South America and starting at on the east starting at Omaha up or down the Mississippi River as there was no connection between to Chicago.

The business of railways is freight involving moving commodities from one place to another and the big exchange of cars is done in Omaha is a yard called Bailey Yard 8 miles long and 3,000 acres. It is also said because of its size, the movement of rail cars is a daily litmus test of the health of the US economy. The busier the Yard is, the healthier the nation’s balance sheet is.

Another story involving transportation or metal is the automobile. In 1919, Major Dwight Eisenhower job was to move a convey of trucks from the east coast to the west coast. Although the car had been introduced and a Model T or a Chev 490 cost less than 3 month’s pay, there were not many roads to drive in on. The trip by the Major eventually crossed 3,251 miles at an average speed of 5.6 miles per hour. It is not surprising when the Major became US President one of the many things he did was financing the interstate highways to connect the states, which many now take for granted. The building of the highways was one of the greatest public works program. In you add the public works administration works of the 1930’s – we still see some of the methods which the economy was transformed.

Linking to dividend paying stocks, while the above relate to government programs, many businesses including profitable ones depend on the government to supply infrastructure in which the business adds value to. Government often has its own time lines, but working with the government base is a hallmark of many successful companies. Often as the company grows larger, the interconnection grows – both need each other.

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

 

 

 

The stories of countries is the story of people who tried to seek out new opportunities in the land they live in and make it better. Sometimes the better is for them as opposed to someone else; sometimes the better is for the vision they believe in; and sometimes the better is for everyone. One of the tasks in looking at the history of any country is how to organize it and getting that right leads to an interesting book. In the book The Men Who United the States by Simon Winchester, published by HarperCollins, NY, 2013 the organization has followed classical eastern lines. The organization is wood, fire, earth, metal and water.

There are many good people who made the US better, it has also had its share of rogues. One of the stories concerns why some of the public servants were considered the finest in the world. Before the start of the great railroad building across the mountains of the west, the land needed to be surveyed both above and below ground. The US was fortunate to have a gentleman named Clarence Rivers King to be the first ever director of the US Geological Society. Long after he made his reports in the 1860’s they were still being used. The story of the rogues is shortly after the gold rush, the Great Diamond Fraud was hatched. Two ragged looking men went into the bank to put in the vault a canvas bag into the safety deposit box. The bank cashier demanded to know what was inside and in turned out to be uncut diamonds, rubies and other gems. They men eventually said they had found them in the mountains, just waiting to be picked up. The owner of the bank formed a company, raised money to get the gems. He also had the existing gems appraised as well as used a consulting geologist to offer his opinion. All things were looking good and people wanted to own stock in the company – the price went up.

Mr. King thought it should very fishy for gems were not to found in the west – wrong geology for the gems. He used the weather to narrow the location and the rock formations others had seen. In turned out, the two men and others had put the gems in ant holes and invariably they had risen to the top. The desert was salted or the gems had been bought from Europe and placed – just waiting to be found. Not surprisingly the rogues had cashed their shares out at higher prices and skipped town when the information became known.

Mr. Winchester’s theme of the 5 elements lead to interesting stories about the reason why cities are where they are. In the case of the eastern seaboard, the geology changes and when the rocks are hard, the rivers flow faster, when the rocks are softer the river broadens out and eventually becomes estuaries. The broaden river is friendly to boats and boatman. Where the rocks are hard, boats had to be changed and mills were made. If you look at Baltimore, Washington, Richmond, Philadelphia they were are settled in similar fashion. Take a look at the bridges and try to imagine the water rushing by.

Linking to dividend paying stocks, when there is a stock boom or gold rush, the desire to cash in and make money is very high and often scams are done. The simple and logical seem to fall out of the way, easy money and greed come upon many. One method to try not to fall for greed is investing in companies which make profits and pay dividends. The simple is making money and paying a dividend, if they can that is good, if they can not find alternatives. The total return over the years will be much better than the roller coaster of returns of many alternatives.

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

 

 

 

The stories of countries is the story of people who tried to seek out new opportunities in the land they live in and make it better. Sometimes the better is for them as opposed to someone else; sometimes the better is for the vision they believe in; and sometimes the better is for everyone. One of the tasks in looking at the history of any country is how to organize it and getting that right leads to an interesting book. In the book The Men Who United the States by Simon Winchester, published by HarperCollins, NY, 2013 the organization has followed classical eastern lines. The organization is wood, fire, earth, metal and water.

The earliest explorers were confronted with the ancient forest; paddled in wooden boats, kept warm by building fires and made wooden homes. Once the outlines of the country were formed what is inside it needed to be discovered the riches of the land to grow and what is underneath the land. Water  is for travelling on the waterways and for power. With the invention of engines was the employment of heat. Finally metal which is in the copper of the telegraph, the steel wire of the telephone and a host of other devices. With these 5 themes – the people behind them make interesting stories and fit well.

Linking to dividend paying stocks, similar to the demands of Mr. Winchester to find themes to organize, as an investor you need to find relatively simple methods to organize the continual data that flows to you. Today, we have access to greater and greater information through the internet however the data can make life more complicated – what to do and when to do it? In the case of Mr. Winchester he found the themes and then the book followed relatively easy. If you invest in dividend paying stocks, an easy theme is the company profitable and can it continue to pay and increase its dividend? If yes then you can move to other questions, if no find an alternative company. In many methods business is more competitive, continually changing and more complex which means you need to find simple methods to keep yourself on track – in some companies the free cash flow; in the case of utilities the government regulations of increasing rates.

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

 

As investors you likely have a very distinct idea what risk/reward is and you often make decisions based on how much risk versus how much can you be rewarded. If you move the equation to the making career choices it somehow changes. Most of us understand the continual changes in the workplace with companies occasionally downsizing but generally we believe it will happen to someone else. The working world has changed and will not be going back to what it was for generations of people. Many years ago, working for one company was a badge of expectation; not it is seen as not the normal and people will work for many employers and once in a while be their own employer. Anne Kreamer has written a book called Risk/Reward – Why Intelligent Leaps and Daring Choices are the Best Career Moves You Can Make published by Random House, NY, 2015. Ms. Kreamer identifies 4 general categories people fit into: Pioneers, Thinkers, Defenders and Drifters. If you wish to try to determine where you fit in there is survey at http://www.annekreamer.com/survey/risk

In general the groups are:

Pioneers – about 10% of the people. Pioneers tend to approach work from the vantage point of “You only live once” They tend to be decisive and more entrepreneurial.

Thinkers – about 40% of the people. Thinkers are reliable, hard-working backbone of the workforce. They are theoretically comfortable with risks but do not take many and as such they often have dreams about something else but stay with the company.

Defenders – about 36% of the people. They like things to be predictable and tend to view their work as a means to an end rather than a calling. They tend to like things as they are.

Drifters – about 14% of the people. Drifters have 2 types intentional and unintentional. The intentional those who drift in and out of the workforce because they chose to and can make a living doing so. The unintentional are doing it to pay the bills and they are the angry people showing up in the election process. They no longer believe success is tribute to hard work but more luck or the lucky sperm.

Understanding the groups and where you fit in allows you to help map your career path as well as relate to other people – what makes them tick and what attributes they bring to the company. Similar to generalization most people can easily fit into all groups but tend to be more comfortable in one or two of them. All the groups have pluses and minuses, many relate to attitude which is outlined in the book

Linking to dividend paying stocks, when you buy them you really want little change to happens to the company. You bought the stock for a reason or the yearly dividend yield, you would like that to continue. As we have seen in London, England things were going fine and then people voted and life changed one way or another. Life happens – how do you adjust, in the world of investing you move to one of your alternatives and continue along.

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

 

Seymour Schulich is a billionaire whose career has spanned stock brokerage, investment counselling, mining and the oil industry. He is Canadian and is among the greatest living philanthropists and many universities has his name on buildings. He also awards 650 scholarships a year. He is in his 70’s and wrote a book to tell students about his life experiences and the book is called Get Smarter – Life and Business Lessons by Seymour Schulich published by Key Porter Books, Toronto, 2007.

Gold – gold is an inflation edge because it is easy for governments to print money. It is not easy to find and produce gold economically which is why gold has held is value against inflation. When the US dollar is weak, gold goes up in price.

The Power of the 20% Position Versus Hostile Takeovers – Warren Buffett said the greatest bargains come in buying the first 20% of a public company. His group has bought 20% in some very good companies and he says we do not participate in auctions or trying to buy 100% of the company. Invariably the price goes higher than desired.

Corporate taxes – Successful Companies Pay Them! – there is a big difference between trying to minimize taxes and trying to avoid them. The greater the scheme or efforts to minimize them, the greater the ability to make really dumb mistakes, because management spend time and effort to minimize taxes rather than grow the business.

Governance – because 1 1/2 to 2  of US corporations misbehaved, the government overreacted in the field of governance. Reality check is Boards of Directors do not run companies, management does. The only real job of the Board is management succession.

Mr. Schulich would:

Rule 1: no investment dealer can be both a principal and agent.

Rule 2: all multi-vote share should have a 10 year sunset clause where they must be renewed by a majority vote from all classes of voting shares.

Rule 3: No corporate stock options can be granted to any person who owns more than 5% of the shares outstanding.

Governance is best summed by the Bible rule – Do unto others as you would have them do unto you.

Philanthropy  – is about giving back. You can give time, talent or treasure  (the 3 T’s), if you give one or all three they are all important. Mr. Schulich’s passion is education and he gives to universities and scholarships. Every year he gives 400 scholarships to 4 universities because a 100 years from now many things will not matter, but the world might be a better place because you helped a young person.

Linking to dividend paying stocks, over the years you own them part of the reason is to generate wealth for you to live (i.e. pension) and to give away to your family and community. Through owing the companies, you have developed patience and discipline and the markets have worked for you. Do the lessons change every year, not really but you have to keep watch, ensure the companies are staying profitable and continue to take advantage of opportunities.

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

 

 

 

Seymour Schulich is a billionaire whose career has spanned stock brokerage, investment counselling, mining and the oil industry. He is Canadian and is among the greatest living philanthropists and many universities has his name on buildings. He also awards 650 scholarships a year. He is in his 70’s and wrote a book to tell students about his life experiences and the book is called Get Smarter – Life and Business Lessons by Seymour Schulich published by Key Porter Books, Toronto, 2007.

Skin in the Game – when you are investing in stocks, your chances for success are greatly improved when you pick companies where the officers and directors own a large amount of stock. The reason is it human attitude and behavior change completely if he own something, or has skin in the game. (most times they do not bet the house on a big transaction or make seemingly stupid errors(.

On Buying a Business – Mr. Schulich’s father told him “Nobody sells a good, growing business. If life there are exceptions, but you need to know why the seller is selling.

Deals and Investments – The 5 questions to ask why screening a deal:

How much can I make?    or your potential upside

How much can I lose?       or your potential downside

How do I get my money back?    issues of liquidity

Who says this deal is any good?      management record

Who else is in the deal?                   endorsement

The upside/downside equation – successful deal making requires only 2 things an ability to asses odds and the discipline to act only when the odds are heavily in your favor.

Going against the crowd – a great rule of markets, deal making and life is: when everyone thinks something is so, it usually is not.    Being a contrarian is not easy. The best opportunities come to those with patience, courage, and a cash reserve.

Negotiation – the most effective negotiating point in any deal is when you reach the point of indifference or you no longer care in you settle. In most markets, you will reach the best price if you are give up and walk away. The seller will chase you down and come back with a lower price.

Zero-sum Games  – is a game in which for you to win, someone has to lose. No wealth is created just merely passed from one player to the next. Playing these types of games other than temporary amusement is just plain stupid.

Why Growth Stocks are a Poor Choice for Wealth Creation – if you buy stock in a fast growing company it will be trading a high Price/Earnings Ratio, eventually when the growth slows the PE Ratio will fall and so will the stock price. The better thing to do is identify commodity price trends or buy $ 2 of assets for $ 1 to give yourself a margin of safety. In this fashion, you avoid losses and the wins will take care of themselves.

Venture Capital – Investing in Start- Ups – some lessons learned

a) In each 5 year segment, the fund made no money for 4 years but the 5th year was exceptional because it takes 5 years to build a good business.

b) Success rested on the performance of just a few of the investments

c)  The best results came from entrepreneurial groups that had done it previously for themselves or an employer. Experience in running a business is a useful test with evaluating a start-up proposal.

Linking to dividend paying stocks, while the process is to let others run the company it is equally important to be able to evaluate the company for different perspectives. The advantage a profitable dividend paying company has it can make mistakes and still make money. Sometimes it seems the simple questions were not asked and management went into what seemed like a good idea at the time because they did not understand or it was keeping up with Jones. Making money today and tomorrow is the issue.

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

 

 

 

 

 

 

Seymour Schulich is a billionaire whose career has spanned stock brokerage, investment counselling, mining and the oil industry. He is Canadian and is among the greatest living philanthropists and many universities has his name on buildings. He also awards 650 scholarships a year. He is in his 70’s and wrote a book to tell students about his life experiences and the book is called Get Smarter – Life and Business Lessons by Seymour Schulich published by Key Porter Books, Toronto, 2007.

Why Financial History is so Important to Study – financial history keeps repeating itself which is why you need to study it. A great book for the South Sea Bubble and Dutch Tulip craze is Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds.

James Grant has said: risk is most threatening when it is most obvious. It is human nature to extrapolate current trends far into the future, to assume that excellent gains in the market will shadow even greater wealth. In reality it is the reverse, very high returns usually produce inflated asset prices, which return to normal only after a long period of poor returns.

The best years or decades of the market was when the markets were irrationally cheap. After WW I  the PE ratios were 6 or 7; they moved to 12 which was considered normal in 2007 they were 20. After the crash it was a great time to be a buyer as the markets rallied.

Speeches – 10 Rules to Utilize  – Be Brief; Try to communicate one main idea, no more than 3; create a surprise; use humor; slow it down; use cue cards and look at your audience; self praise is not honor; never speak before the main course in a dinner speech; reuse good material; and use positive body language.

What is a Leader?  – Andy Groove of Intel said when everybody knows that something is so, nobody knows nothing.

The qualities of a good leader are: persistence, discipline, conviction, judgement and an ability to share the credit. Discipline is the ability to figure out what worth your time and effort, what is not and to cut out the latter,

Partners – the primary benefit of partners is as sounding board.

An old Chines Proverb – behind an able man, there are always other able men.

Dealing with Bosses or Successful People – It is possible to divide people into 4 main groups and then work with them.

Amiable – want to be liked. They are good listeners and team players. They are responsive, but can be indecisive and reluctant to get rid of malcontents or other toxic people.

Drivers are the tough guys. The rise early, work long hours, make decisions quickly and demand a lot of themselves and others.

Analytics are the deep thinkers, They are the ones to lock themselves in the room to assess all the facts and when they make decisions they are more systematic about it.

Dreamers -people with a lot pie-in-the-sky ideas who leave it to others to worry about the details of their high-concept plans. They have their role but not leadership.

Investing in Foreign Countries – try to avoid swinish countries – the chief characteristic is they are governed by people who have little sense of how to create wealth but no shortage of imagination when it comes to stealing it. They change laws, concoct phony tax assessments or alter contracts.

Spending money – Mr. Schulich’s Dad had a golden rule when the money is in your pocket your are the boss. Once it is transferred to the merchant, he is in charge.

The Oil Industry – historically, oil has better profit margins than mining and is 10 times the size of mining. Oil and mining’s great attraction is you can double or triple the size of a company with one drill hole. Oil is entering a golden age of shortage of supply, eventually fusion power will be commercialized.

Business Axioms

Business is a means to an end, not an end it itself. Nobody on their deathbed says I wish I spent more time in the office.

Never quit a job unless you have another job. You are perceived as more valuable.

Always ask the question “if this decision is wrong, is it going to be painful or fatal?

Keep away from advisors and consultants. They know a 1,000 ways to make love but do not know any women.

The best test of a deal’s true attraction is to ask your partners Would you put your own money in the deal? if the answer is no – pass.

Always have at least 2 people from your side present at any negotiating or deal-making sessions. This give you time to think and compare perceptions.

Never confront or threaten people or institutions who have more power than you.

In negotiations always try to get the other party to name its asking price. If they will not give you one start low, you can always go up.

Almost everything in life is easier to get into than get out of.

A Successful Businessperson has to Learn to say No! – the art of leadership is saying no, not yes. It is easy to say yes. In business, you will see dozens or perhaps hundreds of potential deals most are average or below average, the path to superior results is to accept only the best ideas. You can be diplomatic, firm or a combination but you must be comfortable with the idea of handling rejection.

Linking to dividend paying stocks, learning to say no or having patience to wait for opportunities is a factor in investing. Most weeks the stock market does not make major moves, in jumps in and out then goes down and then up. You need to have patience to wait for the times it goes down and then up; one method is to invest in profitable companies which pay dividends. As the stock goes up and down, you can determine what price you would pay to buy more and wait. When is it relatively cheap to increase your total return?

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