In a recent article by Norman Rothery, PhD, CFA and founder of StingyInvestor.com, he suggests if you can you should reinvest your dividends to take advantage of the compounding factors.

If you own a credit card, and financial institutions are offering them as the consumer wishes to spend, then you will be aware what happens if you carry a balance. Given the majority of consumers carry balances, if you do not carry one, talk to someone who does. The interest quickly doubles the cost of the purchase. We all accept that is how credit cards work, the compounding is a fact of life. If you are investing you want the compounding to work for you.

Mr. Rothery examined the data collection by Professor Robert Shiller work at the S&P 500 from 1990 to 2019. Buying the index would have given you an annual 7.6% return not including dividends. If you reinvested your dividends the return jumps to 9.8%. In terms of dollars, to make it easier using $100,000. The money would grow to $891,000 without dividends or $1,655,000 reinvesting. If it was $10,000 then $89,100 or $165,500. The risk was investing in the S&P 500 Index.

If you do not reinvest your dividends, a reasonable alternative can be 3 month Treasury bills your money would grow to $252,000. If you used the money to pay bills, hopefully you are debt free. The idea is to think about total return, not just annual return.

In today’s investment options, it is easier to reinvest your dividends in the big market indexes and mutual funds.

Linking to dividend paying stocks, the example Mr. Rothery used from Professor Shiller suggests reinvesting your dividends adds 1.5% to your return. Given the low risk, good compounding and if the company can not pay a dividend the fund does not own it, if you can it is a good idea to reinvest your dividends and let compounding work for you

In the US, we all have opinions about religion, and there are many who practice religion and focus on becoming better people. If that is all the majority do, then it is very worthwhile and helps form a valuable people in society. Sometimes we disagree with the administration of religion and how rich is the religion. Most people do not know, that is why there are books such as God’s Bankers – A History of Money and Power at the Vatican by Gerald Posner, published by Simon & Schuster, NY, 2015.

In many countries, the country tries to impose currency controls to ensure people continue to reinvest in the country. It does not always work as people find methods to move money outside the country where the money originated. For the Church, although the country of Italy imposed currency controls, the Vatican City was not legally part of Italy, it was and is its own small community although highly dependent upon Italy for its infrastructure. With the rise of offshore banking havens and a change in people who ran the accounts for the Catholic Church. Offshore banking ventures were highly utilized to ensure secrecy and hid information from the tax authorities. One of the rationalizations was “You can not run the church on Hail Marys”

In the book, there are chapters on using stolen securities to use as collateral for residential development deals. If the property is developed and sold, all benefit. If the venture is a bust, then the bank would look at the collateral and the organization would claim they were an innocent victim of a complex fraud. Fortunately, in the present day securities are electronic form.

Often those that use every possible method to evade taxes also take more risks in the speculation of assets. From currency, to gold and metals, to everything that can be bet on. The example is people like to remember George Soros’ bet on the English Pound going down, they forget he lost money on the Japanese Yen. No one is perfect all the time. The trick is to ensure whatever is lost does not affect the entire portfolio or keep the risk-reward limited. For the Catholic Church in the 1970’s, they were involved with money in the Franklin National Bank failure, because the President of the Franklin had built up a strong relationship.

With the bankruptcy of the Franklin National Bank and other related companies, the Vatican tried damage control through an interview with Institutional Investor. The cardinal said the portfolio was not as big as people thought and the Archdiocese of Chicago brought in $170 million a year, which was more than the Holy Church in Rome. The funds primarily came from Peter’s Pence, trusts, last testament gifts from the faithful, sales of stamps, gasoline and religious artifacts.

The Vatican Bank through various people became involved characters that make spy novels interesting to read, In real life, it has taken many years to straighten out the operations of the bank. By 2012 the size of the Catholic Church has expanded to over 1.2 billion followers; 6 million lay employees; 4,500 bishops; 412,000 priests, 865,000 members of religious institutes and school. Catholic charities help over 20 million people a year.

Pope Francis appointed Rene Bulhart to overhaul the bank and when Mr. Bulhart needed to push back to straighten things out, the Pope backed him. The bank is now going to be run above reproach.

Linking to dividend paying stocks, in the financial world there are many many alternatives, the more money you have the more alternatives there are to invest in. If you can keep it safe and invest the overwhelming majority of your assets into profitable companies paying dividends then you will miss many of those who wish to reward themselves first before rewarding you.

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

In the US, we all have opinions about religion, and there are many who practice religion and focus on becoming better people. If that is all the majority do, then it is very worthwhile and helps form a valuable people in society. Sometimes we disagree with the administration of religion and how rich is the religion. Most people do not know, that is why there are books such as God’s Bankers – A History of Money and Power at the Vatican by Gerald Posner, published by Simon & Schuster, NY, 2015.

For most of its administration, the reality of the Catholic Church was it was cash flow poor. That was not a bad thing, but it did lead to reasons to leave the church. In 1929, the Catholic Church received compensation from the newly formed government of Italy the equivalent of $1.3 billion. What does it do with the money? Similar to you, if you inherited some money what would you do with it? The usual answer is some renovation of your house or buying a new one and investing some of it. The church did add to its buildings in Vatican City. The church also hired Bernardino Nogara to invest the money.

He started with trying to diversify money from Rome and Italy into Europe, but most of us will know the 1930’s meant the world recession. The investments lost money, however he did allocate money into gold. By the mid 1930’s stock prices around the world were depressed. Mr. Nogara was a buyer and soon the Vatican had large positions (often controlling interests or majority control) in Italian financial institutions, utility, mining, textile and property companies. The government of Italy was selling some of its assets including Italgas and the Vatican became a majority owner. This was one of the best investments for the Vatican.

The good news for the Vatican was the diversification stabilized the church’s income. The bad news is the government of the day was Mussolini and the ties were strengthened. In one sense the Pope was happy because he did not like communists, but he was okay with the fascism.

The book outlines the relationship between Hitler, Mussolini and their governments before and after WW II. Clear lines between morality and what is good were clearly erased.

After the war, one of the things Mr. Nogara accumulated was a great deal on land outside Vatican City in and around Rome. Much of the 1960’s Olympics in Rome was on Vatican land sold to government of Italy. At the time, the Catholic Church owned more land outside Vatican City than it did inside at 102 million square feet of property. For any institution selling off land, is a one time gain.

One should remember the Catholic Church in 1960 had 600 million followers; 5 million lay employees; 20 million children in parochial schools; a million nuns; 250,000 priests and a charity that was one of the world’s largest (13 million people were receiving some type of assistance). They had and have man on going costs. After 1960, the Catholic Church sold many of its holdings in Italian companies to be less than majority shares.

Linking to dividend paying stocks, as an individual your ongoing costs are not institutional in size which means you can own as many shares as desired as long as they fit under financial needs. Unlike the church which should have spiritual needs or morality, your sense can be what is legal or what is moral. Fortunately there are many alternatives for you.

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

For most North Americans religion plays some value in their lives, often times spiritual in nature. It is good and unless you are a trustee of the church, you may not pay too much attention to the organization of the religion. For countless of followers that is great, the message of kindness and love is the most important aspect and if you try to live your life within those guidelines the more power to you. For others you may wonder about riches and the church. The organization is different than the local parish church.

In Europe prior to King Henry VIII, (Henry wanted a divorce because in a monarchy the most important aspect of ruling is to produce an heir to continue ruling. His wife had daughters and Henry wanted a boy. The religion did not allow divorce, so he changed religions to almost exactly what existed except it allowed divorce Anglicans); Europe was Catholic. The Catholic religion was formed in what is now Israel, but gravitated to Rome where St. Peter’s Church is located. The Roman Empire was pagan until an Emperor of Rome – Constantine converted to Christianity. Once he converted, he changed the religion of the Roman Empire and then formed a council to set out the rules. The first Pope’s similar to other Emperor’s of the world thought they were next to god and needed to live lives in palaces. Popes and Bishops had to have great palaces.

From an organizational aspect, lifestyle costs money. At first the church received money from the followers and some from the government. The direct government money fell off, however indirect government support never changed for church lands were not taxed. In most communities in the US, when cities were being established land was given to the religions to establish churches. How does the church earn more money. Similar to other institutions, it is wonderful if leaders have great amounts of money. Early on in the church existence, the center of gravity moved from Rome to Paris as the Kings of France were the wealthy and the prime benefactors of the church. When Spain rose to power because of the gold from Mexico and Peru, the benefactors were Spanish. Eventually the power shifted to back to Rome and the Papal States – prior to Italy becoming an unified country, the Catholic church was the administration of a third of Italy. However, the funds never were great for the ambition of the church.

In the book God’s Bankers – A History of Money and Power at the Vatican by Gerald Posner published by Simon & Schuster, NY, 2015 the reality of church finances are examined. What should a Pope do? If you are human, at some point or another you will sin. The Pope decided some of these sins come be forgiven if you gave an indulgence or gave extra money to the church. At the time of the Crusades, the Pope said if a Christian went on the Crusades they would be forgiven for all their sins. Over time, some of the sins became any sin as long as you paid money to the church you would be forgiven again and again. The increasing number of sins helped split the church to Protestants and Catholics. One of the issues from an administration aspect was the money the church received became less.

Eventually one of the offsets was the rise of the economic power of the US and the Catholics who sent money to Rome. By the 1900’s the US was second in giving after Italy. The country of Italy was 98% Catholic and Rome administration the Papal States. It was not until 1929, that the Vatican and the country signed the Lateran Accords which gave Vatican City to the church as an independent country as well as 750 billion lire in cash and 1 billion lire in government bonds that paid 5%. (in 2014 dollars the settlement was worth $1.3 billion). The Italian government also put 25,000 parish priests on their payroll.

Linking to dividend paying stocks, we all have impressions have institutions just because they have been around for a long time. Are they rich and powerful? what is the cash flow? will they continue for a long time? The reality with the administration of the Catholic Church, is despite the lands, the church was cash flow poor for much of its existence. When you invest your money, try to buy companies that are profitable and have the ability to increase their dividends because they are cash flow positive.

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

The US economy is dominated by retail and the Christmas season is the biggest time people spend money. The Chistmas sales number is a number all policy makers watch for and hope for, because if the number is better than expected, the mood of the people is likely to be better than expected. In an article by Nivedita Balu of Reuters, Mastercard released a report which showed shoppers spent more money online than in retail stores. The online sales hit a record high.

E-commerce sales in 2019 made 14.6% of total retail sales and increased 18.8% according to Mastercard’s data tracking retail sales from November 1 to December 24. Overall holiday retail sales rose 3.4%.

People still went to the mall, but sales fell 1.8%, however online sales growth was up 6.9%. The apparel category registered stronger than expected e-commerce growth of 17%

Linking to dividend paying stocks, people in general are more comfortable buying everything on line and when they pay on line they often use a credit card. Owning the shares of the credit card has been a very good thing to own. While one hopes that individuals can pay off or most of their credit card bills, the reality is the companies will make more money if they do not. What is good for the individual is not always great for the economy in general, thank goodness people are individuals.

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

When you leave the house today or just about any other day, what do you have on your possession? You likely have keys for the house, maybe keys for a vehicle, some coins, your wallet and a smartphone. In 2007, the first Apple iPhone was sold to the public and the phone has changed society, but it could have made you money too. In an article by Reuters, 10 ways the phone has changed the world.

Access Everywhere

In 2020 there are 5 billion smartphones in use around the world, according to Canalys Research. Internet subscriptions has gone from 1.3 billion to 7.2 billion globally. In the developing world, there are now more mobile connections than people.

(in relationship to the big telcoms – they make their money from smartphone subscriptions not land lines)

Tech Uber Alles

Apple was once a niche company, today it is one of the world’s most valuable companies. The 5 largest Fortune 500 technology companies are Apple, Amazon, Alphabet, Microsoft and Facebook. They are worth $4.7 trillion compared to $800 billion in 2010. How are they in your portfolio? Mobile phone related technologies and services accounted for nearly $4 trillion in 2018.

There’s An App for That

On every smart phone there are dozens of Apps for services, many of them are free but once you have them, consumers are expected to spend more than $120 billion in app stores.

Feed Me

People spend an average of 34 minutes every day scrolling on their phone. Advertisers noticed and mobile ad spending surpassed TV for the first time in 2018 as a percentage share of the US market.

Smile for the Smartphone Camera

Global shipments of digital cameras dropped from 121 million in 2010 to 19 million in 2018 according to Camera and Imaging Products Association. (do you remember Kodak?)

Google reports its Android devices takes 93 million selfies everyday.

Where Am I?

The combination of GPS and information from the cell towers and WiFi networks makes smartphones incredibly powerful tracking devices. Phone companies and app makers routinely record the movements of subscribers and sell the data to advertisers for $20 billion a year.

Nearly 50% of the companies surveyed by Verizon said they planned to use smartphone management tools to track their employees.

You Can Look it Up

Before 2010, people typically consulted the Encyclopedia Britannica for information, now Wikipedia is consulted 240 million times daily.

Distracting Drivers

One of the places people look at their phones is in their vehicles, sometimes they are driving and about 13% of accidents involve mobile phone use according to the National Highway Traffic Safety Administration

Forget Your Wallet

Apple Pay, Google Pay, or your bank account app for debit or credit are being used to pay bills. In China Alipay and WeChat Pay are used by 80% of the population. QR codes made this possible.

Say What?

The phone aspect of the smartphone is decreasing usage. In Britain, the number of minutes on the phone fell from 254 billion in 2013 to 206 billion in 2018. Mobile data usage jumped almost 9 fold and the number of emojis has tripled to 3,000.

Linking to dividend paying stocks, the smartphone has changed the way we communicate and companies had to make the change to stay profitable. The money use to be in voice but now it is data and it seems it will not stop evolving. As the smartphone evolved some industries did not do as well, making cameras, but others did very well. The bigger question is as the industry changed how did you benefit? Did you buy the FANG stocks? An ETF? the individual stocks? or did you watch from the sidelines?

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

In the trade agreement between China and the US, the door opened for US banking institutions to expand operations in China. A couple of days later, JP MorganChase announced expansion in China.

In an article by Yilei Sun, Chenge Leng, and Brenda Goh of Reuters, Tesla the US electric vehicle maker agreed to a new $10 billion yuan or $1.9 billion 5 year loan with a group of Chinese banks. The banks are China Construction Bank (CCB) Agricultural Bank of China (AgBank), Industrial and Commercial Bank of China (ICBC) and Shanghai Pudong Development Bank (SPDB). The loan is a rollover of a earlier loan and is being used to build the factory in Shanghai. The loan is at 90% of China’s one year benchmark interest rate or the rate offered to its best clients.

Tesla has started to produce vehicles from the plant, and aims to to build at least 1,000 Model 3 cars a week by the end of 2020.

China which has burnt billions of tons of coals for electricity needs to find methods to reduce greenhouse emissions and believes electric cars are part of the solution.

Linking to dividend paying stocks, in North America we look to American financial institutions as the bedrock of the economy, but in the world there are options. All companies have banks, that can finance the government wishes and companies turn to them for alternatives. Remember in all sectors there are alternatives and options outside of your backyard.

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

In late December, the Board of Directors of Boeing met and decided CEO Dennis Muilenburg had handled the crisis of the 737 Max Jetliner wrong and for the company to regain the confidence of the travelling public, he had to go. It was not that he could correct the software but as the face of the company, he seemed not to give the empathy the public was seeking. It seemed to the public, the CEO was overly optimistic when the 737 would be flying as opposed to saying when we all governments signed off on the safety, we will fly. If you were flying would you be comfortable flying on a 737? You maybe but it would likely be in the back of your mind, no.

The stock market react positively to the news, however much effort will need to be done.

Linking to dividend paying stocks, companies similar to Boeing have many revenue streams, for Boeing they have other planes, they are involved with NASA, they are involved in the defense industry and President Trump increased that budget, so although the 737 Max is important for the years to come, Boeing is still a large and important company to the government of the US. In addition, Boeing major competitor is Airbus which is an European based company, can you imagine the US not having an aircraft company? The company has many elements going for it, but if the CEO does not make its customers and suppliers have confidence then changes had to be made. If you own the stock, watch for the better because the stock seems to have a bottom for now.

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

For dividend investors, you have to look at utility companies because they have monopoly like competition and utility rate boards who tend to give the utility an increase in rates every year. For the companies, all utilities have an ongoing appetite for capital and one firm they all look towards is Zimmer Partners LP and its founder Stuart Zimmer. The firm Zimmer Partners is a $9 billion hedge fund and is focused on energy and utility companies.

The President and CEOs tend to meet the hedge funds at conferences and as large shareholders, each President and CEO needs to know what is the intention of the fund. One such case is a utility called Fortis which is headquarter in Newfoundland but owns utilities across North America including ITC Holdings in Michigan. According to Andrew Willis of the Globe and Mail, Zimmer Partners owned a large share of ITC and when Fortis bought the shares, Fortis pitched an exchange of ITC for Fortis. Zimmer said no.

Over the years, the relationship has grown through attending conferences and industry events and the respect of Zimmer Partners and how the utilities work has been strengthened. At one event, Mr. Zimmer said he was open to increasing his size of his position in Fortis.

Fortis’s goal was to take the risks of equity financing off the table over the next 5 years, by accelerating our equity needs today and presenting the market with one large deal. The way it worked was Fortis negotiated a $500 million stock sale to Zimmer Parners and then worked with a syndicate of 11 investment banks to sell $690 million of shares at the same price. Fortunately for Fortis the public offering sold quickly.

Fortis saved money on commissions with the sale to Zimmer and Fortis was able to cancel plans to raise $1 billion from what is known as at the market or ATM. An ATM allows a company to bring in cash constantly by quietly selling small amounts of equity on a daily basis.

Linking to dividend paying stocks, in the financing of companies there are many options and similar to the individual if a company can save money by using the resources to its advantages that is a good thing. Companies such as utilities have an on going capital requirements, they need to be well run and use hedge fund owners for the purposes the hedge fund owners find mutually agreeable for the long term term.

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