On April 10, the House Financial Services Committee met and you can watch the hearing on cspan. Look under Congress and similar to You Tube you can watch – learn some things and be entertained depending on your politics. Since the midterms the Democrats control the House of Representatives and it is reflected in the make up of the committees and the questions to be asked of guests. Prior to the midterms, the Republicans were very easy on guests they liked, now the reverse is true. Democrats tend to be harder on those they think have picked up more than their fair share of rewards.

10 years ago, the financials system including banks around the world were in dire trouble because they owned trillions of dollars of mortgage backed securities which had little value, prior to the collapse all the players were making lots of money from the system, then prices fell and the financial system collapsed, often the CEOs and Boards did not know or understand the risks they had. The Dodd-Frank Bill has passed to ensure banks understood the risks and had capital, better yet had excessive capital and decreased the ability of the banks to take on leverage and risk. During the mortgage backed crisis, some banks were leveraged up to 30 to 1, which is great for winning bets but not good when the market collapsed.

The House Committee brought in 7 CEOs of the largest financial instiutions in the US, it turned out for 5 hours to question and reflect about the past 10 years. The CEOs were from Citibank, JPMorgan Chase, Morgan Stanley, Bank of America, State Street, Bank of New York Mellon, and Goldman Sachs. Everyday trillions of dollars move through the banks and they play a large role in ensuring a quality banking system.

The good news is since the 10 years, all the financial instutions are profitable, have sufficient capital, made their businesses leaner, and have a great understanding of the risks they manage and take on a daily bais. All the banks believe if and when there is a downturn in the economy, they will not need government intervention to help them.

The hearings dealt with the big picture items – what keeps you up at night or what concerns you now? The answer included cyber crime, unregulated shadow banking, education loans and auto loans and the normal everyday economy.

The House representatives could ask any type of question they wanted to, from the non bank to underbank people; pay structures, stock buybacks, fees – if you are charged them they are a pain but represent less than 2% of the bank’s total income; the fines they were charged over the past 10 years etc.

All the questions were important because people see banking differently depending on your perspective, as access to capital is one of the important elements in how the economy can and will function.

Linking to dividend paying stocks, invariably some of the companies will have a relationship with one of the big banks. They are important to the on going normal operations of the country, but none are perfect. They have made mistakes, it is better when the companies recognize them and fix it, rather the regulators fining them and forcing them to do better. Two of the themes one could easily take is if cyber is a big concern and the banks are paying hundreds of millions of dollars to protect themselves, a cyber company should be in your portfolio; also the banks are doing very well and making healthy profits – it would be good to own a bank or two in your portfolio.

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

One of the good things about democracy is the various Secretary’s must come before House and Congress committees. One of the committees is the House Financial Services on International Financial System. Treasury Secretary Steven Mnuchin appeared before the committee for more than 3 hours.

The committee demonstrates while the President seems to only want to look inward, the world of finance is very global and needs many strong international committees to operate. Inward looking means someone has to pay attention to the rest of the world, where the US has taken a lead for many years. There are many regulations which help bring stability to the system and the term systemic risk is a term often heard. In the world of existing politics in Washington, the term bipartisan is often heard, which means both Democrats and Republicans need to work together.

In the committee. Mr. Mnuchin had to deal with insurance, banking, tariffs, international capital, income taxes (he looks after the IRS) and everything of concern to a group of House Representatives.

Linking to dividend paying stocks, many of the organizations and government committees the companies need to operate often come attack from deregulation, however they are important to operate to ensure regulations are followed. Life is a balance or a strive to find balance and as long as governments do not go too far one way or another, dividend paying companies should have regulation certainty and be able to worry about the competitors not the government.

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

On You Tube there are many up loads of movies and recently watched a movie called Swindle made in 2003. The movie stars Tom Sizemore, Sherilynn Fenn and they are trying to rob a bank. The movie is about a small disc which holds EURO plates or to print money and the reason why it would work is one of the countries in the EURO has not updated its technology to the latest technology to fend off criminals and counter fitters.

As the public, we expect that governments can and do stay up to the latest technology with regards to those elements we all have confidence in. Money is the big aspect, if the government adds different methods to print money, then we expect or assume all governments have made the switch to whatever has been agreed on.

It may be true, governments have made the switch, but are you positive? In the movie there is a laggard, which likely change on its own schedule. The premise of the movie is the leader was going in to copy the disc and walk out and would likely be allowed to walk out because she was not carrying any cash. The other robbers who thought there was a backway out, might be shot, but the leader was not going to be. Since this is a movie there is a twist, being an inside cop.

Linking to dividend paying stocks, it is hard for many companies to keep up to date with every new technology piece, particularly if the public begins to adopt the technology. Until the company adopts, there is an opening for a competitor or something wrong to happen. Hopefully with profitable dividend paying companies, the company can buy the companies with the new technology and be further ahead. That is the hope for investors, how well management executes and understands is something investors need to listen to.

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

When people are elected to office, one of the many administrative aspects of elected office is appointing people to Boards and Commissions. Ideally, the higher the post the more qualified the person, in as much as they could be either Democrat or Republican and make decisions for the betterment of the country. In an ideal world, most people would not pay much attention, however as the elected world has been more popularized who is appointed and who is not is of concern. In terms of the Federal Reserve, the President has and continues to send tweets about lower interest rates. In the early part of April the federal reserve rate was running at 2.4%. The President believes if the reserve rate was closer to 0% the economy would pick up steam and there would be no threat of either inflation or possible downturn in the economy.

What is telling about the President’s tweets is what interest rates he never talks about – consumer rates and the typical credit card at 18%. The President is only interested in the federal reserve rates and wishes to appoint new governors. According to Reuters, Mr. Cain, formerly the Chief Executive of Godfather’s Pizza previously served on the Kansas City Fed. At 72 and hopefully in good health, and if he wishes to serve, he would be a good choice. The President also wishes to appoint Stephen Moore an economist who believes low interest rates do not cause inflation.

Linking to dividend paying stocks, all investors you want an reasonably stable investment climate. It is difficult to believe investment decisions for your company’s long term future would be dependent on the costs of 1% interest rate versus the costs 2or 3% interest rate, if it is you have better seek alternative investments. Most of the time who elected officials appoint to Boards and Commissions do not matter greatly because the decisions they make could be either political party. When Presidents appoint people just because they agree and will do his point of view, versus what reality tells you, it is time to worry because governments change.

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

 

 

Why nobody likes to see couples divorce, the reality is many do. One of the many consequences is the sharing of assets. Often times when someone is very wealthy and marries someone who is not, an agreement on which assets will be split is done before the marriage. In the case when both spouses have about the same income, there is less worry until much later when the marriage has dissolved. In the case of the Bezos, while the Bezos had some money to start the company, the early days of Amazon did not make the couple wealthy. They lived on hope and trying something new with the internet.

A number of years has passed, Amazon is a driving force in the economy and the Bezos have managed to keep a large number of shares and became billionaires. Technically and legally, MacKenzie was allowed to have 50% of the couple’s net worth and for a while the net worth was in the area of $143 billion. According to Jeffrey Dastin and Arjun Panchadar of Reuters, MacKenzie has settled for 25% of the assets or she will be worth about $36 billion. Jeff Bezos will keep the 75% of the shares of Amazon; he will keep the Washington Post and the rocket company Blue Origin LLC.

Linking to dividend paying stocks, one of the most important aspects of many companies is succession or who takes over the company next. For many dividend companies, a few families tend to have a great deal of control or seemingly control or influence of who the next management team will be. Sometimes the founding families are well into the 3rd or 4th generation, if they are interested. As investors, as long as the company is profitable is the first concern, the second concern is what influence do they families have and is there reasonable peace among the brothers and sisters. If there is, then you have less worries.

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

One of the great mysteries of the world of shipping is how do you tell where you are when you are at sea? If you can not see land, do you know where you are? Until the l770’s it was almost impossible to pinpoint where you were, except for north or south of the equator. It was relatively easy to tell latitude by the position of the sun; however the longitude was unknown. Because it was unknown, there were many shipwrecks and ships running a ground or not knowing land was nearby for fresh water and provisions. People died because on the ship, no one knew where they were. There were clues – how to measure your speed, but it did not tell you where in the sea you were.

There were many people who tried, but the one who eventually succeeded was a Englishman named John Harrison. There is a terrific movie called Longitude starring Jeremy Irons and Michael Gambon which is worth watching on You Tube. In the 1700’s and many even today, what your education and schooling was, helped dictate your lot in life. John Harrison worked cutting trees and as a clock maker, he did not graduate from any university. When the English government announced a prize, the Board of Longitude expected to give it to one of their own. John Harrison who was driven to produce the most accurate clocks on land and sea, eventually took 50 years to develop a clock a little larger than a pocket watch and thanks to the influence of the King was awarded the prize. In the city of Greenwich, England if you ever have the chance to see Mr. Harrison’s progression of clocks you will be in for a treat.

Linking to dividend paying stocks, the story of John Harrison is that anyone can be an inventor, but it takes something else to make money from the inventions. Mr. Harrison won the prize (in today’s money a couple of million dollars) but he did not produce the clocks which all shipping uses. Mr. Harrison was a clock maker, not a graduate of the university which made winning the prize very difficult for the Board of Longitude to give or they will be many roadblocks to capitalizing on inventions. However, many profitable companies can buy inventions and continue to be innovative in the the market. Ideas are a powerful thing, but selling them to users is where the money is made. Concentrate on the later and your investments will do better.

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

Apple is a very profitable company, it sells iPhone, iMusic, the Apple operating system and people love to use it. The price point of the phone has always been higher than the average phone from Korea, Japan, and Chinese.

Last month Apple launched Apple card and Peter Misek a partner at Framework Venture Partners LP wrote an article about what you can expect if you own an iPhone.

Apple will not this year, but within a year or two, be able to examine the way you buy and spend money which will tell the Artificial Intelligence approximately how much you make. From your savings and spending habits, the phone will offer advice – advertising to spend money and possibly where to save money. In addition if you need credit from loans and mortgages, your past spending patterns will give a terrific indication of what you can be preapproved for with 5 clicks of the phon or less.

All of the above is possible right now, but it will take Apple a year or two to begin the implementation and they will because there is no cost to acquire a customer, the customers already love their iPhone and were willing to pay a premium for it. There is simply too many potential dollars to earn by Apple not to do it.

Linking to dividend paying stocks, it the above case, Apple can offer more services to the existing base of users at limited cost to it, which makes the ability to use the information inside the phone to predict how well you will repay or to keep loan losses down. It will add income to Apple and the stock will continue to do well.

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

Most companies around the world are private, however when they want access to the publics money, they must reveal details of their financials. For many years, the firm Saudi Aramco which runs the oil business for the government of Saudi Arabia has relied on money the government or banks. The company has decided to do a bond deal of at least $10 billion maybe more and revealed its profits in 2018 was $224 billion.

In an article by Reuters, the group has 257 billion barrels of oil in reserve which is more than 50 years of current production levels.

In 2021, the company may launch an IPO which is expected to generate $100 billion.

Linking to dividend paying stocks, as long as the oil needs oil to run its economy, Saudi Aramco is there to deliver equally it delivers profits, which would make it the most profitable comapny in the world. It would be an easy decision to be a buyer of shares.

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

John Heinzl of the Globe and Mail and I agree that dividend investing is something everyone should be doing. It is easy and grows your money with limited risks. In an recent article, Mr. Heinzl wrote about 10 reasons why it is one the simplest and most effective ways for small investors to build wealth. Once you have the wealth, there are many options including keeping most of your money in dividend stocks.

6. Diversification is a Snap – everyone should start with a few companies and let them build up, you will likely be bias and pick them from an industry you know or a customer of. That is good, to achieve further diversification there are many dividend ETFs to choose from and gain greater diversification.

7. Tax Benefits – the wealthy people help write the tax code to fit their type of income. They receive dividends from corporations and have tax credits on the income as opposed to bond and bank interest which has no tax credit.

8. Dividend Growth fights Inflation – after you have bought your dividend companies, the next step is examine if the company increases or expects to increase the dividend every year. There are companies that do and the dividends go up with inflation. If you bought a bond, the same income would be generated.

9. Dividend investing Unhooks you from the Market – it is entirely possible to spend a great deal of time and energy in front of the TV and computer watching how the market is doing. You can learn something along the way. It is also very possible to invest in dividend companies and not worry about the next couple of months of the market. You know when your dividends are being paid, as long as they are being paid, you do not need to worry about your investments. If the market goes down, you have cash to buy; if the market goes up, you have cash to diversify or do something else with it. The trick is follow relatively simple rules when you invest. Is the company profitable? How do they make their money? Can they pay their dividend? Then check off the boxes until the next dividend payment.

10. It is Fun – After you have invested, you really do not need to do anything, but vote at the AGM. The dividends and the power of compound interest, along with long term capital gains increases your wealth with limited effort and that is a good thing.

Linking to dividend paying stocks, in investing let the companies do the heavy work worry about competition; technology both good and bad; you are interested can they execute with their customers and attract new ones. There are many aspects of management to watch, but you do not have to worry until the company is not profitable and there are many signs along the way.

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