A few months ago, an article was read about the number one concern which keeps CEOs up – cyber security. After reading that comment, an index fund of cyber security firms was purchased because those contracts will be renewed for a long time to come. Recently the book Exploding Data – Reclaiming Our Cyber Security in the Digital Age by Michael Chertoff published by Atlantic Monthly Press, New York, 2018. Mr. Chertoff brings his perspective of being Secretary of Homeland Security to the book which means there are examples of countries and people trying and succeeding in breaking into what we consider sensitive information data banks.

When Russia invaded the Ukraine, at the same time they had their cyber security people invade Ukrainian information data banks. They hacked the power grid shutting off control computers at 30 substations and then wiping control computers to make them useless. The attack caused control systems to go “suddenly blind” and to issue fake reports that made it seem power was flowing when it was not.  A secondary phone disruption had prevented technicians from getting updates by telephone. This prevent customers from calling in and reporting power outage. And the President says nothing about Russian influence in the election process! One is tempted to wonder what is the big difference between the Ukraine system and the American system? could someone do the same thing or have they tried?

In Mr. Chertoff’s book there is lag between the existing laws and what can or has been tried with cyber security. Both to prevent crime and to go after those that can.

It is reasonable to ask at the AGM how is the company surviving and what resources do they put into cyber security attacks. Depends on the answer because if there is no hacking, someone is either not telling the truth or in denial.

Linking to dividend paying stocks, some of these companies are most vulnerable because they can pay the ransom, if and when hacked. Some organizations routinely pay ransom, what is the policy in the companies you invest in?

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

One of the most important votes for the cannabis industry was in a state where cannabis was not on the ballot. According to an article by Jameson Berkow writing in the Globe and Mail noted a Texas Republican Pete Sessions lost in the midterms. The significance is he was the Chair of the House of Rules Committee and he prevented dozens of proposed laws that would have reached the House floor for debate and eventual vote. He was a gate keeper against the cannabis industry.

Industry people noted it is amazing one person can have the power to be the gatekeeper coming from a relatively small district in Texas. Many states rely upon the federal recognition and once that happens, others will change.

Linking to dividend paying stocks, one of the reasons why industries change or do not change is the gatekeepers, who control access. For many dividend stocks, the gatekeepers are on the side either willingly or within the system to ensure dividend stocks have a near monopoly. These are the controls which do not show in the annual report but how government works with or for the companies.

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

With every company or country, after issuing bonds, there are numerous investors examining if the company or country can repay the bonds. The economy of Italy has been very dependent on the Euro market to keep the bonds selling. The negotiations between Brussels and Italy continues.

In an article by Abhihav Rammarayan and Sakat Chatterjee of Reuters suggest the negotiations means that it is possible a sharp rebound or drop if the debt story improves. In Italy, the recent election elected anti-establishment group who wants Italy to spend more, while the Brussels people at the EU want less spending and more repaying of the debt.

Italy has the biggest outstanding bond market in the euro zone and futures trading has rocketed in recent months as hedge funds have stepped up their presence. Average daily turnover for short term Italian government bond have surged 40% to nearly 70,000 contracts, according to the futures exchange Eurex.

Mark Dowding of BlueBay Asset Management sees large hedge funds taking short positions through the short and long dated BTP futures.

One portfolio manager in London uses futures to take bets on Italian debt because the margining system in futures contracts makes it less capital intensive than purchasing bonds. Margin means less money down to control a larger position. If you paid cash, then the trader would have to put up the entire amount. If you are correct you make more money on margin.

Linking to dividend paying stocks, most people should not invest in futures unless they have a very large portfolio, but it is important to know why hedge managers are doing. They make money taking risks, as a dividend investor, you make money with much less risk and sometimes more reward. If a hedge fund losses money, and you earn money you have made more money for less risk. One of the best rules in investing is lose less.

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

 

 

In mid November, oil prices were decreasing rather than going towards the expected $100 per barrel they dropped below the $70 a barrel for the first time since April. In an article written by Reuters investors are worried about a slowdown in the economy.

The US, Russia and Saudi Arabia have produced near record high at 33 million barrels per day or a third of the world’s oil. US energy firms have 886 rigs working, the highest level since March 2015.

Iranian oil is going to South Korea and China, partly because Washington gave exemptions to Iran’s biggest buyers. The sanctions are not cutting supply.

Linking to dividend paying stocks, oil plays an important role in our economy, but when the price gets too high institutions examine more ways to conserve their resources or use less. When the price falls, there is less need. For those readers who work in office buildings or have a house, did you see the company making changes or did you insulate your house better? Most of us are price sensitive to oil but the large oil companies have access to oil at low prices which makes them a good investment and the dividends can help pay for the oil prices at the pump.

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

In article by Ron Bousso and Shadia Nasralla of Reuters, the oil company British Petroleum or BP profit increased to a 5 year high as higher oil prices along with strong production. The company reported 3rd quarter of $3.8 billion exceeding the expected $2.85 billion of analysts.

It has been a number of years since the Deepwater Horizon disaster and the cost of the clean up; BP is doing new projects or has a lively step to it.

BP said they will pay for the BHP deal with available cash and not need a rights issue and expects to sell $5 to $6 billion in assets to reduce debt.

BP launched 9 major oil and gas fields including in Azerbaijain, Oman, Egypt and Angola. Much of the production is gas. Higher profits came from new fields and bringing new higher margin barrels into production faster through efficient project execution.

Linking to dividend paying stocks, while BP has never stopped paying dividends the Deepwater Horizon because of the payments needing to be done has been a pull on the company’s revenues. When disaster happens, it takes time and effort to return to what is normal. How the company handles the disaster and when it can see a more optimistic outlook determines if you keep your shares or look for alternatives

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

There are many theories on how to invest and how much to invest and occasionally a simple one is the best one. In an recent article by Benj Gallander and Ben Stadelmann who co edit Contra the Heard Investment Letter, they wrote about Bank of America.

Bank of America was started in the San Francisco during the gold rush time, built up a franchise on the west coast, when the government allowed big banks to merge, the bank merged with Nations Bank to become Bank of America. In the depths of the banking crisis, B of A bought Merrill Lynch. Along the lines, B of A wanted to be the number one or two bank, when consumers thought about banking products and for a time it was that bank. In 2008, the price of the stock fell to $6.76 and Warren Buffett helped bail it out.

The simple idea Benj and Ben had was because of the name Bank of America, failure of the name of the biggest consumer banks would be a blow to America’s ego. The bank would survive and the stock would rise up. It took a few years and it did happen. Now the bank’s dividend is growing and the stock price is in the $30 range. The recent quarter was excellent, the bank made $7.2 billion and Merrill edge has $200 billion is assets under administration. Generally they are going to make an easy fee from the $200 billion.

Linking to dividend paying stocks, it is much easier to have a simple reason when the company is making a profit and paying dividends, because many aspects of the company are doing well. The issue is can it be better and when. In the case of Ben and Benj, the issue was yes it will because of the strength of the underlying assets of the company. Sometimes simple works.

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

Everyday there is a wealth of information to be absorbed and most of us do not have the time to read and analyze everything or we rely on short cuts. In an recent article about the JP Morgan index, Scott Barlow helps explain why that index is important.

The monthly JP Morgan Global Manufacturing PMI Index is an excellent way to check for mispricing in industrial metal prices and domestic mining stocks. The data looks backyard or what has happened, however when metal prices diverge rom changes in global manufacturing activity it is often a sign that speculation excess in metals – bullish or bearish is creating investors opportunity. Another method to say that is global manufacturing creating a demand for metals? what are metal prices doing?

In Mr. Barlow, he compares the JP Morgan Global Manufacturing PMI Index to the S&P GSCI Industrial Metals Index and they are showing the same direction. The direction is negative and there has been a sell off in metal prices.

Andrew Garthwaite, a strategist with Credit Suisse uses the JP Index to compare the yield from 10 year Treasury. In 2017 it was at a high of 55, now it approaches 50, if the number is below 50 expect a worldwide decrease in manufacturing.

If the above continues, Mr. Garthwaite believes US Treasury yields will decrease.

The most widely agreed upon definition of a stock price is the discounted value of cash flow and dividends. Bond yields determine the discount rate, if it goes higher stocks go down, if it goes lower stocks should go up.

Similar to every theory, there are elements in the economy which can change the theory until the next month.

Linking to dividend paying stocks, no one knows which stock will go up or down, but you can look at history to determine which are better ones to own. Throughout history, if you own a profitable stock which pays a dividend, that has been a very good thing to own. Understand why your investments make a profit and as the value of the investment grows in your portfolio, you may start looking for the JP Morgan Index or another one.

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

Similar to countries around the world, Australia has faced drought and these days it seems we have more than less. We have all heard about the cycles of life (Lion King) but is there things which could be done to lessen the drought? Recently an You Tube video popped up and it was good that it came. The previous post was about dirt, if you do not have water no crops will grow. The Mulloon Institute story of two men and a creek or river in Australia. They own land on the creek but it was eroding, the creek was prone to flash floods when it did rain and then long dry spells, similar to many farmers they were looking for a way to lessen the droughts.

One of the gentlemen, saw the land differently, he believed the earth held the water like a sponge and it slowly trickled back to the surface. With the creek, he believed if you could slow down the water, plant reeds and willows then the water would be retained and soak into the earth, allowing the fields to stay green or be planted and grow. His partner had the resources to try and it worked! The lands by the creek stayed green through the drought while the lands on adjoining properties went brown. Over the past few years, the Mulloon Institute has gone further down the creek or river and more farmers are reaping the benefits. If it can happen there, it can happen anywhere.

Recently read a book called Silent Spring by Rachel Carson published by the Houghton Mifflin Company, Boston, 1962. She writes about the ill effects of chemicals in our environment and in the US for a number of years there was a single determined effort to treat a pest or what is perceived to be a pest by chemicals without consideration of how nature would do it. In nature elements are interconnected, for example in both Australia and the US, Willow trees were sprayed to be killed. Willow trees have long roots systems which hold water in the soil, eliminate that and what do you put in? if nothing the streams will erode the banks faster. Now you have more problems than you started with. Working with nature helps solve problems with less money.

Linking to dividend paying stocks, it took a couple of visionaries – one that had a vision and one that could make the vision into reality. We all tend to think some form of change is better, but often looking at how the systems developed originally or how elements are connected will give a solution. In many ways, one solution to investing is investing in profitable stocks, that pay a dividend. If the profit is sustainable, then you will reap a dividend for a long time to come and be wealthier for your actions.

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

In the fall after the plants are gone, farmers and gardeners look for next year. What can I do to improve or make it easier to farm or garden?  One method is to read books and one which was recently read was The Gardener’s Guide to Better Soil by Gene Logsdon published by Rodale Press Inc, Emmaus, Pennsylvania, 1975.

If you are fortunate to live and work in rich, black loam full of humus, all you  really need to do is start your planning. If you are similar to the rest of us, the quality of the soil will depend on how well your plants do. The better the quality, the better they will do.

If you consider the book was written in 1975 and om 2018 we are still dealing with the problem when the solutions are know, it sometimes makes you wonder.

Man is 7 inches from starvation is an old but true saying and it means we grow on the top 7 inches of the earth.

The fall of almost every civilization is largely an account of raping natural resources until all the easy profit goes out of them. The history books from Roman times to modern times are filled with examples.

We do not set up to intentionally do it but man finds a good land and establishes a civilization. His flocks graze the grass; he tills the soil. Increased populations put more demand on the productive capacity of the land. Overgrazing and over-tilling both follow. Plant life becomes too weak to restore itself, and the soil grows yearly more deficient in plant food and tilth. Weak plants can not control erosion – note wind and rain do not cause farm erosion, lack of nitrogen and organic matter do. Deforestation, over-grazing, intensive tillage all then contribute to a hard soil where water runs off quickly. Summer soils become drier, winter floods more destructive.

In the 1930’s many people heard of the dust bowls. Once alarmed the answer was technology. Technology included dams, grass waterways, contoured slopes, chisel plowing, terraces. Chemical fertilizers were used on a giant scale. By the middle 60’s, America had a surplus of food. The areas that showed the greatest increase in agricultural production was the Great Plains and California. How was it done – irrigation.

Water comes from somewhere and is it being replenished?

The issues remain, which is a shame – we know how to fix it.

Linking to dividend paying stocks, we all like to believe we have made progress but sometimes the answer is not so much. History does not always have to repeat itself. Mulching and using composting to continually enrich the soil is similar to collecting dividends. The company makes a profit, pays dividends to you – you are enrich once again and can either put more money into the business (buy shares) or have other alternatives to save or spend the money.

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