Microsoft Corp is buying GitHub for $7.5 billion in stock. In an article by Dina Bass and Eric Newcomer of Bloomberg News, the company will bring in house a community of 28 million programmers who publish code openly and extending a shift away from a strategy of shrouding its software in secrecy.

Microsoft’s deal with GitHub will speed the company’s moves into the cloud and artificial intelligence spaces. Microsoft for the past decade has tried to do more in house and less for programmers to look at the software. Both Bill Gates and Steve Ballmer championed developers building proprietary software for Microsoft, rather than the kind of open-source projects found on GitHub.

Under the new President Satya Nadella has been increasingly relying on open-source software to open-source software to add programming tools, and the purchase of GitHub will be a key part of the way Microsoft writes its own software. Mr. Nadella acknowledged that he will have to earn the trust off GitHub’s users. For now GitHub will continue to operate independently in San Francisco as opposed to Seattle where Microsoft has its headquarters. The other deals above $2 billion Microsoft has made are: LinkedIn for $26.5 billion and Mojang video games $2.5 billion

Linking to dividend paying stocks, the purchase of GitHub means the management of Microsoft is changing or adapting to new styles. All companies have to adapt as society changes and it is important to see if your company is changing or can adapt to what is and can be.

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

If you read history books such as most of us do, there is a bias from the writers which is normal and natural. Much of the world is formally in a hierarchical process and given the nature of the beast, it is much easier to research. In a book called The Square and The Tower by Niall Ferguson published by Penguin Press, NY, 2018, the author suggests that one should also concentrate on the informal change or networks of the people with power.

In terms of connectivity nothing is easier to see that the internet and the companies that we all use.

In 2000 Google began selling advertising associated with search keywords, on the basis of a combination of price bids and click-throughs. By 2011 this was the source of 96% of their revenues. Since 2011 this revenue source has allowed Google to expand to a multiple of other platforms – gmail (2004), Android (2007), Chrome (2008), buying companies which became Google Earth, Google Analytics, Google voice, You Tube and more.

Facebook which is about social interaction in the US 82% of the people who are 18-29; 79% between 30 to 49; 64% of the 50-64 and 48% of the age group 65 years plus.

In China, 3 companies dominate because the Chinese limit Google and Facebook. The 3 companies are BAT – Baidu (the search engine), Alibaba (similar to Amazon) and Tencent best known of We Chat. These 3 companies have revenues in excess of $20 billion. Tencent’s We Chat is used by 86% of Chinese Internet uses and is fast replacing the business card with the snap QR code. Alibaba’s revenue in China exceeded Amazon’s in the US in 2015; its share of the total retail revenue in China is twice that of Amazon in the US.

In India, the cellphone company Bharti Airtel has a customer base as large as the US population.

In Kenya it took 8 years for all households to have cellphones. It took 4 years for Safaricom’s pioneering M-Pesa payment system to reach 80% of households.

Giving the world’s poor mobile phones telephony is proving easier than providing them clean water.

In the technology world, similar to most industries corporations will pursue monopoly, duopoly or oligopoly if they are left free to do so. This is why a small number of companies dominate the information and technology sectors. Despite the claims to be the great levelers, social networks are thus inherently unfair and exclusionary. This leads to two kinds of people – those that own and run networks, and those that merely use them.

In traditional societies, the advent of market forces disrupts often hereditary networks, and as a result promotes social mobility and reduces inequality. Meritocracy prevails. But when networks and markets are aligned, as in our time, inequality explodes as the returns on the network flow overwhelmingly to the insiders who own it,

When you read about the above numbers, you have to think if the trends continue they will get more entrenched and bigger. As an investor you need to be exposed to those companies whether it is individually or in an index fund. Along the way, invariably all those companies shares will go up and down, but as this is the system in which we live in. Try to be an owner.

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

If you read history books such as most of us do, there is a bias from the writers which is normal and natural. Much of the world is formally in a hierarchical process and given the nature of the beast, it is much easier to research. In a book called The Square and The Tower by Niall Ferguson published by Penguin Press, NY, 2018, the author suggests that one should also concentrate on the informal change or networks of the people with power.

In the book, Mr. Ferguson uses a number of different stories through the ages – for this blog the one of Breaking the Bank is relevant.

George Soros runs the Quantum Fund and when examining the European rates he knew that a system of fixed exchange rates would come under strain if there were significant and persisitent differences in the economic performance of the member states. He also understood financial crisis are not caused by individuals they are caused by herds – think of the movie Lion King and the herd of Wildebeest running. What they were running from and why, you do not need to know, all you need to know if the herd is running and to get out of the way or there will be trouble. Mr. Soros believes reflexivity played a role in financial markets. This means reality helps shapes the participants thinking and the participants thinking helps shape reality.

The critical thing is Mr. Soros could not by himself break the bank by himself. He observed most of the time I am a trend follower, but all the time I was aware that I am a member of a herd and I am on the lookout for inflection points. Most of the time the trend prevails; only on occasionally are the errors corrected. It is only on those occasions that one should go against the trend and try to be ahead of the curve.

In the bet against the English pound, the key was to get others to get a critical mass of investors to put on the same trade as he had in mind. That has not hard because Soros was already part of a network of like-minded investors. In fact Robert Johnson of Bankers Trust helped Soros devise the trade. The critical part was the Euro currencies were being maintained within relatively narrow bands; whatever happened, the values could not possible rise against the mark. so if the speculators sold the pound short and lost, they would not lose much money. However if  won, they stood to gain a great deal. Mr. Johnson thought at 20% on the upside. Mr. Soros thought why not go for the jugular or short as much as possible as the risk reward relationship was very favorable.

Other traders and hedge funds saw the same risk-reward and were in the trade and began the herd. As the hedge funds went in so did the commercial banks and the herd was betting against the English pound and won.

Linking to dividend paying stocks, hedge funds look for price opportunities or price differences that should not exist but do. They use a combination of short selling and options, to be safer with your money buy dividend stocks with no margin. It will take longer but over the years your money will roll in because you have invested in a profitable company. Over time, profitable companies are worth more than non profitable companies and you have achieved a dividend along the way.

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

 

If you read history books such as most of us do, there is a bias from the writers which is normal and natural. Much of the world is formally in a hierarchical process and given the nature of the beast, it is much easier to research. In a book called The Square and The Tower by Niall Ferguson published by Penguin Press, NY, 2018, the author suggests that one should also concentrate on the informal change or networks of the people with power.

If you reflect on WW I, why did the war start? If you were told between 1815 and 1914 there was relative peace in Europe, why did it not last. The answer is not because the Arch Duke was shot. The real reason is order established in Vienna in 1815 broke down.  According to Henry Kissinger the key reason was the Secret Reinsurance Treaty the Germans signed with the Russians. The treaty said Germany and Russia should be neutral if one of the countries was involved in a war with a third country. Germany was trying to ensure Russia would sign a mutual defence treaty France. At the time of the shooting, the 3 great powers saw war as the sole alternative to a crushing diplomatic blow,

The two big powers were able to mobilize close to 80% of the adult males into uniform merely by sending telegrams. Those who thought the war would be over soon underestimated the imperial state’s ability to sustain industrialized slaughter. The triumph of hierarchy over networks.

Linking to dividend paying stocks, often the why something is important is complicated. There are many variables at play and trying to understand them allows you to be a better investor.

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

 

If you read history books such as most of us do, there is a bias from the writers which is normal and natural. Much of the world is formally in a hierarchical process and given the nature of the beast, it is much easier to research. In a book called The Square and The Tower by Niall Ferguson published by Penguin Press, NY, 2018, the author suggests that one should also concentrate on the informal change or networks of the people with power.

Mr. Ferguson believes there has always been networks and the first networked era was the introduction of the printing press in Europe in the late 15th century. The second era is from the 1970’s with the introduction of the computer. The zenith of hierarchically organized power was the mid-20th century the era of totalitarian regimes and total war.

Hierarchy means there is a node at the top, and other nodes can communicate only through the one ruling hub.

Networks operate differently but they still have gatekeepers. The gatekeepers must decide whether or not to pass information to their part of the network. Part of the decision is based on whether their decision is how they think that information will reflect back on them. This help explain why some ideas go viral and others fizzle out in obscurity because they began with the wrong note, cluster or network.

Networks according to John Pladgett are important not just as transmission mechanisms for new ideas, but as sources of the new ideas themselves. Networks by themselves do not create new ideas because they can also attack one another. Most of the attacks on networks tend to be from hierarchical entities. Networks may be spontaneously creative but they are not strategic.

Network theory summed up:

1. No man is an island – remember crucial roles are played by people who are not seen as leaders but connectors.
2. Birds of feather flock together –
3. Weak ties are strong
4. Structure determines vitality
5. Networks never sleep
6. Networks network
7. The rich get richer

Linking to dividend paying stocks, everyone is an network and in a hierarchical arrangements, how your company reacts to both is important to your as an investor. Investigating the President and the Board of Directors gives you an indication of the people the President must talk to in order to keep his/her job. Is the Board dynamic or old and collecting payments? In does not matter if they are collecting payments, but you want to see innovation or desire to accept change on the Board.

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

If you asked the President of most companies what their greatest fears are concerning their company, 2/3’s of them would say cyber-attacks is a serious threat. The reason behind the concern is if the company is hacked and the information released to the public, the stock price will fall and some consumer trust will be lost forever. How much depends on how the company responds.

In an article by Clare O’Hara of the Globe and Mail, investors should be looking at the sector of Cybersecurity because as connectivity increases and amount of data does also, cybersecurity becomes more important. A major breach of data is every CEO or Board’s worst nightmare and that is why spending on cybersecurity continues to increase and continues to be outsourced. As an investor you like it when you hear money will be spent on the companies doing cybersecurity.

The leading companies are F5 Networks, Palo Alto Networks, Fortinet Inc, Akamai Technologies, Check Point Software Technologies ltd.  One method to buy the companies is use the ETFs which mirrors the Nasdaq CTA Cybersecurity Index which tracks the performance of companies engaged in the cybersecurity segment of the technology and industrial sectors.

Linking to dividend paying stocks, while the above stocks may not be household names the fact that they will have a continual payment and one that potential could increase over time makes them seem utility like. As investors you like because companies will include cybersecurity firm(s) in their annual expense and the monthly payments are wonderful for dividend investors.

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

In an article by Landon Thomas of the New York Times News Service, one of the most well known names in the bond trading business is not having a good year. Bill Gross has had a rough 2018 – on his personal life he was divorced and on the bond markets he is losing money.

Mr. Gross is worth over $2 billion and made his money on a fund called Pacific Investment Management Co or Pimco. At it height, the Total Return fund had over $292 billion in assets and was the largest fund of its kind. Pimco popularized a bond fund for individual investors, a shift from the bias of institutional money.

Mr. Gross left Pimco in 2014, set up shop in a competing company called Janus and now runs the Henderson Global Unconstrained Bond Fund. Its assets are over $2 billion with a substantial portion of Mr. Gross’ personal money in the fund. The old fund over the past 3 years is up 10%, the new fund is up 1%.

At the end of May, Mr. Gross’ fund dropped 3% in one day because he believed interest rates on German and US bonds would rise, however the political situation in Italy had prompted investors to seek safety in those bonds, increasing their prices and pushing down their yields.

Bond funds are not supposed to lose 3% in one day or 6% in a half of a year. Generally bond bunds are supposed to be safer and more stable on prices than stock funds. Mr. Gross besides investing in government and corporate bonds, also uses derivatives and other complex financial instruments that if the markets remain calm help improve the performance of the fund.

Linking to dividend paying stocks, when someone is successful, it is natural and expected that the person is listened more than the average person. It does not mean everything they do will be successful, but people are expecting more than normal. If you read the marketing from the fund companies, they point to someone’s being more successful than the norm and that is why you may want to learn what they do and do not do. If you invest in dividend paying stocks – the easy question is how safe is the dividend? and will it be paid every year? from those questions will lead to others.

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

A number of years ago, to gauge how the economy was doing people waited for the factory growth numbers for the month. As the economy has changed, in the US the housing market and consumer spending is much more important. In the US, consumer spending as reported by Reuters posted its strongest gain in 5 months. Lucia Mutikani quoted Chris Rupkey chief economist at MUTG in New York as consumer spending is accelerating and inflation is holding firm in a tightening labor market, so the Fed is likely to stay on course with its gradual rate hikes this year despite the signs of uncertainty elsewhere.

Consumer spending which accounts for 2/3s of the US economy jumped 0.6 % in April the Commerce Department noted.

In China, where much of the US factories have relocated, they grew at its fastest pace in 8 months. The official Purchasing Manager’s Index (PMI) released on May 31 rose to 51.9 and remained well above the 50 point mark that separates growth from contraction for the 22nd month.

Cost pressure is still one of the major problems facing Chinese manufacturers noted Zhao Qinghe, an official with the statistics bureau. In China the services sector now accounts for half of the economy.

Linking to dividend paying stocks, over time economies change from agricultural to manufacturing to service. As the economy changes the key numbers to gauge how well the economy is doing change. Remember the old adage – a concern with the economy is when your neighbor’s loses his job, a recession is when you lose yours. Each of us picks and chooses different numbers to understand how the economy is doing locally and nationally. Remember why they are important and how that translates to making decisions.

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

If you were cynical under President Trump’s administration you would say although President Trump ran under a different platform, as soon as he won business would get bigger. Companies that have monopoly or near monopoly positions will emerge stronger in the President’s administration. The cabinet and appointments to regulatory bodies reflect the position and it is not surprising Bayer wins US approval to buy Monsanto.

According to Ludwig Burger and Diane Bartz of Reuters the company many people know for aspirin is buying the company known for GMO seeds. The reason why the companies are getting together is Bayer is the world’s second largest crop-chemicals business with Monsanto’s industry leading seeds business. The company will have sales of $30 billion and its competitors will be DowDuPont’s Cortea Agriscience at $18.6 billion; ChemChina’s Syngenta at $16.5 billion; and BASF at $11.8 billion.

In the US, the Department of Justice Anti-Trust Division has signed off on the merger after Bayer agreed to sell $9 billion in assets. Bayer has since said the expected synergies from the merger will be $300 million less because of the need to sell more than expected assets.

Linking to dividend paying stocks, sometimes but not always being cynical about the motives of the company helps you make decisions. If you are cynical about President Trump opening the doors to creating larger business, then you might see opportunities to make money, whether it is good US policy or good self interest or not. Political administrations will come and go, but the opportunity to make money and try to both limit competition and gain monopoly like conditions on the ability to raise prices is a thing of beauty.

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