The Total Money Makeover is a book by Dave Ramsey and the just of it is if you live debt free you will be wealthier. If you can pay your expenses and live on your income allowing for savings then you will get money working for you, rather than working to pay off the debt.

For 65% of Americans it is hard to do for they have an average of $15,654 on their credit cards. Similar to most people it did not start that way, but evolved over time and thanks to high credit card rates it is very difficult to pay down the debt. To pay it off, means living on less than your income and accumulating savings. Similar to most people, things comes up – home repairs. desiring new things; a keeping up with “the Jones” or your neighbors. There are a multiple of elements happening in your life.

One of reasons it is hard to pay off the debt is credit card companies are great marketers. They know if you pay by credit you tend to buy more. If you pay by cash, you buy less. Credit cards are the lifeblood of retailers and in our economy if people did not shop, the economy would fall apart. In the book Total Money Makeover, Mr. Ramsey notes Sears and Target received 40% of their income from credit card payments. You use their branded credit card, typically buy more and the retailer receives the money from interest payments.

Linking to dividend paying stocks, the above is one of the reasons to own shares in either MasterCard or VISA or both. Both stocks have risen and both pay dividends. MasterCard has a 40% ROI. With the economy seemingly to move towards more digital, credit cards are here to stay, although it is increasingly possible to use your debit card.

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

If you own dividend producing stocks, generally you have enough money not to worry about your next meal or two. It generally means savings and after you reached a particular amount to act like a pension, you may wish to look at other investments. As interest rates rise, as an investor that is a good thing, because if you can buy quality bonds that will have close to a 100% of being repaid (If you buy government bonds it is 100%) then you should consider moving money to the bonds and capturing the higher interest rate. Stocks tend to fluctuate in price, the main aspect with bonds is can they pay their principal back?

There are other investments, and you may be tempted by private placements. There are two concerns – the fees paid and how do you sell? Recently read about some private placements with fees of 40%, as an investor you would have to double your money just to break even. Private placements are done at a smaller scale outside of the stock market to raise money for a venture. When can you cash out? Often times they aimed at what is hot in the marketplace – if house prices are seemingly doubling, then buying land and building homes is the pitch. Just remember the land has to be zoned and usable for building homes. There are often large pieces of land seemingly available, the problem is the former use buried waste in the land and the land has to be cleaned first. It is expensive. If you are looking at investing in private placements look at the land or what the private placement would invest in before leaping. Would you live there or what to work there? By making appointments to look at the land, it gives you time to think about the investment – it most cases extra time is a very good thing to have and do. If you can hearing it is a limited short term thing – walk or run away.

Linking to dividend paying stocks, with these investments, the questions are easier. Does the company pay dividends? can it raise its dividend? why is it profitable enough to reinvest in the business and pay dividends? what is the outlook for the future? do you agree? If yes, then you can keep, it no look for alternatives.

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

 

If you watch the business channels and many people do, often times people discuss the price-to-earnings ratio or PE Ratio. Similar to all ratios, they are designed to help you evaluate or compare apples to apples. In a column by John Heinzl, he writes about PE ratios.

The PE Ratio is calculated by dividing the share price by the earnings, often times it is last year. Thus the term is trailing 12 months P/E.

What happens if you use last year’s earnings, the first concern it is a net earnings which means there could be one time considerations or non recurring items in the earnings. It means you need to look at the company’s earnings to see if there was one time expenses in their earnings.

The second consideration is looking backwards, while a very good indication the P/E does not reflect this year’s earnings outlook. Is the company expected to do better this year? does it have a history of raising it dividends? All stocks which earn a dividend have an analyst or more following them, what do they think?

It is important to note generally companies which are growing rapidly tend to have higher P/E Ratios, while slower growth companies have lower P/E Ratios.

Linking to dividend paying stocks, which looks easy sometimes is a little more complicated than at first glance. It is a good idea not to make your decisions based on one variable, but look at a number to be satisfied you have made a good decision.

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

 

Reread Confidence Men by Ron Suskind published by HarperCollins Publishers Ltd, NY, 2011. The book has 3 main themes – the financial collapse of 2008 and what to do about it; health care reform; and President Obama. When you compare President Obama’s time as the President to the existing President, you are will be reasonably happy so far there has been no crisis in the economy.  At least with President Obama he was able to draw upon the smartest people in the US and know when to take advice and when not to accept the bias of the advice. With President Trump as soon as fellow Presidents of companies tell him what to do he says yes do it. Tax cut for corporations lets do it, now companies can buy back billions of shares which helps existing shareholders (including me) but the deficit is going to be the concern of the next President.

In dealing with the banks, the most important asset they have is confidence. You deposit money, they lend it out and receive more back. The largest banks have a large trading system, primarily in debt or debt like instruments and as long as 99% of the people repay their loans, while you can live another day with money coming into the banks. In the banking crisis of 2008, when the value of mortgage backed securities dropped to almost nothing because too many bad loans – both based on faulty income abilities to pay increasing higher interest payments and declining home prices (when the mortgage amount is greater than the value of the home would you continue to pay?) what should the government do. If the banks sat on the money, the economy does not move because it is based on credit flows. Credit flows are based on confidence to repay loans and losing money means there is no confidence.

It is also true that risk management which is the most important job of the senior management was lapsed because the attitude was securitize the debt and sell it to someone else. What happens when no one buys? One can see there were many problems but remarkably few solutions. The banks are private institutions, does the government go and change management? take the bad debt and hope real estate values go up? what do you do and how do you encourage growth in the economy? While President Obama never got everything right, they made better decisions than other administrations would have or could have.

In terms of health care, a study in Dartmouth revealed not surprisingly if insurance companies or medicare pays more for a procedure, then eventually more of those procedures will be done whether the outcome is positive or not. The idea of health reform should be to reward procedures that make the outcome positive. The problem is hospitals and doctors who are rewarded by the procedures that make money and less about positive outcomes and they tend to have more influence on the health care than regular policy makers because they are seen as the experts. It takes a great deal of effort to affect health reform.

Linking to dividend paying stocks, when companies make money life as it should be is easy to see. When governments want to do reforms, uncertainty becomes an issue. Easy reforms are when procedures can change but companies can still make relative easy profits.

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

If you go back to last year, Apple continued to sell iphones in large numbers, had $250 billion in offshore accounts and paid a 36% corporate tax. Thanks to the tax cut, Apple continues to sell large numbers has brought or is being to bring its billions offshore back to the US and pays a lower corporate tax. Even if it did nothing better than last year, it would have beaten estimates. With the money, what did Apple do – it bought back $23.5 billion of stock back, increased its dividends and there is more to come. With less shares each remaining share is more valuable and with increased dividends shareholders receive greater cash for their holdings. There is nothing not to like, except for the big picture in the US.

In dealing with Apple, in an article by Stephen Nellis of Reuters, Apple sold 52.2 million iPhones which is along with Wall Street expectations but no longer the great numbers of the last couple of years. Apple spent money on buybacks and still has $145 million in the bank to do more. The revenue for Apple was 61.1 billion up from 52.9 billion of last year.The average selling price of an iPhone was $728 compared to Wall Street expectations of $748. Selling the iPhone X and iPhone 8 at a discount was the reason.

People continue to buy music as Apple Music, the App Store and iCloud posted 9.1 billion in revenues compared with expectations of $8.3 billion.

For the next couple of years as Apple continues to do what it was doing plus distribution of cash to shareholders, Apple will be considered to be a core stock holding. Maybe not a growth stock, but things can change.

Linking to dividend paying stocks, the tax cut the President gave to corporations has increased stock buybacks and dividend payments and as dividend buyers that is good thing for the companies. In a couple of years, they will have to do the really work of beating the competition instead of relying on the tax cuts, but for not it is a good thing.

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

Many years ago, there was an advertisement for Avis which says we try harder, they had to say this because they were the number two or three brand. In the world of business, being number one market share means higher profits. In an effort to increase profits, T-Mobile is merging with Sprint in which they hope to close in the first half of 2019 or next year. In an article by Greg Roumelitos of Reuters when you examine mergers, an important aspect is who controls the Board of Directors, in this case, the new President will be from T-Mobile and the owner of T-Mobile, Deutsche Telekom AG will have 42% of the shares and can nominate 9 of the 14 directors.

For Sprint which is owned by Softbank of Japan, it has tried a couple of times to merge and carries debt of $32 billion. Analysts noted Sprint’s growth came through discounting (volumes increase, not necessarily profitability), due to its debt lacks the scale needed to invest in the US network and to compete in a saturated market.

For consumers, the benefits are a higher capacity network, lower prices, create jobs and improve service in rural areas. The two biggest wireless players are Verizon Communications and AT&T, incidentally Verizon is a wonderful generator of free cash which goes into dividends. The new aspect for cell phones users is the 5G network and both Verizon and AT&T scope will be larger than the merger T-Mobile Sprint.

Linking to dividend paying stocks, while competition is important and needed, to be in the top 2 market share is more profitable and that can lead to many more elements. In the cell phone world, it leads to the ability to continually upgrade the network, to spend more money on good customer service and be innovative. Those elements bring more customers and the cycle continues to be strengthened every year. While it is great to watch and be informed of the other competitors, invest your money in easy methods to see success.

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

 

Amazon the company that is reshaping the online world, continues to churn out greater profits. Amazon reported higher profits and a rosy outlook as reported by Jeffery Dastin and Arjun Panchadar of Reuters. Sales for Amazon rose to $51 billion beating out estimates of $49.8 billion.

The world’s largest online retailer announced it was raising cash or prices on Amazon Prime from $99 to $119 in June. It is important to note Amazon has over 100 million people paying the membership and members spending on Prime fees and other subscriptions grew to $3.1 billion.

Amazon stock is up 30% this year, which is why most institutions and mutual fund companies own shares in Amazon.

Linking to dividend paying stocks, if you buy Amazon it is important to understand how the revenue model works – from fees from Cloud computing, Amazon Prime and shipping books and other things. If you believe things are relatively the same then Amazon is a good hold.

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

As with everything else in the world, it depends is a good answer. Since 2008, government treasuries, the most secure debt instruments (the government can raise taxes to pay the interest) have been close to 0%. With that yield, almost everything else looked good that was positive. If you lost money then even 0% looks good. US Treasuries interest rates and yields have been to move up to 3% which makes the depend answer more tricky. Typically, dividend stocks return about 3%, but there was the good aspect of higher stock prices to produce a total return often above 3%. Now that US Treasuries are 3% do you shift to begin buying bonds?

According to Ian McGuggan writing in the Globe and Mail the Federal Reserve is expected to hike interest rates up at least twice more in 2018 as it combats rising inflation. Although with elections being held in November, maybe the second hike will be later. For the second hike the politicians want to ensure the low interest rates which helped fuel the economy is not being hurt. It is important to note as interest rises, neither stocks or bonds thrive. Bond prices move in opposite direction to yields. Stocks are hurt because higher interest rates means higher corporate interest payments. Then the issue of how much debt a company has and should have are raised again.

Linking to dividend paying stocks, while buying stocks, it is better to buy a company with growth rates plus pay dividends as interest rates go up, there is a risk. If you do not know what to do, you can little for as the cash comes in from the dividends there is no reason why you have to spend it. You can wait until a great opportunity from the homework you have done comes forward. This makes it all the more important to be aware of the alternatives and what alternative would you buy and at what price?

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

One of the things small businesses tend to have the most problems with is pricing strategies. There are a multiple reasons because pricing is a process however if you can determine the right price for your product or service it will improve the bottom line of your company. For the importance of pricing, there are a remarkably few books about it and one is from the Self Counsel Press Business Series written by Andrew Gregson written in 2008 published by the International Self-Counsel Press Ltd – Vancouver, BC and Bellingham, Washington.

One of the important elements is do you compete on price or value? If you compete on price understand the margins will be low, but you have to make it up in volume. If you compete on value – you have to help your customers understand and tap into the value they see in your product. There will variables along the line – customers who want to pay the lowest price but are one off customers; there are customers who see value in your product or service and willing to pay more – and you need to find out why they see value and price accordingly.

What makes pricing successful – the company has a decent profit; the owner is paid a reasonable wage; the company and owner can pay their taxes; the company has no difficulty finding the cash to pay bills; the company attracts the best quality of customers who are willing to pay for the value added by the company; the company generates a reasonable return on investment; and bids on jobs are planned to leave no money on the table.

Your prices are too low if you do not generate a profit and liveable wage for the owner; you hate customers because they beat you on price every day; you just spin on the wheel but do not create profit.

What to do – your company needs a unique selling proposition in order to find value in the products and services you offer to your customers. Without it, you will be see as a commodity in the eyes of the customer and no different between you and the competition and because of the internet they are all over the world. Once you have the unique selling proposition you can go through the steps who are your customers; which ones see value and which ones need to better reason; and then you can look at your costs. The process continues every time you open for business.

Linking to dividend paying stocks, when you invest in company which earn profits you can see their value, but you have to ensure customers see the same thing. You expect profitable companies have a very good idea in terms of their pricing strategies and it is something you look at their gross and net margins. Are they consistent, what changes, who are the customers and do they see value they will pay for? The questions never go away.

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