For every investor, one wonders what is better picking the market or index or individual stocks. In an article by Jeff Sommer of the New York Times News Service, he examined a study by Hendrik Bessembinder a finance professor at Arizona State University. What he found was most stocks on the stock exchange do not perform well, however 3 to 4% perform very well which lifts the indexes. The 4% included Exxon Mobil, Apple, GE, Microsoft and IBM – they accounted for all the net market returns from 1926 to 2015.

Mr. Bessembinder found the typical stock does not outperform Treasury bills.

The problem is in the 96% there are always some stocks that perform lottery size returns and who does not want to own one of them? Most stocks on the stock exchange are concept or raising money for potential. The potential does not always come, but it can.

Over the years some of the solutions are: if you buy a mutual fund or index fund, the most important aspect is what do they do with losers. In an index fund, the stock exchange typically changes the stocks included in the index a couple of times a year. The winners are put in, the losers come out which is why over time, index funds go up in value.

If you do not have an index fund, always ask what they do with losers? When do they sell? Most of the information is always about buying, but it is the selling which affects your money.

Linking to dividend paying stocks, the prime reason for buying these types of companies is they are profitable. When a company is profitable it will trade at higher multiples and if it is profitable it can pay the dividends. The dividends plus the long-term profitability helps you into the top 4%. The trick for the individual buying stocks is to try to understand when the best companies fall in price and then buy them and watch as they go back to where they belong.

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

There are many ways to look at the world, as it is, as it was and as it could be. If you look at the world as is was you need to find some very common elements which all societies need to live and evolve. A very interesting book is called Salt – A World History written by Mark Kurlansky published by Walker and Company, NY, 2002. For generations of people, the table salt which is found on many dining room  tables was one of the most important drivers of the world. Although salt is found almost everywhere in the world  for centuries salt was desperately searched for, traded for and fought for.

In San Francisco, the gold rush made California a state, the mining continued with Silver and the Comstock mines. To mine silver salt is needed to separate the minerals. San Francisco Bay has a marshland which is ideal to making salt. Pools were made with windmills pumping water from one pool to another, the water evaporates during the summer, the brine crystallizes and salt is the result. The process well-known from ancient times was beginning to be understood why it does what it does.

The science or chemistry was slowly beginning to be understood. Through looking for salt, people began to understand the earth or geology. In terms of chemistry, salt is sodium chloride. The ratio is 40% sodium (the positive) and 60% chloride (the negative). When you go to the supermarket, you might pick up a Birdseye product which uses refrigeration and vacuum processing which means we did not need salt for preserving. Although there are plenty of delicious tasting foods adding salt makes a better taste. The chemical industry breaks down the sodium and chloride to make the thousands of products which we use everyday. The Chemical industry needs relatively inexpensive hydro, raw material of salt, water and distribution channels to sell to other industries and one can easily see why high returns are made in the chemical industry.

Over the years, there has been much politics involved with salt including India and Gandhi, where the British ruled the country and had a monopoly on salt. Understanding the basic things in people’s lives is understanding geopolitics.

The two biggest producers of salt in the US are Morton’s and Cargill. One of Morton’s invention was to add magnesium carbonate to table salt which kept the salt from sticking together. If you buy salt to throw on the sidewalk or your driveway, the rocks stick together. (51% of the use of salt is used on the roads) However since 1911 the table salt does not. One of the places where the road salt for the northeast comes from is Great Inagua Island in the Bahamas where Morton’s harvests the sea on 30,000 acres; Morton has mines in Kansas (which has estimated life span of 250,000 years); Cargill has a mine near Detroit, Michigan and Avery Island in Louisiana which also the home of McIlhenry’s Tabasco sauce.

Linking to dividend paying stocks, history teaches us we changed over the years because now we take things for granted, which used to be life and death. To understand history is to understand the little things in life which are important, it is also to understand the movement of capital into those important elements. Follow the flow of capital, what is important today, it changes as prices change as technology changes. Some is better, some will be kept on a smaller basis, we are people.

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

 

There are many ways to look at the world, as it is, as it was and as it could be. If you look at the world as is was you need to find some very common elements which all societies need to live and evolve. A very interesting book is called Salt – A World History written by Mark Kurlansky published by Walker and Company, NY, 2002. For generations of people, the table salt which is found on many tables was one of the most important drivers of the world’s economy. Although salt is found almost everywhere in the world  for centuries salt was desperately searchd for, traded for and fought for.

In the book, there is descriptions of the making of cheese, to make cheese salt is needed. Those places in Italy and France which have the wonderful combination of dairy herds for milk or goat cheese plus salt mines to make the cheese. Over the years, the ability to make the cheese has made certain areas the expert places for great cheese. Think of Parmesan cheese and the aging of cheese. The aging of cheese is the slow absorption of salt. It takes one year before the wheels of the Parmigiano-Reggiano cheese to age, if it sits for 2 years the cheese is dry and too salty.

From the meat side of the dairy, salami, prosciutto were made, with salami being derived from the Latin verb to salt. Salt was needed for meat – salted hams from the Basques. Most of Europe was in religion catholic, the Pope decided on Fridays people can not eat meat from the land, but from the sea was good. The meat from the sea was fish – first it was sardines, herring and then cod. All the fish to be preserved needed salt although cod needed less salt. In geopolitical terms – the north had the fish, the south had the salt, salt works needed to be either acquired or built.

The book continues through the ages, but for brevity sakes, a jump will be made to salt in the US. After the War of Independence, the British ban on the sale of salt to the US  caused salt to rise from 50 cent a barrel to $8.00 a barrel. This resulted in American inguenity a Cape Cod carpenter named Reuben Sears invented a roof that slid open and shut on oak rollers, allowing sea salt to made efficiently from March until November. When it rained or in the evenings, the roof was closed, when the sun shone the roof was open. Cape Cod was soon the center of salt production in the US.

Away from the salt ocean, governors encouraged people to find salt mines and one of them was founded in Onondaga in upstate New York. Eventually, the Erie Canal was built to bring the salt to the city. We often think of buffalo in the west, but there was a Great Buffalo Lick on the northern bank of Great Kanawha in West Virgina for deer, buffalo, cows need salt. The salt production from this site, plus pigs from Ohio, Kentucky, and Indiana help make Cincinnati a major commercial center. in the 1830’s one third of all western hogs were packed in Cincinnati.

In the Civil War, salt production in the north was 12 million bushels, in the south was 2.365,00 million barrels. Armies need salt for medicine, in Napoleon’s retreat from Russia thousands died because salt was not available to treat minor wounds. Salt was needed for the soldiers as well as the livestock – the horses of the cavalry, the workhorses to hauled supplies and artillery and the herds of cattle to feed the men. In time, the Union recognized the salt advantage and part of the North’s strategy was to destroy the South’s salt works. Soon the price of a 200-pound of salt in the south went from 50 cents prior to the war to over $25.00 in 1863.

Linking to dividend paying stocks, your perspective on history begins to change reading these types of books. An everyday ingredient becomes scarce and what do people do? The price rises and with perspective, the South had an idea but poor execution in a long war, they were bound to lose. When you think of your investments, think about what are the basic building blocks and are there alternatives? In theory, given what we know today, it should be easier to find alternatives.

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

 

 

 

There are many ways to look at the world, as it is, as it was and as it could be. If you look at the world as is was you need to find some very common elements which all societies need to live and evolve. A very interesting book is called Salt – A World History written by Mark Kurlansky published by Walker and Company, NY, 2002. For generations of people, the table salt which is found on dining room tables was one of the most important drivers of the world’s economy. Although salt is found almost everywhere in the world for centuries salt was desperately searched for, traded for and fought for.

If you think about the city of Salzburg, Austria you might think of Mozart, Castles, Churches, Palaces but you not likely to think what does Salzburg mean? It stands for Salt Town and because of the mountain of salt that is mined nearby, the city grew to the city it has become. The wealth of the city for the government was the salt which was mined and traded around Europe.

In thinking about the Roman Empire, most Italian cities were found close to salt works. In Rome they built a shallow pond to hold seawater until the sun evaporated it into salt crystals. The first of the great Rome roads, the Via Salaria or Salt Road was built to bring salt throughout Italy. Salt was sometimes paid as a salary for the soldier which is the origin for the word salary and the expression worth his salt. The Latin word sal became the French word solde, meaning pay, which is the origin of the word soldier.

To the Romans, salt was a necessary part of empire building and where ever they went they developed salt works. The Roman’s genius was administration not the inventing but the scale of the operation.

After the Romans fell, the next power center to evolve was centered in Venice. Originally they had salt works for the shape of Venice was different. The Italian mainland was 25 miles away and the area was known as the 7 Seas. Sometime after a series of floods and storms the landscape changed and Venice was forced to import salt. They made an important discovery – more money could be made buying and selling salt than producing it. The merchants of Venice were subsidized of salt landing in Venice from other areas. However, because of the policy of even though salt was expensive in Venice, the merchants could make up more on spice and grain trades.

The Venetian government took a profit from regulating its trade and during the 14th and 16th centuries when Venice was a leading port of grains and spices, between 30 and 50% of the tonnage of imports was salt. Where ever the merchants went, they tried to dominate the supply, control the salt works and acquire them if necessary. Venice manipulated markets by controlling production. Adding to their control was the Venetian navy patrolled the seas, stopped ships, inspected cargo and demanded licenses to make sure all commercial traffic was conforming with its regulations.

As long as the commercial traffic was the Mediterranean Sea, Venice controlled the salt trade, however when ships went around Africa and began to go to North American, Venice lost control the salt market. Other cities grew to cater to the trade shift.

Linking to dividend paying stocks, the Romans and the Venetians understood control of the raw materials or gain a monopoly on salt to profit. To have a monopoly took the use of the state’s resources for the greater good. It is no different today, if you find a monopoly or near monopoly enhanced by government (ie utilities) for a long time they will be good investments.

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

There are many ways to look at the world, as it is, as it was and as it could be. If you look at the world as is was you need to find some very common elements which all societies need to live and evolve. A very interesting book is called Salt – A World History written by Mark Kurlansky published by Walker and Company, NY, 2002. For generations of people, the table salt which is found on the dining room tables in the world was one of the most important drivers of the world economy. Although salt is found almost everywhere in the world which we know about, for centuries salt was desperately searched for, traded for and fought for. For millennia, salt represented wealth. One of the ways government’s of the day raised funds was a salt tax and one of the commodities which traders moved was salt.

Not so long ago, almost every family made preserves of food and meat for the winter, now we go to the supermarket, but if you begin to think how people lived, in order to keep vegetables and meat over the winter, salt was critical. This meant many governments put tax on the amount of salt that people used and it was one of the most important revenue sources they had. In China, the salt tax had been going on for centuries and in 81 BC, Emperor Zhaodi invited 60 of the wisest people in China to debate administrative policies – what emerged was a contest between Confucianism and legalism over the responsibilities of good government. On the Confucians side, the question was why must your Majesty use the word profit?  On the legal side, the question was not what was moral, but practical. If you want a government with the ability to defend its border, you need money. The debate ended in a draw, but the salt tax continued.

Throughout the centuries the debate by the government need for profits (revenues), the rights and obligations of nobility (wealthy people), aid to the poor, the importance of a balanced budget, the appropriate tax burden, the risk of anarchy and the dividing line between rule and tyranny have and continue to be unresolved issues.

Linking to dividend paying stocks, the issues and concerns of people do not change a great deal, the ebbs and flows all continue. In the case of the salt tax it was replaced by income tax for salt is available but a short time ago, salt was a factor in everyday life.

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

From the news pages of the newspaper, the President of Brazil is in trouble. A few months ago, the last President was forced out of office for corruption, the new President who has been in senior levels of government for years, seems to be an equal for corruption. The stories are one of owners of the biggest meat producers was taped by authorities for they had shorted the Brazil real (dollar) with inside information from pending government action. It seems bribes are a cost of doing business in Brazil and many organizations are getting caught with their hand in the cookie jar.

Whenever there is trouble in a country, the stock market is affected negatively. This leads to is the glass half full? Is this the time to get out, look at other alternatives or is this the time to buy. In an article by Paula Sambo of Bloomberg News, she has found investment managers who believe the time to buy is now.

The managers acknowledge President Michel Temer maybe on the way out, but looking at the economy of Brazil there are still solid, profitable companies that have operations based in Brazil but trade worldwide. A few years ago, Brazil was seen as host of the Olympics and there were problems with it, but they went on without too much difficulty. The country has a massive economy, large middle class, and many natural resources which means at some point the stock markets will go to normal. The Brazilian market before the allegations against the President was up 69% and the real was up 22%. The key is to do the research to what are the best companies in the country. The best always go up first and names such as Ambev (beer), Fibria Celulose (pulp and paper), Odontoprev (dental insurance), Ultrapar  (fuel distribution), Vale (iron ore), Petroleo Brasilerio (oil) were mentioned in the article.

Linking to dividend paying stocks, the key in investing in any downturn is to have done your homework to know which companies to buy, unless you wish to buy the index. If you are going to buy, look for profitable companies (which pay a dividend) and the shares are off because of the government concerns. The choice should be good and always buy the best companies at a lower price. The companies because they are profitable the share price will return to normal and then climb because they are profitable and for insurance you are collecting a dividend which adds to your total return.

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

Every active investor spends time listening or watching to news, what do the pundits think? Sometimes they are on the correct track, sometimes they talk myth and sometimes they are wrong. To continually fill the space at a relatively inexpensive cost, pundits will be used. The trick is to identify which is which.

Recently Scott Barlow writing in the Globe and Mail wrote about 3 investment myths:

1. Gold goes up in price because of Trump’s inconsistent policies. The inconsistent policies are a given with the new President, however gold has only been reacting to the US inflation adjusted bond yields. For gold prices, watch the federal reserve bank or fed, not the President.
2. The takeover of retail by online shopping trend is getting faster. While online shopping is popular and consistent, the old trend of people only going to shopping centers has changed to both. The pace of e-commerce sales growth itself has remained the same.
3. While many of us have cut the cords to Cable TV, John Malone of Liberty Media says that is ok because the cable industry is a connectivity business (internet) and video retailer (cell phones). Just about no one is cancelling their internet service and for more and more organizations, you need to be connected to access them, including government services. The cable companies – TV, internet and cell phone companies will continue to earn plenty of cash flow to pay high dividends.

Linking to dividend paying stocks, we hear change is the only constant and start to believe things are really changing. In the world of press reporters, when they have a great story, they need to have verified the sources three times. For many myths you will watch to see long-term statistical trends before you change everything which you have learnt. Are there many challenges, yes; do companies try to deal with them; yes. Do not throw the baby and the bath water, just the bath water.

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

In many homes there are gardens, most people like them for their color, for the ability to grow, the time spent doing it and sitting back and looking at the results. Unless you have a large garden, it does not take too much time in a week to do. It is also very possible to have many natural plants in your garden which means even less time to do and more time to watch. Recently Dale Jackson interviewed some investment managers and wrote an article Is it a weed or flower? Tend to your portfolio.

If you are a gardener, then it is possible to use the metaphor to link to investing. It is great to go to a garden center to buy more plants and plant them. You still must ensure they receive sunlight, have a good soil or nutrients and eventually the sun will shine everyday and the plants need watering. After the plants are in, not everyone will achieve peak performance there always is a laggard. You have the option to try to help it recover or replace it. Maybe the plant needs more sunshine, maybe you like the shape of it but the plant really likes shade and it is in the sun. There are many maybe, just like gardening, but you still do it.

Sometimes you will look at the individual plant and not look at the overall garden. If the overall garden is doing well, then maybe you are doing the right thing. In a diversified portfolio not all stocks perform the same, some are up, some are consistent and some might be down but not too much. If you bought a stock for the dividends and the dividends are being paid, but the stock is flat, it can still be a keeper. Perhaps in the next investment cycle it will be your best performer. The trick is therefore reviewing the basic fundamentals of the stock – cash flows, dividend payments, competition, etc. When they change, other alternatives are to be looked at and found.

Many natural plants have flowers, but in another person’s point of view they may be weeds. A weed is something you do not like. In some cases dandelion is a weed, but it produces a lovely yellow flower and then as it goes to seed, the lawn can be easily cut.

Linking to dividend paying stocks, in this case the link was gardening and weed or a flower? Whatever hobby or interest you have, you can use the metaphor to your investing in order for you to make a decision. The fundamentals are important, over time you learn what you like and do not like and when to make changes. The reality is a good investment held over time will increase in value; seemingly an investment that goes below what you paid for is a method to losing wealth and you want to try to avoid it. Whatever method you use, if you think a few years out similar to the garden your can enjoy the blooms.

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

Living in the northeast most of the time my concerns are about daily routine in life, but sometimes one wonders about the world, what are the best values in international stocks? Would you know the names or roughly what they do? Although the New York Stock Exchange is still the center of the universe (or for people in the northeast) it helps once in while to look abroad. Craig McGee with Lawrence Ullman of GMP Richardson use Bloomberg and the MSCI EAFE Index, the index tracks companies in Europe, Asia, Australia. In mid May these results were published but now in mid June you can determine if they did indeed rise in value.

Mr. McGee’s criteria was

over $ 1 billion in market cap trading on US exchange in the form of US depositary receipts.

earnings yield (forward 12-month earnings per share as a percentage of latest price

free cash flow yield (forward 12 month FCF as a percentage of latest price

return on equity

consensus earnings per share estimate revisions over the past 3 months

Company                Country    Mkt Cap   EPS   FCF  ROE  3m EPS   Dividend

($Bil)        Yield  Yield  %   Revision    Yield

Anglo American     Britian       17.3         30.8     14.0   17.9    16.7        0.0

China Pete & Chem  China       99.7          8.4      10.2     8.9      9.6          5.5

Vale                            Brazil        43.1         14.2     15.7    16.4     20.0         0.0

Rio Tinto                    Britian       72.0        10.9    12.1      20.2    19.6        6.5

YY Inc                         China            3.0         9.3       8.6      31.9     6.7          0.0

Ternium                     Lux               4.9         13.0      8.4     14.8      31.6       4.1

BHP Billiton PLC        Aust             87.7         8.4       13.4   13.2        9.9       5.3

Petroleo Brasil          Brazil            62.2        9.6      11.5      5.4       12.8       0.0

Teva Pharm                Israel            31.8       15.3     16.0    11.4        0.6       3.7

The other companies were Petroleo Brasileiro, Lukoil, Cemex SAB de CV, BHP Billiton Ltd, Posco .

Linking to dividend paying stocks, we are all bias for very good reasons. Most of our days are linked to what we routinely do. Understanding we are bias and that is ok, every once in while it is good to look towards the rest of the world who are doing something similar to what we are doing. In this case, the analyst looked at ADR receipts but it is just as easy to buy stocks in other countries. The larger your portfolio gets, then you have to be concerned about currency risks, however that is easily overcome. Investing in the best or first in class, whether is local, national or international is always a good idea.

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