Those of you who loved McDonald’s can remember the Big Mac jingle including 2 all beef patties, special sauce,…   Harvey Schachter (Harvey@harveyschachter.com) wrote an article titled The secret sauce of marketing can help craft your message. Everyone at some point will do some marketing. It is reasonably easy to see marketing which was done with the best intentions, but does not work. Something just does not work, however there are ads that seem to resonate to everyone. What should be done?

In Harvey’ s article he writes about Harry Mills a marketing consultant from New Zealand who was talking to a person with the last name of Sauce. Later, he started thinking about the name and how it applied to marketing as an acronym. He came up with S for simple; A for appealing, U for unexpected, C for credible, and E for emotional. Mr. Mills says the S and E are the most important because when marketing fails the weakness is the simplicity and because of that they can’t get an emotional response.

Mr. Mills wrote a book called Secret Sauce and there is more detail in it.

Simple messages have one central truth and are easy to grasp and picture.

Great example are proverbs from the bible and Aesop’s fables.

Appealing messages are different, valuable and personalized.

Give no more than 3 benefits which are the sizzle which sells the steak.

Unexpected messages are surprising, intriguing and seductive.

Seductive means to lower consumer defences to allow the message in.

Credible messages are trusted, transparent, and verifiable.

If you claim it, someone will check.

Emotional messages are warm, arousing and plot-driven.

The messages drive you to take an action.

Linking to dividend paying stocks, all organizations make a mistake along the way, however because of monopoly like positions, they can recover without giving away the store. It is expected the more profitable companies can use some of the best talent that exists because they pay their bills and the department have money to spend every year. All marketers are looking for new things to keep it fresh, to reach the channels where customers are and are tending to be. As an investor you are looking for a method to evaluate parts of the company besides the financials and marketing is one thing you look at what is the SAUCE of the company?

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

 

 

Isaac Newton is the man who from a young boy to adult man declared his mission in life was to discover the forces of nature. In a book Isaac Newton by James Gleick published by Vintage Books, NY, 2004 Mr. Newton’s life is examined. Mr. Gleick is a science writer and from that perspective Mr. Newton’s life emerges. There are many people who look to the skies or watch balls being thrown or apples drop, but very few do all the work that needs to actually describe it and be able to relate laws to it. Mr. Newton was born in 1643 to a farmer, but his father passed on early. His mother remarried and it was possible for Isaac to learn and eventually go to Cambridge because he was not going to much of a farmer. At Cambridge, the powers that be recognized his abilities and made him a professor which allowed him to go after his mission in life.

Isaac’s gift was when he looked at the world, he had an extra sense organ for peering into the frame or skeleton or wheels hidden beneath the surface of things. He sensed the understructure. His sight was enhanced by the geometry and calculus he had internalized. He made associations between seemingly disparate physical phenomena and across vast differences in scale. When he saw a tennis ball at Cambridge, he saw the invisible eddies in the air and linked them to the eddies he had watched as a child in the rock-filled stream of his boyhood.

Newton was the first person to imagine the properties of nature and give them names – mass, gravity and velocity. In his laws of motion 1. Every body perseveres in its state of rest or moving uniformly straight forward, except insofar as it is compelled to change its state by forces impressed. 2. A change in motion is proportional to the motive forces impressed and takes place along the straight line in which that force is impressed. 3. To any action there is always an opposite and equal reaction. In giving the laws he also said, there is more to do predictions to be computed and then verified. The method of science which everyone does – hypothesis, research, results, repeat, repeat, till the result happens or the hypothesis changes.

If Mr. Newton had remained at Cambridge he would have been celebrated for his scientific feats, however he was also interested in other things and in 1696 he was named Warden of the Mint with a salary of 500 lbs and a percentage of every pound coined. At this time, the Mint was redoing the coins in England which made him wealthy. For this wealth he redid the Royal Society as well as published more from his life’s work.

Linking to dividend paying stocks, most of us do not look at the stars and wonder how the laws of nature work, but we are glad someone does. In terms of investing, most of do not understand the daily ebbs and flows of the stock market, but we can easily invest in very good companies which make profits and pay dividends and over the years have greater wealth. The trick is buy and hold companies that are in business for a long time. The dividends can either be reinvested or go into your account to diversify your holdings and even the market goes up and down, your dividends can keep growing. Ensure most of your wealth is in profitable companies and this will limit your losses.

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

Home Capital is a company based in Toronto, Canada and was serving a particular group of home buyers – those that are self employed and new immigrants. Typically they do not have consistent earnings or a track record so the large banks tended not to give them a mortgage. Home Capital went after this market and had loan losses of less than .05 %, this made them a solid company. They had problems – they funded themselves by selling Guaranteed Income Certificates and their loans were a little higher than the competition. The problem came on renewal, now the people had a history of paying back their mortgages, the competition would take over their mortgages and give lower rates (the banks had less risk as the people build up a little equity in their homes). The churn rate meant Home Capital had to reach out to mortgage brokers to sell their mortgages. However for the past 20 years by the regular metrics of the stock investing, the company was highly rated.

Then a regulator said some of the mortgage brokers were less than perfect, not as bad as it was in 2008, but not what it should be. The company stopped doing business with the mortgage brokers and that should have been the end of the story for the business still had limited loan losses. Then something happen and confidence began to unravel in the bank business. The companies which distributed and help push the GICs put a hold on them and encouraged its customers not to buy them. The lack of GIC deposits lead to more money going out than in. The company had to go to an large institution to get a loan but it carried rates of nearly 20% on the first billion dollars or expensive money. Questions were asked why so expensive? and more money flowed out of the company. All of the above happened in a few weeks, in Feb the company was solid with a stock in the $30s and paying a dividend,  in March the stock slipped, in April the stock hit a low of $5.00 and no longer pays a dividend. A new President, Board of Directors and selling mortgages at a discount has kept the bank afloat.

Linking to dividend paying stocks, in the financial industry, the basic strength of the bank is confidence. Once that confidence goes, it does not matter what the previous numbers were, confidence is going. Similar to your reputation, it takes years to build up and a few moments to lose it. In the case of Home Capital, it paid a dividend and people were attached to the story and the company, but if you did not sell, you are hoping the assets are still worth $20 a share.

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

In the stock market world, the job of the analyst is to find uncovered gems and determine why a stock should be bought or sold. The press covers analyst for both comments and general view of their world, as an analyst they have reasonably regular meetings or conference calls with senior management to gauge what is going on. The other side of the story is all public companies do something – issue shares, sell debt, need opinions when they buying or selling subsidiaries and the like, a good analyst helps maintain this business for the other side of the company. Given the reality of did the analyst’s projection come true or not, in early May Ian Tam of Morningside decided to test the theory and his criteria was:

current year projected earnings per share growth (today’s median consensus estimate for the current year EPS compared against the prior fiscal year EPS)

next year’s projected earnings (today’s median consensus estimate for next year’s EPS vs the median consensus estimate for the current fiscal year EPS)

quarterly earnings momentum for the next quarter (the latest quarter’s EPS, adds the trailing 3 quarters of reported EPS and compares the figure to the trailing 4 quarters of reported EPS)

earnings variability (a measure of how consistent a company’s earnings are over the past 5 years- lower numbers are good)

market cap – the study was for larger companies

to qualify the company’s must have a positive current year median EPS estimate, positive trailing 4 quarters of EPS, and covered by at least 5 analysts.

Company                     Mkt Cap  Curt Yr   Next Yr  QEM   Earnings   Curt Yr Trailing Dvd

($Bil)         Exp GR   Exp GR  Nxt QT Var Score  Med Est  4Q EPS Yield

Chevron                     200.271     689.4        32.7       46.7        19.5         4.40         2.15        4.1

Netflix                           67.493    150.0         90.5         7.9        40.9          1.05        0.76          0

Pioneer Natl Res          28.799   922.1         121.6      84.0        47.9          1.95       0.62          0

Exxon Mobil               340.097     56.8           34.8       19.1        16.2          3.71       2.89         3.8

Applied Materials          45.169   48.2             6.9       19.3        23.0          2.61       2.17         1.0

Devon Energy                 19.945  1040           15.9       49.4        33.6          1.95       0.81         0.6

Chipoltle Mex Grill         13.675   435.9            52.4      32.9         40.7         8.24       4.05          0

Southern Copper             26.042    68.3             22.9      14.4         8.8           1.7         1.18        1.4

Visa                                   193.890    18.4            16.7         4.1         2.2          3.35      3.18    0.7

Cognizant Tech                  38.4         7.2            20.7          1.8         1.3          3.28     3.19   0.9

The other companies on the list  were Nvidia Corp, MasterCard, Aetna, Boeing and 3M Co.

Linking to dividend paying stocks, as an investor you depend on analyst’s reactions and expectations. Ideally the analyst should not be surprised because they have greater interaction with the senior management and if something was not as expected they would know or be looking for it. Large companies to generate large returns have to do something to big to keep growing and gaining market share or at least a near monopoly position. As a consumer, you want options, as an investor you are looking for monopoly.

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

 

According to the Washington Post feature The Daily 202 written by James Hohmann firing FBI Director James Comey the reasons why Mr. Comey was fired was poorly done. The President has the right to hire and fire senior people working for the government. In firing the FBI Director who is the top law enforcement official for a reason given the public trust was eroded. This is the same public trust which likely helped the President win more than the Russian involvement. My opinion is the Russian hacks of the Democratic Party gave fuel to his existing supporters; when the FBI Director added his views on Hilary’s emails, it allowed Republicans to vote for the Republican nominee. To fire the FBI Director for this one would expected the Democrats to fire him, not the Republicans. However, similar to many things in the Presidential White House the time line does not add up.

Linking to dividend paying stocks, in every organization there are the people who made decisions and those that have the title. The decision makers the ones pushing the company one way or another are the people you want to know about. If one gets fired or is let go (usually with an enhanced paycheck), as a shareholder you want to know why? what does it mean for the direction of the company? what governance was going on and how will it be changed? As stock holders you own the company and if senior people are let go for the correct reasons the company can continue and you do not have to worry. If they are let go for a less than reliable reason, you need to find alternatives for your investments, for the next few weeks or months the stock will go nowhere or will decline.

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

If you look at Tesla the stock is up dramatically this year and hopefully it will introduce an electric vehicle priced closer to the average vehicle. Instead of paying at the gas pump you will pay at the electricity charging, but the bill should be much less. If the car is popular and more people buy it, Tesla could change the industry. As the price increases, sometimes you want to buy but then the price says maybe, is there another way to play the game? The answer tends to be yes, but it does take some homework. One way to bet on Tesla is through the companies it sources. According to Mark Burton  of Bloomberg News one method to bet on Tesla is through the demand for cobalt the batteries of the vehicles use. One of the most important part of the Tesla is the battery, not your average battery but one that allows for longer drives without charging again.

The Tesla’s batteries use cobalt and cobalt trades on the future exchanges and there are some public companies which mine the material and have shares the public can buy. The risk is high with these types of companies. The good news is all the automobile companies are beginning to adapt to the changes coming as they expect hybrid and electric cares to make up about a third of new car sales by the end of the decade.

Linking to dividend paying stocks, while Tesla is not paying dividends yet, it is has gone up dramatically and any company which rises in value is worth paying attention to. Tesla could rise up and fall or continue Elon Musk’s rising net worth for Tesla has a greater market value than GM with considerably less capital investments and vehicle sales. The electric vehicle could be here or you might want to invest in utility stocks which will need to ensure the electricity is there to power the cars as you collect your dividend.

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

In reading a book about Edward 1 written by Marc Morris published by Windmill books, London, UK , 2008. Edward I is also known as Longshanks in the movie Braveheart. In the book, among other topics is power struggles between the King and other feudal lords. At the time, most of the wealth was in a feudal system which a family accumulated lands (sometimes because of being friends with the Royals) and 95% of the people were serfs who worked the land for the lords. The lords were the members of the government and occasionally when a King lost a number of battles, the lords would set out to try to be King.

Among the tasks of King is stewardship of the country or how to defend it and keep it together of the income the country has. In times of peace, it is relatively easy,  but in times of war, King tend to overspend. In the case of Edward 1, for much of the time he was King he was at war with someone – Wales, Scotland, France and he went to the Holy Land. Wars are expensive, at the time of Edward 1 in the late 1200 and early 1300’s, the church owned lands – grew crops which meant to go to the Holy Lands the church could pay. To fight wars, Edward had to tax the population but it was really taxing the feudal lords who had to pay. Similar to everyone in history, people are willing to pay something but not a lot. Edward taxed the wool industry, but unless wool could be sold to Europeans, it had a maximum it could be taxed. Edward 1 took grain from the lords estates, however when they took the grain, what would the people do and how could the lords live? In Edward’s time the financiers to government’s were the Italians and Edward liked spending rather than saving money. He had to go to war to plunder someone’s assets. Eventually, people represented the taxes and the other things it represented and the movie Braveheart is one of the movies about people who were fed up with a lot of things including too high of taxes which did not benefit them.

Linking to dividend paying stocks, it is not a perfect world even if you have a monopoly to raise prices, to keep margins high, there is always a balance. If the prices go to high, people look to alternatives. If they begin to look for alternatives, then it will be very hard to get them back. Most people will pay the price because they need to, but they are always looking, maybe not always be doing, but looking for alternatives.

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

In reading a book about Edward 1 written by Marc Morris published by Windmill books, London, UK , 2008. Edward I is also known as Longshanks in the movie Braveheart. In the book, among other topics is power struggles between the King and other feudal lords. At the time, most of the wealth was in a feudal system which a family accumulated lands (sometimes because of being friends with the Royals) and 95% of the people were serfs who worked the land for the lords. The lords were the members of the government and occasionally when a King lost a number of battles, the lords would set out to try to be King.

One of risks if the lord backed the losing side was disinheritance. This was the rebel’s greatest fear, sometimes even worse than death. The reason being it entailed lasting shame and the end of the family’s fortune. Often times rebels would understand being punished to some degree but they would swear loyalty to the winning side or the King if they kept most of their lands. If they were lose all their lands, they would go to a distant property and challenge the King’s forces. In Edward’s time more than a thousand properties changed hands because they back the wrong horse.

Another way to gain property was through taxation. England was a Christian nation although how people received religion was varied. The religion was Catholic and the Pope had forbidden Christians from practicing usury or lending money at interest. Since most jobs were not allowed, those of the Jewish faith quickly became bankers. Due to mismanagement of government by Henry (Edward’s father), Henry constantly raised the taxes on Jewish people. This is turn lead to the bankers selling discounted loans to those who could afford it, and then the Jewish people could pay the taxes. Those that were buying most of the debt were two of the wealthiest people in Henry’s court. The lords bought the loans at 50 cents on the dollar and then asked for the loan to be repaid. If the person could not repay, the lords foreclosed and seized the real estate.

Linking to dividend paying stocks, one off the reasons why one wants to increase their wealth is to enlarge their inheritance. Sometimes the attitudes that were prevalent in the 1200’s can easily be seen in the 2000’s. Another reason why you want to increase your wealth is to take advantage of opportunities to buy relative inexpensive assets and allow them to return to normal full market value.

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

If you have the chance to visit Ireland, you will likely enjoy your trip most people do. However, behind the scenery of Ireland is religion – Catholic and in Northern Ireland Protestant. The people look the same, but it parts of Northern Ireland there is mark distinction for they live in different sections of town. For a long time, parts of Belfast were marked by violence, fortunately now it is peaceful. When it was marked by violence, a gang called the Shankill Butchers killed more people than any other mass murders in British criminal history. There is a book about them The Shankill Butchers – A Case Study of Mass Murder by Martin Dillon published by Hutchinson, London UK, 1989.  It is often hard to read about murders, but the author was trying to understand why the murders occurred between 1972 and 1977.

On one hand, it is relatively easy to blame it on individuals who were out of control and there is that part of the explanation. The leader of gang, did kill someone and threatened families who under normal circumstances would give evidence or there is that element. However, the leader went further than most he felt any one who was Catholic was a target and should be killed. The leader of the gang, operated in an area that many would approve but not officially. He also learned how the operations of courts and justice in order to throw wrenches in to slow down the machinery of justice. Each time, an act was committed he would gain confidence and continue. (the nearest movie character is Raynald de Chatillon in the movie Kingdom of Heaven – although the time was in the middle ages, the leader and Raynald acted similarly for their cause).

This leads to the environment and authorities. In Belfast in the 1960’s and 1970’s the British sent the army to keep the peace. When the army was sent it, they made a decision to block some roads (for efficiency sake) however what it meant was anyone driving in to the section of town that was predominately Catholic was likely Catholic; anyone driving in a different part of town was likely Protestant. People were seized because they were easy targets. The road the killers used is called Shankill Road. In examining the army control, the gang found gaps in coverage and this is where they would do their damage.

Another aspect of the continuing of the gang was resources of the government. In Belfast the local police were lead by a very good detective and in the 1975 dealt with 2,911 crimes and had a success rate of 50% detection rate for murders and over 30% for attempted murders. The department was made up of 10 people and this was in a age before computers.  A comparison in England was there was a Yorkshire Ripper on the loose and more than 300 police and many resources were allocated to finding him.

In Belfast, during the troubles, people had to move around the city and groups felt destroying buses would be a good idea. This lead to many cabs operating and the gang of murders including a cab driver. In the end the leader of the gang with the help of both Catholics and Protestants was killed.

Linking to dividend paying stocks, in most industries there is a gap between the regulations and companies providing services and it is often where larger profits can be made. Governments try to do something but seemingly overlook a solution and causes gaps. In business, you are concern with is gaining access to the money in the pocket, however as times change the gaps will be dealt with. In the case of the gang, conditions change to put an end to the group for whatever was in the mind they were doing the right thing, it was far from the right thing to do.

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