In some cities around the US, there are people looking at the garbage to see what the garbage tells them about us in general. Many of us seen Indiana Jones looking for lost treasurers in the movies; however in real life what we throw away can be studied to see how people really behave. An interesting book about the subject is Rubbish – The Archaeology of Garbage – what our garbage tells us about ourselves by William Rathje and Cullen Murphy published by Harper Collins, NY, 1992. The book is the results of the Garbage Project where researchers went in garbage dumps to see what we throw away. The dumps were identified by what part of the city the garbage came from to see if there were differences between affluent and less affluent neighborhoods. The answer is a little bit. for example less affluent people buy smaller sizes of products; more affluent buy the super sized.

Generally we all report we eat less sugar and sweets than we do; and we over report the healthy foods. The researchers had people prepare logs and then compared it to their garbage. An interesting fact was with red meat we tend to cut off the fat; however when we eat less red meat, we are eating more hotdogs and processed meats with higher fat contents. The fat is hidden so we do not worry about it; but we believe we are eating healthier.

The project looked at garbage dumps and many people believe things will break down in the dump particularly the organics. The reality, the organics breakdown if they are near an oxygen source; once the material is buried the billions of bugs do not go to the bottom of the dump. they stay on top. What should be breaking down will not be for multiple lifetimes.

Linking to dividend paying stocks, whether you are looking for trends and trying to predict how people will behave or breaking down a myth of what a dump does and does not do. Looking at garbage can be another tool, for if someone tells you the next greatest and big thing to save the world, you can use your knowledge to help you evaluate. Garbage dumps are not going away and we will still be big users of garbage companies, how we deal with it may make you money for a long time to come.

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

 

 

 

6 months ago. if you wanted to see the NBA All-star game you would had to book tickets to Charlotte, North Carolina. Then a law was passed against LGBT people and although no players are openly gay, the NBA felt the law was sending the wrong message. The NBA all-star game was in flux and New Orleans Convention People and the Greater New Orleans Sports Foundation teamed up to make a pitch to the NBA. They won and the all-star game is dovetailing into Mardi Gras. Mardi Gras is the big festival in New Orleans with floats and marching bands and street parties and technically related to a Christian time just before you give up your bad things or one last chance to be bad without hurting anyone. If you miss the Christian theme, it is a party and can symbolize the end of winter.

For New Orleans, Mardi Gras brings in thousands of people to New Orleans and the NBA all-star game is icing on the top. Hotel rooms are booked, extra security is coming and  more people are working to service the demands of the tourists. Given New Orleans is a tourist or convention town, the all-star game adds to the city.

Linking to dividend paying stocks, for the most part, dividend paying companies do not have to jump up at every opportunity which comes by, most of the time they have learned to say no or we will get back to you. In the case of the all-star game if the infrastructure of the Convention Center, the New Orleans Sports Foundation, and the Mayor’s office had not been in place, the all-star game would go somewhere else. Dividend paying companies have the infrastructure in place to do and that is what investors are paying for. The ability to supplement the core business of the company. Congratulations New Orleans.

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

In the bible, a few days after Jesus was born, the Roman Governor went to Bethlehem and killed all the infants – it is known as the Massacre of the Innocents and Peter Paul Rubens painted the subject. Herod the Great did it because of rumors of the birth of the next king and he did not want to be challenged. After the United States was discovered and immigrants from Europe begin to flood into the country for opportunity, they first went to the cities and then when offered free land moved inwards. As they moved inwards, it was discovered natives used a large tract of land for hunting and considered the land their territory. A few settlers were likely welcomed, however as more came conflict happened. In reality, Britain and France were firmly established in the North American and used the native tribes in their battles against each other to take leadership of the continent. Britain eventually won the Indian Wars and later lost the Independence War to establish the United States.

During the Indian wars, the battles went on and one of the garrison of Fort William Henry at the southern end of Lake George in what is now upstate New York was massacred. The call for revenge or remembrance was on the British side. What happened is the story of the White Devil by Stephen Brumwell published by Da Capo Press, Cambridge, Mass, 2004. Part of the reasons, the British and French were using the natives was the military was based on battle in open spaces. Anyone who travels the northeast will quickly realize there was not many open spaces. Somebody had to adapt. Eventually the British picked Major Robert Rodgers who would write the manual for fighting in the woods. Rogers Rangers ( yes Special Forces trace their lineage to the Ranger of Major Rogers) for fighting in the woods is similar to guerilla warfare. For example. when marching through the woods – march in single file, each person about 20 yards apart to prevent surprise. Major Rogers wrote there remain a thousand occurrences and circumstances for which no established procedure existed; at these times every man’s reason and judgement must be his guide. Above all, it was essential for the commander of such troops to preserve a firmness and presence of mind of every occasion.

In war, people desire revenged for losses, whether they should or should not is something to be dwelled on afterwards. In the case of the British they lost a Fort and sent Rogers Rangers to defeat the enemy (generally meaning the males of fighting age. The Rangers travelled north to the St. Lawrence and wiped out an established native village near the St. Francis River and Lake St. Pierre – the people were killed and the village burned. Was it necessary for all the lost of life? was it necessary to drop the Atomic bombs in Japan? We do know the battles soon stopped and forthe natives, Major Rogers was called the White Devil and in the urban areas of the United States Rogers was considered a hero.

Linking to dividend paying stocks, fortunately in business people are not killed, companies are, but not people. Dividend paying companies have established a market share and margins to produce profits and can buy their opposition or work to ensure the opposition do not take market share or margins from them. We celebrate success, which is a good thing, knowing decisions were made which allowed success to happen.

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

 

 

This fall will be the 10th anniversary of Apple’s smartphone and a new phone with many bells and whistles will be coming. The stock has risen in one year from $92 to $133 can it rise another 40 points or more? Apple reported that after 3 quarters of declining revenue, revenue rose. The question is how much and why? Ian McGugan wrote an article on whether it can or not.

According to Mr. McGugan  Apple phones already count for one in every 5 smartphones sold worldwide. The company rakes in about 92% of the profits in the sector and has the largest cash reserve outside the US for tax reasons of any US-based company. (President Trump is considering lowering the tax rate for bringing the money back to the US which would be worth billions to Apple).

The launch in the fall is one of the reasons why the stock has gone up because the tech world and Madison Avenue know how to hype and most of believe the innovations of the future will make life better. The question is how do yo value the company? Aswath Damodaran loves to do business valuations (his blog is worth reading Musing on Markets) and he believes the valuation of $129 is good. This is below the $150 Goldman Sachs believes is reasonable. Mr. Damodaran would be a seller at $140.

Mr. Damodaran is the greatest corporate cash machine in history and is fully deserving its market value. However given its size, there is not a lot of room to grow. Thus Professor Damodaran believes the growth rate will be 1.5% a year for the next 5 years and operating margins will decline from 29% to 25%. Apple is being valued as a mature company not a growth company.

Linking to dividend paying stocks, Apple pays a dividend and generates cash, given the world still sees it as a growth company, the way to buy and sell Apple is on the swings. For growth investors will tend to sell as Apple’s growth is slow so the stock will decline. However, the margins are still very healthy which means the stock will go back up. Patience and thinking about dividend company swings between their normal highs and lows is what will make you capital gains and collect dividends along the way.

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

The United States has large oil refineries not far from Houston, Texas and since the oil is in the middle of the country it makes logistical sense. The refineries are also on the East Coast and for the past years of the Bakken production in North and South Dakota most of the oil has been going by rail car to refineries on the East Coat. The pipelines, the President has authorized, will move the oil to the refineries in Texas, which means the East Coast refineries are now importing oil. According to Luccia Kassai of Bloomberg News the US Energy Information Administration reported 884,000 barrels of oil  a day was imported from Angola, Nigeria and Brazil. At the moment it is good thing because the cost of imported oil is less than domestic oil. The US as a whole is energy independent but as the economy continues to improve it still needs imported oil.

Linking to dividend paying stocks, once the pipeline is built the Bakken oil will be less expensive to move by pipeline which will slow rail car deliveries. The slow down of rail cars means the railroads earn less money, but the pipeline companies and oil refineries make more money. Changes whether they are physical changes (pipelines) or technological happen all the time and that is why it is a credit to companies who consistently can be profitable and raise their dividends for years. Sometimes technology will compensate by driving costs down or enabling companies to concentrate on what really makes them money, but change is a constant.

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

The border between Mexico and the US has been an issue in the political landscape for a number of years and every once in a while President Trump accents it. For a north-eastern such as myself, who has never been to the Mexican border, it is interesting to read about the southwest of the United States. We all know Christopher Columbus discovered parts of the Caribbean for Spain. A few years later, Cortez and other Soldiers or Conquistadors had planted Spain’s flag on 2/3’s of the Western Hemisphere. It helped greatly, Spain had access to Mexico’s gold and Peru’s silver which made Spain the richest country in Europe and the reason why gold coins were called Spanish dollars.

In a book called The Spanish West by the editors of Time-Life Books, published by Time-Life Books, NY, 1976 from 1492 to 1883, Spanish culture dominated the area much more than the Anglo-Saxon culture. Some 40 million people in North and South America spoke Spanish, observed Spanish laws, worshipped in Spanish Catholic churches and several million were citizens of the US.Many estates were based on old Spanish grants, Spanish architecture was the rule throughout the West. 7 states have Spanish names – Arizona, California, Colorado, Montana, Nevada, New Mexico and Texas. The landscape of mountains and rivers and towns have Spanish names. The cowboy and the horse came from Spain via Mexico. When you think about the west – beef cattle, sheep and the horse all came from Spain via Mexico.

Much of the west is desert but there are parts that are fertile or have access to water. The key to the growth of the west is water and later air conditioning. Given the low rain, the population of the west was never that great, so Mexico saw it has having potential but not sure what to do with it. In New Mexico – the Comanches and Apaches never allowed the population to grow. It would take settlers moving westward for new opportunities – some for the gold and silver discovered in California before the tribes were defeated by the US Cavalry or the mounted police of the US Army. Similar to many other areas, a war was fought for the states against Mexico. However, once the country was settled and Mexicans became Americans, their ties to Mexico and Spain did not stop.

Linking to dividend paying stocks, all companies have a history and they can build from it. Decisions were made in the past, which allowed the firm to prosper and grow to be what it is, but it still has a past. It is strange to think of all the ties Mexico and the US have, the history it shares, you wonder who is the President protecting the country from? If the argument is drug dealers, who is buying the drugs? One can always look at any issue from two sides – the present and past while looking to the future. The past can sometimes help prevent mistakes in the future.

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

One of the accounting terms is goodwill which is an intangible asset over and above the cost of the assets. When a company buys another, to ensure balanced books, goodwill is used. Since there is nothing to grasp onto, it can change. Goodwill is used because all companies operate on the faith of their customers and suppliers. It is an expectation the value people see will continue and grow. The interesting part of goodwill is if a company acts negatively or begins to loose money, the goodwill quickly diminishes.

Every organization starts off with goodwill, because it general we all want to see people and organizations succeed. It is a good thing. In terms of the Presidency, every new President starts off with goodwill or a honeymoon period, the person was voted in and in general people are willing to wait to see how they perform for the good of the country. You will likely not agree with everything, but at the start of the period, the person has more goodwill than later on. President Trump was excused for being a little off beat in relationship to the normal systems which operate, he said he want to change and he has.  One of the measures the President has received the most press from is his “ban” on some countries in terms of people coming to the US. The President does have the ability to determine immigration and who comes in, however the affect of the “ban” has lost the US goodwill. It lost goodwill because similar to most systems there are lots of parts and it took Homeland Security 5 days to figure who was included and who was not included. It took some time to ask, for the countries involved, what is the existing process and how would it change? To have a “ban” in order to put extreme vetting in place, when extreme vetting is already in place, makes one wonder about the purpose was. There were other questions including: does having a “ban” make it harder or easier to fit the enemy when to fight the enemy you need the goodwill and resources of some of the countries included in the “ban”? If the government was a company, one would say the customers and suppliers have been alienated and they will look for alternatives. You would also look for people to be moving positions.

Linking to dividend paying stocks, these companies tend to be large and somewhat bureaucratic for the good reasons. They are large because they are successful; they are bureaucratic to not to upset your customers and suppliers. For every government policy, some companies like it, some do not, successful ones have to adapt, which is good thing. As you look at your holdings, does the company have the flexibility to adapt? and still generate healthy margins to ensure profits?

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

When oil prices fell from $100 to less than $40 and have since rebounded all oil companies had to quickly adjust to the revenue shrinkage. In the world of large oil companies including Statoil ASA of Norway it involves billions of dollars. Mikael Holter of Bloomberg News recently wrote a column about Statoil and management has come through the recession to put the company in terrific shape.

The company slashed investments by half in 2 years to $10 billion in 206 and plans to spend about the same in 2017 and move to $ 12 billion in two years. The company went through a stage of delaying projects, reducing its work force, and increased debt. At the same time, it increased efficiency improvements and lower rates from suppliers to the tune of $ 1 billion. This has resulted in the cost to break even in its next 5 projects of $ 27 and its biggest oil field the Johan Sverdrup field to $25 a barrel. Its oil field in the Arctic will make money at $35 a barrel down from 2 years ago needing $80 a barrel. The result of the cost cutting and improvements is Statoil can now fund investments and dividends from an oil price of $50 a barrel.

One of the reasons this is important is the Norway economy is built on the cash flows of the oil and $50 barrel allows the oil company to pump money into the government to be distributed for the benefit of the people. According to the Chief Executive Officer Eldar Saetre the next step is to move into a culture where we continuous improve.

Linking to dividend paying stocks, Statoil pays a dividend but equally important it had to go through the painful decisions involving cost cutting in the company in order to make it better. Part of cost cutting is letting go of people, generally some management knows and it is much easier to management when there a steady cash flow and ability to pay dividends. All companies to be better need to go through cost cutting, but generally only when they have to do they find the savings to drive down costs and come out on the other side ready for the opportunities which exist.

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

 

A number years ago, there was a TV show called Cheers and the theme song had a line where everyone knows your name. There are places that are set in tradition of baseball and apple pie. In the world of professional baseball there is the National and American leagues or the big time – the feeder baseball league or minor league baseball is the subject of a book called Where Nobody Knows Your Name by John Feinstein published by Doubleday, NY, 2014. In the book the author highlights a number of players who all made the majors and played in the minors. The world has changed when minor league teams were not attached to major league teams, but not all the Triple A teams are. In the majors, the 162 game season means at some point in time injuries will occur. The prospects and the needed players will be called up to fill the major league vacancies, an excellent general manager knows how to use the list. The prospects even a casual fan can see they will soon be in the major league or the show. The needed players are those that love the game – may have spent some time in the majors, but they are a needed part of the game. The book is about those players who either played well in the majors, had an injury and on the comeback or players who have high level of skills and the majors need them every once in a while. The minimum money is better in the big leagues.

In every baseball season, there are 3 important dates which happen to be holidays Memorial Day, 4th of July and Labor Day. The meanings behind the date is before Memorial Day it is cooler, after the temperature rises. It is easier to play great ball in the cooler weather. The teams that went on a winning streak will begin to lose games as the weather changes. The 4th of July or Independence Day is the mid point of the major leagues and 2/3’s of the way for the minor leagues (they play fewer games). Labor Day is the push for playoffs and for the minor leagues the season is over. Minor league baseball celebrates winners, but it main role is a feeder system or back up for the major league team – if it needs a player, then they go up. The manager of the minor league team must improvise and use all the talent he has.

Linking to dividend paying stocks, every company that pays dividends does not make its money the same degree each quarter. Whatever company you own, has a cycle and some quarters are more important than others. The classic example is retail – more people show in the last quarter than the first quarter. It is important to know which quarter is most important for your company, if it hits its expectations for the quarter, then you have little to worry about, if the company is far removed, quickly search for alternatives.

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