In the year end review, Julie Verhage of Bloomberg News examined where could you have put your money in last year – there are always many choices.

Currencies

Britian’s currency the Pound was the worst performer because of Brexit, the currency was down 17.1%

Bitcoin was up 100%

Russian ruble was up 21.3% but that is linked to oil prices.

World Equity Indexes

Brazil’s Ibovespa stock index was up 63.4% after a new President was installed and hope for economic recovery pushed up the markets.

Nigeria was down 41.1% due to capital controls and oil fluctuations

Commodities

Natural gas was up 60%

Oil was up from$40 to the present $50 or a 45% gain

Wheat and corn were down 13% and 1.6% respectively

Bonds

Venezuelan bonds have increased as payments were pushed back there are still many problems with the economy.

Mozambique were the worst country due to debt crisis and inflation.

In corporate bonds, Sidewinder Drilling were down 80%, however Anton Oilfield Services gained more than 170% on their refinancing.

Linking to dividend paying stocks, there was many opportunities to make money and to lose it, which is the number one reason to invest is not to lose money. If you do not lose money, then you do have to have a great year the following year to make up for the losses. There are risks in every sector, by starting with companies that are profitable, the risk reward goes down on the risk and up on the reward which is a good thing. Next year there will be another year where the world focus on the American economy and what growth rate the economy will do.

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

 

 

 

A few weeks ago was Christmas and one of the great things about Christmas is young people are starting or continuing their dreams. Whatever they are good at they begin to specialize into something that they can be the best in the world at. In terms of hockey, the most important league is the NHL but to get there is very tough. There are usually 20% of the spots on the team which are for superstars who everyone could pick, the other 80% have varying degrees of skill, and depending on circumstances they could be in the NHL. The path for the 80% is the American Hockey League (AHL). While most people dream of playing hockey in the NHL, the AHL has changed itself from a second tier league to one where young players are trained and veterans on their seemingly last legs mentor the younger ones. In the NHL the base salary is around $500,000 plus; in the AHL the base salary is $45,000 which is why people follow their dreams. One can easily look around to salaries in your community and see which ones are more and less and people work them.

Ted Starkey wrote a book called Chasing the Dream – Life in the American Hockey League published by ECW Press, Toronto, 2016. Mr. Starkey takes us through a tour from the perspective of owners, coaches, general managers, players and support staff – broadcasters. From each of the perspective, people are there for different reasons and in sports change is a key. Although many of the teams in the AHL are owned by a team in the NHL (which has changed the locations for them – being close to watch and bring up and down players is a huge advantage) while smaller towns with long history of a team may or may not lose out. For the support staff, learning and loving the game must go hand in hand; for the players they are waiting and learning for their shot at the big leagues.

Linking to dividend paying stocks, owning a team which is very dependent on ticket sales means you have to be close to those buying the tickets for the big money of  TV and radio money is not in the cards. Each year the teams have to do all the things right including have good players so fans continue to come, it is an interesting business that puts many of the teams on the hometown sports pages on a consistent basis. The business remains the same but the players change every year which the business has to sell to the fans who buy the tickets.

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

 

 

A few years ago, ESPN or the sports channel was considered one of the crown jewels of Disney group. Sports is live and although many people watching can likely predict the outcome of the event, no one really knows how it will turn out until the athletes perform. In the last number of years, the cost of securing the big name events has steadily risen and advertising fees are not jumping as much. Although owning a franchise such as ESPN is still a good thing, the sports network has lost money for two years and just a few years ago was producing 70% of Disney’s profit. What should Disney do, if anything?

According to Christopher Palmeri of Bloomberg News Disney’s ESPN has 90 million subscribers paying $7.21 for the channel which is 4 times the leading competitor who is TNT their fees are $1.82. ESPN’s revenue is expected to be in the $12.5 billion category but growth has slowed. The reasons is partly demographic – the population is becoming older and not watching as much sports as they use to; in addition across all age groups people are not signing up to TV packages they way they use to, although the amount of content viewing on sports and entertainment remains high.

Linking to dividend paying stocks, every stock and industry goes through cycles and it takes time before trends change drastically. ESPN is still the leader in sports coverage but how people are accessing sports has changed. Going from 99 million to 90 million subscribers is still a big deal and ESPN commands high advertising fees, however one day something will change. ESPN will begin to think like a start up or the big packages for football, basketball, Olympics fees will have to taper off or actually decline. There is still plenty of value in ESPN and Disney and one way or another they will find a method to capture the value.

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

Every time the outlook for the US economy increases, one of the beneficiaries is bank stocks because one of the most important aspect of banking is the loan loss ratio – the economy improves and loan losses go down. Another aspect to the outlook for banking is after the 2008 meltdown, banking regulations were tightened. The banks have lived under the regulations which improved the safety of them, however regulations do not necessary bring in income. President elect Trump has discussed lowering regulations and with his appointments to the agencies who control regulations for banking, it would be an good educated guess some of the regulations would be coming off or changed it terms of the bank’s viewpoint. From a stock point of view bank shares could rise in value, Peter Aston of Recognia asked which bank should you focus on, assuming you do not buy the banking index?

His criteria are:

a market capitalization of $ 10 billion

examining the operating margin as a tool for efficient operations The bank needs to have greater than 20% for operating margin is the amount of profit the bank makes on each dollar of revenue.

forward Price Earnings (P/E) ratios of 20% or less

dividend yield of greater than 1.5%

Company                               Mkt Cap                 P/E               Operating            Dividend Yield

(US $ Bil)                this year       Margin                       %

Wells Fargo                          281.8                     13.9                       34.7                      2.7

BB&T                                         38.7                    17.3                       32.2                      2.5

US Bancorp                              89.3                   16.0                       37.4                     2.2

PNC Financial                         57.4                  16.6                        33.5                      1.8

BNY Mellon Corp                   50.4                  15.7                       28.6                      1.6

Regions Financial                  17.9                  17.4                        28.3                     1.8

KeyCorp                                    19.9                   17.7                       25.0                     1.8

Linking to dividend paying stocks, a well run bank should be in your portfolio of holdings for when they do well the economy does well. Depending on which bank you pick you may have holdings in one part of the country or another, but banks tend to be very profitable companies relative to other companies. If you change the about criteria you can find your bank if it is not listed. At the end of the year, the banks should continue to help grow the economy and you will have more money than you started with.

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

 

 

In most elections around the world, one or more parties running will call for infrastructure to be built and it will create jobs. In areas around the world, including not far from where you live there are plenty of examples where it did not quite work out. For those of us in the north east, we have trails through the woods where trains ran for a time. In Brazil there are examples and Leonardo Guy of Reuters recently reported about train tracks in northeastern Brazil for the Transnordestina. The railway was going to be a job maker; it was going to replace the trucks moving the crops; it was going to bring relatively inexpensive fuel to the region; it was going to do a lot of things, but the railway after 10 years of building has cost $2.4 billion dollars and is only half done its 2000 mile journey.

The new government believes in P3 or private public partnership with the private paying the bill for new infrastructure. It is important to note, the private part always wants a monopoly for up to 30 or more years to ensure a good return on their investment and then the infrastructure can be owned by the government, but maybe they will need someone to run it afterwards? Can the railway be built, as long as there are commodities to ship profitably, there is still a need for a railway.

Linking to dividend paying stocks, there are many dividend companies which run public assets for a profit and the stocks pay dividends. The key is the monopoly like conditions and good management. The railway in Brazil highlights when the politicians call for infrastructure not everything should be built, but if the government is willing to hand over the treasury for good conditions and good management, private companies will embrace the government’s goals.

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

If you are seemingly a normal average person, you likely ate pizza at least once last year (probably more) and you may have asked what about the price of the shares of the companies? The shares of Domino’s Pizza were up 45% last year and Papa John’s International was up 60%. According to Leslie Patton writing for Bloomberg News the answer to the why is pizza is cheap, fast and increasingly very, very easy to get. Restaurants including the Pizza giants have embraced user-friendly mobile ordering apps where customers can order from Facebook, Twitter and Apple TV.  Besides the ease of order, the pizza chains have rewards programs and ensured that although the pizza at the supermarket maybe a little less, the fresh easy pizza taste better.

Same store sales are up at Domino’s and Papa John’s which means all the restaurant chains are trying to make it very easy to order their food. At the moment, they are not as good and easy as the pizza chains. Next time you order pizza, try to understand what they are doing to keep your patronage.

Linking to dividend paying stocks, going out for meals is an accepted practice with consumers but where do they go? the Pizza companies have embraced technology to make it easy for consumers to start with them. If people start with Pizza, many of them will end with pizza. As you look at your investments – what is the value added which keeps people coming back for unless it is monopoly there are alternatives.

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

In all areas where people are judged, there are lessons to learn from the superstars of the area. If you think of sports and Cristiano Ronaldo who was voted the best footballer in the world. If you want to learn from him start with situps – he does thousands of them a day. Most of the us only do situps when we actually sit up. In the financial world there are famous people such as Warren Buffett and George Soros. Recently John Reese in an article titled Emulating the Superstar highlighted a report titled Alternative Thinking: Superstar Investors written by AQR Capital Management. The report compared returns by superstar investors to portfolios with a small set of buy and sell signals that tracked the investing style of Mr. Buffett, Mr. Soros and others. The conclusion it managed to have results that were close to the real thing.

Factor and style investing are gaining prominence for example with Mr. Buffett you really do not know which stock he buys but he does tend to buy stocks in a particular pattern. Mr. Buffett favors companies that have a long-term competitive advantage in their industries, with earnings that are predictable. This will tend to mean Mr. Buffett rarely buys outside of these companies, but which ones?

One can examine for value, quality (strong balance sheet) low volatility (small stock price swings) and the performance of the market as a whole. You can also, look at 10 year periods for consistent earnings, higher than average return on equity; the ability to repay debt; and if you do invest in this fashion you will be reward over the long term.

Linking to dividend paying stocks, many of these long term investments are companies paying dividends because they generate profits every year. The longer they generate profits the higher they trade on the P/E Ratio and with the dividend the total return is healthy. Slow and steady backed by homework for all the right reasons is a good lesson.

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

In mid December, President elect Trump similar to most people when showed the costs of the F-35s concluded the costs are out of control! Unlike most people, when President elect Trump says it, the stock market listens and the stock price goes down. Bloomberg News reported in an article titled Trump attacks F-35s, deals blow to defence. In the era of national security and personal security, the defence department and related departments often get what it seemingly a free ride in their cost controls. The reality is the plane rather than just flying has to or is asked to have an increasingly number of variables which in turn make the planes more expensive. It is similar to the old story of people being blindfolded and touch an elephant – they all come to different conclusions and expect their conclusions to be correct and incorporated into the solution. In this case the elephant is the Republican Party and when they scream national security, there is a cost to it.

The Bloomberg News reported it seems President elect Trump is willing to attack the big US companies, although after he attacked Carrier, the company ended up with a reduced workforce and a $ 7 million dollar state grant. It could be the companies will have to roll with the punches to end up with more money in their pockets. The government is one of the great stability anchors in the economy for it pays the bills, however when President elect attack the big pharma companies, the stock went down on the slim possibility the price of drugs (or the patents will be reduced) would fall.

Bloomberg reported the costs of the F-35s has fallen but is still a sizable $379 billion cost. for Lockheed the F-35s account for 20% of sales and it needs sales to partners of the US for greater profitability. 600 additional airplanes have been preordered by Britian, Australia, Japan and Italy.

Linking to dividend paying stocks, although things may change and that is a possibility, when the President attacks companies or departments it is generally for a very good reason. The stock market will have to adapt to President elect Trump’s style does he attack in public and in private make deals that allows companies to continue on their normal style? We will find out shortly and in the meantime look out for President elect’s bad side.

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

 

In the Louvre after you made seen the Mona Lisa people will see a painting by Theodore Gericault titled The Raft of the Medusa. The painting is based on a real life venture and was and is the subject of many people examining the subject. One person who wrote a book about the subject is Jonathan Miles who wrote The Wreck of the Medusa published by Atlantic Monthly Press, NY, 2007. The story is the French were colonizing the country of Senegal and were sending a number of ships to do so. The lead ship the Medusa followed the coastline of Africa too close and wrecked on a reef. The ship was carrying 400 people and naturally there were not enough lifeboats, for it was not expected not to make the journey to Saint Louis. The time of the year, they wreck was storm season but also in 1816’s nobody had mapped the coastline of Africa, although people had reasonable ideas. The ship wreck in one of the worst places possible – the land was the edge of the Sahara Desert and all that it implies (think of the sand storms from the movies); the sun; lack of water; lack of vegetation and lack of proper clothing for the desert. There were many strikes against the spot the ship wrecked.

Some people managed to get on life boats and managed to land. They had to walk through the desert for 200 miles and were lucky to be alive at the time. The story of the raft is 150 people boarded and 10 people were rescued from the middle of the ocean 8 days later. The raft as the painting was not well put together to manage the ocean storms; nor to manage calm seas for there was little water (the old sailor expression water, water all you can see but not a drop to drink as the water is salt water) and little food. While people can live without food for a long while, it is the water which we can not live without. What do you do? how long would you suffer? what actions would you take to survive? These are age old questions and the stories are people went to the extreme of both living and not surviving.

Linking to dividend paying stocks, there are many age old questions that ask what would you do and hopefully you will never have to ask them. Most of us do not know for most of lack skills or “MacGyver ability to make something workable of simple things”; when many people were from the farming community if you did not have handyman skills it did not get done. On one hand that is a good thing on the other hand it often would be easier in our lives if we hand better handyman skills. However, if that is our biggest concern then you have done well. Fortunately when you are dealing with money, it is possible although rough to start out again – there are always opportunities which come forth if you have the patience and the ability to do research to take advantage of them when they happen.

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