The larger a fund is the more visible it is because they can affect markets. Institutional funds are required to disclose their holdings to the SEC 45 days after the quarter. As a smaller investor you can see what they were doing or trying to do – sometimes the institutions have done well, sometimes they have not or most of the time they are similar to all investors. Large institutions can make a wide variety of investments under the theme of what they believe will happen in the future. The biggest individual investor is George Soros who runs the Soros Fund Management LLC for the past year he made investments in gold. As reported by Rachelle Younglai in the article Soros cashed in his Barrick stake, the Soros Fund had bought gold shares, SPDR Gold Trust, gold futures and other investments. Last quarter the fund sold some of its investments including Barrick Gold shares at 3 times what he paid.

As a smaller investor, it is impractical to duplicate what institutions can do, because you would not be buying enough shares to reward yourself, however it is possible to try to understand what themes the institutions are doing. Then picking one company or investment in that area. In the terms of Barrick Gold – they paid down some of their debt as well as the price of gold has risen and the stock went up from $7 to $ 21. This was a classic case of buy low and sell higher. Barrick has some of the best low cost gold mines in the world located in Nevada; it also owns some great mines in Chile which are expensive to get to operations but once operating will deliver great results. The company had a lot of debt which was caused by buying non gold companies at their highs and similar to individuals with a lot of debt, it presents problems. Unlike individuals the company had numerous properties to sell or not to concentrate on. When the price of gold rose, its profits rose from existing gold mines and it was easier to sell some assets to pay down debt.

Linking to dividend paying companies when commodity prices fall, it is a great opportunity to use some of your dividends to buy the best companies in the field. Eventually prices rise, and you will have bought low and sell high but often you need patience, foresight and ability to take a very calculated risk. Your dividends allow you to do this for similar to institutional money, you have money coming into your account on a regular basis and you can do something with the money. Your homework is to find the best company with the best assets to minimize risk and maximum reward and then buy.

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

We know that index funds which mirror the index of the stock market can grow your money. The reason is all indexes change over time – some every 6 months the indexes drop the losing companies and replace them with companies do better. That simple strategy overtime means the stock market index will go up, but not necessarily in a straight line. The knowledge of how index funds work means the biggest funds in the world are now index funds and that is a good thing. Ben Steverman writing for Bloomberg News spent sometime with the managers of the Vangard funds to see how they ae managed? Index funds are called passive funds, but are they?

In the example of Vangard Group, the fund manager is Gerry O’Reilly who is responsible for the management of $800 billion in assets. Money flows in (which is a good thing) and when mergers and acquisitions happen they need to be accommodated. To earn extra money things such as lending shares to short sellers are done and smart trading. As you would expect much of the trading is done with the help of technology and risk software, the tough decisions are made by portfolio managers. What do you do with illiquid stocks? what to do with new classes of stock? Mergers and Acquisitions can be and are structured for the best method to the client not necessarily for the investors which means there are multiple methods they are done. The good news is good people and a team of people are needed to run the funds effectively. To keep the basis points similar to the index, takes decisions by people.

Linking to dividend paying stocks, similar to index funds over the long term they should grow as long as they continue to be profitable and can pay their dividends. It takes people to decide which company is better and why the companies should remain profitable? The stock market only has perfect information about what has happen, no one knows what will happen however most profitable companies have lots of parts to them but they must continue to endure through changes in the economy and changes in people’s lives. The fund managers seemingly have greater access to knowledge, you need to keep your investments as simple as possible. How does the company make sales? what are the margins? what are the profitable items? who is the competition? how does it not make money?

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

 

If you think about the city of Rome very high on the list of images will be  Vatican City and St. Peter’s Square. Have you ever thought of who designed the buildings and square? If you have not, then reading Basilica by Rita.A. Scotti published by  Penguin Books, NY, 2006 will help you. The story starts in 1447 when Nicolas V returned the center of the Catholic church from France to Rome and wanted a building to both be a showcase for people around the world and be to the glory of God. The last major work was the columns around the square was finished in 1667 or more than 150 years from the start of construction. In between were wars, popes coming and going the average time of pope was 10 years – some less, some more. There were popes interested in power, popes interested in money, popes that were caretakers and popes that were doers. Many years ago, the best way to become a pope was to grease the palms of those who voted, now days it is different.

Being in Italy – the construction of the St. Peter’s Square attracted and used some of the world’s best known sculpture and painters, partly because at the time most of the population did not read and works of art communicated the message to the populace. Another reason is the artists of Bramante, Sangallo, Raphael, Michelangelo, and Bernini were extra special in their visions and ability and at times the wealthy could employ them. The church and the senior cardinals had money to be spent on art, if desired. To learn  about St. Peter’s Square is learn about the Renaissance and Baroque periods of art.

An interesting part of the gold in St. Peter’s is after Columbus discovered the new world for Europeans and Spain became the wealthiest country in the world, gold and silver  from Mexican and Peru ended up in St. Peter’s as the rulers of Spain were catholic and paid tribute to the building. St. Peter’s was created by man for the glory of religion and even if you are not catholic – to see the building and the art work is a thing of glory as you consider when most of the building was built when engineering was in its infancy.

Linking to dividend paying stocks, if you use the expression of Rome was not built in a day, then you understand it took time to build the buildings, to decorate them, to do the square so when a person arrives at St. Peter’s his/her eyes are focused on the reason for the structures. It takes time to build an investment portfolio and with time, life happens and the world history changes at a regular pace. If you focus on why you are building your portfolio and it tends not to be rich overnight although you would take it. It takes time for compound interest to work, it takes time for the street to apply the multiple of your companies that you want them to; it takes time to be consistent about earning profits year over year. It takes time for you to look great.

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

 

 

One of the most popular singers is Kenny Rodgers and when your popularity lasts decades there will be a book. The book about Kenny Rodgers is called Luck or Something Like It by Kenny Rodgers published by HarperCollins, NY, 2012. Once is a while it is good to read autobiography’s because they tell you about the character of the person. Even if all you know is the person’s talent, in this case Kenny Rodgers loves singing and prefers songs with stories. The most famous song we associate with him is the Gambler, but in his collection are many top selling songs. Although Kenny loves singing and is good at it, that is not enough, he has needed people who believe in him through managers, producers, and other musicians. He was fortunate to have many relationships last in the years. It is also about attitude:

His advice to anyone considering music as a career – do not do it for the money. Most people who set out just to make money do not last long enough to see the money. They get discouraged and quit. Longevity is based on your ability to accept rejection and keep trying. Most people can not do that. Those who do survive do so because they feel music is their calling. These people are hard to discourage.

In terms of audiences for comedy, as a musician much of your career is travelling or doing shows in another city in another evening. For a concert, there is often warm up acts before the main act starts. In terms of comedy, people will clap to be nice but they will not laugh to be nice. Trying and failing at comedy is a process worse than death.

For a fan, Kenny’s books about how the system works in terms of which songs does he sing and how did they come to his attention. For a successful singer, many songs come but few are chosen so they have to mean something and come at the right time. The songs that come are “shopped around” to various artists who may like them. When they are used and song they feel natural and sincere.

Linking to dividend paying stocks, when you are investing in these types of companies, these are the ones that have already made it and can count on tours every year, depending on how well the singer is will depend on the size of the location. There are many variables which will influence the company, but you want to know whatever products they have will continue to have a ready market and the company can sell it good margins for itself and you. You are not looking for the rising star, but the star which has staying power.

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

If you go into the old movies or collection of old movies – there are themes as Voyages to distant planets. In the 1965, a few years after President Kennedy told Americans we will be on the moon before the end of the decade. Space travel movies were made and one of the  Grade B movies made was Voyage to the Prehistoric Planet. The only reason for watching the movie was the leading star is Basil Rathbone. If the name sounds familiar he was the face of Sherlock Holmes for 15 movies. When you watch the Sherlock Holmes movies and then compare it to Voyage to the Prehistoric Planet, you might wonder why did he take the gig -need of money? In the Star Trek TV show which aired a year later in 1966, at least the communications and the ability to move to a planet were light years ahead of what was existing  thus suggesting what could be. In the Voyage to the Prehistoric Planet the communications were CB radios. The imagination level was left to a low budget and tight schedule or that was a distinct lack of it.

Linking to dividend paying stocks, the difference of quality between movies and what is good and what is produced can easily be seen on the movies. That is you challenge when looking at stocks on the market. They all have business plans, they all have Presidents, but many lack the ability to make profits on a year to year basis, let alone to pay some of the profits in dividends. We all can see the differences in the things we care about and it helps make up your personality and outlook on life. Bring the same attitude to the market and concentrate on the quality, it will save you money and more importantly the quality companies will grow over time and you will be wealthier.

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

The House of Rothschild for many reasons is in the news and one of the most famous reasons is it relied on quick information to gain great wealth after Wellington beat Napoleon at the Battle of Waterloo. The myth and the facts have intertwined for many years and many believe if only they could have inside information, they would be able to capitalize on the markets. The reality is always a little different, the facts are many years the Rothschild were bankers to governments. Prior to the 5 brothers setting up in different cities of Europe, when governments paid their debts they often moved physical gold from one place to another – there was a risk of that. The Rothschild changed the movement to a piece of paper which lowered the risk of gold movement – they just needed a very good and protected safekeeping system. Along the way, the family lent money to governments or where bankers to governments – every time there was a war – somebody had to pay for the war. Governments came to Rothschild and other bankers to receive loans – sometimes they paid back, sometimes they did not. When they were in debt too much, similar to most people you curse your bankers. However as times improve and money is paid back, then you banker is your friend.

In the movie the House of Rothschild made in 1934, there is a scene where Napoleon who came back for the second time was winning wars against much of Europe. In battles against Wellington and the English he was winning. The news from the battle ground was Napoleon was winning which meant there were more sellers than buyers of English gilts or bonds. Rothschild was buying. The war went on for weeks with Napoleon having the advantage  and Nathan Rothschild was using the resources of his bank to support the English gilt. When the battle turned, Nathan received word prior to the general public Wellington had won, this news sent up the English gilt to par and slightly above 100 where under normal conditions  the price would have been in the first place, the effect was to make Nathan the richest person in the world.  The myth is insider information, the reality is Nathan bought most of his position prior to receiving the news. When Nathan received the news he did not double down or triple down for he already held a very large position and he did not have the credit to but was relieved and financially saved.

If you use a modern example – the Big Short by Michael Lewis large amounts of money was made by a few firms shorting the price of mortgage backed securities (expecting the price to fall) For months, the few firms kept increasing its position, when prices fell large profits were made. The stress for the firms was when would the price fall in line with the firms thinking because on the other side of the trade the rest of the street and the world bond traders believed the bonds were safe investments.

Linking to dividend paying stocks, the reason the system works over time is your position of holding profitable companies increases overtime. Profitable companies invariably split their shares and they increase in value. The dividends which kept coming in become larger and overtime the position increases. When the price decreases you buy more, as the price increases you will be wealthier. The trick is to ensure you invest in a profitable stock that will be in business for many years. The myth of insider trading said because the solution was relatively simple, but complex and those that buy large positions before material changes are announced will be investigated and sometimes charged.

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

 

Traditionally in the summer, more paperbacks are read than through the winter, one of the authors which has enjoyed great sales in paperback is John Grisham. A number of his books were turned into movies and the subject matter filters the news for Mr. Grisham writes about the law, lawyers fees, tort cases and wining the lottery. In one of his recent books – The Litigators published by Dell, NY, 2012 the subject is about just about everyone’s favorite bad company – a big Pharm company and a drug. The nature of big Pharm companies is they spend millions of dollars on testing various drugs and invariably because people are individuals something could go wrong or a person dies. That is the risk, the reward is once a drug is discovered, after the first pill is produced the second one cost tenths of pennies, but it can be sold for dollars, something just below insurance companies and government regulators think is too high. The reward for the big pharm company is due to its distribution networks, the drug can be everywhere in days and the money will roll in. As long as the drug is deemed safe and is in fact safe, it is almost a license to print money. In the book the Litigators – a small law firm dreams of the millions from the big Pharm company; the big Pharm plays hardball and uses all the advantages money can and does provide. In addition the clients of the small law firm begin to dream of the money they will be getting. At first, the relatives begin to treat the clients in the manner in which they should be treated all the time. People are people and treat each other differently depending on how much money they think they have and how much they think they can get by inheritance. There are exceptions but as you look or really look at the economy you will see people surviving and maybe how much better their lives would be if they were doing better than survival. Winning the lottery or winning a law suit or turning 65 to collect pensions makes a difference.

Linking to dividend paying stocks, the longer you own the stocks, the more value they grow and the wealthier you will be. Savings and using the power of compound interest will give you opportunities that others will not have. The reason to use the dividend paying stocks is to enhance the things which make life valuable to you. The average person tries to do the right thing and in our life having savings and building your nest egg is difficult, for it takes time but once there is enough in the account, it begins to generate income without much effort and for you to enhance your life. Read the books, enjoy the suspense but try not to be in position where you only dream about the money.

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

On You Tube you can watch a British series called Hedge Fund Lions Den in which two firms try to gain money from asset managers. Institutional Asset Managers are companies who invest money for others, but they specialize in either very wealthy clients or pension funds. The advantage of pension funds is every pay day, people are contributing to their pensions and pension funds have a duty to invest the dollars for the pensioners. When many people deposit money into accounts, the asset managers go to the pension fund managers and ask for a share of the money to invest in different asset classes. When a pension fund is large it needs to diversify its funds into asset classes – stocks, bonds, futures, real estate, and any other asset which can provide a consistent return. In the case of trading futures, there are as many ideas as there are people and to a degree under the correct conditions they all can work – the issue the asset managers is which conditions and when do the theories translate into consistent returns. If you are small, the trades have to be very focused, the greater the dollar the more the fund looks like an index fund.

In the series – two individuals who believe they have the next best thing are trying to gain funds from the three asset managers. Then all the stresses of trying to be successful and being successful is the next stage. The series is all those elements of how money is allocated to managers and there should not be a real surprise. In the realm of alternative futures trading – how simple is what you do being described? How comfortable are the asset managers with the individuals? do you want to work with them? as well as their track record and why they believe their system is the one for the asset managers.

Linking to dividend paying stocks, if there is a tradable market there will be players. With stocks we know that buying profitable companies is less risk than buying non profitable companies because the highs and lows of the companies will be different. Often times having an emphasis on capital retention leads to capital gains. If you focus on capital gains, you may miss the easy capital gains. As a dividend stock buyer, this is what you want the easy capital gains as well as dividend for long term wealth creation. Learn from the hedge fund players, but unless you are in their ballpark concentrate on slow but steady.

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

 

The whole point of failing low interest rates is to spur demand for consumers to open their wallets and spend. Over the past year, the consumer stocks are up over 20%, are there any bargains left?

Peter Ashton of Recognia Inc looked at the sector and his selection was:

Companies that have demonstrated a stock price increase of at least 4% over the past 4 weeks or past month.

Companies with growing earnings – based on analyst projections of companies whose growth rates should be about 3%.

Since the idea is to look for bargains, the average P/E ratio for the sector is 29%, looking for P/E ratios of less than 20. The idea is they can approach the average.

Company                    Mkt Cap     Price Prefor        EPS Growth     Forward         Dividend

($ bil)          (4 weeks)  %          Rate %                 P/E  %              Yield %

General Motors        46.5                7.9                      16.0                     5.4                     4.9

Whirlpool                   14.3                14.6                     19.4                     12.8                   2.0

Goodyear Tire              7.2               13.4                     20.8                       7.3                    1.0

PulteGroup                   7.2                 8.5                     19.9                     13.1                     1.7

HarleyDavidson          9.3                 9.3                    5.5                          13.2                   2.6

Harman Interntl        5.7                 23.9                  8.5                          13.9                   1.3

Thor Industries          3.9                 13.6                   24.0                       16.7                   1.6

Brunswick                     4.4                  9.5                  18.8                        14.3                   1.2

Stanley Black & Dec   18.3                10.0                 11.8                        19.3                  1.8

Linking to dividend paying stocks, making over 20% on your investments is a great thing considering the bank account returns. Government policy of low interest rates is meant to stimulate the consumer and company spending, but economy really depends on the consumer. As consumer stocks go, so does the economy. If you owned basic consumer stocks you would be wealthier but doing the things you do during the summer. It is always possible to minimize risk, and have good returns when investing in profitable stocks.

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