Seymour Schulich is a billionaire whose career has spanned stock brokerage, investment counselling, mining and the oil industry. He is Canadian and is among the greatest living philanthropists and many universities has his name on buildings. He also awards 650 scholarships a year. He is in his 70’s and wrote a book to tell students about his life experiences and the book is called Get Smarter – Life and Business Lessons by Seymour Schulich published by Key Porter Books, Toronto, 2007.

Skin in the Game – when you are investing in stocks, your chances for success are greatly improved when you pick companies where the officers and directors own a large amount of stock. The reason is it human attitude and behavior change completely if he own something, or has skin in the game. (most times they do not bet the house on a big transaction or make seemingly stupid errors(.

On Buying a Business – Mr. Schulich’s father told him “Nobody sells a good, growing business. If life there are exceptions, but you need to know why the seller is selling.

Deals and Investments – The 5 questions to ask why screening a deal:

How much can I make?    or your potential upside

How much can I lose?       or your potential downside

How do I get my money back?    issues of liquidity

Who says this deal is any good?      management record

Who else is in the deal?                   endorsement

The upside/downside equation – successful deal making requires only 2 things an ability to asses odds and the discipline to act only when the odds are heavily in your favor.

Going against the crowd – a great rule of markets, deal making and life is: when everyone thinks something is so, it usually is not.    Being a contrarian is not easy. The best opportunities come to those with patience, courage, and a cash reserve.

Negotiation – the most effective negotiating point in any deal is when you reach the point of indifference or you no longer care in you settle. In most markets, you will reach the best price if you are give up and walk away. The seller will chase you down and come back with a lower price.

Zero-sum Games  – is a game in which for you to win, someone has to lose. No wealth is created just merely passed from one player to the next. Playing these types of games other than temporary amusement is just plain stupid.

Why Growth Stocks are a Poor Choice for Wealth Creation – if you buy stock in a fast growing company it will be trading a high Price/Earnings Ratio, eventually when the growth slows the PE Ratio will fall and so will the stock price. The better thing to do is identify commodity price trends or buy $ 2 of assets for $ 1 to give yourself a margin of safety. In this fashion, you avoid losses and the wins will take care of themselves.

Venture Capital – Investing in Start- Ups – some lessons learned

a) In each 5 year segment, the fund made no money for 4 years but the 5th year was exceptional because it takes 5 years to build a good business.

b) Success rested on the performance of just a few of the investments

c)  The best results came from entrepreneurial groups that had done it previously for themselves or an employer. Experience in running a business is a useful test with evaluating a start-up proposal.

Linking to dividend paying stocks, while the process is to let others run the company it is equally important to be able to evaluate the company for different perspectives. The advantage a profitable dividend paying company has it can make mistakes and still make money. Sometimes it seems the simple questions were not asked and management went into what seemed like a good idea at the time because they did not understand or it was keeping up with Jones. Making money today and tomorrow is the issue.

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

 

 

 

 

 

 

Seymour Schulich is a billionaire whose career has spanned stock brokerage, investment counselling, mining and the oil industry. He is Canadian and is among the greatest living philanthropists and many universities has his name on buildings. He also awards 650 scholarships a year. He is in his 70’s and wrote a book to tell students about his life experiences and the book is called Get Smarter – Life and Business Lessons by Seymour Schulich published by Key Porter Books, Toronto, 2007.

Why Financial History is so Important to Study – financial history keeps repeating itself which is why you need to study it. A great book for the South Sea Bubble and Dutch Tulip craze is Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds.

James Grant has said: risk is most threatening when it is most obvious. It is human nature to extrapolate current trends far into the future, to assume that excellent gains in the market will shadow even greater wealth. In reality it is the reverse, very high returns usually produce inflated asset prices, which return to normal only after a long period of poor returns.

The best years or decades of the market was when the markets were irrationally cheap. After WW I  the PE ratios were 6 or 7; they moved to 12 which was considered normal in 2007 they were 20. After the crash it was a great time to be a buyer as the markets rallied.

Speeches – 10 Rules to Utilize  – Be Brief; Try to communicate one main idea, no more than 3; create a surprise; use humor; slow it down; use cue cards and look at your audience; self praise is not honor; never speak before the main course in a dinner speech; reuse good material; and use positive body language.

What is a Leader?  – Andy Groove of Intel said when everybody knows that something is so, nobody knows nothing.

The qualities of a good leader are: persistence, discipline, conviction, judgement and an ability to share the credit. Discipline is the ability to figure out what worth your time and effort, what is not and to cut out the latter,

Partners – the primary benefit of partners is as sounding board.

An old Chines Proverb – behind an able man, there are always other able men.

Dealing with Bosses or Successful People – It is possible to divide people into 4 main groups and then work with them.

Amiable – want to be liked. They are good listeners and team players. They are responsive, but can be indecisive and reluctant to get rid of malcontents or other toxic people.

Drivers are the tough guys. The rise early, work long hours, make decisions quickly and demand a lot of themselves and others.

Analytics are the deep thinkers, They are the ones to lock themselves in the room to assess all the facts and when they make decisions they are more systematic about it.

Dreamers -people with a lot pie-in-the-sky ideas who leave it to others to worry about the details of their high-concept plans. They have their role but not leadership.

Investing in Foreign Countries – try to avoid swinish countries – the chief characteristic is they are governed by people who have little sense of how to create wealth but no shortage of imagination when it comes to stealing it. They change laws, concoct phony tax assessments or alter contracts.

Spending money – Mr. Schulich’s Dad had a golden rule when the money is in your pocket your are the boss. Once it is transferred to the merchant, he is in charge.

The Oil Industry – historically, oil has better profit margins than mining and is 10 times the size of mining. Oil and mining’s great attraction is you can double or triple the size of a company with one drill hole. Oil is entering a golden age of shortage of supply, eventually fusion power will be commercialized.

Business Axioms

Business is a means to an end, not an end it itself. Nobody on their deathbed says I wish I spent more time in the office.

Never quit a job unless you have another job. You are perceived as more valuable.

Always ask the question “if this decision is wrong, is it going to be painful or fatal?

Keep away from advisors and consultants. They know a 1,000 ways to make love but do not know any women.

The best test of a deal’s true attraction is to ask your partners Would you put your own money in the deal? if the answer is no – pass.

Always have at least 2 people from your side present at any negotiating or deal-making sessions. This give you time to think and compare perceptions.

Never confront or threaten people or institutions who have more power than you.

In negotiations always try to get the other party to name its asking price. If they will not give you one start low, you can always go up.

Almost everything in life is easier to get into than get out of.

A Successful Businessperson has to Learn to say No! – the art of leadership is saying no, not yes. It is easy to say yes. In business, you will see dozens or perhaps hundreds of potential deals most are average or below average, the path to superior results is to accept only the best ideas. You can be diplomatic, firm or a combination but you must be comfortable with the idea of handling rejection.

Linking to dividend paying stocks, learning to say no or having patience to wait for opportunities is a factor in investing. Most weeks the stock market does not make major moves, in jumps in and out then goes down and then up. You need to have patience to wait for the times it goes down and then up; one method is to invest in profitable companies which pay dividends. As the stock goes up and down, you can determine what price you would pay to buy more and wait. When is it relatively cheap to increase your total return?

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

 

 

 

 

 

 

 

Seymour Schulich is a billionaire whose career has spanned stock brokerage, investment counselling, mining and the oil industry. He is Canadian and is among the greatest living philanthropists and many universities has his name on buildings. He also awards 650 scholarships a year. He is in his 70’s and wrote a book to tell students about his life experiences and the book is called Get Smarter – Life and Business Lessons by Seymour Schulich published by Key Porter Books, Toronto, 2007.

Success Correlates to Exposure – Fortune really does favor the bold as well as the person who participates in many endeavors. For Mr. Schulich, things happened to him because he kept a hand in different ventures. It took a while before he found his magic formula with Franco-Nevada. What he means is throughout his career his edge or focus was on mining and oil and gas. He knew the businesses and when he tried other areas of the economy it did not work for him.

Handling Adversity: Life Lesson – It is easy enough to be cheerful when life flows along like a song. but the person who is worthwhile is the person with a smile when everything goes wrong.  Ella Wheeler Wilcox

90% of What You Worry About Never Happens – usually the negative things in life that befall you are things you have never thought about at all. The 10% of the worries that materialize are rarely as bad as your anxious mind envisioned.

Friends – Real relationships are built up over 20-30-40 year time periods. A real friend is someone who would loan you $100,000.

Be the Promoter, Not the Promotee (or Patsy) – it is said, in  a poker game,if you can not figure out who the weak player (patsies) are at the table with 30 minutes then you are it.

All promoters follow a few golden rules:

a) they never let the facts get in the way of a really good story.

b) the one-eyed man is king in the land of blind

c) even a blind squirrel finds an acorn now and then.

Selling – Sooner or later everybody has to sell something. You could be selling yourself, a product, a project, a charity. Some tools to help:

a) Once you have made a sale, stop selling.

b) Never bring bad news to clients – send them good news, when you call they will take it

c) do not point out hypocrisy

d) it is a fine line between being persistent and being a pest. Try to know when to back off

Never Give Out Free Options – option is the right to buy something at a specific price at some point in the future. If you are going to give an option charge a fee for it. A free option is a terrible thing to give up, but a wonderful thing to own. One of the best examples of a free option that turn gold was in basketball. The ABA was formed, it failed and some of the teams joined the NBA. The owners of the St. Louis franchise beside getting cash asked for something extra. A portion of the TV rights – TV brings in big money to sports. This agreement made the list of The Dumbest Moments in Business History complied by Business 2.0 magazine.

Don’t let Cash Burn a Hole in Your Pocket – It is amazing how cheap assets can become in a fire sale and how far their values can fall.

Never let cash burn a hole in your pocket. Do not pay excessively for anything just because you have the money. The biggest opportunities come to those who can write a cheque when assets go on sale at knockdown prices.

Track the Cash – When Mr. Schulich was young and taking his MBA and CFA, he asked his Dad about his business. You had no formal training, how do your monitor the business from a financial standpoint? His answer,  I get a statement of the cash on hand every two weeks. It is rising, I do not worry. If it is falling, I get concerned.

In every company, Mr. Schulich was an investor or principal the first metric he tracked was cash. If the cash was rising – positive things. Namely the receivables were being collected, not too much buildup in the inventories was occurring, and the business was generating free cash flow.  Always track  the cash levels.

Linking to dividend paying stocks, one of the reasons why they are worth investing it is they generate cash to make profits. As long as they are generating cash to make profits they are worth keeping. The all important metric of free flow cash is something all investors should monitor, when it fluctuates when it is not suppose to check out other alternatives.

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

 

 

Seymour Schulich is a billionaire whose career has spanned stock brokerage, investment counselling, mining and the oil industry. He is Canadian and is among the greatest living philanthropists and many universities has his name on buildings. He also awards 650 scholarships a year. He is in his 70’s and wrote a book to tell students about his life experiences and the book is called Get Smarter – Life and Business Lessons by Seymour Schulich published by Key Porter Books, Toronto, 2007.

The Decision-Maker: A Tool for a Lifetime. Since Mr. Schulich was in his teens he has used an effective tool to making decisions. On one side of the paper write the positives of doing something (and the extra thing is from a 0 – 10 score how you rate  them for yourself.) on the other side of the paper is the negatives and how you rate them. You add up the scores and if the positives outweigh the negatives by over 2:1 then do it. If not, the answer is no or think twice about it.

Know Your Edge – Always ask, where do I have an edge?

Reciprocity – in business and in life: reciprocity. In simple terms it is the idea that people have a very hard time saying no to someone who has done something, even a small favor, for them.

Money’s Value falls 90% every 30 Years. because of inflation. For a long term view, Mr. Schulich recommends:

a) keep a sizable proportion of your wealth in inflation sensitive assets like real estate, commodities, and precious metals. They hold their value against inflation better.

b) If you get the chance to lock in your debts for years at low rates of interest, do it.

c) Be skeptical of life insurance  – only buy term and only get enough to protect your family if something happens to you.

Be a Positive Person – have a positive attitude because you will need to beat the obstacles that the pessimist sees.

“Two men looked through the prison bars. One saw mud, one saw stars” Oscar Wilde

There’s No Such Thing as an Overnight Success – it usually takes 5 to 10 years to build a successful business. In 1983 one third of the companies that were on the Fortune 500 in 1970 had disappeared; the usual lifespan of a multinational company is 40 to 50 years.

Rules for Aging (or Living) Mr. Schulich loves reading and one of the gems was Rules for Aging by Roger Rosenblatt. It is about human nature.

a) Nobody is thinking about you – they are doing what you are doing thinking about themselves – just like you.

b) Avoid swine – people who act in a swine-like fashion

c) Appearance is frequently reality

d) Envy no one

e) Never expect gratitude. If you spend your life expecting glory and praise for the good things you do, you are going to burn a lot of energy when it does not happen. If you get gratitude feel pleasantly surprised.

Patience: A Key to Success in Business and in Life – People who win at business bet seldom and only when the odds are in their favor. Winners put themselves in a position of seeing a very large range of potential investments. They buy into one of hundreds. Warren Buffett states you need a maximum of 20 great insights in a lifetime to become very wealthy and successful.  Besides having patience, you will need a cash reserve, so you have the money on hand to exploit those opportunities.

Charlie Munger (Warren Buffett’s partner) has many stories:

He was speaking to someone selling fishing tackle. My goodness, they are purple and green, do the fish really take these lures? The man says Mister I do not sell to the fish, I sell to the fisherman.

Linking to dividend paying stocks. Mr. Schulich made billions of dollars because he focused on many of the same things anyone can, but rarely do. It does take patience to do nothing, in the book there is a little pie chart 99% patience, 1% action. It means to wait for the correct opportunities and then do it. Later in the book, the way to wealth in the stock market is wait for the market to drop and then buy the best of the breed and have the patience for the markets to go up again. It takes a great amount of discipline to do that and one easy way to learn is buy dividend producing stocks as you wait for your opportunities.

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

 

 

 

 

 

Often times for dividend stocks we will look at the S&P 500 for very good reasons – the companies have achieved size and trading to be in the S&P 500. Once inside, automatically more analysts will follow the stock; more institutional investors will buy and sell; the index removes companies on a regular basis and puts in better ones; there is plenty of opportunities to make money with the S&P 500. However, by sticking to the S&P 500 you might ask what are you missing, and are you missing good returns for the stocks outside maybe more regional in nature? Given we are people, we tend to follow habits which align to our lifestyle or because we live or travel in various areas those are the areas we tend to look at first. There is nothing wrong with that, but there usually is something good going on outside of our regular comfort zones.

Ian Tam of CPMS Morningstar Research recently did a search on lesser-known dividend stocks to see. The strategy he used was:

Dividend yield relative to sector median  – it has to be higher. (for example 1.8% means a stock yields is 1.8% higher than the sector it belongs to).

Return on Equity – a profitability metric that takes the latest estimated earnings per share divides by the book value of the stock)

Return on Total Assets – divides the EPS by total assets.

3 Month estimated revision  – today’s analysts consensus estimate vs 3 months ago

Market Capitalization

Not in the S&P 500 Index

Company            Mkt Cap     Dividend   Yield relative  Forward    Forward Return  3M estimate

($ Mil)       Yield %       to sec med        ROE %       on Total Assets   Revison %

NutriSystem       705.7          2.9                 1.8                      57.4              25.0                     8.0

NorthStar Asset  2,156.4     3.6                  1.3                     146.4             29.8                    2.9

Novartis AG      189,216.2    3.5                   3.5                      15.9                 8.6                  -3.7

Maxim Intrgted 10,644.6   3.2                    3.2                      27.6            14.3                     0.8

Regal Entertain   3,201.7    4.3                    3.2                                            6.7                    3.8

Meridan Bioscien   794.0    4.2                   4.2                    24.5               15.3                    2.7

CEB Inc                   2,003.2   2.7                    1.6                                            9.2                    2.2

Packaging Corp    6,376.0   3.3                    2.1                    28.7               8.5                    8.6

PetMed Express        373.2   4.2                   2.7                     26.3           23.1                    1.0

Sturm Ruger & Co  1,165.1   3.1                    2.0                    31.1             22.0                  -4.9

Linking to dividend producing stocks, some of the names you may have heard of, some you will not. The point is as you go away from the well known stocks, you have to be more selective but every region there are opportunities to make money. It may take longer for the street to recognize the value and trade at higher multiples but if a company is consistently making money, it will be found for all the correct reasons.

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

 

 

In wartime, the two sides try to get the upper hand or into the thoughts of the leaders. Both sides try to figure out what the other side is thinking or will do often by monitoring the logistics of the other side. If there is going to be an invasion of people, they will need support vehicles for generally people need to eat; in a war battle there will be those who are injured or die; or there are logistics. In addition, the other side tries to tap into the other side with intelligence. In wartime, people feeding their bellies can be more of an incentive than feeding their conscious. With war there are many books and one of the more interesting ones is Fall from Grace by Larry Collins published by Signet Publishing, NY, 1985. The setting is the second world war leading up to D-day. The big question is where will the troops land? and equally important will it be a two place assault or one? If it is two then the Germans have to have troops in two places; if it is one then the British would send it to the weaker German troops.

Strategic deception falls into two basic categories. The simpler of the two is ambiguous deception. The idea is to assault your enemy with a blizzard of misinformation, multiplying the options he has got to consider. In the end, the action your deception forces him to take is in fact inaction. You paralyze his ability to move decisively.

The second is more subtle it is called misleading deception. The idea in this case is to give your enemy a helping hand by reducing the ambiguity he faces. Instead of spattering him with a wide range of disinformation, you attempt to very subtly build up for him one attractive alternative. Except, of course, it is the wrong one, but he is very decisive.

The trick is to be sure that our lies, our deceptions are accepted long enough to get the result we are after. The aim was to influence the decision makers to make a precise mistake that will lead him to the fall into the trap we have set out for him.

Linking to dividend paying companies, part of success of a profitable company is coming up with the correct strategy. There are many competing views from experts (consultants) as well as the competition. In business the victory is an increase in market share or maintaining a constant profitable market share. As you examine the President’s letter to shareholders you need to ask is this the correct strategy? if it is and the company is great at execution of strategy, then holding on to the shares can be a good thing.

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

 

One of the longest running TV shows is The Nature of Things by David Suzuki and besides great pictures the message is somehow we must learn to live with nature. From the TV show, Mr. Suzuki also discusses how to be green or environmentally friendly and that is the context of his book David Suzuki’s Green Guide written by David Suzuki & David R Boyd published by Greystone Books, Vancouver, BC, 2008.

If you think about North America prior to the World War, it was countries dominated by rural living, after the war came the suburbs and opportunities in the cities. With the suburbs came driving to work (and soon everyone else) as opposed to the majority coming in by commuter train. It was not wrong, but it used lots of resources and the prevailing government encouraged the expansion of the road system to make it even easier.

Now days we live with climate change, something is happening so what can a citizen do. Most of us are not going back to rural living (although it was environmentally friendly it was a tougher life) but we can do things to make life better. If you own a house, many were not built well (if you live in  the part of North America where the writer lives, it seems many were built for southern California living or they get cold in the winter). To save money, it makes sense to insulate your home to use less energy. Is that green or being prudent? Studies show the most important financial impact you have in terms of your home is where it is. Eventually, neighbors begin to look like other neighbors and tend to do what your neighbors do. Depending on your income that can be expensive. If your neighbors are more likely to stay at home and sit on the porch in the evenings, the cost can be less.

As consumers, we all make choices and retailers will cater their offerings to what they believe our choices will be. We all make small choices, but they have larger effects.

Linking to dividend paying stocks, one of the reasons why they become wealth creators is there is little reason to trade them, you can buy and hold and have few expenses or lower fees. Index funds work the same fashion, lower fees means you keep more. If you focus on cost savings or being green, you will keep more of your money. If you invest in profitable companies, they will trade at higher multiples and you will be wealthier. It is easily possible to be green to make or save money.

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

Where people gather regularly, there eventually will be secret societies. Most of the time it will be the little things people will do what people regularly do – gossip; eat and drink; and maybe some good works. Sometimes there are groups who would overthrow the governing establishments and depending on the results are either evil or patriotic. In terms of the evil ones, one of the books about them is called The Most Evil Secret Societies in History by Shelly Klein published by Michael O’Mara Books Ltd, London UK, 2005. Some of the societies involve criminal organizations such as the Mafia or Triad or Tongs; some involve a cult with dangerous circumstances such as Order of the Solar Temple and Aum Shinrikyo; some involve trying to prolong the Nazis such as The Thule Society and Odessa; some involve a new world order such as The Illuminati or Ku Klux Klan or The Hashishim and some seem to involve orgies such as The Hell Fire Club and Argenteum Astrum.

Only when the societies begin to kill off its members or citizens or the police do they cross the line between what they do on their own time to now it is in the public’s interest. There is no doubt when you look around the world, there is great inequities and some secret societies want to keep it that way or and some want to change society to seemingly make it more fair. In other words, there are valid reasons for secret societies to exist.

Linking to dividend paying stocks, since the dividends are declared in advance and payable on set dates, the public is welcomed to join the dividend paying club. The entrance fee is a profitable stock that pays a dividend and can be expected to continue paying. The big secret is through the use of compounding interest and higher multiples for profitable companies, with relatively low risk your wealth will increase over time. If the company can not pay its dividend, you move to another alternative company trying to keep your money in the best of the breed or the best companies. In this fashion, it is a relatively low administration time for you and you can enjoy the good things in your community and your life.

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

One of the nature’s little wonders is an insect that gives life to the floral world – bees. Bees are gathered of pollen which they make honey from it. There are many books about bees and one of them is Nature’s Little Wonders – Bees written by Candace Savage published by Douglas & McIntyre, Vancouver, BC, 2008. The bee goes to flowers to collect pollen and the flowers benefit because the bees spread the pollen in the flower so it can reproduce and flower. The reason why bees are considered nature’s little wonders is how does the bee organize itself in the hives and how does it find the pollen. It turns out the bees are intelligent and interestingly generally women rule. The ruler of the hive is the queen bee who produces millions of eggs; the bees in the hive build and maintain the hive so the queen can lay her eggs. The also produce honey  which we humans eat. The flavor of the honey is dependent on where the bees are collecting their honey. Similar to the properties of wine, the location of the honey can be tasted.

Bees tell other bees where good places are to collect honey are with a dance. These dances will give directions to the other bees for them to try out and come back and tell others. The bees go out and are able to come back to the hive which means many have attempted to study how they does this and marvel at their other skills.

Linking to dividend paying stocks, what seems simple is often complex. The bee at first glance seems simple – it gathers pollen for food and to make honey. The gathering ensures plants are pollenated and the circle continues. As you look through the many stocks on the exchanges – they are all trying to make money however only a few actually do. If you start with those and try to invest from those that continually make money by increasing their dividends you will make a complex exercise more simple and profitable to you.

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