There was a book a number of years ago called Everything I Need, I Learned in Kindergarten or something to that affect. One of the things you do in kindergarten is listening at story time and reading stories. Whether its children or adults, whether it is to inform or to sell, a story must be there or you will lose people. In this era when people are more cynical, a good story will always catch their attention. This leads to the problem where some of the best minds think about data and metrics, but storytelling is a different skill which is not always easy to do.

According to Harvey Schachter’s column in the Globe one writer has tried to make it simpler for managers to tell better stories. Richard Krevolin a screenwriter and professor at UCLA and USC film schools has written a book called The Hook published by Career Press,  Wayne, New Jersey, 2015 in which he outlines how to tell stories.

The basics is a 3 step approach – start by being able to articulate the premise of your story in a single sentence. The second step is answering 7 questions and final step is the outline.

The 7 questions are:

Who is your main character?   –  the hero should be the user

What does you main character need/want/desire? –  the dramatic problem

Who or what keeps him from achieving what he wants?  – who or what is the antagonist

How does he achieve what he wants?  –  how does the process work

What are you trying to say by ending the story in this way?  – what are your themes and motives

How do you want to tell your story?   what will be the narrative device  – this is a critical decision for how you tell will change everything.

How do your characters change? –  this is what makes the story credible

The 3rd step is the outline and it has 4 possibilities:

Origin stories – this is the simplest approach – the beginning of the product or service.

Mission/values stories –  from the mission/values of the company’s statement of values

Knowledge sharing – move from bullet points to a story that happens to share information

Brand/vision myth – told to inspire or create myths. Keep it believable.

Linking to dividend paying stocks, all companies try to sell their story to investors. How much you are accepting of them is the reason why you might buy their shares. There are many alternatives and if you hear and read a good story you will begin to put the company on your watch list. One method to do stories better is simply ask people to tell you a story when they ask you for advice.

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

 

 

 

The start of the year for the stock markets has not been kind for most investors and what should you do? sell everything? The headline went around the world and there is truth in what it says. Ideally, if you sold everything you would be in cash and could capitalize on opportunities as they arose or at the very least your portfolio would not lose anymore money. According to Tom Bradley President of Steadyhand Investment Funds Inc. and others the toughest decision is Just when and how will you get back in if you sell everything?

Part of the problem is if you have a negative attitude, there is no perfect time to buy. The headlines in the newspaper will only report after it has already happened. If you are out, it is very hard to get back in because you see all the reasons not to be in; you will not see the opportunities to be found.

At the moment with interest rates being low, thinking long term it will take years before your money doubles based on the compound interest rates. When you are out of the market, you will begin to look for perfect answers and with the stock market the only perfect answer is what has happened. You need to begin to think about being approximately correct, not perfect.

The secret is to ensure your investments are in the best quality investments as possible. Start with companies that make profits and can pay dividends even as their share price falls – this is the buying opportunity. When the market goes back to what is considered normal, these are the shares that will rise first.

The method to go through the stock market ups and downs is to have a diversified portfolio that will allow you to keep your head above water and can see opportunity. This means money in the market, cash, bonds, and medium and large companies. Try to stick to profitable companies and remember most of the money is made when good assets return to their normal prices.

Linking to dividend paying stocks, if you have a reinvestment program this is when you can build wealth by buying more quality companies which are profitable and the price has fallen. When the market goes up for all the good things the economy is doing, the stocks which rise first is the quality ones. Try to stick to them and you will be more at ease when the markets go up and down.

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

One the books known to many people is Moby Dick the famous story about the hunt for a Great White Whale. There is a new Hollywood movie about the hunt called In the Heart of the Sea and it shows the sea is not always pleasant and calm. For many people we have memories and desires to be on the water when it is pleasant and calm and filled with adventure. The sea can be rough, but why did people go on a ship to try to catch whales?

The answer can be varied, but for the owners it is money, there is gold to be made in the whale oil. Prior to electric lights, whale oil was used to give light to homes, as well as the whales offered other products. This high demand according to the Economist on January 1 helped earned a company called Gideon Allen & Sons a whaling syndicate based in New Bedford, Massachusetts a return of 60% annually. Between 1817 and 1892 overall returns averaged 14% a year.

New Bedford was not the only whaling port in America; nor was American the only whaling nation. Yet according to a study published in 1859, of the 900 whaling ships or the seas, 70% were American and 70% of those came from New Bedford. What was so special about New Bedford? A place a hours drive to Boston. The merchants had developed a new business model that was extremely effective at marshalling capital and skilled workers despite the immense risks involved for both. The model is similar to the high tech model of today.

The model was the Managers held big stakes in the business, giving them every reason to attend to the interests of the handful of outside investors. Their stakes were held through carefully constructed syndicates and rarely traded; everyone was financially at least on the voyage. Payment for the crew came from a cut of the profits, thus decision making could be delegated to the point where it mattered – to the captain and crew.

At the top of the hierarchy was the agent or agent firms such as Gideon Allen who were responsible for the purchase and outfitting the ship, the hiring of the crew and the sale of the catch. Captains ran the show while the ship was at sea and often put in capital as well. Investors received 2/3’s of the profits, the rest was divided among the crew in what was known as the lay system. A capital may receive a 12th lay or one twelfth of the profit; a crew member would receive 1/300 or 1/777 whatever they could haggle .

For the agents, the firms invested in multiple expeditions. The reality is out of 787 boats launched from New Bedford 272 sank or were destroyed. However the ones that came back paid well and many agents were millionaires. You can still see the model being used today.

Linking to dividend paying stocks, when you invest you want to earn more than leaving your money in the bank and there is risk attached. The risk can lessened if you invest in profitable companies and let them do the heavy work. Investing in profitable companies allows diversification across the economy and as long as the companies remain profitable they can be held. As the companies go through their business cycles it is entirely possible to switch to alternative companies and use the dividends to buy the good companies at lower prices.

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

 

In the Renaissance, great artists flocked to Florence because at the time – artist worked when they were commissioned. One of the great ones was Michelangelo and the biggest patrons were the Pope or the Catholic Church and wealthy families – kings, prices or merchant kings. Each of the groups had people finding the great talents to bring glory to their holdings. One of the great talents is Michelangelo. In the book Michelangelo a biography George Bull published by St. Martin’s Press, NY, 1995 brings him to life in the times he lived. Michelangelo Buonarroti worked in sculpture, fresco painting and architecture and worked in what is known as the Italian Renaissance. One way to look at the The Renaissance or rebirth is the man’s relationship to God. In the past, it was well below, the Renaissance brought man closer to God. This is seen in paintings where perspective or images of 3d were seen in the paintings. At the same time – in science people are looking inside man to see how he is put together and that comes across in the paintings and sculpture.

In terms of commissions, the artists would be summoned by various individuals to bring glory to their name and what they have accomplished. The art was then seen by the people of the city and enhanced the profile of the patron. Similar to getting paid, sometimes the patrons were flushed with cash, sometimes they were not and payment was slower. Besides doing art, the artists had to negotiate with the patrons for payment on a regular basis.

Linking to dividend paying stocks, for these companies there is no negotiation – they either pay or they do not. The announcements will be given in advance because of the rules of the stock exchange. If the company reduces or stops its payments, in all likelihood there should have been many warning signs regarding to the method in which the company makes a profit. By paying attention to the business model, there should be limited surprises.

Prior to WW II most people lived in smaller communities, after the war with veteran subsided housing, the suburbs developed and now more people live in urban areas. From the small towns of the world came people to the city and a few became very wealthy in their new surroundings. One of the stories is about William Maxwell Aitken who was born in a small town in New Brunswick and went on to become a press baron of Fleet Street in London. He was similar to Rupert Murdoch of News Corp which also owns Fox. Mr. Aitken had staying power and his newspaper the Daily Express became the largest circulation in England and in those days the publisher had great clout with political elites, as well as business elites who bought the advertisements. In England, after you are accomplished there are titles to be given and Mr. Aitken was given Lord Beaverbrook. By the time he was in his 60’s he decided to give back to his hometown and province. A number of civic buildings were built and he also decided to collect paintings. If you have plenty of resources, the paintings quickly covered the walls of his country home. Towards his 70’s he decided the province of New Brunswick should have an art gallery to improve the culture in the province. In the book Beaverbrook   A Shattered Legacy by Jacques Poitras published by Goose Lane Editions, Fredericton, New Brunswick, 2007 there lays both the solution and problem.

The idea of an art gallery is a good one – many people enjoy both looking at art and creating it. The building of an art gallery in a small town (50,000) was one in which Lord Beaverbrook wanted it done yesterday, while the realities of art gallery to ensure the art was properly lighted and temperature so as not to be damage the art quickly lead to cost overruns. In most art galleries, most of the art including paintings are not displayed, they are in storage. The art needs to framed properly and a host of other things – all take time. Art can appreciate in value and this is where the problem began. When Lord Beaverbrook had the idea of an art gallery and set up a funding formula was the art lent to the gallery? Or gifted to the gallery? Who has the say on whether the art can be sold? This was the reason for the title of the book A Shattered Legacy – the intentions were not set up for the next generation.

The next generation such as the one we are in have seen newspaper empires decrease in value and so it was for the Aitken family. The dividends that once flowed to the Foundations which funded the gallery and other ventures began to decrease and eventually the papers were sold. The directors looked to the paintings and discovered some had dramatically increased in value and wanted to sell. The Art Gallery people looked into who owned the paintings and said no, you do not own them. The court battle went on, cost millions to discover what Lord Beaverbrook should have done but did not and essentially the art gallery shifted to being one run by the people in New Brunswick and Atlantic Canada.

Linking to dividend stocks, while as owners we buy and live off the dividends, if you set up legacy funds, what should the trustees do if the money becomes less? When can assets be sold or how does changed happen? The foundations which the writer has sat on, we reviewed the will to give us guidance, remember  make it simple what you can and cannot do or legal fees will be paid.

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

If you invest in the stock market, the best time to buy is when stocks are low. The age old question is will stocks go down further or will the best ones rally and begin their long climb back to normal. If you examine times when people became wealthy, it was during the times when few were buying and they could buy assets for less or at a bargain or at a discount. The best assets rise in value, the question is how do you know which is the best ones? In an article titled Fishing for bargains in troubled times by David Milstead offers methods to ensure the stocks you pick are the best of the worse.

One metric he uses is the number of stocks whose dividend yield begins to outstrip 10 year government notes as the market falls. (note when dividend stocks prices decline, their yield goes up). Mr. Milstead says on Tuesday Dec 29 the 10 year treasury was yielding 2.32% there were 210 stocks which had greater yields. By Thursday the yield fell to 2.15 and more than 257 stocks were greater.

Another metric to look at is enterprise value or market capitalization plus net debt divided by EBITDA (earnings before interest, taxes, depreciation, and amortization). In the S&P 500 the cheapest 20% is less than 7.5.

Mr. Milstead notes sometimes there are reasons why a company stock is low in value for seemingly good reasons which vary from management execution to competition to business models to their profits being tied to one very specific segment of the marketplace.  Having said that below is the list of 10 cheap stocks to consider:

Company            Ticker       Dividend  EV/                 PE         % Return

Yield %     EBIDTA                     Since 12/29

CF Industries    CF-N          3.51             5.9                9.1          -20.7

Ensco PLC          ESV-N        4.61            5.1                5.1            -16.4

GM                      GM-N           4.8             5.1                5.7            -14.4

NetApp              NTAP-Q       3.08           3.3               9.5             -13.8

The Mosaic       MOS-N         4.31            5.9              10.5           -13.7

Transocean       RIG-N          5.45           5.7                9.5            -13.5

Magna                  MG-T          2.49          4.2               7.7             -13.0

Lincoln National LNC-N     2.20           3.4              7.3              -13.0

Principal Finan     PFG-N     3.78          7.4              9.9               -12.8

Seagate Tech        STX-Q      7.30           6.7              9.9                -12.4

Linking to dividend paying stocks, all the above pay a dividend which gives many choices which is good. In the world of investing, buying good quality companies at low prices and waiting for the market to go back to what is normal allows you to earn a healthy capital gain with little risk and be paid a dividend while you wait. There are many alternatives pick yours and be on easy street.

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

 

 

 

 

 

 

 

In the short term, anyone who has a theory about the stock markets will be right for the moment. In the long term, 95% of the theories will be good for the recycling box. The reason is no one knows what will happen in the next week or so, but in the next 10 years  we do know. In an article in the Globe John Reese writes according to Vanguard founder John Bogle there are 3 factors which will go a long way to predicting where the market will be 10 years out. The 3 factors are:

1. dividend yield
2. corporate earnings growth
3. speculative return – the change in what investors are willing to pay for each dollar of earnings (whether the P/E is rising or falling)

Currently the S&P 500 has a dividend yield of 2.1%. Historically corporate earnings has grown at 4.7% Add them together you get an investment return of close to 7%.  The speculative return is hard to gauge factor is a percentage point or two.

The point of the above shows that very real, generally stable factors drive the long term stock market returns. This means the market in the long term is about earnings and dividends. History has shown buying undervalued shares of solid business leads to better than market average returns.

In Mr. Reece’s models 3 stocks for you to consider are:

Thor Industries – owner of Airstream line of campers and trailers

National Oilweek Varco – the oil service companies have gone down, some by too much, the model shows this one should bounce back or return to higher values sooner.

ePlus Inc.  a Virgina based information technology company.

Linking to dividend paying stocks, there are many alternatives in dividend companies but for long term growth it is very hard to beat them.

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

 

 

 

 

 

In investing, the only perfect knowledge is looking back. The problem is we live today and look to the future so there is always a large challenge in doing it better over the years. John Heinzl writing in the Globe and Mail offers a number of resolutions for you to bring to the decision making process after you have picked your stocks.

1. Be An Owner, not a trader.

If you are a home owner, do you wake up each day thinking about selling your home? Why do you want to sell your stocks? If you pick the best of the companies and they are doing well in terms of sales, profit and growing dividends do you need to sell them? Being a trader increases your fees and you may be selling for no good reason – have a reason.

2. Accept Market Volatility

Stocks prices go up and down. The stock market will go up and down, but it you picked the best of the breed stocks, you do not have to worry about them, because you have a longer time horizon.

3. Own high-quality companies

If you go into the stock market trying to get rich quick, you will likely lose. If you go into the stock market trying to buy profitable companies that should be around for decades to come, then you will win. When the market goes down, it is a great time to look at and buy these profitable companies because they are profitable they will go up faster when the market goes up.

4. Be Patient

Time and compounding are your biggest allies as an investor. If you can get compound interest working for you, you need to do very little to earn money.

5. Reinvest dividends

If you do not need the cash, reinvest the dividends into the market whether it is the same stock, the same fund, or new high quality dividend stocks. Over time the growth and size of your portfolio will increase.

Linking to dividend paying stocks, the trick is buy the highest quality stocks or best in the breed and wait. As long as the company is doing what it has in the past to generate profits and is consistent doing it, buy waiting your wealth grows. If you believe their business model needs to change, change stocks – there are many alternatives in the market.

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

 

 

For many years the leaders of the American economy were the big three auto companies based in Detroit – GM, Ford and Chrysler. If you were an automobile fan – the big show was the Detroit Auto Show which would preview the new models. The factories in Detroit produced them, the talent of manufacturing and engineering was great, the office towers hummed with activity and the shops were second to none as  Detroit was the place to be. The skyline changes slowly but if you have not been to Detroit in the past years – the city proper has vacant lands and houses; one exhibition seen a few years ago was the city did not issue a building permit all year; however the suburbs are good. How did it slip away? A Globe and Mail automobile writer Peter Cheney is going to this year’s auto show and he writes about the Detroit he knew and where in went wrong.

In Mr. Cheney’s estimation, Detroit is producing the best cars and trucks it has ever made, but Detroit will never be the same. The city is a fallen empire and the gravitational center of the auto industry has moved elsewhere. Today there is a decentralized supply system in which components flow from around the world for final assembly in plants dominated by robots. The plants are all over the planet and the engineering talent is in Silicon Valley.

In the 1960’s Detroit ruled the world of transportation. The assembly line created by Henry Ford, combined with the stylistic manipulation and social engineering of GM masterminds such as Alfred Sloan and Harley Earl made for record sales and an unquenchable demand.

By the 1970’s cracks in the business model appeared. Detroit expertise was in big, powerful vehicles and the world demanded smaller for efficient cars. Part of the problem was Detroit made more money with the bigger cars and people wanted them and Detroit was in love with them. Part of the problem was the solution offered by Detroit for smaller vehicles were terrible – working for them was considered second tier on the way to the executive suite. This left big openings for VW, Toyota and Nissan to walk in.

In the era when money was coming in hand over fist; labor costs soared as quality went down. Once labor costs went up, it was very difficult to change that. One of many stories is some Detroit workers welded coke bottles in the sills of cars creating a rattle which could never be fixed.  In addition management was no better and perhaps worse.

The business model tried to keep imports out at the same time they fought efficiency and pollution control measures. If they had actually produced cars that people wanted rather than fighting the US government perhaps things would have been different.

Linking to dividend paying stocks, for generations the automobile stocks were ones to own and provided billions of dollars in dividends and capital gains. Over the years of owning a dividend paying stock, once has to review the company to see if it is maintaining its profitability or for you to look at other dividend alternatives.

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