In every city’s history there is a great something – bigger than before and hopefully nothing has ever matched it. In Chicago, it was the fire; in other cities it is the flood or the earthquakes. People flocked to cities for better opportunities and when many come because the rural area or their previous homes were under attack, cities grow up fast and usually faster than urban infrastructure allows people to be safe. Many of us take for granted the fire hydrants, the sewer system, the water filteration system, the lighting until things go wrong and they do not work. Then we wonder why the city fathers did not put them in or why they are not working properly. In London, UK a PBS series in 2014 focused on the great fire of 1666. Thousands of homes burnt and there was reasons in the background why the authorities did little.

In part where the fire started was the slums (they can be cleared out); there was disease there (in cleans the area up); in part was an ineffective King who lived on the other side on the fire and was not worried until the fire threatened him and his living style; in part the city was not meeting its payments (the cupboard was bare) and there was little desire to pay compensation to stop the fire. Add to the mix England had recently changed from a Catholic country to a Protestant one and people saw threats behind every action including setting of the fire. At the end of the 4 days of the fire destroying half of London, the King actually became effective.

Linking to dividend paying stocks, there are always reasons not to do something. It is less expensive, there are few threats, there is always something or some technology. The trick is to invest in companies who actually seem to know what they are doing and doing it well. In England, while the fire burned the King was useless, until such time as he went to the area being harmed and ordered things to be done. Is the company president worried in the glass tower or is he/she ensuring the company is doing what it should be doing?

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

 

 

 

Until WWI, it was common practice for the winning country to loot the treasury and take items of value back to their home country. If you check the major museums for example the Louvre in France received many of its treasurers from Napoleon’s successful wars in Italy. Other museums have similar stories. At present, we expect the museum either to buy or receive donations from its patrons. In WW II, besides the desire for Germany to conquer Europe, underneath the effort was to kill or eliminate Jewish Europe. Similar to all campaigns, it started small with a few inconveniences and then ramped up to forcing remaining Jews to have no contact with the rest of the citizens of the country through the use of ghettos and sending people on a one way ticket to a camp (where many were killed by gas or hunger or disease or being broken or slave labour or….) The more important aspect of the Nazi campaign was how did non German countries react. The book Pack of Thieves by Richard Z. Chesnoff published by Doubleday, NY,1999 outlines countries did not offer much fight and for most part the citizens did not seem to mind. There was only a handful which fought or tried to help.

If you look around, people accumulate things and some have wealth but most are getting by for they have hope either their children will do better or maybe they will win the lottery. For the wealthiest percentage, the Nazi’s targeted their homes and possessions and had a deliberate policy of taking all their possessions. Some of the possessions which could be sold, were sold to help pay for the cost of the military. The Nazi’s were good bureaucrats who ensured everything was written down, to be sent to the storage facilities to eventually be allocated. The policy was very effective across Europe.

The issue which the book examines is when the war was over, the Germans had surrendered, the military machine was shut down, what happened? It turns out although there was many records of taking possessions, because receipts were not given very few people returned anything. Home and apartments were not given back; insurance companies did not want to pay; governments did not want to offer any considerations particularly financial; it was if people and their institutions said they did it under distress, but we are glad we did it, so start your life somewhere else. In some cases in Poland, Jews had lived in the community for 900 years and there was little humanitarian concern after the war.

Linking to dividend paying stocks, companies and their people make mistakes (it is why every company has a lawyer or lawyers), however how they react to the mistakes is often a defining moment for shareholders. There are always two methods – delay and hope it goes away or be proactive. There are plenty of examples of both and generally we believe governments and insurance companies like the delay feature. How should the company react and how does the myth when it does act properly goes into play is how we see the company is doing.

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

Spain is bringing in riches from its colonies in Central and South America according to Robert Goodwin in his book Spain – The Centre of the World 1519 -1682 published by Bloomsbury Press, London,2015, what does Spain do? The Habsburg’s were Catholic and soon the Spanish side of the family became the dominate in both armies and church affairs. As well as the many palaces, churches and universities which lead to patrons of art which lead to a thriving arts and culture scene in Spain. Two of the well known artists are painter El Greco and novelist Miguel Cervantes who wrote Don Quixote.

Returning to banking, banking was in its infancy in the early 1500’s. Banking was primarily for travellers, merchants and governments who needed to send money over long distances. The money was made on its spread on the interest rate and lending out the client’s deposit while the bill of exchange was in transit. Banking was relatively simple and the bankers travelled between the great fairs of Europe.

The gold and silver that flooded into Spain was a massive stimulus to trade in Europe and also brought inflation because all the economies of Europe were now interconnected. This changed the focus of the banking industry and international merchant banking was born.

The Spanish crown borrowed in two basic ways. The foundation stone of sovereign debt was juros -a range of government bonds securitized in one way or another with a guaranteed rate of interest over the life of the loan. The interest was typically linked to a source of income ie a sales tax. The other way was called asientos- floating debt agreed on an ad hoc basis to fund some particular project or campaign on which the interest rate was higher and the term of the loan shorter.

The Genoese bankers innovation was to create a secondary market for Spanish sovereign debt by selling shares in the juros to a range of investors. This worked well until 1570 when Spain was trying to figure out its obligations and realized it was short of money. Much of the lending was tied to resources coming from Mexico and Peru and it was beginning to slow down, but the Hapsburg empire with its armies, catholic protection, the infrastructure projects in Spain were expensive. Fortunately for Spain, innovation in silver mining by Bartolome de Medina known as the patio process increased the yields from the mines of silver. The silver production increased and Spain was saved for another 50 years.

Linking to dividend paying stocks, the themes really never go away, Spain was awash in riches and spent the money to be the center of the universe. The commodity production slowed down and Spain was in trouble. The resources are still coming but there was an imbalance between revenues and expenses. This is the reason why management matters.

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

 

 

 

 

There is a verse known around the world- in 1492 Columbus sailed the ocean blue and discovered the new world. In reality, people had been to America before, however most had not subsequently conquered the country. The next voyages after Columbus, particularly Cortes brought back Aztec gold and soon Spain was the richest country in the world. One of the many books about Spain is one by Robert Goodwin published by Bloomsbury Press, London, 2015. In the book, he focuses says Spain the Center of the World from 1519 to 1682.

The setting of 1492 is Spain has changed hands from the Moors (Muslim) to Habsburg (Catholic) and while being a good country Spain was not the center of the Habsburg empire. When Columbus came along, the wealthiest people were paying high prices for spices and they were looking for alternatives. The Portguese, the Dutch and the Italians were dominating the spice trades and the high profits. Columbus was sent across the seas to bring back spices. He brought back some as well as stories about gold, by the early 1500’s the conquistadors had used force, disease and in-fighting to wrestle control of the Atzec empire to bring riches to Spain. The first voyage included a large gold disc with a design of a beast in its center surrounded by foliage motifs weighing 3,800 pesos de oro(the Atzec’s worshiped the sun and the moon); a large silver disc which weighed 48 silver marks; two necklaces of gold and precious stones, one which has 8 woven threads set with 232 red gems (rubies) and 173 green stones with 26 gold bells hanging from the border.  Upon seeing the riches the new King said we must have colonies and soon all of Central and South America were claimed by the Habsburg empire. In time, the city of Seville where gold and silver and other items were landed would be the center of world trade for a century and half.

Linking to dividend paying stocks, how the company started and what practices it did to accumulate its position is not the most important thing it determining whether to buy a company’s shares or not. In the case of Spain, its wealth came from Central and South America but to manage the wealth which was to keep Spain as the dominant country for almost 200 years is to be celebrated. Management matters particularly when it relates to monarchies and their successors.

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

 

Most stock market investors will do a combination of three things: manage some of your own money, have someone else manage some of your money; and use indexes. Depending on your results, you will be either happy or make adjustments. If you go into a company which manages money often times there will be a chart on the wall which shows over the years, the stock market is a good investment as the chart rises. The question for you is why? The answer is very simple – the index changes every 6 months and discards the losers and adds new winners. If the losers make money again, they can come back in. At this point in time, there are many index funds to choose from. A starting point would be the S&P 500 Dividend Aristocrat fund. This fund is composed of companies in the S&P 500 whose companies with 25 consecutive years of dividend increases. In David Milstead’s  column of Hobnobbing with Dividend Aristocrats he explains how the fund works. He also recommends looking at the S&P High Yield Dividend Aristocrats fund which is from the S&P Composite 1500 companies which have increased their dividends for 20 years in a row. The companies joining the 20 year list are: Donaldson Co (filtration and auto parts); IBM; Lancaster Colony (food company); Lincoln Electric Holdings (welding supplies); New Jersey Resources (gas company); NextEra Energy; Polaris Industries (snowmobiles); RenaissanceRe Holdings (reinsurance) and RLI (insurance).

Linking to dividend paying stocks- it is easier to find good stable companies with a good return and low risk to owning and the S&P Aristocrat funds help make it easy. These are companies that are doing well and have paid dividends for over 20 years. It is relatively easy to see what companies are on the list and that will give you ideas where to put your money. If a company pays dividends it has to be profitable and if it has been paying dividends for over 20 years, in your research you can see how it is able to retain market share and increase prices over the years. If they can still do it, it is worth buying either through your shares or through the index.

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

 

Imagine a time shortly after people have discovered the earth is not really the center of the universe, but the earth revolves around the sun. For generations people have looked up at the stars and navigated around the world and imagined what was up there. Did people’s souls go there? Add a government and clergy who really did not want to change their beliefs of the world, it is quite the mix. If you are interested in the story, then the book The Queen’s Conjurer – The Science and Magic of Dr. John Dee, Advisor to Queen Elizabeth 1 by Benjamin Woolley published by Henry Holt and Co, NY, 2001 is worth reading. Dr. Dee was one of those really bright people who in the 1500’s was looking into the stars and using the instruments of the day was almost perfect to what the instruments we use. This was also the time Europeans were writing and exploring the lands to the east or North and South America for they were looking for alternatives routes to China and Asia where the spice trade brought high markups or good profits. On the maps of the day, North and South America were not explored so people believed there were methods to go around them – the Arctic (they would find out it is cold and the water freezes. They should have known for it was not too long ago that trade between London and St. Petersburg, Russia had started). Mr. Dee was in contact with the map makers of the day, had a position advising the Queen and was interested in the stars and mystic world.

Linking to dividend paying stocks, there is little magic to know but the compounding interest is great magic to work with when you buy shares – the combination of dividends plus capital gain is quite a sight to take advantage of and been seen. The search for alternatives is the reason why dividend buyers pay attention to the market place, not for the new concepts, but the ideas that can bear fruits as they catch on and change the marketplace. The learning is the how it can help or additions, not necessarily the new. If you buy and hold, keep paying attention to the alternatives.

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

 

 

In days gone by, because there was few alternatives watching the railway was something everyone did. The big iron horses brought goods and people down the line to somewhere and if the railways were thriving so was the economy. Now to enhance our cities, many city fathers (and mothers) have moved the railways to the suburbs of the city so it may seem railways are less important, however the reality is as the economy goes so does the railway. The only difference is people are not carried by the railway companies. Amtrak and Via do it. The great thing about railways is they are not building more rail lines which means the competition is left to the railways to fight it out among themselves or there is a large barrier to entry. There are alternatives, but for the commodity of goods such as coal and oil, there are remarkably few alternatives. In the case of oil, a pipeline has to be built and sometimes the railways benefit from the naysayers.

In 2008 and 2009 all stock markets were down, however since then the railway companies saw it shares go up a minimum of 3 times the lows. The railways companies have been increasing revenues by moving oil, with the fall in the price of oil, that will and has slowed down. You will still see oil cars, just fewer of them. If you factor out the oil slide, the analysts will tell you the big five railways are actually managing through the recession reasonably well. The view of the analysts are Union Pacific (UP) and Canadian National (CN) have demonstrated track record of operational excellence; CSX and Canadian Pacific (CP) have greatly improved their efficiencies over the past couple of years and Norfolk-Southern has plans that put them on track to do so.

The big question is this the time to buy the railways? David Milstead writing in the Globe and Mail believes it could be. As with all investment questions there are cases to be made for and against the decision, only time well tell which is correct. Each of the railways has reasons why they should be able to outperform as long as they continue to improve and the economy keeps getting better.

Company    Ticker   Market     Net Debt   Revenue   EBITDA  Net Income   P/E     Dividend

Cap (US$)     (US$_Mil)                                                 Ratio   Yield

CN               CNR-T   41,550      7,298           8,958      4,563        2,513          15.9       2.0%

CP                   CP-T   18,376      5,901            4,768     2,284           960         15.3        0.8

CSX               CSX-Q   21,810       9,265          11,811       4,792         1,968       12.1          3.2

Norfolk So  NSC-N   20,878      8,992         10,511        3,943        1,556        13.1         3.4

Union Pac     UPN-N   59,925    12,810        21,813        10,064       4,772       13.0         3.1

Source S&P Capital IQ

Net debt is debt minus cash

Revenue, EBITDA and net income are for the past 12 months

EBITDA is earnings before interest, taxes, depreciation and amortization

P/E is based on analysts’ estimates of future earnings

Linking to dividend paying stocks, there are very good reasons to look at the railways, as the economy improves and the companies improve the railways will benefit. Some of the railways have greater revenues tied to one commodity or another and that is a consideration but they are not building anymore railway companies. The companies are profitable which means the dividend can still be paid and there is great potential for capital gain as you patiently wait for your homework to come rolling down the track.

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

 

 

 

 

 

When you look around in the urban environment. many people are from somewhere else who have settled in the city to make a living and hopefully make more than from where they came from or opportunity. Just because you move to the city, does not make you forget your roots and one method is send money back to your parents or relatives. Sending money back is a good thing for them for it will allow them to pay bills and do what needs to be done. If you are sending money to another country, unless you live in a city with the same banks, there are 5 common mistakes people make when sending money abroad.

1. Settling for the first deal. The bank you deal with can send the money, however it might be more expensive and time consuming. Some alternatives are 8 times less expensive.
2. Not using the real exchange rate. Look up the exchange rate on the internet or Google. Then look up the exchange rate the bank is giving you. That is the spread – are there better alternatives?
3. Missing the hidden fees. Are there extra fees along with the exchange rate? maybe?
4. Not being rate-savvy – rates change all the time. Pay attention to the rates.
5. Not using a regulated service. When everything goes right, it does not matter; the first time the person says the money is not in the account and you have to check and contact the provider and run around you will wish there was a regulated or licensed banking partners.

Linking to dividend paying stocks, comparison shopping, looking at the alternatives will take time the first transaction; however when you decide to invest in dividend paying stocks time will be on your side. The combination of dividend plus capital gain will be worth the time spent.

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

 

In the movie Speed, the detective is talking to his boss and he says I know it, but I do not how, but the “bad guy” is always one step ahead of him. In WW II, the allies were one step ahead of the Germans because they had broke the German code from the Enigma machine and read most of the signals between Hitler and his generals throughout the war. The book The Ultra Secret by F. W. Winterbotham published by Harper and Row, NY, 1974 outlines the Allied responses. The desire to be able to read minds or to have relevant excess knowledge is the same for every industry (there should be a division who job is to try and figure out the competition – what will they do? how to react and to next steps). In the stock markets, the only method to have perfect knowledge is to look backwards to what has happened. To have inside knowledge means to be able to buy enough shares which will have a significant impact on the share price. There are methods if you only want a small price – companies that buy back shares or buy shares for their pension funds do it only select days. Companies tend to release good news on specific days and bad news late on Fridays. There are a multiple of patterns which can help; prior to CNN and other news channels it was only the traders who bought Bloomberg or Reuters terminals to have their news and be able to do something with it. At the present time information is much easier to receive.

In the book, there is an age old problem, the Allied generals could read the messages what do they do to minimize losses, while at the same time not necessarily alerting the Germans that they knew what the Germans were thinking. How do you use inside information? At first when the Germans were winning the war, it was about limiting losses. For example if the generals knew there was going to be a bombing, they tried to move people from the area and alerted fire trucks or first responders to be ready to act after the bombing. As the war turned and the Allied forces begin to win, then effective countermeasures were put in place for the element of surprise was long gone. Surprise in battle and where the troops are expected to be lead to many leaps forward.

Linking to dividend paying stocks, every since trading begun, everyone is looking for inside information. Some of your investment strategies are based on what you know in the industry where you earn a living; just working there will give you a reasonable insight into trends because that is what you pay attention to. There are many other methods – trying to hear gossip at industry meetings or i.e Chamber of Commerce gatherings; whenever people gather. The other method is to be chose profit companies which have a growing dividend and let others worry about it. As long as your information about the company and why and how it makes a profit remain constant you can let the dividends flow and the markets push up prices to record capital gains.

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