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.

One of the most fiercely independent elements left for every person is how much money the person makes and how they spend it. We report to the government on our individual cases at tax time, but we seldom tell anyone else and since we do not tell, people speculate how much we have or do not have. In many families and schools – somehow speaking about finances seems to be a secondary issue, it comes up only when there is something wrong. Rob Carrick who writes about Personal Finance in magazines, government commissions and in the Globe and Mail asked a variety of people in the financial services industry why do people fail with money? The reasons are varied as the people for there is no correct answer, except for generally the concept is people are earning more than they need or should have savings. Many of the answers do not relate to the people at the low wage income how are barely getting by, with that said, we can move on. The reasons in general are:

1. Finding satisfaction in spending and consuming rather than saving. It is true some spend more than others, they are the drivers of the consumer economy and in general that is a good thing. It is true depending on where you live, there will be a “keeping up with the Jones” meaning if your neighbors have new cars and have done new renovations, you are more likely to do the same. If you lived in a different neighborhood you might do them less. If you do have this problem without savings – you need to do forced savings. One method is set up with a bank and deposit money into a mutual fund once a month and let the fund grow. If you pick a fund ensure its fees are low.
2. Not starting early enough. The idea here is to use compound interest rates to do most of the work. The problem is most people start with a little and it takes years to grow, the largest growth is after the fund has accumulated to a size, for example if there is $1,000 in the fund and you gained 10% (for easy math) you would have $1,100. Ten years later when it goes over $10,000 then you have $11,000 but when it reaches 100,000 then you are getting $10,000 and you can see it easily going up as the years go by. Rather than pay compound interest rates to the credit card company you earn them.
3. A flawed savings program. Most of us expect to live more or less similar to what we are doing now. In terms of income and health and family obligations. When they change most of us have few options and there goes the savings. The solution save regularly not just when it is convenient.
4. Risky investments. Once you accumulated savings a multitude of options are available for you and come to you. You may have a family member or relative in need of capital to invest in their business. Sometimes you win, sometimes you lose. Not losing your money should be (and it is hard) but not losing your money should be your investment strategy.
5. See the title of this blog, many people hope things will take care of themselves. If you own a house and live in the correct neighborhood and housing prices rise before you sell, then the strategy may very well work. If you do not live in the desirable neighborhood then maybe just maybe you have to be proactive or ensure you can live on  less money. There are many free things – the best is a walk in nature.

Linking to dividend paying stocks, these stock will help your investment strategy because you are investing in the profitable companies and be paid a dividend for your holdings. Over the long term, the stock values of the companies will rise and you will have more money to do the things that are important for you.

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

 

Before lotteries became our game of chance, the track was the next best thing. At the track there are many people who represent all kinds of analysis towards either breaking even or making a little more to dreaming of a winning on a longshot. There are generally very good reasons why the horse is a long shot. In a movie made in 1985 Tim Conway, Harvey Korman, Jack West and Ted Wass stared in a MGM movie called The Longshot. The 4 characters are friends who regularly meet at the track, usually bet $2 or $5 on each race and generally broke even, but in the back of their minds are the thoughts of winning the long shot to change their lives. Each of them would have something a little different to spend the money on, but to go to the track on a regular basis is to think about the long shot and the potential winnings. In the movie, the gentlemen know that the inside confidential information on who will win and who will not win, rarely comes to them. They seemingly have a tip, which to them is the big tip, the one tip they have been waiting all their lives for – do they go for it or not? The questions rarely change and make the movie fun to watch.

Linking to dividend paying stocks, over the years and through various people being charged for trading on confidential information, people trade and benefit from inside information. Most people have some sort of information, they know a little, however whether the information is enough to move the stock materially and you could actually make significant money from the information is an unknown. One of the methods you can do this is buy options for calls and puts, of course if this is the only time you buy the options the regulators may notice. A better way to invest is try not to lose money by investing in profitable companies which pay a dividend will allow you to increase your wealth. When the general market goes down, you buy the best companies you can and watch the companies rise as the markets rise for when the general market is down, there is a flight to quality stocks or the best stocks. On your entertainment budget – play a lottery who knows maybe it will happen to you.

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

Hoosiers is a nickname to describe Indiana basketball and is a movie about a small town against all the odds, the high school basketball team went to the State Final and won. The movie is from MGM and made in 1986. In Texas, Friday night football is the big event of a community, in Indiana basketball has the same affect. Sports play a role in community and when it works, there is nothing better to bring the community together and Hoosiers the movie represents that viewpoint. In the small town world, although it seems relatively simple, there can be various undercurrents for things that happen recently and faraway.

Besides the Cinderella story of a 7 person basketball team going all the way to winning the state championship against the a more powerful, wealthier and recruited team; there are other lessons to learn. In the movie, the coach is played by Gene Hackman whose character was a college coach with a winning record and wants to win more than anything else. When he coaches the small town team, some of that comes out; as well as the desire not to do it again – maturity and the love of the game are also important. The other lessons – the focus on the fundamentals, the combining of the group to be a team, to break down the team at the start of the season to build them up; the measurements of the hoop and key when they reach the building where the state championship is held.

Linking to dividend paying stocks, while the desire to buy a stock not on the radar and as it grows to become a leader you would benefit financially, you have to recognize these are rare examples (Wal-mart). An easier process is to look for a mature management that has desire to grow the company and loves doing what the company does. You should be able to find more of them and they will benefit you, with limited risks.

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