A week ago, one of the stocks which has been owned was partially sold.

In order to be a good investor, you first need to have idea of where the market might go. Then you do your homework or test the ideas, and if the idea comes forth you can act on it. One idea is eventually interest rates need to go up. They may have to but with the slowing of the Chinese economy which lead to higher commodity prices, perhaps even with more people working the economy has a long way to go before rates are raised. We do not know what the federal reserve will do, but it is worth asking what if rates went up – which stocks would likely benefit? One sector that should benefit is the banking group. In that vein, Charles Martin from Thomson Reuters looked at what banks could benefit.

He started with companies with market capitalization greater than $ 2 billion.

The banks made money on the difference between interest income (money they lend) to the money they pay to depositors – the term is called NIM or Net Interest Margin. Mr. Martin was looking for positive NIM.

He wanted a price earnings ratio of less than 20.

The law requires banks to have 6% of Tier 1 capital. Mr. Martin wanted a higher degree of safety or 12%.

The price to book ratio was to be less than 1.6, analysts concern anything less than 2 to be undervalued.

To measure how the company is managing their costs there is an Efficiency Ratio and Mr. Martin was looking for less than 60%. This is overhead costs divided by total revenues.

Company

Often times in investing there are two competing stories,  the glass is half full, the other is the glass is half empty. Until the glass either gets to 3/4s full or 1/4 full, many people do not really know what to do. A week ago the shares of Tesla Motors fell from $270 to $242 because of worries about production cutbacks of its biggest selling electric car. The Tesla is an electric car which besides being more expensive than the average car needs a great deal of infrastructure for people to drive more than 300 miles. After 350 miles it needs to be charged, having never been in one but seen them, the cars look good and drive with little interior noise.Part of the company’s growth is tied to a new electric battery plant being built in Nevada.

In a column in the Globe written by Chris Umiastowski called “Don’t slam the brakes on Tesla just yet”, the article offers the half full idea for the company. Chris expects the price of the shares to fall but over the longer term to go higher after each fall. He particularly pays attention to the management team, if it doing what they say they are doing then you can continue to back them, but if they begin to depart then situations change. The issues for the growth investor are why did you buy the shares? are the reasons still valid?

Linking to dividend paying companies, the process is easier than trying to figure out the potential market, the big question is the company still profitable to pay the dividend? if the answer is no then you know when to find alternatives. If the answer is yes, then you can either do nothing or determine at what point would they not be able to be profitable. As dividend buyers the issue is the company’s profits almost similar to a monopoly or very few competitors and the ability to affect prices?  If that is still the case, whether the company grows or stays similar size is not important, staying profitable is.

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

Martin Chuzzlewit is a novel by Charles Dickens also available in mini series produced by the BBC which was recently viewed. Mr. Chuzzlewit is getting older, but not dead yet however he is part of the upper class or wealthy in England. The premise of the book is to examine how the relatives – immediate family, cousins, and the list goes on behaves when he appears to be on his last legs. Do they care for him or do they see the money they will inherit? It is an age old question and we know that in general, baby boomers did well and as they begin to retire many will inherit or will give money to family and whoever else they wish to. In the book, Mr. Chuzzlewit is not without fault and he finds himself selfish in his decision making process, he is after all human, but at least he finds out who the worst cases are.

Linking to dividend paying stocks, one of the good things about them is the wealth tends to increase over time, as the wealth increases it allows for financial freedom however you define it. Wealth also brings other concerns among them long lost relatives who wish a piece of the pie. There is no perfect answer, but it is better to have the problem than not to have it. Warren Buffett has said his children will be millionaires but not necessarily billionaires from his inheritance.

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

It was reported by Reuters on August 7th, Blackrock expects big data to jumpstart stock-picking business. Blackrock is a large financial company with about $4 trillion assets under administration including its popular index shares. It is very large player and recently offer some alternative financing to oil services companies. The article in Reuters written by Jessica Toonkel is how to use big data. The CEO believes this data can revive his firm’s ailing stock picking business. Big data is the ability to gather great amounts of data to find the key to determining what the possible future will be. For example, a classic example is on Black Friday and leading up to Christmas are the shopping mall parking lots full – satellites can tell you (the Christmas season is the most profitable time for retailers). Big data allows to garner as much information as needed to determine what the buyers will tend to do or should be doing.

Linking to dividend paying stocks, there never is a guarantee the more data you know the big the decision making process. If you are a retail investor, one that has less than trillions or billions or millions, sometimes too much data means it is hard to make a decision. The simple question is the company profitable and can it stay that way for a long time should lead you to your investment choices. Profitable companies can and do pay dividends, unprofitable ones do not. Profitable companies stock price will move up to and above the average EPS or earnings per share. Start with the simple and you will lose less money and with a dividend you will make money over the long term.

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

Last week, there were celebrations in Egypt as the construction involving the Suez Canal was finished. It was a $ 8.5 billion project and involved both new canals and widening of existing canals and the project was completed within 1 year. If you look at a map of the Mediterranean Sea -to the north is Europe; to the south is Africa and in the lower western corner is Egypt and a seemingly shortcut to the Red Sea which connects you to the Indian Ocean and China. The movement of goods over the sea is still the least expensive method and having a shortcut which cuts the time to go around Africa is a big deal for shippers. Egypt is hoping and expecting with the expansion more ships will pass through and each time they pass through the canal is a toll road – Egypt receives fees. If shipping increases by 30% per year and is constant the fees Egypt is looking at could rise to $13 billion from today’s $5 billion. If the shippers come through the Canal, the investment was worth it.

Linking to dividend paying stocks, as long as the trip is concentrated safe, shippers will send their ships through the canal for it is both less expensive and less dangerous than sending their ships around Africa. In simple terms, Africa is a barrier to entry and the only game in town or monopoly is the Suez Canal. From a shippers point of view they hope there is peace in the area. There are natural barriers for entry which allow companies to maintain an advantage, however there are always alternatives even if the alternatives are slower for the moment. The question to ask is how does the alternatives become more competitive and when that happens – there will be a migration to other sources until the market sorts itself out.

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

On September 2011, one of the people I was working with was on the phone to Cantor in the World Trade Center, shortly after the phone went silent and the image of America changed. Before it was possible to examine whether America was a source of good in the world or had plenty of shady sides. Now that time was passed, it is evident that in many countries around the world America has its shady side, when it comes to protecting America’s interests. In our economy as a company grows it becomes vertically integrated and buys assets in other countries to diversify its holdings and sell its products around the world. If it sufficient size, there is the ability to influence the governments of the day to ensure its holdings are essentially left alone or not touched by government regulations. If a country wishes to nationalize without compensation then the company’s executives turn to government agencies such as the CIA to see what can be done. The CIA has a history of overturning “bad” governments to “good” governments which protect and allow assets to produce wealth to be sent to the US. In the book, Rogue Nation by Peter Scowen published by McClelland and Steward, Montreal, 2003 some of the worst cases are documented. The cases include countries in Central and South America, countries in the Middle East and Asia. Some were done to protect the corporate assets from communism; some were done to show others what America was willing and could do; and some were done because they could. Very few action were done to protect the average person in the country.

Linking to dividend paying stocks, one hopes the ethics and vitality in the home market is brought forth to the external markets. The world can use many of the products and services available to North Americans, but how far should the government go to protect those assets? It is an age old question, but one that never has a great answer. Be proud of the company diversifying its markets at high margins; but do not be surprised the world does not always look favourably at your home country.

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

In the modern age we often think of queens or princesses similar to the late Princess Diana of England. She was a relatively naïve, young lady from the right family who eventually grew into her position after producing heirs to the English throne. A very different woman was Josephine Bonaparte. In the book Ambition and Desire – the Dangerous Life of Josephine Bonaparte written by Kate Williams published by Random House, NY, 2013. The end prize was being married to Napoleon who went from a small town roots to one of the greatest generals in France to becoming Emperor of the empire to his downfall, but that is a different story. Josephine was born in the French Island of Martinique where the family estate grew sugar cane and employed many slaves. When she married she moved to France but she was essentially the same naïve young lady from the islands. After having children and a separation – she moved into a convent  which catered to separated wealthy ladies where she learnt the rules of court, how to use her figure and who to target to achieve her ambition of money and power. She learned well becoming the mistress of the French leader after the revolution and settling with Napoleon.

Linking to dividend paying stocks, similar to people, there are many layers to dividend paying stocks. There is the image of a well run profitable company, it could be because of the long-held monopoly – as long as it holds strong then all else is good; there is the dividend which comes from the ability of the company to make profits; there is the reputation of the company as well as the years of being in business. All help shape the users of the goods and services of the company.

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

If your stocks and income have risen to the degree you are very rich, one aspect you have to be concerned about is thieves. Ideally you are insured, but when it comes to expensive art and jewels, the con artists will be in the area. They are going to the usual places where the rich gather to steal assets. In the book Heist Society by Ally Carter published by Disney Hyperion Books, NY, 2010 some young people steal paintings for a seemingly good cause. The paintings were originally stolen by the Nazis ended up in private collections and in this case were stolen and needed to be stolen again to give to their rightful owners. The art of stealing from a museum with high security makes interesting reading.

Linking to dividend paying stocks, the ability to steal means the ability to look through plans of the museum; and use the strategy of humans dealing with the security measures to accomplish the “stealing” of the paintings. Along the way the readers learn about the emotions of the people involved. It is possible that teenagers could do this, but generally the skills needed including the use of technology and teamwork takes years of practice. The book still is an interesting read. The learning point is to do anything well, advance planning or doing your homework has to be done well and since you are dealing with people, many possible considerations need to go right.

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