Recently the movie the Age of Ultron was viewed whose story among the super heroes was about man’s desire to use technology to help make the world better. There is little doubt that the world is better, however there have been consequences along the way. The book The Polluters – the Making of Our Chemically Altered Environment by Benjamin Ross and Steve Amter published by Oxford University Press, NY, 2010 looks at some of the consequences.

The lifeblood of our cities is water. For many years, water was seen as never ending, till the invention of air conditioning which allowed people to live in the desert like areas. If you like in the area, water is a necessity. If you live in other areas, mostly you think about water for bathing, sanitation and recreation. For industry, they thought of water for production of whatever was being made. What happen to the end result or discharges was not a big problem for most people. If you think we have an abundance and the waste will be carried away, do you worry about pollution controls? Pollution controls are an expense as most companies do not recycle their water, they send it away and get new water from upstream. If you examine regulations – many lobby groups sought a core principle of no regulatory program shall include a prohibition against the discharge of any waste.. unless there is a practical and reasonable method of treatment… This has meant that unless government provides the water treatment and leads in water treatment, industry had few reasons to do so, even when they knew the consequences. For many years water rates and penalties were kept minimal because of both jobs, taxes and a belief in the ever ending water supply.

Linking to dividend paying stocks, if the world is to be a better place these are the companies that have to lead. As an investor often times you can get both – leadership and a continuing dividend payment.

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

Recently the movie the Age of Ultron was viewed whose story among the super heroes was about man’s desire to use technology to help make the world better. There is little doubt that the world is better, however there have been consequences along the way. The book The Polluters – the Making of Our Chemically Altered Environment by Benjamin Ross and Steve Amter published by Oxford University Press, NY, 2010 looks at some of the consequences.

If you ever been to Los Angeles or seen pictures you will know the city of LA is surrounded by mountains or hills and sometimes the wind does not blow or the air is stationary and collects whatever is in the air. When the wind is moving, the air is cleaned. For a number of years, the fog and pollution built up in LA and no one really knew why. For a long time, people looked towards chemical companies, the oil companies, factories and eventually all of them had to do something. It was not enough and still the smog returned during the summer. When it affected the more desirable neighborhoods, a commission was formed to gain pollution regulations. Eventually a scientist isolated the problem to the automobile engine. Part of the cause was to ensure car engines performed better lead was added to the gasoline which caused pollution and with al the vehicles on the road, everyone was both part of the problem and solution. What to do about took many years to solve. It is the reason why now all governments look to the California regulations – partly because the market is big and the regulations are higher standard than others. The authors write the regulators came up with the solution to the problem, however they were fought all the way by the companies scientists first trying to disprove the theory, then casting doubt on the methods and sometimes the people.  Understanding LA is a big city, the reason it found its solution or how the smog was created was because the local elites pushed to find answers, a smaller community with only one factory where the answers were seemingly easier to find – Donora, Pennsylvania the solution took longer to find.

Linking to dividend paying stocks, as companies operate they leave a footprint some where, as investors we want them to make money and pay dividends. Companies allocate resources and leave many footprints which may not add to the profitability of the company. Often the companies wish to do better than government regulations, which if you are realistic about it, the companies had an influence in making them (they should do better).

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

Recently the movie the Age of Ultron was viewed whose story among the super heroes was about man’s desire to use technology to help make the world better. There is little doubt that the world is better, however there have been consequences along the way. The book The Polluters – the Making of Our Chemically Altered Environment by Benjamin Ross and Steve Amter published by Oxford University Press, NY, 2010 looks at some of the consequences. In the book, the authors argue the industry had its way for too long and more needs to be done. The jobs the industry has created while desirable are part of the problem. In the US depending on how the world environment or big picture looks – many things have been overlooked. Sometimes chemicals were used because the alternative was worse. For example DDT was invented to combat malaria and lice. It did this and fewer soliders died from malaria which is a good thing. It turns out, similar to many drugs side affects show up years later. The DDT would get into the food system and birds could not hatch eggs because the eggs were too thin. Cancer is linked to the drug. What was more important the soldiers or the environment the soldiers needed to live in afterwards?

Many times the answer to that question is to solve the problem and worry later. Sometimes the question has always been manipulated by the large  companies when they formed lobby groups such as the Liberty League. This was a lobby group designed to limit government interference in their companies. The league lobbied and gave money to politicians to ensure their voice was heard. The lobby group also funded universities to ensure the results reflected their viewpoint. This is always been the problem with relying on the facts – many times we do not know the facts, just the results. For example, a company workers were getting cancer – was it the chemical they were making; was it the air circulation in the building; was it from the smokestacks? or was it a combination of things? Eventually the company built a new plant and 10% of the costs went into health and safety as opposed to the normal 1%. What happens in the cancer continues?

Linking to dividend paying stocks, often times the public wants large companies to be in charge of new chemicals because in general they feel it is safer. The worse practices should not be done by a large company, when they are – the public feels betrayed because they had given their trust to the large company. This was often the result of the company attempting to keep government out of their company and having the resources to clean up the risk management equation. The first thing they did is send lawyers out to ensure no one sues, rather than ensure people are safe and find a method to fix the problem. Which is better for the stockholders?

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

As the New Year is approaching we all want to be winners and hopefully you have more wins than losses, but we are human. In striving to be a little better we like to be inspired. In a book review by Harvey Schachter of the Globe and Mail reviewed Larry Weidel’s book Serial Winner.

Mr. Weidel  believes the 5 step approach is the best and they are:

1. Decide
2. Overdo
3. Adjust
4. Finish
5. Improve

The first thing to do is decide to start the journey. Whatever your project or thing to do is – decide to begin. You have a great idea begin to work on it.

The second thing is we often underestimate the time and effort need to accomplish what we want to do. Be prepared to overdo it.

Understand by overdoing it, you have to think like a singles hitter in baseball. A very good batting average is .300; outstanding is .400 which means not doing 2 out of 3 times. You will need a Plan B. Winning is a series of adjustments.

At the finish line, cross it. Do not stop before you are finished.

The fifth level is celebrate your finish and move on to the next level or to keep improving. Always be improving till you are 6 feet down in the ground.

Linking to dividend paying stocks, simple instructions or ideas are sometimes the hardest to implement. In your investing strategy try to bring the reasons to simple ones with the flexibility of adjustments along the way as you learn. Trying to improve should be the continuing New Year’s resolution.

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

 

 

 

 

A few months ago two drug companies merged with the intent of having their head office in Ireland in order to save US corporate taxes. We know their are trillions of dollars in bank accounts not in the US because it is taxed less. When you hear about these stories the one thinks of The Bahamas, Bermuda, Cayman Islands, Panama and other countries around the world. Last year, on a visit to the Cayman Islands (did not open a bank account)but saw all the big mutual fund companies have offices or signs in front of offices on the islands. There are good reasons, the laws are written what goes on in the Cayman stays in the Cayman and will not be told to anyone under the threat of jail terms. For many companies and people, tax avoidance is part of normal life – the companies and people keep more of their wealth and pay less taxes to their home governments. There can be as many reasons as their people for people to reduce taxes – some believe in small governments and only willing to pay a little, but not too much. It is generally believed about 15% of the money around an economy is from crime proceeds – now days the drug industry is the biggest component. However, not paying the taxes legally is something many more strive to do. It is relatively easier to open and transfer money to accounts in the islands, and once it is there because of secrecy laws, it typically gets transferred between number companies a few times before it lands at its destination. The secrecy laws makes tracking the funds very difficult and very time consuming.

In a book called Canada – A New Tax Haven by Alain Deneault published by Talonbooks, Vancouver, 2015, the authors suggest that Canada ( a so called respectable country) has embraced or made it easier for companies to use Caribbean tax haven countries through treaties and various banks having a long history of branches in the region. Over the years, the customers included United Fruit – which sent more money off the islands that invested in the islands for the people; the laws have evolved that made working with tax havens much easier. For example transfer pricing is a legal method and very well used in the corporate world. The company sends money to a subsidiary in the tax haven; since it is to legal to deduct interest for loans and mispricing results. A example is the subsidiary charges $100 for what costs $ 2 in the home country. The money is in a tax free country and kept on the books of the company. The the tax rate is lower and the corporation maintains more of its wealth. The real point is the money really never went anywhere, never added any more value. The issue becomes if Canada is operating like a Tax Haven why would any company pay their fair share and what is a fair share now days?

Linking to dividend paying stocks, as investors we expect company treasurers to take advantage of the legal loopholes given by the country. We want the company to be profitable and pay the dividends and we keep more because of the lower rate of taxation. When the amounts get to be too much, as individuals you wonder if the system we have is right for our home country? or is this the way it is?

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

 

 

 

 

If life we will experience life and death, often times they bring families together. Life or a new baby is hope for the future, death is the ending of one life and celebration of the life. Death also involves doing something with the body and funeral homes. Many years ago, the ceremony revolved around the church, now many funerals are held at the funeral home for people can gather and then move to another room to meet and greet. The funeral home does not do this as merely service, there is a cost to it and it is a business. In the past, people were buried in a casket and went into the family plot or area of the cemetery; now that families live near and far, cremation is a option for the family. For the funeral home, one brings in more revenue than the other. It is with this in mind, the book Curtains – Adventures of an Undertaker-in-Training by Tom Jokinen published by Random House, Toronto, 2010 was read. Mr. Jokinen is a radio producer who was interested in the funeral business and spent a few months learning the industry and wrote the book.

Funerals tell us about changing families, changing attitudes and economics of the person. Many people really do not spend a great deal of time thinking about their funeral, for much of our lives are spent on living it. When a spouse or friends begin to die, people will have a general idea, although if your are thinking about your funeral also think about your will – have one. The funeral industry – the pick up of the body from the hospital, the dressing of the person, the getting to know the person, the obituaries that are a mainstay of newspapers, to what type of funeral makes the industry an interesting one that is constantly changing.

Linking to dividend stocks, for many years the preconceived notion of burial was in a casket which lead to funeral homes providing that service for a fee. The funeral business got used to it and was a good business to be in, with more cremations that is a lower revenue product, the funeral industry needs to change or adapt to those who want the caskets. No industry ever remains the same, however change affects all – if they are making easy money who wants to change to work for it? No matter what type of stock you own, how your industry adapts to change will be a constant theme in the years ahead.

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

The US pipeline giant Kinder Morgan cuts its dividend by 75% during the second week of December and this was a big change from years of growth and increasing dividend payments. Kinder Morgan arose from the days of Enron who sold the pipeline division to concentrate on other things. The pipeline was taken over by Richard Kinder and others and made Mr. Kinder a billionaire. For many years, it has been a great investment with a rising dividend. John Heinzl who writes in the Globe and Mail offered some lessons from the reversal. The lessons are:

1. A rising dividend alone does not guarantee anything

One of the analysis is to ask if a company not only has a dividend but raises the it and what is the expectation of raises in the future. The rising dividend can be a very good sign if it is supported by growing cash flow and earnings, a healthy balance sheet and favorable business outlook. If those things can change, then the story has a different ending.

2. High yield = high risk

In September, Kinder Morgan’s yield was 6.3%, by the time of the cut in dividend the yield was 13%. When the relative yields at the bank are much lower, the stock market is telling you something.

3. Payout ratios matter

Through the first 9 months, Kinder Morgan made 1.58 a share and paid out 1.42 in dividends, the ratio was 90%. Common sense tells you 90% for you, 10% for the company is not a good balance. The 10% left little money for reinvestment into the company and seeking new opportunities. Something had to change.

4. Debt ratings matter, too

Kinder Morgan’s bond rating was getting close to junk status. A pipeline can not operate on junk status, they needed to increase the rating and one method was a dividend cut.

5. Don’t count your dividends

Project your dividends, but do not spend them until they have been declared by the board and the money spent. Boards can change their minds.

Linking to dividend paying stocks, while we all look for simple methods to determine which of the many companies we wish to buy and hold, the financial health of the company remains  the reason why you need to do your homework.

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

Part of investing is learning and not losing money is the hardest lesson to learn. Many people in the investing world are out to get your money and scams have not changed much in the past 100 years but the emphasis changes. If you look at interest rates, they are low – if someone comes up with an idea to increase it with no risk RUN Away or stretch the time you need to make a commitment. Remember someone trying to scam you wants you to do action today.

If it sounds too good to be true it is.  Trust your gut instinct. Always get advice. Buy the best stocks you can – this is time to trust the brands.

Commodity prices for minerals and oil have fallen to new lows. If you are going to buy, look at the best companies. ideally a dividend while you wait for the price recovery. The best stocks will go up first, then the juniors make moves when prices have already gone up to justify buying a possibility. The best stocks will actually own the resources and now will be getting paid a higher price for the resources

The big warning signs according to the Financial Consumer Agency are:

You are promised high returns with no risks. No such thing there is always risks.

You are contacted by someone you do not know. The people on the phone may be nice, but they are after your money. Ask yourself if you had less, would they still be nice?

You have to act fast – a once in a lifetime opportunity. Always act slow.

You are asked to keep the matter secret.   Tell people, they may have been contacted before and have a story to tell.

You have to pay fees in advance. You should never pay fees in advance.

You are told a regulatory agency approves the investment. Regulatory agencies do not approve or offer an opinion on the quality of the investment.

Linking to dividend paying stocks, we all want to make money and have enough for our needs and beyond. Many people have done the correct things all their lives, and financial fraud is designed to take away your money. Buying dividend stocks will not make you rich this year but if you hold them for years, adjusting them on a yearly basis, they will give you a good income and prices of the stocks will tend to rise over the years.  The turtle method of slow and steady is truly a good method to use.

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

 

 

 

 

When you read the financial papers and the general emphasis is on protecting your money rather than choosing from the many opportunities to grow your money, you need to look at if at companies with moats. The bigger the moat, the better and a moat means lasting competitive barriers to entry. Ian Tam from Morningstar Research recently looked at some companies along with companies showing positive earnings and price momentum. These should be the best of the breed stocks.

Morningstar defines moats through the specific qualities associated with economic moats:

• intangible assets – brands, patents, regulatory licenses
• switching costs
• network effect – when the value of goods or services sold increase for both existing and new customers
• cost advantage
• efficient scale.

The combination of these qualities will determine how wide the moat is. All the stocks below have wide moats.

The other columns are Moringstar Fair Value Estimate Dividend by the Price, Earnings reported quarterly, 5 year growth rates and dividend yields.

Name   Company         Fair Value   Quarterly Earnings  5 Yr     3 Month   Yield

Estimate/Price  Momentum       EPS     Price Change

1. Gilead Science           1.23                 13.69%              78.88   5.99     1.65%
2. Allergan PLC              1.17                   9.3                     61.96  16.44    0
3. Magellan Midstream 1.26                4.6                     22.86  0.22      5.06
4. Monsanto                     1.33                  1.6                     17.15    14.66    2.21
5. Time Warner               1.33                  0.61                   17.05     2.71     1.98
6. Walt Disney                 1.17                  6.62                   20.51     11.78   1.24
7. Cerner                            1.15                   6.36                   21.69     0.28    0
8. McKesson Corp            1.17                   4.85                   19.64    2.98     0.59
9. Ritchie Bros Auction  1.16                    5.51                   12.41      0.15    2.47
10. CBRE Group                   1.04                   5.94                  21.81     14.59   0

According to Moringstar Research if you kept yourself in the top 10 names for the last few years, you would have average 10.8% return as opposed to the S&P 500 of 7.8%.

Linking to dividend paying stocks, often because these stocks have a moat they can continue to pay the dividends for a long time to come because they are profitable or regulated to ensure they have a good return on investment. Stock markets go up and down, only in hindsight do you know what happened, you might as well pick up income along the way and try to invest in the best possible companies. The above 10 show a starting point.

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