If you listen to politicians, they talk about the middle class all the time which is the reason why nothing gets done. There are many theories to how to help the middle class and part of the concern is while the rich can spend, they can only buy a limited number of goods and services. For the economy to do well, the middle class has to spend, however if the middle class is spending, at some point they spend too much. What is good for the economy is not necessarily good for each household.

The question is why are households including two income households increasingly going broke or declaring bankruptcy? In a book written by Elizabeth Warren and Amelia Warren Tyagi titled The Two Income Trap – Why Middle Class Mothers & Fathers are Going Broke? published by Persues Books, NY, 2003.

There are many reasons why the middle income or two income families are going broke and one of them has to do with interest costs and credit. Many years ago it was hard to gain access to credit and because it was hard, most people did not access it. They lived their lives as much as possible with it. Credit card was invented with Diners Club and know the two biggest names are MasterCard and VISA. The banks own most of the shares in the companies and individual banks “sell them or give out credit” as they see fit. If you pay off you credit cards every month, the service is invaluable. If you do not and pay fees and late payments and other fees, you are the people the banks want as customers, you make them money. There lies the problem, the people who need the most help, the people who should have the least credit and the money makers or there is very little reason to stop them from having credit to pay interest upon interest and other fees along the way.

What should the average person do – go through the financial fire drill on a regular basis.

1. Can your family survive without one income? Could you survive on one income for 6 months?
2. Can you downshift the fixed expenses? How much of the budget is fixed expenses or need to be paid month after month no matter your income? What can be cut to save on expenses? Do not stretch yourself on a house you can not afford. Most people move 4 or more times, buy then upgrade with a bigger down payment.
3. As long as your fixed expenses are low enough for you to manage through a crisis, then you can splurge or have fun.
4. What is your emergency backup plan?  Whenever possible go for the shorter commitment, that will give you most need in times of trouble. It will also save you money – you will pay less interest.
5. Plan your expenses and solutions the same as in business. If you have to pay creditors, remember companies plan for non payments.

Linking to dividend paying stocks, above MasterCard and VISA were mentioned. For the past few years, the companies have maintained a 40% return on investments and their stocks rose in value. The new concern in the market place is will Amazon, Google and Pay-pal on the phone change those margins to under 10%?  There are many reasons why the 2 income trap of the middle income group is under pressure and it will not likely let up soon, there are many individual stories of families doing ok and well.

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

 

 

 

If you listen to politicians, they talk about the middle class all the time which is the reason why nothing gets done. There are many theories to how to help the middle class and part of the concern is while the rich can spend, they can only buy a limited number of goods and services. For the economy to do well, the middle class has to spend, however if the middle class is spending, at some point they spend too much. What is good for the economy is not necessarily good for each household.

The question is why are households including two income households increasingly going broke or declaring bankruptcy? In a book written by Elizabeth Warren and Amelia Warren Tyagi titled The Two Income Trap – Why Middle Class Mothers & Fathers are Going Broke? published by Persues Books, NY, 2003. The first thing they tackle are the myths of why they are going broke because the statistics indicate their parents made less money but managed. One of the myths heard around the holidays is the over-consumption myth – they spend too much on things they do not need. While one can always find examples, the reality is clothing and food are actually decreasing in price. The real reasons are generally something else.

A dream of many people is to own a house in the right neighborhood and for the price to increase in the years to come. The choices have costs associated with them. The right neighborhood can be those with great preschool course for the children to have all the advantages. The problem is the best preschool comes with higher house prices and there is a theory about keeping up with the neighborhood. If everyone has a relatively  new SUV and you drive a 10 year car, do you fit in or would you update? These and many other costs can increase the cost of living in a home. Ideally pick a home you can afford according to the old budget formula, including making a down payment to avoid extra fees. If you choose a house and your fixed expenses consume a high proportion of your income, what will you do when things begin to break down and need replacement? in the home and in your life? House prices affect the declining middle class.

We all hope we are healthy, when a baby is born we ask is it healthy. If not health costs and insurance costs drive the budget as they are part of the fixed costs people have. If you are healthy, life is easier.

Women’s role play a good and bad part of the decline of the middle class. When women were generally at home, they were the great all-purpose safety net. Even though they were not paid, they could and did many jobs which kept families together including finding work. They were the ultimate insurance in case of unemployment or disability of their spouse. With two income families – there are extra costs but there is little leeway for the non fixed expenses.

An addition fact for the middle class is through no fault of their own, there is a high probability that one or both of the wage earners will be laid off or lose their work. In the 1970’s it was 2.5% chance; in the 1990’s the odds were  6.3% will have a “pink” slip. In the 2000’s it is likely higher.

Linking to dividend paying stocks, often what is good for the company may not be that great for the workers. As dividend investors we want the company to control costs as well as make profits to continue to pay for the dividends. In the information age, the most effective cost to cut is people; which of course means people have to adjust to something.

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

 

 

 

Everyone has access to information and seemingly it is hard to determine what will happen in the future. As an investor you want knowledge, understanding and clarity. But if you read the financial press you will generally come across conflicting stories. In an article titled Tips for staying afloat on a sea of financial new, John Reese the CEO of Validea Capital wrote he saw information suggesting oil was going down to the 20’s and oil could go up to the 80’s, one of the prices will be correct and one will be wrong. The problem is of course, each side has very valid reasons for predicting one way or another and you never know for sure until the event has passed. What do you do? Among Mr. Reese suggestions are:

1. Be a fox, not a hedgehog.

Gather as much information as you can before making a decision, particularly information representing opposing viewpoints. When you made a decision, ask yourself How might I be wrong? Then you will know how to make corrective actions, if you are wrong. If you are correct carry on.

2. Consider the track record

In your research you will encounter many people making an opinion. Some people make opinions to drive people to their funds; some opinions you will like and others you will not. One thing you can do is determine their performance in the past. Most will have done some things very well and others will be average.

3. Stick to the numbers

You can always read more information, but at some time you will need to look at quantitative systems that focuses on fundamentals and financials of stocks rather than the subjective ones. There are a variety of people who have and had a long history of making money – Ben Graham, Warren Buffett, Peter Lynch and others. You can learn from them.

Linking to dividend paying stocks, the reason why this blog suggests you start with these companies, and there are lots of them , is profitable companies will tend to lose less stock prices fluctuates) but if you hold them for a few years, the dividends plus the market price to earnings ratio will make money for you. When the market tend to go down or is bearish there is a flight to quality stocks and their price to earnings ratio goes up because they make a profit. Along the way the dividend payments add to your total return.

 

 

 

 

 

In the old story about King Midas – he loved gold so much that he wished for and was granted that everything he touch would turn to gold. This power was great when he touched his plates, his bed, his throne but became too much when he touched his daughter and could not eat because they turned to gold. The Midas story will be with us as long as our economies are based on money and the desire to have more. One of the great writers of the late 1970’s to 2000 was Anthony Sampson and one of his books is called The Midas Touch published by BBC Books and Hodder & Stoughton, London, UK , 1989. In the book and there is a TV series, Mr. Sampson explores money and people. Fortunately for us readers, Mr. Sampson knew many of the leaders of companies and countries and he gives an excellent analysis of how money makes the world go round.  For a variety of situations, you could easily change the country name and the situation would be the same as the time when Mr. Sampson was writing.

One could easily change the greenmailers for the hedge fund kings; the influence of Japan for China; and countries awash in debt have grown. We know in general, that people will strive to accumulate and sometimes it will be good (borrow with relatively inexpensive money) till it becomes bad (repay with expensive money). Fortunes will be made and fortunes will be lost and headlines will be seen of the business pages.

Linking to dividend paying stocks, if your company can stay profitable during the economic cycles, it stands to reason that opportunities can be taken advantage of during the economic cycles. During the relatively easy money, credit can be used to enhance returns; and during the expensive cost of credit; divisions of companies can be bought as the parent has to sell to pay the debts. To maintain this balance, a company has to be profitable and prudent – two easily found variables in dividend paying companies. If the companies are profitable enough to pay its dividends, then it should be profitable enough to take advantage of opportunities.

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

 

 

 

 

If you love to be in the outdoors and particularly enjoy seeing up close wild animals, you likely need a guide to help you. Whether the shooting is with a camera or a gun or fishing rod in pristine country, when someone goes into the “wilds” danger lurks. Some of the danger is from animals in their normal habitat; some of the dangers are the countryside. In the Book Andy Russell – Memories of a Mountain Man, published by Macmillan, Toronto, 1984, Mr. Russell lives at the base of the Rocky Mountains and makes his living as a guide. He takes people, typically wealthy people from New York area into the mountains to see the mountains including the animals, sometimes they shoot an animal with either a camera or a gun. In the book, Mr. Russell writes nobody knows better than a mountain guide that the rugged country in which he lives and works is never through with teaching him as long as can put one foot ahead of the other. The mountains have a way of never letting you bask for long in the feeling of having graduated to the ultimate crest of skill where nothing can touch you. They have a way of springing things on you when you least expect it; moments of profound truth where your heart is in your mouth, when you know you are looking at death and survive. Mr. Russell goes on to state some times he almost died but somehow did not. Treating nature with respect is a theme throughout the books.

Linking to dividend paying stocks, in the same manner the mountains need respect for guiders, the market needs respect from investors. Anyone who does not give respect to the market and takes it for granted will lose money quickly. Although this blog suggests it is easier to work with the market though dividend paying stocks, markets go up and they go down. Sometimes for no other reason than the tide goes in and it goes out.

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

 

 

 

 

The subject of the book The Greatest Game Ever Played is golf. The book was written by Mark Frost and published by Hyperion, NY, 2002 and if you consider the many tournaments played the narrowing of the field must at first glance be very hard. The book is about the September 1913 US Golf Open – this was at a time the British and Scottish golfers dominated the leadership board at any tournament. Part of the reason was two British golfers were simply the best in the world – Harry Vardon and Ted Ray and in terms of golf courses in the US in a relative sense there were not that many so there were not that many championship quality golfers. The US Open was the changing of the guard when US Golfers would become more dominate. Within the mix of the top professionals (and the money won meant there was a new tournament next week and being the golf pro at the golf course) and a few amateurs. One of those amateurs was a 20 year old Francis Ouiment. If you check Google – Francis won the tournament and golf became very popular to where you will find many golf courses.

Watching golf without knowing much about it is generally a less exciting event – watching it on TV with commentary brings in the decision making process and the understanding why those who play, play the game. An example in the book is: to stand in the still, perfect sweetness of this place outside of time, a club in his hand, looking down at a small white ball, knowing exactly what he was about to do.  To bring the focus to reality by executing the shot desired using all the mechanics of physics.  The book has wonderful descriptions as seen above and makes it an exciting reading.

Another aspect of the game of golf or at least championship golf is the poker part of the game – bluffs, perfect shots, and psychological warfare, the stresses. In non competitive golf, the above are much more friendly including walking in nature and sharing an outing.

Linking to dividend paying stocks, after the 1913 US Open, more people took up the game and business changed to what it has grown today. After the US Open because Francis Ouiment was an amateur, lived across the street and was a former caddie – golf was seen to be open to more than the idle rich. Each industry has a turning point where it becomes the standard, at some point (it is easier to see looking backwards), after that date it seems easier and then consolidation is the next stage. At the consolidation stage, it is easier to invest in dividend paying stocks.

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

For many people on the planet, the furthest they will go is within 100 miles of their birthplace, for others the world is their playground. For the later group, there is a magazine which is devoted to ensuring they see the sights few see – Conde Nast Traveler who tries to have great writers write about great places, thus making the journey and destination both important. With great writers, the descriptions are wonderful to read. The Book of Unforgettable Journeys was published by Penguin Books, NY 2007 and takes a person around their world in your reading spaces. An  interesting addition to the chapters are after the story are companies to help you if you decided to journey to one of the places described. It is one of those wonderful books to read in the winter for helping you decide where place you would like to journey to.

Linking to dividend paying stocks, similar to taking a trip there is or should be some preparation or research. Having a reasonable idea of where you what to go and one or more highlights you would like to see. If you buy a stock, you should have an idea why and some benchmarks on what would be a reason to sell or to hold it longer. For dividend stocks, the journey or receiving dividends on a regular basis helps make the decision process easier.

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

 

 

At the Climate Meetings in Paris, one of the many solutions to climate change is to have more vehicles move from gas powered to electric powered with the electricity generated as clean as possible. If that change happens, the utilities companies will continue to be even more valuable. At the moment we look at utilities both for their continuing abilities to pay a dividend and the outlook for interest rates. If interest rates go up, the stock tends to go down, however the dividend rate continues to be paid. What companies are the ones to buy?

Peter Ashton of Recognia Inc published a chart in one of the newspapers on oversold US Utility Stocks.

The criteria he used

1. minimum market capitalization of $ 20 billion  or the larger more established companies
2. companies are currently trading at least 10% below their 52 week high.
3. dividend yield of at least 3%

 

Rank   Company                Ticker   Recent      Mkt Cap    % chg            Dividend

Close          US Bill        from 52 high  yield

1. Exelon                         EXC-N    27.70     25.5         -28.8%           4.5%
2. Duke Energy              DUK-N   67.72      46.8         -24.7             4.9
3. Southern Co                 SO-N     44.58      40.7        -16.1               4.9
4. Dominion Resources    D-N    67.22      40.1         -16.9               3.9
5. American Electric     AEP-N     55.61      27.3         -14.9               4.0
6. PPL Corp                       PPL-N     33.65      22.7         -11.8               4.5
7. PG&E                              PCG-N    52.36      25.7          -13.0              3.5
8. NextEra Energy           NEE-N    98.88     45.7          -12.2              3.1

 

Linking to dividend paying stocks, the important aspect of this chart is trying to lower your risk and keep your money. To lower the risk, narrow the field and determine why the companies went down and sometimes the market oversells. By exercising control or doing nothing but ready to do something, you can buy seemingly bargains. Are the companies a good buy now, it depends on how long you intend to keep them. If for a long time, the answer is yes.

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

 

 

 

If you watch business shows on TV either Shark’s Tank or Dragon’s Den you will have seen Robert Herjavec sitting on chair 5 and offering good advice and sometimes offering money. Mr. Herjavec was written a book called Driven – How to Succeed in Business and in Life published by HarperCollins Publishers, Toronto, 2010.

Chapter 31 Everything in Life Involves Selling Something

Mr. Herjavec is an admirer of anyone with great selling skills.

4 Qualities of Outstanding Salespeople

• They believe in what they do
• They enjoy and engage people
• They listen more than they talk
• They eliminate reasons not to make the sale

At its core, selling consists of relating to another person and persuading that person to go somewhere he or she had not planned to go.

Good salespeople know where to apply their energy with a potential customer and when to stop wasting their time on tire kickers and window shoppers.

Planning a sales pitch to a customer with my team begins reviewing all the good things that are likely to happen including reasons why the prospect will surely respond positively. The answers come, then tell me the reasons why we will not get the sale. Once we eliminate all the reasons for a prospect to say no, the only answer that remains is a yes.

Chapter 37 Humility is More Effective than Arrogance

It is never pleasant when things go wrong, but it is never wise to assume the other person is to blame either. When things do go wrong, it is a good time to learn how to improve the way you do business and to appreciate the difference between optimism and realism.

The longer Mr. Herjavec is in business, the more he realizes that success is almost never hinges exclusively on the quality of your product or service. It also involves on the people you deal with and the way they relate to each other.

A successful sale depends not as much on how well you communicate the content of your pitch as how good you make people feel.

If a pitch does not go well, try to learn call the group and ask what you did well and what you did not for the next time. Perhaps you can do better and the relationship can become one of your biggest customers.

How I Handle Customer Complaints

• Assume the client is right 99.9% of the time and move on
• Remember the role that customers play – you are in business to serve your clients, who pay the bills
• How to fix things with clients is as important as what you fix
• There is no such thing as a small complaint – address and solve all complaints
• The ultimate complaints are usually expressed silently – most do not complain, they walk away
• The first response to a complaint must be good communication
• Test your system to anticipate and eliminate complaints
• Treat your employees like clients
• Solutions are important. Blame is useless, do not finger point – solve first.
• When the problem is solved, analyze. The goal is to find ways of preventing reoccurrence.

Linking to dividend paying companies, there are more chapters and information in the book which is good to learn from. After buying your shares, you tend to pay more attention to the company and one method is how they sell and how they handle complaints. The better they do it the better the financial results.

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