Every industry is generally content with the ebbs and flows of the economy of the world, there are cycles which people try to prepare for, generally not very well, but they try. What throws a wrench into the plans are crisis, for as much as we all talk about crisis planning, we are not very good at it. Whether the crisis is a some sort of violence attached to it or it is medical related. In the classic case of medical is J&J reaction to its drugs being laced with life threatening drugs. J&J pulled all of its medicine off the shelf and changed its production facility to have the aluminium foil on top of the drug, plus the move to pressed down and turn tops. This action which initially cost millions, save the company billions and their actions is considered to the classic case of what to do. In the not being prepared and not sure what to do is the book Cattle Crisis by Scott Wooding published by Fitzhenry and Whiteside, Markham, 2006. The book focused on the Mad Cow disease or BSE in the Canadian cattle market.

For many years, Mad Cow disease was not seen in North America, it had been seen in England and almost destroyed the cattle industry. One would think those in the industry would have crisis management plans if the diseases showed up. If the disease shows up, the effect on humans is not good, which means all countries of the world would close its borders to meat exports. This is to be expected, the issue is how does the industry move to come back to normal. Prior to the border being closed with a case of BSE, 90% of beef exports and 99% of live cattle exports went across the border to the US. In addition, the biggest meat packaging plants are owned by large American companies. Cattle farmers and the supply system did not treat the border as that big of a deal. The industry was expecting the case to be isolated, it would take a few lumps and all would return to normal. Then a second and third case happened which brought out the protection issue and a presidential election meant delay is better than saying yes. The result is the beef industry went into a two-year depression with affects all throughout the economy.

It could have been, the beef industry thought the government testing was adequate and maybe needed to be expanded. Another issue is no one is really certain what cases BSE and why one steer is affected and not another, but what does happen is when the borders closed, there was a glut of beef supply which sent the price down. The governments of the day reacted by giving price supports to the beef farmer, which sounds good. The meat packers benefited because of the various methods they ensure they have a product for their plants.

In the years since, all cattle are tracked and there has not been any cases of BSE however the issue of the day is what should the industry do in the worst case. Over time, there were programs to reduce the supply and price supports but with government money time is not on your side, government money takes months rather than weeks.

Linking to dividend paying stocks, it is worth looking in the markets the company receives its greatest profits to pay the dividends, what is the worst crisis the company has to manage and can it? or is it dependent on either the government or the normal flow of economic cycles? If it is, reduce your holdings for the recovery will be long time in coming back.

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

The transformation of the city of Mecca is the book written by Ziauddin Sardar titled Mecca The Sacred City published by Bloomsbury, London, UK, 2014.

Mecca as the maps show is in Saudi Arabia and the House of Saud is in charge of its upkeep. Thanks to oil wealth, the city has been radically changed for the better or at least what its rulers believe is the better. At times, the religion is more puritanical or less religious diversity is seen. One aspect was to expand the Mosque because pilgrims went from 200,000 to 2 million. It was both easier and less expensive to arrive at Mecca, which lead to many changes for all. The city has changed, wealth and those catering to the wealth changed the skyline of the city from what it once was. The Hajj and the aspect of going to Mecca at least once in a lifetime if one is able is open to more people which is good. For the author who has a long history with the city, sometimes it is hard to see the past structures served their purpose, but with more people changes needed to be made. In the end Mr. Sardar believers Mecca is a place of eternal harmony, something worth living for and striving to attain. it has always been and it will always be.

Linking to dividend paying stocks, cities which have a religious reason to exist will occasionally be divided by people and their views either too liberal or too conservative. If they operate with peace and diversity is open, sometimes the most amazing results will occur, unfortunately people are people and they will jockey to take power. Similar to dividend paying stocks, to take power means sometimes management is great and sometimes, one hopes their grasp will slip away quickly for the asset or company is truly special.

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

If you are Muslim, one of the commandments is to visit Mecca and walk around the Kaaba 7 times if you are able. In the early days of the Muslim religion the aspect of if you are able meant most people did not go to Mecca, however with the rise of the middle income millions now go. Mecca was the birthplace of Muhammad and God’s words were first revealed to him in Mecca, but the city did not embrace him till much later. Before Muhammad, Mecca was a pagan worship city located on trade routes which made the city or town important for a month or two. After Muhammad, as the rules of praying is to face in the direction of Mecca, the city became more important and dependent on pilgrimage. The transformation of the city of Mecca is the book written by Ziauddin Sardar titled Mecca The Sacred City published by Bloomsbury, London, UK, 2014.

In and around 785, the Santuary or the Haram was changed to what we see of it today. The 484 columns were built and with the completion Mecca was changed from a “backyard” town to a rich, cosmopolitan city with all the good and negative aspects of city life. It was during this period, those who came to study, came and question and find answers. Once can easily imagine many different ideas of what Muhammad actually meant or did not mean. In addition people wanted to send precious goods to Mecca either as presents or to be sold to the travellers. This meant bandits threaten the travellers which the government would need to deal with.

As the city grew, it faced danger from other empires who were intent on taking Mecca, however when the city was at peace, the city would be prosperous for the wealthy would compete with each other to build mosques, fountains, schools, public baths, libraries and hospitals. Mecca had the kind of infrastructure that other Muslim cities had for centuries. One of the methods Mecca received funds was the surre of the Holy Cities. The word surre is from the Turkish word meaning precious gifts. The people established many foundations which were aimed at part of life in Mecca and distributed at the Hajj time.

Although many rulers wanted to do development work – the consulting time was months which meant projects took decades to finish. The city went through its ups and downs as cities and empires went up and down.

Linking to dividend paying stocks, you will likely pick one of more of your stocks as the jewels in the crown and expect to hold them for a number of years. That may turn out to be an excellent decision, but know that all companies similar to cities go up and down even though the importance of them remains. In the case of Mecca, as the city is very important to those who pray and because of the event everyone would have and does have an opinion about the city. Sometimes the leaders are not any good and add little value to the holdings, sometimes they were great. Cities like Mecca will bounce back and more about that in part 2

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

One of the tasks around the home is to cut the lawn, while lawn additives are rarely used, the grass grows anyways. In parts of the lawn the grass is thicker, in parts there is puttering around to add to the soil for the grass to grow thicker. Besides having a mulch lawn mower – the grass cuttings go back onto the grass and cutting up the leaves in the fall, for the most part the lawn does what is best for itself by itself. However, if the forecast during the week is for rain, it will mean the lawn will need to be cut every week till the summer months heat up perhaps it will be every two weeks. It might be the household maintenance that is practiced is an exception for there is a multi billion dollar lawn companies. If you go to your local hardware store, it is easy to see the names and you can always ask if people are actively doing something to their lawns or being passive. You will find active tends to win out.

Linking to dividend paying stocks, these are the companies while you can tinker with them, their payment of the dividends is consistent. Ideally, you want your company to increase profits every year and thus increase the dividend, but as long as the dividend is being paid you have won half the battle. Similarly the lawn is growing no matter what I do, the dividends are flowing no matter what I do or do not do.

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

If you look at the new products in the marketplace, more and more of them are connected to the internet and to your smart phone. Some of them have value, some have convenience, but there is a bigger and bigger trend. The trend is called the Internet of things.

An example of the internet of things is the Nest. It is a device to attach to your thermostat which can be controlled from your smart phone. To do this first – a sensor must determine the room’s temperature. The information has to be converted to something which the device can understand. Another chip converts the information for your home’s heating and cooling supplier to understand. Another chip converts that information to your smart phone where you can do something or nothing. This relatively simple tasks uses a variety of chips to implement.

If there is a trend, there are methods to make money from and one way is to look at the semiconductor companies or the companies that make the chips which power the internet. There are choices, which means some will do better than others, but according to David Milstead writing in the Globe and Mail under the article Semiconductors primed to power the internet of things. Mr. Milstead took the list from 100’s to 12.

Company                        Ticker      Mkt Capital  Revenue    Net Income    EV/EBITDA     P/E       Dividend Yield

(US$Mill)     (US$Mill)     (US$Mil)                                                    %

Ambarella Inc.             ANBA-Q        3,495           248,              64                   27.22x        35.3               n/a

ARM Holdings             ARM-LSE      24,718        1,302            433                                    34.5              0.6

Atmel Corp                  ATML-Q          4,124         1,394             47                  15.58          21.1              1.6

CEVA                           CEVA-Q            404              51            – 2                                       44.6              n/a

Imagination Tech           IMG-LSE         946             262           -13                   18.69         33.8              n/a

Intel Corp                      INTC-Q         151,096        55,887        11,766               6.31          14.1              3.0

Microchip Tech             MCHP-Q           9,639          2,147             369               9.56          16.4              3.0

Nvdia Corp                    NVDA-Q          11,675         4,730            628              10.03         19.6               1.8

NXP Semiconductors   NXPI-Q             24,446        5,868             322               13.7          17.5               n/a

Qualcomm                    QCOM-Q         110,199       27,491           7,157             10.18       14.6               2.8

Silcon Lab                     SLAB-Q               2,412          369                 36              16.87       24.2               n/a

Texas Instruments          TXN-Q              55,805        13,212           2,990           10.92       18.3               2.5

Source  S&P Capital IQ

EV/EBITDA and P/E are based on analyst’s future earnings

E/V is enterprise value which is market capitalization plus net debt

EBITDA is earnings before interest, taxes, depreciation and amortization

Linking to dividend paying stocks, you will see from the above 7 of the companies are paying dividends which allows both money to be invested into the sectors of the economy where more chips are used as well as pay dividends to you. The larger companies tend to be more diversified into products that people are buying and have adapted as people moved from desktop to laptops to smart phones – the chips are different. Every once in a while you need to go into a computer shop or look through a computer magazine to see what opportunities people see in the future. With every trend, there will be winners and losers, some with go on for a period of time, some will be short. Often times with larger companies with cash on had, they will be able to move through the trends a little better than a small cash strapped company.

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

A couple of weeks ago, my hair was cut by the barber which given the warmer weather it felt great. If you think about the hair care industry – billions of dollars are spent every year, we all grow hair. We have to do something with it or the hair will grow towards you feet and you will be doing something with it. The are divisions of companies which cater to hair such as Head and Shoulders which is part of Proctor and Gamble (P&G); there are many hairdressers which means some are very good and others likely just good and remember your hair does grow back. There are many price points to cut your hair which means some people earn a sizable income from cutting hair. Next time you are in the shop look around at the products the hair dresser uses and you can begin investigating.

Linking to dividend paying stocks, while we all grow hair, the direct link to making money from the hair care industry is not as simple as you first think it should be. The entry point into barber chair is open to many participants – many hair cutters rent the chair, which is one reason why people move around. To make money is to find direct linkages or products that are used by the mass group of people on a regular basis. To make money you need to be selective.

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

 

Last weekend the author attended a dance rehearsal of a ballet company, there were some obvious benefits of watching young women and some men stretch their bodies in front of the audience. The class started the exact same for the juniors to the senior members of the dance company – everyone started with the same exercises. They do this 5 or 6 days a week, for the dancers likely 7 days, but everyday, they start with the same stretching of muscles and move on to where their bodies can turn out. They do not start with the exciting stuff, or go through the motions, they stretch until they are ready to do the big turns. The teacher made comments and one of the things he said was to complete the circle.

Linking to dividend paying stocks, similar to the dancers you start at the basics before you jump to the more exciting stuff. The basics to investing is make a profit – sell more goods than you buy at a healthy margin. It sounds simple, it is hard to execute. If you invest in profit making companies, the stock market will reward you in the short and long term with higher multiples and when the market goes up and down, the profit making companies retain their value longer and bounce back faster. Think of the circle or the economic cycle but start with basics – does the company make a profit to pay the dividend? then ask how much more?

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

Similar to most countries around the world, the US economy was first settled on the shores by the sea, eventually railways were built to carry goods and people, then highways were built to carry cars and people and now planes help move people around. In the era of the railways in the western US, there were only a few routes to go through the mountains, and the first trains that made it had a monopoly and the seemingly easiest paths. There are many stories about building the first national railroad, suffice to say it was built. After it was built great amounts of coal and minerals including gold were discovered to ensure the need for the freight trains. In the year 2000 David Haward Bain who previously wrote a book about the building of the Union Pacific decided to follow Highway 30 by car with his family – on a road trip. His purpose was to view from the highway what many had done from either covered wagon and trains and go west. The book The Old Iron Road by David Bain published by Penguin Books, NY, 2004 is the result.

There are many stories which result about the west and the opening of it to settlements. While driving and stopping and viewing then researching the history of the sites is the book which makes it a very interesting read and it hoped if anyone goes on road trip they will do something similar. In the end, people wish to make a living and move towards where there is opportunity, In the west, the projects tended to be big and still are for on the plains – there are lots of open space and in the mountains, mountains need to be moved.

Linking to dividend paying stocks, if you read a book such as The Old Iron Road, you will notice chance is not something that happens very often, there tends to be a reason. A town is selected as the switching yards over another community; the promoters of the railway have a side deal with someone who can guarantee them tonnage shipped; what we do now with machines back in the 1880s took lots of people (who all have stories); there are lots of booms and busts; generally we try to remember the positives of what really happened. There are always good stories and some of them will help you make money or by looking towards how sustainable the ventures are will help you keep your money. For example a town is a switching yard, it is hard and expensive to move the institutional investments; it is possible but hard to, asking yourself why will the area continue to generate funds for the company is a good question.

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

The sun is shining and the world is open to you – the road awaits and you maybe off on a road trip, did you look at a map before you leave? Most people do, unless they are planning on going the same way as they did before. Have you ever thought about the map or atlas? who drew them? who was the first? what skills were needed? what was going on in the world and did the person actually have to travel around the world to know? The book Mercator – the Man who mapped the planet by Nicolas Crane first published by Weidenfeld & Nicolson (paperback by Phoenix in 2003) London UK, 2002.

To make maps, particularly in the 1500’s took many skills, not the least is gathering great amounts of information to properly fit on the map. One can think about our present day, most of the world has been discovered but names of places continually change and need constant updates for the most current map. If you think about the 1500’s the patrons for the globes were typically the princes or kings of the government of the day. Each of them had slightly different religion or thoughts about religion and it was reflected in the maps of the day. For the maps of the day, did not just have land masses but drawings on the side to show the importance of the prince or king. In the 1500’s this was both good and bad – the Catholic Inquisition happened (Luther had introduced Protestant and the leaders who were Catholic when they went to war jailed anyone they thought or supported the Protestants), which meant the symbols on the maps could put and did put Mercator into jail. Fortunately, the university supported him and academic freedom helped release Mercator from jail.

When Mercator was not bothered by the clergy or Imperial pressures, his thought process was free to take lateral excursions, changing course, bursting the banks to flood the fields of conventional wisdom. Mercator’s greatest asset: the ability to reconcile apparently disparate concepts, to articulate the result with unprecedented graphic eloquence. Some would describe his gift of one of originality; he viewed it as an exercise in harmonization.

In a simpler language he took the great amount of information, and determined correctly how it fit and communicate that thorough his maps, which allowed others to make decisions. In addition, in the mid 1550’s the center of books and printers and dealers of Europe was Frankfurt and the twice yearly book fairs drew the  public. Mercator was represented and the quality of his map making lead to sales which allowed him to continue to make more maps.

Linking to dividend paying stocks, Mercator was a great map maker which lead to making maps, but the real story is the ability to sell his product through the printing houses of Frankfurt. His ability to harmonize the information, the placement of longitude lines which made sailing accurate, his use of italic in the font, through the use of triangulation he became the world’s first scientific mapmaker. There is much to celebrate about Gerard Mercator, to bring us to mere morals, it helps if you have a map for your investments. The map can be goals, expectations, when to sell, when to add to your holdings with an understanding things happen in the world, most of what happens is beyond your control.

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