There has been a boom in accessing oil from shale which has been great for the economy, giving domestic energy towards self sufficiency and made money for many people connected to the oil industry. Similar to every commodity, too much of a good thing means lower prices and the shale industry is doing very well. Oil prices have dropped and there are concerns which is probably the reason why interest rates have not gone up. In a related article, Carl Mortished writing in the Globe and Mail – is solar having its shale moment? Thanks to technology, solar panels are decreasing in price which is one of the reasons why my home is being outfitted with them this year. With more homes being fitted with solar panels, there are opportunities for investors. Mr. Mortished believes 3 factors made the revolution of shale from oil possible. These were entrepreneur behaviour and innovation, market demand (high oil prices) and human aspiration. These 3 factors play well for solar power systems – energy self sufficiency is in public policy for hundreds of years – the ability to generate electricity is a good fit. Solar power systems have been falling in price and should fall another 40% over the next 4 years which means they cost less and bringing in extra income from your home will be the normal thing to do. Human incentives, fears, and aspirations are powerful and can drive economic policy in a way that high level policy can not. It is the human capacity under pressure to find solutions and seek gratification that will bring about the solar revolution.

Linking to dividend paying stocks, as the price comes down whether you pay for your solar power system or go through a 3rd party, solar panels will generate an income to offset or ensure your electricity bill is nil or maybe even positive cash flow. As costs fall the equation looks like a bond or guaranteed dividend payment. At some point in time, the biggest home builders will buy a solar company because people will expect their homes to have solar panels. Increasingly there will be greater opportunities to make money in the sector. The 3 factors from the article entrepreneur behaviour, market demand and human aspiration can be applied to any emerging industry, just ensure there really is market demand.

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

A number of years ago, there was a popular movie starring Gregory Peck called the Boys from Brazil. In the movie, former high ranking Nazi members escaped from Germany with treasures – gold, jewels and  money. and set up operations in South America where they felt comfortable and had dreams of rebuilding the empire. In a book called Inside the Fourth Reich by Erich Erdstein published by St. Martin’s Press, NY, 1977 fiction becomes fact. When the war is over, what happens? Typically the leaders are punished and former enemies become partners. Typically it would take plus 10 years because during war – in the name of the cause humans treat others very badly. In Mr. Erdstein’s book, he found a new life in South America and eventually moved in the justice department. He began to hear stories about how Argentina with its links to Germany encouraged Germans to come after the war. When Peron left, other governments welcomed the Germans, espically members of the Nazi party. In turns out after great research, undercover work, and the use of police resources there were very strong links to senior members of the Nazi Party. Safe houses or ranches, people who benefited from Nazi Party being in power were alive, functioning and trying to recreate their dream.

In the book, Mr. Erdstein notes his past experiences helped make him track through the web – his experiences included illegal activities, government relations, undercover work and working in justice. Part of the reason is to unravel the web, it is never a straight line the process goes through pieces of information and misinformation to narrow the move down to the next step. There is a reason why it is very hard to find the former leaders – they hide and are protected. The end of the book while the journey was very exciting, eliminating the leaders did not make the Nazi’s disappear.

Linking to dividend paying stocks, leaders lead and they should take responsibility if things do not go well. As an investor, it should not feel like Mr. Erdstein’s journey through the complex web, for if it does, you should move to other companies. There are many companies that are much more straight forward about how they earn their money, make profits and return money in the form of dividends. The complex companies tend to break the law, the simple ones are the ones you can depend on for longer periods of time.

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

As a person living, you will be in a variety of groups throughout your lifetime. Most of them are design to ensure you have extra support for example the church is moral supports; for some with extra disposable income – investment clubs will appear. For the elite, those who do not have to work and have a well above annual income – part of keeping the lifestyle is investments. In the book Secret Societies of America’s Elite written by Steven Sora published by Destiny Books, Rochester, Vermont, 2003 the Knights Templar and Masons have been a connector of America’s elite. If you were in, it was easier to amass greater fortunes. The way to be in was to be a merchant particularly an investor in the shipping business. The ships carried goods and services – soon of it legal and some of it illegal. Of the illegal side, slavery and opium were part of the freight which went around the world. If you think about the cocaine barons of the present time – the opium barons are now institutional in the US. Some of the biggest fortunes received healthy foundations to branch into other businesses including real estate, banking and insurance. The continuing wealth gave money to universities and museums to increase the goodwill of the families to the broader public.

Linking to dividend paying stocks, a book such as Secret Societies is an interesting read and shows how the myth of the US as open to everyone is not exactly true. It also shows or demonstrates how companies will use the resources of the state to increase or maintain their abilities to continue to deliver profits. There are many connections as long as the owners continue to be able to profit, connections are used. If you invest in an upstart it can show you how big the odds are against you. To shorten the odds, buy into the connections and let them work for you.

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

As an investor, it is hard not to like Jim Cramer and if you read his books you will gain plenty of ideas on not losing money and more importantly making money. He wrote a book called Get Rich Carefully published by Penguin Books, New York, 2013. One of the wonderful things Mr. Cramer does is tries to ensure you do your homework before investing.

The hardest thing to do in the market is to sell unless the company is doing really badly, but in reality someone is on the other side doing the buying. Lessons on when to sell or view better opportunities:

1. When the thesis changes, cut your losses immediately.  – You bought the stock for a reason based on research or homework. If the reason changes, other companies in the same industry can be great alternatives if you want to stay in that sector.
2. Don’t risk it all for a small profit – if you see the sector is in danger, move to alternatives.
3. If a stock goes down on great news, just sell it.   Good news should send prices higher, if the market sends in lower something is changing in the sector that you need to exit.
4. Upgrade clusters should be sold, not bought.  If the stock is moving higher because of the upgrades of the analyst, what happens when they are all bullish? If the next quarter is so-so the movement of the stock will be downwards.
5. Beware of multiple shortfalls – if one company falters, look at the alternatives, if they falter sell
6. Sell stocks that don’t participate in rallies – if you own multiple stocks and the market in general goes up 1% look at your companies did they also go up? If the market rallies the next couple of days did you stocks go up? It is a good time to sell because the market is buying other things.
7. Sector woes = sell.  All stocks are in sector baskets, if all the stocks in the sector are going down, then it is time to go to alternatives and wait for the bottom based on earnings. Then you can buy back in at lower prices.
8. After the crash, no financial should be given the benefit of the doubt – it used to be the banking industry was a wonderful sector to be in. The new rule is if you get bad news, do not battle it just exit the company.
9. Retailing’s tough- bad comparable store number means to sell – If the company is not selling inventory, it will be even harder the next quarter.
10. De-diversification can be costly – if you are diversified but to close to one commodity – prices go in cycles and the market will go down.  Watch your portfolio and try to stay really diversified.

Linking to dividend paying stocks, there are other lessons from Mr. Cramer’s book but it is sufficient to say listen to the market and the market is right. If you do your homework, always try to buy the better companies, you will do better. If you do not sell, ensure you are getting a dividend because the price will go up and down. To follow Mr. Cramer’s is to follow growth patterns because Wall Street loves growth. For the longer term, investors love stability and dividends. For best results, have cash and be ready to buy when the best stocks are lower in price and watch as they rise in the near future.

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

As an investor, it is hard not to like Jim Cramer and if you read his books you will gain plenty of ideas on not losing money and more importantly making money. He wrote a book called Get Rich Carefully published by Penguin Books, New York, 2013. One of the wonderful things Mr. Cramer does is tries to ensure you do your homework before investing.

Mr. Cramer has a Charitable Trust company to be an open showcase of how to run public money; he has a private company, but to allow people see what decisions he is making. Running the charitable company allows him to showcase execution – when to pull the lever to buy and sell. One thing it does show is no one on Wall Street is perfect – people make lots of mistakes and have lots of winners. Some lessons

1. Changing you mind about a changed company.  Wall Street rewards company’s that have extra value technology or products as opposed to commodity products. Commodity products can be produce anywhere and somewhere in the world it is cheaper. Extra value products have higher margins or make more money. Companies change but it takes time to see ie PPG
2. Learn to like Stock Offerings – companies issue stock for lots of reasons and they are not necessarily bad for shareholders. Issuing shares is cheaper than debt – the question is what are they doing with the money?  Sometimes all shareholders benefit greatly so learn to take advantage of the situation.  Ie Real Estate Trusts, Kinder Morgan Energy Partners
3. Buying an Estimate Cut – sometimes the cut means the bottom and next year will be better.
4. The market will always tell you if they are low enough.
5. Buy when linked quarters bottom – on the charts if you believe in the company and the quarter is no worse than the last quarter, this is a buying opportunity, it should be better next time.
6. Know your Metrics – each industry has a key metric which needs to ranked first, then EPS.
7. Don’t touch that core holding! – you own for many reasons, if the business is still the reasons why you bought it, keep it till the business changes, then sell – you will leave less money on the table
8. Make each buy matter – how to buy. In the example Mr. Cramer uses if you want to buy 150 shares start with 50, see how the price goes. If it goes down a point, you can buy more. Always buy at lower prices. Remember the general market goes up and down, when it comes down there are great opportunities to buy.

When Not to Buy

1. No worst-of-breed buying – always buy the best companies – there are lots of them
2. Cash isn’t always king – cash is wonderful on the books, what matters is what is done with it.
3. Don’t blame the customer – if a company blames a customer, check to see if the customer is buying from someone else, perhaps a better product or service.
4. Don’t tell us not to worry – when the company says don’t worry, exit quickly. If the company has accounting irregularities exit quickly or just stay away for 6 months.
5. There is more to life than cost cutting – companies that can cut costs but not grow revenues are not worth having.
6. Stay true to your convictions – if you have done your homework, and you think a stock is cheap on the numbers continue to hold. Stocks bottom when companies meet expectations after repeatedly missing them. The question to ask are expectations being met?
7. Don’t violate the cost basis – never buy any stock above your cost basis unless something absolutely transformative has occurred that you think has not been given its due by the marketplace. The change has to be material to its expected earnings performance.

Linking to dividend paying stocks, Mr. Cramer offers great advice which is hard to do. With dividend paying stocks, you are likely to hold for the dividend which means the price goes up and down, however when it goes down there is buying opportunity if the reasons why you own it still remain.  If you try to follow Mr. Kramer lessons you will lose less money and get rich.

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

As an investor, it is hard not to like Jim Cramer and if you read his books you will gain plenty of ideas on not losing money and more importantly making money. He wrote a book called Get Rich Carefully published by Penguin Books, New York, 2013. One of the wonderful things Mr. Cramer does is tries to ensure you do your homework before investing.

For long term investing, the key to understanding is to identify the big-picture themes or megatrends for the era in which you are in. After identification, instead of a spraying of a shotgun, figure out the best companies to and can take advantage of the big themes. Taking advantage means to make money and managed the company. The advantage to doing this piece of homework is Wall Street goes through cycles or goes up and down. On the down cycle, you can buy bargains, which is why Mr. Cramer only recommends going after the best companies in the theme.

The themes Mr. Cramer believes the trend s will be around for the next 5 years are:

1. Tech companies that embrace the 3 aspects of Social, Mobile and the Cloud.  If you are older than 30 you might think tech as the desktop, the theme is tech as the laptop and mobile phone. It does not mean the other companies are not as good, but for growth companies  – the names of companies to examine are Google, Facebook, Salesforce.com, LinkedIn, Amazon
2. Companies that keep you healthy – the attitude towards food has changed.  Companies such as Whole Foods, Hain Celestial, Chipotle, GNC Holdings
3. The New Frugality – saving money or low cost, good quality – Home Depot, Lowes, TJX Companies, McCormick (spice) , Costco, AutoZone, Six Flags, Priceline
4. Anticompetitive Mergers – airlines mergers US Airways and AMR;  car rental companies – 3 companies control 87% of the business Hertz, Avis and Enterprise; Gannett publishing was able to buy into TV stations; Walt Disney; PVH and VF Corp, Eaton
5. The Power of Innovation – tech in the old style companies for them to change and innovate. Examples are Colgate, International Flavors & Fragrances, Under Armour, Domino’s, DuPont
6. The New Pharma – Celgene, Gilead, Biogen Idec and Regeneron
7. Oil and Gas produced in the US – EOG, Core Labs, Occidental Pete, Schlumberger, and Kinder Morgan Energy Partners.

The idea of looking for the big megatrends is for you to see how the better companies are managing and you can hitch a ride. Mr. Cramer recommends you pick them up on the downturn of the cycle and ensure the reasons you bought them remain.

Linking to dividend paying stocks, for Mr. Cramer growth is the key but whether you invest for growth or dividends it is always best to invest in the best of the companies. They tend to have less risk and are easier to monitor.

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

As an investor, it is hard not to like Jim Cramer and if you read his books you will gain plenty of ideas on not losing money and more importantly making money. He wrote a book called Get Rich Carefully published by Penguin Books, New York, 2013. One of the wonderful things Mr. Cramer does is tries to ensure you do your homework before investing. You have money and what to invest in – if you are not sure try a low fee S&P 500 Index which is the bench mark all the money managers are trying to beat and if they do not you have done better. If you want to invest in individual stocks, then you will need to do your homework.

You done the macro level and decided to pick a sector or two to invest in, what do you do?

You ask more questions and Mr. Cramer has 10 tests of high grade stocks:

First Test – is there potential for multiyear growth that we can put a value on? A clear growth path that provides long-term visibility with multiple revenue streams?

Wall Street loves growth, does the company you are looking at – know how to get it? What trends support it?

Second Test – Is the total addressable market big enough for the companies to sustain their growth?

Third Test – Does the company have the ability to stay competitive?

Fourth Test – Is there a possibility for the company to return the capital over time, through either dividends or well-timed buybacks?  Or does the company have such a well-defined growth path that it can just continue to pile the money into the business to get consistent growth?

Fifth Test – Can the company expand internationally?

Sixth Test – Can the balance sheet support strong growth?

Seventh Test – Is the stock expensive on the out years?

Eighth Test – Does the company have the right management?

Ninth Test – Does the company need macro growth to meet the numbers?

Tenth Test – Can the company maintain or grow its margins?

Linking to dividend paying stocks, when the growth stock is also a dividend payer that is a bonus. One of the reasons why you want to start with dividend paying stocks is to get the discipline to eliminate the ones who do not pay a dividend. There are much more of them than dividend payers. The idea behind doing your homework is to narrow the list of companies for you.

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

As an investor, it is hard not to like Jim Cramer and if you read his books you will gain plenty of ideas on not losing money and more importantly how to make money. He wrote a book called Get Rich Carefully published by Penguin Books, New York, 2013. One of the wonderful things Mr. Cramer does is tries to ensure you do your homework before investing. You have money and what to invest in is the question – if you are not sure try a low fee S&P 500 Index which is the bench mark all the money managers are trying to beat and if they do not you have done better. If you want to invest in individual stocks, then you will need to do your homework.

The first stage of homework is using the great amount of information which exists on the internet. Mr. Cramer believes first you should with a macro or wide view and then narrow it down. Ask yourself where do see the economy going in two years time? How about one year? In the area where you gain your income – what about that area?

After determining where the world is going – you can listen to some conference calls from company’s whose skill is in making that judgment will determine their success. For example – if you been by a construction site – you likely have seen the yellow CAT signs; it turns out that company is called Caterpillar and they are very good at selling heavy equipment and truck engines around the world. Why is this important? Caterpillar’s conference calls will tell you how they are doing around the world – are they selling more in China? (one of the world’s biggest economy) or is slowing down? What are the big miners of the world doing? Selling more truck engines – the domestic economy?  There are other companies which give you a great indication of what their customers are doing with their money. Are margins being squeezed or they are making less money? In the book Mr. Cramer lists Alcoa for insights into the aircraft business; GE for energy savings, health care and aerospace; United Technologies for its elevator service – are high rises being built? 3M has a global glass division which many laptops use.

Each sector of the market has a core metric at its heart:

Aerospace  – what is the backlog?

Agriculture – what does future contracts for the individual crops

Airlines –  fares, fees, seat miles and fuel costs

Apparel – raw costs and inventories

Asset Managers – assets under administration

Autos – their percentage of seasonally adjust annual rate of cars sold

Banks – net interest margins – how much can they make off their deposits

Brokers – employee compensation – how much is the firm sharing with their employees

Casinos – the handle or total amount bet and the drop which is total amount exchanged for chips

Chemicals – raw costs and volume growth

Coal – inventory, if increases stock goes down

Consumer Packaged Goods – margins and organic growth

Cruises – net yield

Defense – backlogs

Diagnostics and Devices – approvals from the FDA

Drinks – sales volumes

Drugs – what is in the pipeline?

Engineering and Construction – backlog

Food Stocks – cost of the package; new successful launches

Footwear – future orders which underlines growth and product orders

Gold – finding and developing costs

HMOs – the medical loss ratio: the ratio of total losses versus total premiums paid

Hospitals – the reimbursement fates from the federal government

Hotels – the revenue from available room or hotel’s average daily room rate x occupancy rate

Housing – backlog numbers, sales and how much they make per home

Insurance – the combined ratio (payout ratio) and the quality of assets the company owns.

Internet – traffic acquisition costs

Media – advertising and subscription dollars

Minerals – cost of extraction and cost to send to the market

Oils – oil cost replacement

Oil Service – the Baker Hughes rig count

Paper – the price of contertainboard

Pipelines – can it raise its dividend?

Telecommunications – focus on the churn rate – winning and losing customers

Utilities – the yield

Linking to dividend paying stocks, Mr. Cramer strongly suggests you stay with the best companies if you want to get rich carefully. Always choose the best companies and in the long run they will make money for you through the cycles.

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

The Crash of October 1929 has been written about extensively from US sources because Wall Street dominates the world, as the song says if you can make it in New York you can make it anywhere. It the hinterland, are places like Canada. What happened in Canada is of concern for the ripple effects. In a book called Gold Diggers of 1929 – Canada and The Stock Market Crash by George Fetherling published by James Wiley and Sons, Toronto, 2004, the book asks what did happen? The reality is even without the crash on the stock market, the depression would likely have occurred, the crash just meant the easy party was over. Credit tightened in which the bankers’ response for a loan was no, no and no.

In Canada, Toronto was always had a concentration of mining companies listed on stock exchanges. Most of them never produced a mine, but had claims that likely some mineral content existed. For years the exchange was corrupt. The brokerages sold stock to primarily American and European individuals and stock prices were manipulated. It was helped that mining was seen and generally was an individual grub staking enterprise – people would go into the bush and hunt for minerals. In that regards, the myth built up but in order to dig and bring the minerals to market it took money. Most people who go into the bush are not skilled at mining finance, although a few were. It was during the 1920’s when some of the richest mines in the world were found; the others were not so rich.

In the 1920s, there were articles in the newspapers, most people read newspapers about how to could make money on the stock market and as a result the number of offices expanded. In addition, the rules of margin meant only a small amount had to be put down and the investor was buying stock. People forgot that profits are only realized when you sell, not while holding the stock as the price rises and falls. There is still an age old question of when do you sell?

The crash of 1929 happened and prices decreased, partly because of margin calls – if you only put a little down, when the price went up the profit was greater, and when the price fell more cash was called for. Do you sell or put more money in? In turns out the best strategy was to wait a few days or months and buy in the future. The last crash in 2008 took 3 years before it was a great time to buy, if there was cash. As a result of selling, there was great consolidation in the brokerage sales system or offices closed. There was work for the company – eventually governments of all levels borrowed money for infrastructure works and to help the unemployed.

Linking to dividend paying stocks, when there is a crash all securities will come down in price – it is a given. If you have patient capital, you can ride out the storm. If you have access to cash, it can be a great time to buy quality stocks at a bargain. The quality stocks will tend to move back to normal in the shortest time frame. The payment of the dividends allows you to have patience capital as well as buying more or reinvesting the dividends. There is no perfect answer.

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