Bad Science is a book by Ben Goldacre , Fourth Estate, London, 2008 and stems from a column he writes in the Guardian newspaper called Bad Science and you can read his blog at http://www.badscience.net. Mr. Goldacre writes about your health and what you should or should not believe. The last column showed some of the classic methods to ensure the data gives the result you want, the next points is why we continually believe the stupid things the marketing industry sends our way.

The reason is essentially most of us will not take every piece of data presented and examine it for all the flaws before we make a decision – we reason informally or by intuition or by rules of thumb that simplify problems for the sake for efficiency. This efficiency or convenience comes at a cost – it can be exploited and it is.

Randomness – as human beings we have an innate ability to make something out of nothing. We can spot patterns, but what happens if we spot a pattern where none exists? What if we are wrong in considering what the randomness should look like, what if we are not that good at it?

Regression to the Mean – if things are at the extreme, they are likely to settle in the middle.

The Bias Toward Positive Evidence – we tend to ask questions to reinforce or confirm our hypothesis. If the marketers are asking the first question, what result do you believe you are confirming?

Bias By Our Prior Beliefs – very few of us do not react to data based on what we think the result should be or we have a bias for a certain result.

Availability – our attention is always drawn to the exceptional and the interesting, and if you have something to sell, it makes sense to guide people’s attention to the features you want them to notice.

Social Influences –  our values are socially reinforced by conformity and by the company we keep. Communal reinforcement is the process which a claim becomes a strong belief, through repeated assertion by members of a community. In this fashion testimonials with communities can become more powerful than scientific evidence.

Linking to dividend paying stocks, the above are generic to all of us, we have flaws and the marketing industry of all companies use the above. Many times it is okay, which is why in retrospective many of us are brilliant. When presented with data, ask about how the data was collected and the exceptions, similarly when you receive the annual report – read the notes to see what the exceptions are. The other thing to do is to counteract the marketing people follow tried and true methods of investing – profitable companies over time which pay a dividend. They lose less money on the downside and over time the combination of dividends and capital gains makes a great investment with low risk.

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

Bad Science is a book by Ben Goldacre , Fourth Estate, London, 2008 and stems from a column he writes in the Guardian newspaper called Bad Science and you can read his blog at http://www.badscience.net. Mr. Goldacre writes about your health and what you should or should not believe. A great deal of good health has to do with eating the basic food groups, do regular exercise, and display the traits of a good person on a regular basis. Since some people get sick and others seemingly doing the same thing do not, nobody really knows what is the best thing. That does mean various industries have not come forward and recommended things that you could do to improve the likelihood of not getting sick or doing preventive actions. How they do that, is what Mr. Goldacre writes about – and part of the task is to be cynical about the answer given by companies with the desire to make money from the process. The process the health industry and many other industries use to help answer the question are remarkably the same:

Use of Experts or Authority – anyone who spends a great amount of time on something will become an expert. If you wish to be paid for spending a great amount of time on the issue, you will need some initials behind your name. Every professions spends time lobbying the government to ensure the initials the professional body gives remains the top choice of the government departments which most interact with it. For example if you wish to audit tax returns your designation has to be CA or Charter Accountant. Other designated accountants can do the same thing but will not be recognized by the government or recognized by customers. In the case of health – we as a general public expect something similar to Doctor, because the Doctors have lobbied for the past couple of hundred years, if it health related, you need a Doctor. This does not mean all Doctors are great, and we hope your doctor is one of the great ones, but it does mean for health advice – doctor is the bedrock of advice.

Show Statistics of Improvement – if we do something we hope that the new is better than the existing method. Every year, thousands of new graduates come into the marketplace with great potential and something new and better will come from them. They will need to show the problems they are trying to solve can be solved with something new. The classical tricks to play in the statistical analysis in order positive results shows up include:

Ignore the Protocol Entirely – always assume that any correlation proves causation. Place all the data and if you have measured enough some things are bound to be positive by sheer luck.

Play with the Baseline – sometimes a trial starts and it is doing better than the trial on the placebo or sugar pills group. If so leave alone, if the reverse adjust the baseline in the analysis to show the positive results.

Ignore Dropouts – in all trials of people, some people will not come every week or will drop out of the surveys. Do not report them because they have likely faced some side affects to the drugs.

Clean up the data – all results are put on a graph. If the results from the ones outside of the major concentration of points or outliers help your data leave them in, if not drop them.

Torture the Data – if the results are not showing what you want figure out what good things it shows and concentrate on those results.

Linking to dividend paying stocks, the analysis done in the medical profession for new drugs is similar to the investment industry new products each year. In terms of investments when markets go down, there is an opportunity that it will go back to the normal trading range, (hopefully you did not own the stocks when it went down), new products will emerge to invest in the new opportunity. The reality is over the long term the best stocks – those that consistently make a profit which allows them to pay a dividend is the only ones you have to concentrate on. If the market goes down, you will have dividend payments, if the market goes up, the market pays higher multiples for profitable stocks.

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

The Crusades is a book by Zoe Oldenbourg, Pantheon Books, New York, 1966 and among the topics is who are the Crusaders and why did they go the trip from France to Jerusalem? Many leaders of the Crusaders came from France but people came from all over Europe to Jerusalem, the question was why? In reality, the town was thousands of miles away, the land nearby is desert, there Is no natural trade route and for the most part the town was a minor holding to the group that was administering it. The only reason Jerusalem was important was for religious purposes – in Christianity – Jesus spent the last few years of his life around the town including dying on the cross and going to heaven; in Muslim – Muhammad was taken up to the heavens; in Judaism – the great temple of Solomon which held the Ark of the Covenant was built in the city. Given the connection to the great religions of our times, people have wanted to go to see, but not necessarily to live permanently. Given the town is not on a natural trading route and thus not a profitable income for its rulers, it was always considered a minor holding. But every once in a while the other religions would want control of the town for reasons of the spirit or the dream of having control of the town, but when that control was held the religion focused on its version to the exclusion of the others. Jerusalem was and is a tourist town and dependent on outside income to be sustainable with the great part due to donations from outside the country.

Linking to dividend paying stocks, if you own shares in companies your journeys may take you past the holdings of your company. These journeys can take you across the town or the country or around the world where ever the company drives its income from. The journeys can help you ensure the companies you invest are sustainable and will last a long time for the betterment of society. The Crusades were about a dream and sometimes dreams are fulfilled, sometimes dreams are best not done, but when you get to the destination the basics of profitability and sustainability are needed to ensure the dreams come to reality.

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

The Crusades is a book by Zoe Oldenbourg, Pantheon Books, New York, 1966 and among the topics is who are the Crusaders and why did they go the trip from France to Jerusalem? It was one thing to journey to the city, but to maintain the area is a different story. The Barons from France took power and set up an organization remarkably similar to the one they left behind or a feudal system. On the other side of the equation was the Moslems who held control over the territory. It was interesting reading for the most part the two religions got along because the patch of territory is more desert than fertile land. In the desert, the ways of European agriculture do not survive very long, or the Europeans had to adapt or keep the populations relatively small or leave. Adaption takes time, energy, resources and lots of faith. On both sides, the structure of government meant a good general enable lands to be expanded, a bad general gave the lands back. A good ruler expanded the empire, a bad leader through infighting gave the land back. A good leader took in account of the people’s belief systems and lived in peace; a bad leader attack what was precious and spent most of the time fighting enemies.

Linking to dividend paying stocks, in the context of the book were the kingdoms the lords took over to collect the taxes and fees to administered the lands. They also took in plunder or stole each others merchandise and saw it was good. If the lands were relatively peaceful, a set amount of money came in each year and reasonably fair administration could be done. If the ruler was at war with a competitor the income of the lands went down and needed an influx of cash from what are now illegal events. At the time pirates worked for a share of the proceeds as well as giving a share to the ruler, one way or another funds needed to be accumulated.

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

The Crusades is a book by Zoe Oldenbourg, Pantheon Books, New York, 1966 and among the topics is who are the Crusaders and why did they go the trip from France to Jerusalem? If you look at a map of Europe that is a long trip – with most of the journey by horses or by foot. Although there is some romantic ideals of doing in the glory of God, a long trip generally takes money for supplies along the way and to go into hostile lands or occupied lands means the other side has to give it up. Generally the idea of physical fighting for the Church was not the prefer means of fighting for the Church. The preferred method is for your belief. However Ms. Oldenbourg writes in the feudal society the Lords and Knights were the army of their lands and when offered to go to Jerusalem they were also given the promise to forgive their sins of the people they had killed in protecting their lands. Also included in the crusades were believers, people that we put in jail for crimes; as well serfs who thought this would be better than what we have now. When the Knights committed themselves to go, this meant a fully equipped regiment was in service for the trip – the support staff, the engineers, the arms makers, etc.

Linking to dividend paying stocks, often times when decisions are made there is a personal reason for it that is wrapped around or spun around general themes which few would question. In the Crusades, the Pope was spinning the news of a Crusade which would help him solve other pressing concerns for the Papal States. Asking why would the person take the action at this time, leads to the real reason, not the general public information reason.

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

In many ways western democratic countries are modeled on ancient Greece. However if you look closely at Greece, some flaws begin to appear – votes were for free men only. Ancient Greece had many slaves or free labourers to do the work necessary in the city, in modern times one can argue about the amount of compensation but there generally is a minimum income for work. In a interesting book David M Schaps wrote a book called Economic Rights of Women in Ancient Greece, Edinburgh University Press, Edinburgh, Scotland, 1979. Ancient Greece similar to many societies was dominated by men, who wrote the rules favouring men, for example property left to the oldest son,but what about women? It turns out women had economic rights and although many looked after the household – the running of it, the care of the children and be given a dowry at the time of marriage. Marriage was a contract between the bride’s father and the groom. The groom would then be responsible for the maintenance of the wife and children. If there was divorce the dowry goes back to the wife. In ancient Greece there were rich women and poor women, some owned property although not many are recorded for most records are dominated by male names.

Linking to dividend paying stocks, the dowry often times was movables such as furniture, but it had the great appeal of preservation of capital and some growth. As it was back then, it still is, one of the best strategies to earning wealth is not losing it or preserving it, which is why investments in dividend paying stocks is of great benefit. The dividends ensure a return and because of the company consistently earning a profit to pay the dividends the stocks grow over the years to increase the wealth at a low risk to the holder. In Ancient Greece, there was a dowry from the bride’s family, a good thing to invest the money is dividend paying stocks for the long run of the marriage.

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

The story of the Four Queens by Nancy Goldstone , Penguin Books, 2007 is 4 sisters who marry well and influence Europe in the mid 1200’s. One was married to Louis IX, king of France; one was married to Henry III, king of England and the other two were married to the most powerful people behind the Kings – Richard, the Earl of Cornwall and Charles of Anjou. How all four married into the families and how their marriages brought peace to Europe is the subject of the book. Every family in the world hopes their sons and daughters marry well, for Raymond Berenger V the Count of Provence his four daughters surpassed expectations. In terms of managing the relationships between France and England – having the Queens related would mean although their was difficulties, France and England were more at peace than they were at war. In terms of the barons – these are the lords who are one level down from the King and Queen. The barons have a variety of names – Lord, Earl, Count depending on what lands they own. The best method to keep these folks in line, besides having a strong army was to bribe them. If someone is offered more money, more lands, the niece or daughter or a cousin’s daughter or niece in marriage to improve their social standing so much the better. Often times money was the grease to withhold your troops in the case of disagreements, in the case of war – the winner picked up any valuables from the losers. If war was fought, it was a more civilized approach where the battle would be fought during the day and the evening was time to tend to the injured and dead and if you were losing, it was time to go home. Withholding your troops is not to send them into battle or coming at noon when the battle was over.

Linking to dividend paying stocks, although the terms of war are often used when one company buys another, the market will lose their taste of honourable words for  a higher stock price. The first line of defence of any company under a possible merger is to protect the senior management and existing owners, the 5th line is to offer something for the existing workers. In the book the Four Queens, the ability to offer bribes does wonders for peace, now days the offer of stability of employment to the elected officials and not increasing prices to consumers for a set period of months is the type of bribes which get offered for the workers. For the owners, increasing the stock price swings the most votes.

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

The story of the Four Queens by Nancy Goldstone , Penguin Books, 2007 is 4 sisters who marry well and influence Europe in the mid 1200’s. One was married to Louis IX, king of France; one was married to Henry III, king of England and the other two were married to the most powerful people behind the Kings – Richard, the Earl of Cornwall and Charles of Anjou. How all four married into the families and how their marriages brought peace to Europe is the subject of the book. Every family in the world hopes their sons and daughters marry well, for Raymond Berenger V the Count of Provence his four daughters surpassed expectations. In the feudal times of the Kings and Queens would marry off their families to achieve alliances with others in the expectation of if someone attacked their lands, the others because of marriage would be obligated to help defend the lands.

In peace time, when the marriages happened, the girls tended to early teenagers, besides their youthful beauty, would bring a dowry for the kings to pay off their debts. The first was married strategically and the other sisters began to fall into place because of who she married. In the 1200’s the biggest debt holders were the kings and to get out of debt,new lands needed to be acquired to pay off the creditors. Another method was to marry off a family member for the dowry or payment of money by the bride’s family. In the case of the Berenger family, the Count had a pledge the same asset a number of times to keep up appearances and to satisfy the groom’s expenses. The lives of the 4 Queens reads similar to many Court stories in terms of forming alliances, keeping the barons friendly, for there is always someone who wants to go fighting, and maintaining their standing.

Linking to dividend paying stocks, this particular book focuses on the power behind the throne, someone has to sit on the throne but that does not always mean they were the best candidate. It means they won the right to sit on the throne to carry on, and hopefully they will do a more than adequate job. There is always people behind the scenes who ensure stability is seen by all, in this case, the queens might have been better at the job than the kings. As an investor, the most important aspect of the company is to continue to earn a profit and pay a dividend; one of the variables which is always interesting to watch is how the senior management interact and act for the good of the company.

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

In the book Animal Fakes and Frauds by Peter Dance, Sampson, Low Berkshire, 1975,  the author reveals some of the shapes and sizes of the animals that generations have discussed. Mr. Dance worked at the British Museum (Natural History) and would come across these animals in the course of his work. In all things in life, when people are asked exactly what did you see? and what do your remember? for most of us, unless we trained ourselves, the answers will have variation. If you believe you are an exception, next time you are in lunchroom setting or restaurant, pick someone out of the crowd, allow them to sit down and describe the person to the person you are having lunch with without viewing the person you are describing. How much do you remember of the person? Most of us remember something, but every detail? This was the case with the animals fakes and frauds, generally the people remember something but in the short time they saw the animal, other features were embellished. Soon word was out and more than likely the person, in their recollections, felt the description was accurate. Unless someone is trained in that area of the animal kingdom there was no reason not to believe it and much of it could have been true.

Linking to dividend paying stocks, as investors we have access to information, but we like to be told a good story in order to invest our money. The stories often tell of the years the stock or the fund did very well. Is this the year which the exchange is going to repeat itself with higher stock prices? The truth is on the stock market, the best answers are looking back at something that has already happened. Looking forward the best answer is I do not know, but we a method to achieve more money is to invest in quality stocks which consistently earn a profit. If a company consistently makes money, then the multiple of times the earnings trades at will go higher. Add a return of dividends and the money returning to you is not a fake or fraud just good sound investing.

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