The Loggers is a book by Richard L Williams published by Time-Life Books, NY, 1976 written about the forestry industry on the west coast of the US. Prior to the gold rush which lead many people to the west, the trees kept people in the west (and still do). The timeframe of the book was the 1850’s to the 1900’s, the railways had not connected the country which meant people travelled in ships. The logging companies had gone through the good and easy wood in the northeast and the Midwest and were looking for great forests. The forests were found on the west coast, but the land is not flat which made considerable opportunities for solutions to be found. There was a need for wood to build ships, building growing cities in the east and the tall trees were the dream of many a logger. Saw mills were set up, although the pay for loggers was never great which meant when gold was discovered, the loggers migrated to becoming miners. Eventually many of them came back to logging. and the challenges to get the trees from high in the mountains to the bay where the saw mills were located.

In terms of the lifestyle, the work was hard for the loggers and when they eventually returned to town, the earliest cities always had a section devoted to bars, prostitution and gambling. The loggers would typically sent 3 or 4 months in the bush, then come to town with money in their pockets. One bar in Portland called Erickson’s had a bar of 200 yards staffed by 50 bartenders ready to take the money.

When the railroads were built, the government gave them free land grants, partly to encourage the railroads to become sustainable after the railroad was built. In this fashion the other activities would drive traffic to the railroad, but as railroads were traded on the stock exchange, new owners would sell off assets to pay for other ones. Frederick Weyerhaeuser bought 900,000 acres of timberland from Northern Pacific Railroad for $5.4 million. Northern Pacific was thinking that Weyerhaeuser would transport the timber on the railroads as a customer. At the time Northern Pacific had 44 million acres of land which was quite the asset.

Linking to dividend paying stocks, as long as commodities such as trees are sustainable they make good companies to invest in. Particularly now as the economic situation changes and demand for wood products will be higher. The history of logging and other industries are interesting in how the loggers found solutions to their problems of the logs in one place and the mills in another. History also shows some companies have hidden assets, ie the railroads had grants of land, some of it becomes valuable which makes the railroads more valuable than at first glance.

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

The history of Cotton is the history of the industrial revolution which many do think about however in the book Cotton by Stephen Yafa, Penguin Books, 2005. there is a very good argument made. In the history of cotton, the civil war is fought which similar to all wars is never quite what on the surface it seems like for example the north and south issue. There was the majority theme of slavery overriding the war, however the economies of Boston and New York were on dependent on the cotton trade. The plant was grown in the south, the cotton bales were shipped to mills in the Boston area or the mills in England via New York ports, a disruption in the flow of cotton bales would cause unemployment. The war was fought, it went too long with many battles however in the broader picture the north with the greater concentration of railways and manufacturing plants to supply the army had an enormous advantage from the start. The south was essentially an agrarian society with limited infrastructure and fewer population to man the army. The civil war caused no cotton crop for a number of years and a recession in the economy. Those that stayed on the land were free to become farmers on relatively small farms which allows for a living but unless cotton prices are high does not generate surplus funds. All over the world, farmers borrow or take credit from the bank or the general store and when the crops come in during the fall, pay back the creditors. Some years are better than others where surpluses can actually be made.

The next phase of cotton was the invention of denim or blue jeans, now days most families have more than one pair of blue jeans in their homes at various price points. The acceptance of blue jeans from mining and ranching to hippies to urban designer jeans have many stories along the way. In terms of production of cotton, similar to all crops, there is a pest for each, and in the cotton plant, the pest is called the boll weevil. In an attempt to combat the pest the industry has tried many pesticides with various side affects for both the environment and humans. The other story with cotton is the migration of the production of the textile industry where it has moved from the Boston area to North and South Carolina to China to India and places in between. Cotton is an interesting story.

Linking to dividend paying stocks, cotton is a raw material or commodity which price goes up and down; the manufacturing plants tend to be very price conscious (or on the look out for the place where the price of  labour is kept to a minimum) the products come in a wide range of price points and that is where money is to be made. Invariably all governments want cotton producers to produce the crop and offer subsidies which keep the producers growing but that is not where your first choice of investment should be. Manufacturing needs to be value added or the ability to raise prices to continually to earn revenues to pay dividends. Retail is a tough business but some companies continue to do well including in the textile business. While the product of cotton and the history is very interesting, you must narrow your choices to find continuing profitable companies to invest in.

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

The history of Cotton is the history of the industrial revolution which many do think about however in the book Cotton by Stephen Yafa, Penguin Books, 2005. there is a very good argument made. Cotton came from India and silks from China and one of the reasons the British took over India is the fabric industry. Cotton was known for many years but the ability to remove the threads from the seeds was a hard manual work which meant not much cotton could be produced. With the invention of machines to do the work in England developed by Richard Arkwright, the machines soon meant England was selling cloth to India. In the US, Samuel Slater with financial backing from Moses Brown (Brown University in Rhode Island)  help start the great factories in Lowell, Massachusetts near Boston, Mass. The financial investors were from Boston and this translated into many of the highly reputable institutions near Boston receiving their endowments from the cotton trade. The other aspect of the trade is many parts of the Southern US has ideal growing conditions for cotton. The invention of the Cotton Ginny by Eli Whitney allowed farmers to plant as much cotton as possible and to work the lands – slaves were imported from Africa. The ability to produce more when the world was demanding more cotton fabrics, allowed for increasing prices and produced great wealth in the Southern US, the Boston/NY area and the mill owners in England.

Linking to dividend paying stocks, one of the reasons to invest in them is the wealth they generate, but usually wealth generation has a price somewhere. In the case of cotton, the price was cheap labour in the factories and slave labour to look after the crops. Once the cotton left the factory, few people questioned how it was arrived in the stores except for the demand for the product was high. Hopefully the companies you invest in most people are achieving wealth creation including yourself.

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

Spring is the season where people get outdoors to do things, which is good for the health. One of the activities the author does is swimming at a local pool. Swimming is a good exercise and sometimes in the water your arms and legs can move more than on dry land. Most of the time swimming is going up the lane and then coming back, but occasionally it is possible to observe the others in the pool. Their swimming styles, strokes, socialization and turning when they come to the wall.

If you watch the best in the world, when they exploded off the wall their legs would have been in a crouched position, their feet not too deep from the water and they would resurface 10 or 15 feet from the wall. During one swim a couple of weeks ago, one person was doing a turn but he was only to push off 2 or 3 feet which is a lot of wasted effort. If the person had come a little closer the turn could be an advantage to his swimming, however every turn he was too far away. Other swimmers barely pushed off the wall and perhaps their concern was the activity not the efficiency. It could be in a general swim what they are doing is the correct thing to do for them for they are swimming.

Linking to dividend paying stocks, with the best companies you are expecting them to perform to the highest potential, not doing whatever. The expectation is the important element, as long as the company is profitable and pays in dividend, you are reasonably happy or at least content to hold. The expectation is the company will do what is necessary to continue to improve and prosper, the standard of expectation is not whatever happens is good enough. Expectations play a role in the stock price – expectations of earnings, growth prospects, management and the expectations of the shareholder.

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

Warren Buffett talks about economic moats, and an economic moat is similar to the castles in the middle ages which had a ring of water around them. Castles are designed for both offensive (to be seen and see the potential enemies) and defensive ( very hard to break in) reasons. If there is water around the castle, it is hard to walk over the water. Craig McGee of Morningstar Research Inc examined stocks in the Morningstar data base to see which companies have an economic moat and how would the returns be if you had invested in them. He was looking at the top 20 stocks with the best combination of price to sales; price to earnings; return on equity. He found if you owned these stocks your return would easily beat the index, often double and equally important using less risk. The model suggests if you wish to own stocks, these are types you want to own. When you buy looked at how wide the economic moat is.

In my part of the country, the winter has been long and the highs for the weather below normal, that is to change over the coming week. In anticipation of the change or to prepare for the warmer weather at the grocery store some ice cream was purchased. As the weather changes, going outdoors without multiple layers of clothing will be possible, but so will all the other things associated with spring and the outdoors. Things such as gardening, home repairs and eating ice cream. Each of the proceeding can be done when the weather is not as agreeable to work in, but as the weather warms it tends to be the days more people will buy the products and services.

Linking to dividend paying stocks, similar to the eating of ice cream – more is consumed as the weather gets hotter or there tends to be a season for ice cream. This means from an investor point of view, are the sales expected from the best quarter being achieved? if the answer is yes, then the stock can be held on to, if the answer is no – look for a good price to sell the stock. Most stocks have patterns in their sales, as investors it is your job to look and see if they happen.

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

Reading about Netscape is technology using computers and the internet, which to many of us urban, service orientated people is very exciting and sometimes we forgot about the word technology use of 150 years ago. In one of those small town libraries, which has very interesting books, a book was found about Technology on the Frontier by Dianne Newell, UBC Press, Vancouver, 1986. Ms. Newell  is a History Professor at the university, and she writes about an interesting time. When North America was settled, the obvious places that were accessible by boat were settled. As the economy built, people went into the bush country to see what there was, besides trees. Minerals were discovered in parts, but minerals fluctuate on the commodities market and when prices are high, there is a rush to deliver them. When prices are low, town sites become ghost towns. In the book Ms. Newall focused on after a mineral is discovered, what technologies allowed it to be mined and sold profitably, or at least sold for a while. The mining industry for a long time used the backs of the miners and for some minerals that was good. For others, where great quantities needed to be moved and the cost of the infrastructure factored in,  better methods or technology were needed. The option of investing in better technology or the mines is always a good one. In the time period Ms. Newall writes about the shipping industry came first, then railways were built and to run a profitable railway, profitable ore bodies needed to be found or at least believed to be found.

Linking to dividend paying stocks, while the adventures are exciting to read about, the ideal investment is a mature mine that still has many years of ore to yield. For example salt mines, rather than iron ore mines, although the iron ore mines that feed the ore to steel mills is more sexy. In the 1800’s it did not seem to take great amounts of money to be invested in order to achieve a return, but the land is big and profitable deposits are hard to find.

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

Jim Clark the cofounder of Netscape wrote a book about his experiences called Netscape Time by Jim Clark , St. Marin’s Griffin Press, NY, 1999. Within the book besides the description of how Netscape was founded are important lessons to run a successful business including funding and venture funding, managing companies, use of resources , however to focus on two items – the market and the competition.

Mr. Clark writes – one of the great revelations that comes from the introduction of any new technology is that the users or the market will tell you how the products of that technology are used. The market tells you where the your market is and you better listen. A wonderful example is many know the original use of the Gutenberg’s printing press was to print copies of the bible. If it only be used for that, no communication revolution would have occurred. Once a bible could be printed, leaflets and books could be printed that was the revolution which the market said it wanted. The quality of a measure of how good a product is – and how smart a company is- can be seen in how quickly both adapt to new and unplanned for events. The market drives the market. You have to remember 15 years ago when Netscape came out there was no Yahoo or Google to organize the internet, it was done to give the world the internet and they will figure out what to do with it.

The competition is another theme Mr. Clark talks about in his book and it is Microsoft. If you have a computer, likely you have used Microsoft products, which is why Microsoft is still a dominant player in the software business. Microsoft is not great at inventing things, it is great at buying other ideas and gaining control of markets which in turns allows Microsoft to make a lot of money. In the software industry, if you are not a Microsoft supplier, you worry about the company and how and when it will send its resources into your area. Microsoft, as a late comer to most innovations, it came late to the power and money making possibilities from the internet. In the book, Mr. Clark was always worried about how they would react and could they both companies survive.

Linking to dividend paying stocks, as a company which is sustainable, as an investor you have to watch is how well in tune the company is to the market. In the case of Netscape, the market with the internet changes, what was the establish norms some years ago changed, people can do the same thing through different processes. While the dividend paying company is making money, you have to ensure that the company is well tuned to the market to continue to make money.

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

The world was much different 15 years ago, for it has only been 15 years which most of us had access to the internet. As our lives have changed, it is interesting to look back at before internet was a given in the daily life and the companies which attempted to give us the internet. Back then, the uses of the internet were not seen by the 99.999%, but a few did see something, how they were going to make money off it was an unknown, but a few did see what could be. Jim Clark, the cofounder of Netscape, was one of those people in the .0001% and was the right person in the right position at the right time. He wrote a book about his experiences called Netscape Time by Jim Clark, St. Marin’s Griffin Press, NY, 1999. Mr. Clark was the Chairman of SGI or Silicon Graphics Inc. and was in the process of leaving, although he was a multi-millionaire but not a mega millionaire. He was looking for something else and was alerted to the talents of Marc Andreessen and Mosaic. Most people know the internet was originally a government service with a heavy emphasis on university researchers and defense contractors and run out of the National Center of Supercomputer Applications (NCSA) on the University of Illinois Urban-Champaign campus not far from Chicago. The reason why Silicon Valley is not in Chicago is Stanford University was able to encouraged its people when they had a great idea to set up a company and run with it. Companies that made money gave back to the University and the cycle keeps going. The University of Illinois people felt the company had to go through the University or bureaucracy, which just encourages people to find a better way to commercialize the ideas.

Eventually, Mr. Clark and Mr. Andreessen thought their great idea was to make a killer app or make it easier to use Mosaic which would open up the internet to the average person and thus companies where money was to be made. Each sector would use the internet to do all sort of things, many of which they were already doing with pen and paper. When Mr. Clark set up his company, there were among the thousands of non descriptive companies setting up in the Silicon Valley area. As investors, it is important to remember, with technology after the idea of what is desired, the most important asset is not the computer but people. Mr. Clark was able to set up  the company – he would use his knowledge gain from building SGI in terms of how companies, processes, people and money come together to form products, while Mr. Andreessen and fellow engineers would concentrate on writing the software. This was the ideal division and many companies which are set up, it simply does not exist. The skill set is different, but must complement each other. One raises money, one spends money; one tries to figure out how to generate revenues, one makes it easy for people to use the software; the bridging between the gaps is very hard for most companies.

Linking to dividend paying companies, instead of thousands of companies in non descriptive offices, dividend paying companies already have paying customers which are sustainable. The products are meeting needs and the company continually tries to make the products and services better. That is a different environment than bringing a new market for new uses as the risk is much higher that the market that is being targeted does not generate the revenues needed. When you buy dividend paying companies the risk is lower, and the return more stable which allows for the long term rise in your investments.

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