We all love music in one form or another and maybe you have read a book about your favourite singer. If you focus on the instruments invariably a piano is used . An interesting book about the history and the companies which made pianos is called The Piano Makers by David Wainwright, Hutchinson of London, UK, 1975. The book focuses on piano making in England and the customers were often found in in upper income homes because in the 1800’s entertaining was primarily done at home. The musicians would travel between countries or go on tour and play at homes many times those related to the Kings and Queens of Europe. Eventually what the royals do, other will tend to follow and pianos were bought by the wealthy for there was a time when all proper young ladies were expected to play the piano. The choice of the brand of piano was the ones being favoured by the royals or their favourite musician. The piano companies of the day would ensure their pianos were available when the musicians went on tour. The musicians at the time were Beethoven, Paganini, Liszt, Clementi, perhaps names you not only have heard but maybe even performed some of their work.

Linking to dividend producing stocks, there are many people connected to the piano business, although most of the companies are not publicly traded, you can still learn from the industry. Over the years, there has been many manufacturers which brought about improvements to ensure when the proper keys are engaged the tone and quality is rich and high. There continues to be a wide variety of price points and learning to play an instrument is still high on many people wish list for themselves and their children. How the piano was developed and manages to stay relevant is a very interesting journey.

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

Recently reread a book called Fool’s Gold by Brian Hutchinson, Alfred Knopf, Toronto, 1998 which is about Bre-X. The company Bre-X was a gold mining promoter whose stock went to over $100 a share before crashing down because there was no commercially mineable gold. Along the way, the saga exposed many different layers of human greed and gullibility.

In the case of Bre-X as well as many other cases of fool’s gold there is a reliance upon experts. We all rely on experts, the world is too complicated not to, however if you are going to allocate a large amount of your resources, the rule is you have to at least know the process of how the industry works in. For example, in the case of Bre-X, the company was in the mining business, but most of its life was spent in buying claims near proven deposits and trying to raise money to drill a few holes hoping the mineralization of the earth was in its claims. All those actions are high risk, high cost and under normal circumstances do not translate into a commercially feasible mines. The reason why the company existed was to issue shares at pennies and sell them based on hope – the possibility this time it is different and ideally the shares are worth more than a dollar or two. Then it is on to the next hot area of mining. In the case of resource extraction the above is the normal and accepted method of attracting funds for mining development because the only method to know what is in the ground, is to drill. Given the nature of the industry – experts are used to look for the best claims; to drill; to look at the drill cores and make estimates given the sample size what the level of mineralization under the ground should be. There is a number of steps in the process which rely on experts and as the courts have found – there will be experts on both sides on the argument.

Linking to dividend paying stocks, while the above process is interesting and can be very exciting, it does not pay consistent dividends, unless you focus on the large mining companies. To focus on small mining companies is to speculate on price appreciation and you will need to become familiar with whatever exchange you are using insider reports and who is buying and selling shares; also which companies are issuing even more shares because they actually believe the hype they have released in the form of press releases actually matches reality.

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

Recently reread a book called Fool’s Gold by Brian Hutchinson, Alfred Knopf, Toronto, 1998 which is about Bre-X. The company Bre-X was a gold mining promoter whose stock went to over $100 a share before crashing down because there was no commercially mineable gold. Along the way, the saga exposed many different layers of human greed and gullibility. The greed was to buy shares in a company who continually said their drilling samples were giving the indication of the biggest gold mine in the world. There is gold in the area, as in most areas of the world, except there is not enough gold to be commercially mined. There was however a great number of people who were fooled, as well as people made money, and when the saga was finished  the shares were worthless after a few months the look for the next greatest thing was underway.

To give context to the story, there are remarkably few large deposits of minerals discovered, even though the mining companies have access to more information than ever before. In the late 1990’s new mines were being discovered based on looking at different theories of how minerals were formed. Unfortunately, the key to any mine is to drill into the earth to verify the theory works. This leads to a great many people looking for the big one, but very few ever discovering one. Bre-X came at a time when it seemed what they discovered was more than possible and everyone wanted to believe. Bre-X also exhibited many signs, which everyone saw in retrospective, to be troubling. However since everyone wanted to believe, the experts who others believed were doing more but were actually dependent on other experts who thought the other experts were doing more and as long as the fees were coming in, few were cynical to ask the tough questions and receive answers.

Linking to dividend paying stocks, if you only bought dividend stocks, the episode would have passed you by. Although the price of Bre-X shares were worth a great of money, the company had never made a profit and had not mined a single ounce of gold. However, if you read the papers, Bre-X due to the large increase in share price was all over the news, until it came trumbling down to worthless. The dividend producing mining company were still making a profit from their other mines, it just their investment in Bre-X turned to be a bust or a write down. The story also tells how even though business says the government should not be in their business, how quickly business turns to the government for help and to keep others away if all the rules were not fully carried out. If you speculate, which is a natural thing to do, do not have all your eggs in one basket, because one may be fool’s gold and one maybe the real thing, but which is which?

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

You may seen TV advertisements asking you to donate money to help people around the world for they live on $2.00 a day. In many western countries, although it is possible to live off of (2 x 365 or 730 dollars a year), it would be very difficult. In many western countries, there are few squatter areas as well as there are social assistance that should push that number up. An interesting book called Portfolios of the Poor was written by Daryl Collins, Jonathan Morduch, Stuart Rutherford, and Orlanda Ruthven published by Princeton University Press, 2009. The book is subtitled How the world’s poor live on $2 a day and the researchers went to a number of countries around the world and convinced people to keep a dairy of their financial transactions. How does money come in, what are the expenses, are there savings? what needs to be done to make the lives of people better?

It turns out the $2.00 a day while accurate for gross income, does not reflect the consistency of the money. Most of the world’s poor have very irregular income – which means some days are good, others are even tighter. The non consistency of money means having savings or some savings is critical to living. It also means that most of the poor will be borrowing money from moneylenders at high rates but depending on the flexibility to repay the loans, the loans are seen to be good value by the borrowers. The analysis by the authors shows in all income groups people do roughly the same thing – the difference is institutional supports. The wealthiest have the most, the poor have the least. For financial institutions dealing with the poor the principles of reliability, convenience, flexibility, and structure must be followed. When the principles exist taking account of the irregular income, the poor will use the institutions. It is noted many institutions often do not want to deal with the poor and are delighted other informal methods exist.

Linking to dividend paying stocks, all companies which cater to a broad market place will deal with the poor. A critical but important factor is poor people over the course of the year typically have access to money, most of it is not at the same time as obligations have to be met or the money comes in irregularly. Are they penalized or does the company use flexibility with them? Does the company want them as customers? Do the rules and regulations help or hurt customer relations? The internal rules and regulations of any company will determine the continuing ethics of its people and long term financial dealings. The longer you hold onto your stocks, the more you should look to the internal rules and regulations of the company to see if you should continue to hold it.

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

Not so long along a play by a local community group was attended, as a local group there was people in the seats which is good. However, the cost per ticket indicated a more break even event. There was some advertising in the program, hopefully a few grants from government, likely more at the local level, and some people in the community who gave donations to ensure the theatre continues to perform. As an investment in ideas or community building, the money was well spent. As an investment in year over year continuing dividends, it would be a thin one at best.

Linking to dividend paying stocks, we all pick our individual holdings for particular reasons that is what makes us human. That is a good thing, one person may want plus 10% return with no risk (hard to do in a low interest rate setting); another wants something else which is equally good for them; another maybe interested in gaining dividends and not worry about the stock price as long as the dividend is almost guaranteed; this is why investing often has an depends answer. Whatever you decide what is good for you, that is good. There are always many alternatives to choose from.

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

If you look at the world’s billionaire names – you will see people from around the world and all of them likely have or should have a book about them. To earn a billion dollars is a major accomplishment and makes an interesting story. One of the billionaires on the list is Li Ka-shing whose made his first billion in Hong Kong and now makes it around the world. A book titled Li Ka-Shing was written by Anthony B. Chan, Macmillian Canada, 1996

Two more lessons from Li are what is your attitude towards the government and what other opportunities are there? If you talk to anyone over the age of 65 or considered a senior citizen – they will have lived through many governments – some very helpful, some neutral and some not helpful to them. As an entrepreneur in Hong Kong Li had to deal with the end of Hong Kong by the British and the rise of China. Similar to most wealthier people in Hong Kong buying assets in other countries was done, but Li decided to stay because he believed in the long term future of Hong Kong. After being vertically intergrated in property development, Li added cell phones, satellite TV and property developments in China. At the time there was a large risk but it worked out. Part of the thinking of Li on his investments was always do your homework first and considering how to narrow the odds of not losing money. In terms of cell phones which everyone seems to have now days, think about 15 years ago and where the industry was? did you own a cell phone company? those who invested in them made money and still do.

Linking to dividend producing stocks – when Li made investments into non property developments he did not put all his money in. He saw the opportunity, and put some money into the ventures. This is what you can do with your dividends – most of your investment dollars should be can be in very stable consistent paying dividend stocks. With some of the dividends you can diversify into other sectors of the economy. In this fashion you have some growth, but stability in your investments.

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

If you look at the world’s billionaire names – you will see people from around the world and all of them likely have or should have a book about them. To earn a billion dollars is a major accomplishment and makes an interesting story. One of the billionaires on the list is Li Ka-shing whose made his first billion in Hong Kong and now makes it around the world, A book about Li Ka-shing was written by Anthony B. Chan, Macmillian Canada, 1996

A lesson to be learned from Li is about debt. When Li first went into business he made plastic flowers (the type you see in the dollar store), when he received a large order it was time to move to a larger premise. Li did not like debt and moving allowed him not to be a tenant but an owner. Over time the value of the property went up and Li started doing real estate where he found his niche and soon was making more money in real estate than producing plastic flowers. In time emerging as one of the largest real estate players in Hong Kong, Li began to diversify for as everyone knows property values go up and down. Li needed something else with consistent cash flows, this lead to buying an electric company – Hong Kong Electric. The reason why he could buy the company was the previous owner was in large debt burden and had to sell. Li had done his homework and was ready to buy when the opportunity came along.

Linking to dividend paying stocks – in both business and personal lives debt can be your best friend and worst enemy. Debt can be friendly to help you buy your property, but take on too much debt or property values fall, those nice institutions which lent you money will only want their money back. If you own dividend paying stocks which has a consistent cash flow when others get into debt, you can purchase assets at a reduced cost. If you have a long term outlook for the assets, the assets will tend to rise in the future and you will be wealthier. To do such a thing means you have to do your homework first and be prepared to take advantage of the ebbs and flows of the market.

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

If you look at the world’s billionaire names – you will see people from around the world and all of them likely have or should have a book about them. To earn a billion dollars is a major accomplishment and makes an interesting story. One of the billionaires on the list is Li Ka-shing who made his first billion in Hong Kong and now makes it around the world, a book about him was written by Anthony B. Chan, Macmillian Canada, 1996.

Li says he has a simple recipe for financial success – one needs to have many important qualities to succeed, a capacity to work hard, loyalty to those working with you and the job at hand, good judgement and a little luck. These plus a sense of direction – for if you have no direction you will be pulled to the sides of the advice of others and if you follow everything you will have less. Li also said before I make a final decision, I study everything very carefully – from supply and demand to the political situation. Once I make a decision, I go quite fast to catch the market at the right time. However good a situation looks, I always prepare for the downside. in addition, as a dealmaker I have a well deserved reputation as being above board and honest. If I say yes, we go ahead, sometimes I say yes too quickly and it is not to my advantage, but I keep my promise. That wins me trust and my word is golden.

Linking to dividend paying stocks – one of the lessons you can learn from Li is doing your homework to know which of the many opportunities to move into. When you own a dividend paying stock that has consistently paid dividends and even raised the dividend, money will be coming to your account on a regular basis. You have your choice what to do with the money – spend it, reinvest in the same company or invest in other companies. Before choosing other companies you should have done your homework because share prices go up and down – which other companies do you want to own? Doing your homework means taking your time and when the money flows in you are in a position to make a decision or take advantage of the opportunities that you see.

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

If you ever wondered how a newspaper works, books about newspaper wars are worth reading. About 10 years ago in Canada, a new national newspaper was launched and the story is written about in the book Ego and Ink by Chris Cobb, McClelland and Stewart, Toronto, 2004. The paper was launched by Conrad Black partly because he owned other newspapers and wanted to have a marquee paper and for a few years, the paper was the best newspaper in the land. However it was heavily subsidized by the other newspapers in the owner’s chain of newspapers and eventually the competition  revamped their offerings to be better newspapers. Eventually Mr. Black sold to a media baron who believed in the convergence of media properties.It only seems to work when there is a national crisis, the other times it sounds like a good idea and money is invested in it. To show how things change quickly, the idea and the billions of dollars that very reasonable people believed was a good investment in 2000 has turned and very few people would spend money even millions if they believed an area was underserviced in newspapers.

Linking to dividend paying stocks, prior to the internet, newspapers and the companies that owned them were a very good stable investment. The papers enjoyed both influence or access to influence makers, steady profits and a desire by wealthy people to have both. Since the internet, newspapers margins have shrunk as advertising dollars have moved, the competition is tougher every year and fewer people read newspapers. Even though newspapers are still printed (full disclosure – the author has subscriptions to 3 papers and generally reads more than that) and money is made, the margins are getting lower every year and the next generation will be putting less advertising dollars into the papers. From an investment point of view, you would want to invest in the other properties of the company which owns the newspaper and expect a modest profit for the paper.

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