Entertainment in our society is big business whether it is sports, movies or other leisure activities. Each of the areas have seasons where they typically generate more money than others. In the movie industry, summer has traditionally been when people went to the movies more. Although a great story made into a great movie will bring in movie viewers no matter the budget, the summer traditionally has the movies with the greatest advertising dollars attached to them. The wonderful thing about the summer blockbuster is if you go to the movies, like the movie, see the theatre is full of people and the movie is on the highest gate receipts, that can translate into high stock prices for the companies which produced the movie.

When you watch the movie previews, for the ones you like note who produces the movie. In this fashion, not only are you watching a movie you are gathering intelligence about your potential investments. There are many magazines which focus on the stars, if you own shares in an movie company, some of them are working for you. You maybe similar to me in that recently as the pages of the 50 hottest stars article were turned, fewer of names had recognition value, however there were some movie previews that have sparked an interest in seeing. This only means more research has to be done both on the stars and the financial reports to see which company would be the best one.

Linking to dividend paying stocks, the movie industry has been operating for a long time and it will continue to operate a long time for a great story in a movie will always be popular. Every year, the industry changes, different themes pop up, the costs are higher (so are the rewards), distribution channels change but the industry still keeps going. Sometimes it is easier to watch the movies, enjoy them and not have to worry about whether summer blockbuster will come or not. The alternative is to invest in good companies with a near monopoly consistently turning out profits and expecting to raise their dividends.

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

If you like urban design and planning or enjoy looking at your urban environment and considering how it could evolve, there is a wonderful book called Walking Home by Ken Greenberg, Random House, 2011. The book is the life and lessons of a city builder who has worked around the world and tries to make the urban area better.

There were many themes in Mr. Greenberg’s book but to focus on two of them – design and mixed use. The first issue design is important, but who does the designing? Early in Mr. Greenberg’s career he worked in smaller locations because even smaller locations are in need of consultants. In smaller urban areas it was easier to see how the process works to ensure a plan is not shelved and gathers dust. In smaller locations officials wear a variety of hats and make decisions that will make implementation both easier and harder. For example in the capital plan, improvements to the road system are budgeted for, often times dependent on a higher level of government grant, and in place, when someone comes afterwards and suggests there are methods to improve the downtown area it is too late. The work has to be done before the capital budget is approved. There are people making day to day decisions that affect the urban infrastructure, the best method is to co-ordinate them with a vision of what could be.

Everyone loves mixed use but, who are the connectors? One of the things people tend to like about downtown areas is the number of things going on. Whether its offices, stores, entertainment, culture, education, etc. That is true but in many instances each of the uses tend to be an island by themselves. There are many examples but the classic one is the Renaissance Centre in Detroit. The building was designed to improve downtown Detroit, which is a great thing to do, except for it is difficult to go outside, it is very easy to drive in and out. Not surprisingly that is what people do. A simpler example is a park the author walks through, originally when it was designed there was no pathway but people made a path, because it was easy to walk through. Eventually the educational institution put in a path and it continues to be well used. Connectors tend to see the end product – how do or how will they use the device?

Linking to dividend paying stocks, each of the above the design and mixed use facility are easy to get wrong. Companies do it all the time, because there are many competing interests and decisions are made by very well intention people but sometimes it just does not happen right and the question what were they thinking comes forth? Fortunately, the dividend producing companies tend to get it more right than wrong and  are able to continue to pay a dividend.

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

If you like urban design and planning or enjoy looking at your urban environment and considering how it could evolve, there is a wonderful book called Walking Home by Ken Greenberg, Random House, 2011. The book is the life and lessons of a city builder who has worked around the world and tries to make the urban area better. There are many variables in any situation but the focus today is to take the example of any urban area at least 200 years old and walk from the city centre to the suburbs. Although all cities are different, what is similar will be the core area tends to have smaller blocks, you can see the faces of the people on the other side. At some point the roads will get wider, the emphasis is on the car and it is very hard to see the faces of the people on the other side because there are very few of them. The urban areas developed first around the boat, then the railway, and recently the car. Each of these modes of transportation were both good and not so good for the city. Each of them brought different economic development to the area and the cities changed over the years.

Linking to dividend paying stocks, as you view the different changes from the urban core to the suburbs, the issue is adaptability. One of the things you can see is how difficult it is for most companies to remain consistently profitable to pay a dividend. There is and there will be continue to be pressures in the marketplace which is the reason why choosing consistently dividend paying companies narrows the field and helps your investing returns.

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

In North America most people living in a residence have a hydro bill. Hydro allows for light to extend the day, it allows for fridges and stoves to operate so we can eat, and a host of other products. In order to receive hydro, we all sign up with the local hydro company and soon the bill begins to come. In the winter when it is dark and cold outside we need more hydro, during the time we are entering, summer, we will generally use less hydro. There are alternatives such as candles or solar panels but if you look around most neighbourhoods, hydro is still the choice for usage. Perhaps one day we will all have solar, but looking around the neighbourhoods where the author is, not there yet. Whatever we use, the hydro bill comes as long as we reside in a home or house.

Linking to dividend paying stocks, instead of looking at the hydro bill as something to pay consider investing in the company that sends the bill. There are some investor owned utilities, the same idea for your other bills. some of these companies pay dividends, you choose to deal with them for a reason. does the reason fit with other people? is the company well managed? if you like it and it is profitable and paying a dividend, that is a starting point. At the very least, the dividends can pay you monthly usage and the stock price can grow as you continue to be a long term subscriber.

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

The headline in last week’s press was one of the funds received billions of dollars on its investment as the company was bought. The normal pattern for a hedge fund is for it to buy a public company, take it private and restructure it. A couple of years later sell the shares to the public which values the company at a higher multiple and the hedge fund and its investors receive a generous return. The other side of the press release was before the fund decided to invest, the fund would have examined dozens of ideas and proposals. The average fund after examining hundreds of ideas, it chooses to invest in 20 of them. 17 of those deals will likely end up losing money. 2 will do reasonably well and one will be the 30 times return plus or the home run. In terms of percentages, it is a 30% chance of success, the issue is no one knows which one is the big winner. The same amount of effort that went into the big winner went into the ones that lost or broke even.

Linking to dividend paying stocks, it is easier to have success if you try for singles and doubles because they are the normal. If you start with companies that pay dividends and have so on a consistent basis, you automatically hit a single or safely. As the companies continue to pay dividends through the economic cycles, the stock will rise and fall a little, but over time because the stock continues to pay a dividend the stock price will rise. Start your analysis with those that pay dividends and you will be further ahead.

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

Recently a documentary was watched on a possible new Leonardo da Vinci painting. The best known painting is the Mona Lisa and there are not many paintings by Mr. da Vinci, although the ones that exist are extra special. An art dealer thought the painting was special, but no idea it was that special. After he bought the painting  he began to wonder why is it special? There were few clues on the painting and to verify it a number of steps had to be done. The material the painting was on was carbon dated to the correct period. A forger was introduced to the show how forgeries are done. The forger buys an inexpensive painting that has all the correct art dealer seals, removes the paint and repaints the canvas to the more expensive piece. This was to show just because one piece of the puzzle fits in, other parts of the equation must be determined. The hairpiece of the lady of the painting (a relative of Mona Lisa) was figured out to be the correct era and more important the painting was photographed so it every inch of the painting could be used to examine it and to find out where the painting came from. The painting came from an very old book to celebrate the lady’s marriage and the book for the past century has rested in a very restricted library. By the end of the documentary all the analysis agreed the painting was one painted by Leonardo da Vinci which meant the value of the painting went from thousands to millions.

Linking to dividend paying stocks, to find special stocks is less work than finding and securing an expensive painting. With the painting, the concern of forgery is overriding, with special stocks start with do they pay a dividend? As with the painting as you determine your expectations and what you do not want, the list gets narrower. In the end you have a number of stocks which produce a dividend and meets your other demands which equates to you can not have a bad decision but a choice among equals.

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

An old tale in India is if you blindfold or ask people that are blind to touch an elephant and then ask them what they imagine the animal looks like, you will get many answers. One will touch the large legs, one will touch smooth tusk, one will touch floppy ears, one will touch the swinging trunk and one will touch the big body. All will be right and all will be wrong, because the elephant is both large and multidimensional. It use to be most transactions were relatively easy to be put together, now they generally are complex. When transactions become complex, we try to bring them to their simplest explanations enabling more to understand. Through bringing something complex to simple, also means accepting some basic assumptions and can lead to group think. For many activities there is nothing wrong with it and it comes with the territory. In the financial industry, returns are unknown, but expected, however looking back is a different story the signs and answers can easily be seen as they are crystal clear. Thus it is important to look at a wide range of opinions including some who see numbers differently. While most of us tend to read and associate with people that see the world the same way as we do, which is not a bad thing, once in a while the other party is correct.

Linking to dividend paying stocks, one of the reasons why this blog writes about this subject is at the very basic whether a stock pays a dividend or not is easy to see. To pay a dividend on a consistent matter means the company makes money or is profitable, most companies on the stock exchange are not, they have promise for the future. Many of them have great ideas and they maybe the best ones, time will tell. For the dividend paying stocks, questions of sustainability, should the dividend be raised, lowered, and other questions can be raised. But if you start with a profitable company which consistently pays a dividend, no matter how you see the numbers, as long as payments are made, in the long run stock prices will increase.

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

Recently Ken Fisher’s book The Making of a Market Guru, John Wiley & Sons, 2009 was read. The book is a collection of Mr. Fisher’s Forbes magazine columns from 1984 to 2009.

Mr. Fisher wrote about his Dad who was in the investment business, and a few of his classic statements were: always think the long term, buy what understand and be yourself. Ask a question such as what is the management doing that the competition is not doing? Great managements live the answer and produce great stocks.

A great deal of investing has to do with your mind set and answering 3 questions will help you be a better investor: 1. What do you believe is true that is actually wrong? -perhaps it is saying or a myth. 2. Can you fathom the unfathomable? and 3. What is your blind spot?

In another column, Mr. Fisher noted when you look at any annual report, before looking at the Balance Sheet  read the footnotes. The more complex the footnotes, a warning light should come on to avoid the stock. Accounting is a fluid process, for example changing the way revenues are calculated from one year to the next, although perfect legal, changes the outcome. Companies are similar to people in they wish to give the best appearance possible and if things are not going to what the market is rewarding, changes can and will be made. Examining the footnotes to the report allows you to see if the annual report became more complex. If it does, it is a big warning sign. What usually happens with complex footnotes is at some point in the future, write downs happen. Also, remember the quarterly reports are not audited, they are selling tools for the management.

With Mr. Fisher’s book, it would be easy to write many more parts, suffice to say, reading his columns either online or in Forbes is a good thing to do.

Linking to dividend producing stocks, one of the reasons this blog likes to begin with dividend producing stocks is to narrow the field of choice. There are many stocks on exchanges, many of them could be the next great thing, they also could be wallpaper. If you start with dividend producing stocks, at least you start with companies making money and overtime the shares should rise as well as your wealth. As we all live longer, we need income and growth to beat inflation and the combination of stocks plus the dividends does this well.

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

Recently Ken Fisher’s book The Making of a Market Guru, John Wiley & Sons, 2009 was read. The book is a collection of Mr. Fisher’s Forbes magazine columns from 1984 to 2009.

In one of many Mr. Fisher’s columns he reflected on what separates the very successful on the Forbes 400 list from the rest of us. One thing is what they do or do not do. The really smart ones do not get sucked into the trend of the day or week or the month. They tend to stick to what made them wealthy in the first place, by avoiding the fads. The very rich do have problems, much of their wealth is tied in big, illiquid chunks of businesses. They are still very rich, but they can not sell and move on when valuations change for their businesses. For the non Forbes 400 list, building a business is the best way to get rich, owning stocks helps you maintain the wealth.

When you look at a market how do you know when it is peaked? The answer is no one knows until you look back and see all the signs. A potentially better solution is to wait for clear signals that the market has peaked and still come out ahead. Generally market peaks roll over, they do not spike. Generally markets drop slowly at first and most of the drop is in the last third of a bear market. The thing to do is when the market begins to turn is to use 3 month averages to see if you see a top. Then look to the future to see if you see problems. If you see them, turn bearish. You will give a little on the pullbacks, but very few in the market consistently time markets.

Portfolio management has 4 basic rules: 1. Use a benchmark – Mr. Fisher uses the Morgan Stanley World Index. the index is used  to compare your results against what would happen if you put the funds in an index fund; 2. Analyze your benchmark components – for each stock you own think about expected return and risk. Think about what you do not own as much as you much as you do own. (what could you be missing out and is that ok); 3. Know that you may be wrong – no style can always be right. 4. Build insurance into your investments – seek something that should go up should other things go down, but the insurance really does reduce your risk.

Attitude in investing is about better investing. If you do well, your confidence builds and you will tend to think you are great and you will do it again. The market knows you are overconfident, it baits you with opportunity, you will take a bite and lose. The lesson is to learn from your failures. No one  is successful all the time, unless they trade on insider information. Up until the 1930’s it was acceptable practice, now the regulators will track you. A healthy respect of the markets and the people in the industry will help you.

Linking to dividend producing stocks, there is no magic bullet, but time has shown buying good fundamental companies with a monopoly like competitive position and paying a dividend leads to long term success. The markets move in cycles and good companies are recognized with higher stock prices. One of the keys continues to be asking the questions why do you own a stock? If the short answer to your question includes the stock has been paying dividends for the past number of years and is expected to continue paying, and if you are not planning on selling, the daily price changes do not matter. Everyday it seems we can assess information in new and exciting ways, sometimes it is very desirable, with dividend stocks it is a nice feature.

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