The title refers to a book called Glock The Rise of America’s Gun by Paul M Barret, Crown Publishing, NY, 2012. While the book discusses guns and America, part of the book focuses on the companies that make guns. The author has fired a gun before but does not own one and generally does not focus on the handgun issue, however there is a sizable population in the US and elsewhere that does and law enforcement carry guns. You maybe similar to me and not terribly concerned with the type of guns they carry, however law enforcement is government contracts and they buy guns and pay their bills. The industry was dominated by Smith & Wesson, Beretta, Colt and others for a decades. The industry had not changed, the quality of the guns was declining, and Gaston Glock thought he could and did invent a better gun at a lower cost. It was lighter, more accurate, had fewer parts, and what was wanted by the law enforcement industry. Not surprisingly, people bought the better gun.

The book outlines methods which were used to reach out to the public and law enforcement to gain contracts. Also, the denial of the competition plays a key role because one of the components of the Glock gun is plastic. The competition did not believe or could not believe gun buyers would want a Glock. However, in repeated comparison tests the Glock was the better gun for reliability, accuracy and safety. Some of the methods used included (education) training facilities or sending a trainer to the bulk purchasers, direct advertising to distributors, product placement in the media, taking advantage of reports in the media – which spurred sales.

One of the reasons why people tend to avoid the gun companies is even though they can be very profitable, eventually someone does not injured which results in lawsuits and government regulations. One interesting story is Congress passed a law picking a date with pre the date nothing has to be done; after the date, new regulations apply. One method to get around the law was to offer free new guns to any agency which had bought pre. In that fashion, the agency receives the new guns and the old ones can be sold at higher prices to the public. Gun manufacturers thrive on turmoil, when the general public gets scared it buys guns to protect themselves. The industry remains very profitable.

Linking to dividend paying stocks, there are ads on TV which show large screens looking for tooth decay, one would think this type of attention to detail would be in all industries, it is important to see if it actually does. Glock came along and invented a better mousetrap while the competition could not or would not believe the public would buy anything but what they gave them. The public can change quickly and it can decades to bring them back. If you believe the companies you own are getting complacent, shake them up or sell the shares because change comes quickly and last for a long time.

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

This weekend in North America is a holiday known as Labour Day. We trade our labour for money and years back the large unions must have influenced the governments of the day for a holiday to celebrate the working person. For those that work in a paying field, congratulations and thank you. The other part of the long weekend is the next day is back to school for children and young adults. The hope for our society is to become a better educated one and our young people are the hope for the future.

Linking to dividend paying stocks, as the amount of dividend grows over the years, your financial choices grow over the years. One of the reasons to buy dividend paying stocks is this growth in income allows you to have a choice of who you give your labour to. For if you accumulate sufficient dividend paying stocks, how long you work and how stressed out at work can easily change. Thus for labour day, actually the markets are closed, but the next day celebrate your independent ways of thinking with the purchase of dividend paying stocks.

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

In the biography of Hjalmar Schacht – Hitler’s Banker, by John Weitz, Little Brown and Company, NY, 1997, there are many interesting stories in the book. In the 1920’s there are famous pictures of Germans taking wheelbarrows of money to pay for everyday consumer items. Shortly after this period, Mr. Schacht became the head of the German Federal Reserve. In a couple of years through austerity measures the value of the German mark rebounded and Mr. Schacht was a hero both domestically and abroad. When things are going well, a new management style was needed and Mr. Schacht was replaced but he retained good press as he lectured around the world. A few years later, the economy was not working and Mr. Schacht received his old job back. Along comes Adolph Hitler who through the split vote system in the German parliament receives enough votes to become Chancellor. Similar to every federal civil servant, you serve at the request of the leader but neither agree or disagree with the leader’s policies 100% of the time. It was the same with Mr. Schacht, they both wanted a strong Germany – one through high trade surpluses, one through the use of war and other tactics.

Linking to dividend paying stocks, often companies making profits have a love hate relationship with the government. As long as the company is able to make healthy profits the government who supplies that ability is the one the company supports. All democracies are funded by citizens or companies who after a certain size of a cheque expect something back from the government. The company will look at the personnel of both the government and the top people in the civil service to see if the cheques should keep coming. People such as a Mr. Schacht help legitimized the government and extended the goodwill. Eventually, even though Mr. Schacht and Mr. Hitler were for the same end, how Germany achieved its place was the difference. Process or the how always matters whether in a dividend paying company or growth stock.

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

the biography of Hjalmar Schacht – Hitler’s Banker, by John Weitz, Little Brown and Company, NY, 1997, there are many interesting stories in the book. One particular interesting one is why was World War 1 started? From the history books at the end of June a Crown Prince was assassinated, but nothing exciting happened. It was investigated however, all the countries were not getting along with each other or did not trust each other. Soon countries were drawing lines in the sand, which nobody thought would be crossed as well as to show its citizens back home they were prepared to take a stand. All the European countries had various reasons to “poke” their neighbours. By August each government never thought a world war would develop, nor was there any particular reason to go to war, except the leaders thought it would be a short one.

Linking to dividend paying stocks, all companies and the people that work within them think they are the best and do a good job. Some people hate the competition, with a passion, when that passion over steps good judgement, companies follow paths to fight the competition at the moment rather than serving their customers. Years ago, consumers were more loyal, now days it means an opportunity to look around at other providers. If you own shares in a company that hates its competition too much, look to move your shares to another company. The company may still be profitable but eventually it will need a change of management and restructuring.

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

David Chilton wrote the Wealthy Barber a number of years ago and its message and its delivery are still very valuable today. The message of pay yourself first and spend less than you make will never be bad advice. In his updated book The Wealthy Barber Returns, David Chilton, 2011, Mr. Chilton offers more advice in a different format. The first thing even though the message of spend less than you earn is great advice, it is hard to do – we live in a consumer society; often your spending habits depend on the neighbourhood you live in; we are “sold” on having everything right now; and as long as we are managing or look like we are managing, very few have an interest in us not doing what most of us do well – spend money. If you are in the wonderful position of not owning money, then investments come into your focus.

With investments the rules you will learn to quickly love are compound interest and the rule of 72. The years for your money to double is 72 divided by the rate you are earning. If you were receiving 12%, the answer is 72/12 = 6 years; at 6%, the answer is 72/6 = 12 years. In terms of investing – you maybe one of the 20% of the people who consistently beat the averages of the stock exchange, for the other 80% an index fund with low fees will get you there with less risk.

Linking to dividend paying stocks, another method is own stocks in mature industries that are profitable and pay dividends. The key is profitable and paying dividends, you will notice from the long list of companies on the stock exchange most do not fit the criteria. From the short list, then you choose what companies to invest in. The stock markets offer many stocks filled with hope for the future, and some of them will come through, but the bulk of your money should be in the companies already making money.

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

In races of all kinds – sports and politics are the easier to see, prior to the race both sides will be trying to manage expectations. As a fan you want whoever you are cheering for to win, but the team still has to perform. If your team is favoured, then the job of the leader and/or coach is to both manage expectations and to ensure whoever performs, performs well, for if you underestimate your competition, the competition can surprise you resulting in an upset. Similarly on the stock market, companies have expectations that can be profited from. Companies on the stock market have a track record of performance and expected performance. Sometimes the company is clicking on all cylinders and performs very well; sometimes companies are doing well but not quite meeting the expectations but still doing well. And sometimes companies are not doing well and the stock price deserves to go down. In the second case is where money can be made. We all follow certain sectors more than others because that is where our normal interest is. When the company is doing well but not beating expectations the stock price tends to drop, because those that bought it to double and triple their money need to sell and buy something else. There is likely nothing wrong with the company, but expectations have changed and people value it differently. As an investor, you can then ask yourself when do you believe the company will be clicking on all cylinders – 3 months?6 months? or a year?

Linking to dividend paying stocks, while the above process applies to all companies, it is easier to narrow your field for example which dividend paying companies are underperforming but still profitable to pay their dividend? When the prices go down based on changed expectations, it can be a buying opportunity and you will can make money both on the price increase and the continuing dividend. The market will tell you there is a reason for a drop in stock price, what the reason is always the big question that can be best answered in hindsight. If the company remains profitable and pays a dividend, then in the longer run the share price will tend to go upwards as it meets and beats expectations.

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

The other day one of the people the author works with asked do you collect anything? Originally the answer was not right now, it the past there were things that were of interest.However, upon arriving at home lots of magazines were easily found. As a subscriber of various magazines they arrive at the house and sometime in the next couple of weeks they are read and placed somewhere. Perhaps in the back of my mind the magazines are kept because they could be valuable similar to the first copies of Superman. Although the magazines that arrive for me tend to have a wide subscription and only go up in valuable to a very specific audience, who in all likelihood could find the same information on the internet.

Linking to dividend paying stocks, the stocks which are owned do pay dividends so in a sense I do collect something – dividends. In terms of the magazines they are looking for a home, perhaps my doctor’s office or medical clinic for the magazines could use an update. As you look around your home, and notice you collect something, collecting dividends is just as easy and rewarding in the present and over the long term. Be a collector-collect dividends.

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

A number of years ago, there was a movie called Enemy of the State staring Gene Hackman and Wil Smith and others. The premise of the movie was the Director of one of the Intelligence Services was trying to cover up a crime and the Wil Smith character accidentally was involved. The character raced around trying to go back to his normal life while the Intelligence Service was using all the tools of the US government to track him and do something to him. The Gene Hackman character used to design all the tools for the intelligence service, something happened and now was trying to live off the grid. Recently in one of the newspapers was a story about the latest thing to be soon in every new car. At one time the car was freedom to go anywhere because no one knew where you were going. Then GPS was put in the cars, you may remember GM’s commercials about OnStar, soon all new cars came equipped, similar to many cellphones which have GPS in them, which means someone can find out where you are, although 99.999% no one is concerned. The latest software to come was designed to see if you are a good driver or not. All of us who drive, believe we are at worst a good driver, some of us believe we are better than good. The latest software will detect how you turn corners, hit the brakes, or tailgate more than normal. If you are guilty of these and other infractions your insurance bill will go up. The software will be in car, the software is designed for the insurance companies to follow your habits and determine if they are good or bad.

Linking to dividend paying companies, while the software company is not public, the ones that are process the data are. At the moment there is little to invest in but your insurance company should be a user. Most of the time, no one is interested in your habits but something that is habit forming is receiving a dividend from a company you have invested in. The money either flows to your brokerage account or bank account and the folks that process the money are interested to ensure you receive the correct amount.

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

Recent media reports we are living longer, that is great. However living longer does mean other considerations, as long as you have your health or are reasonably healthy then living longer is wonderful. After your health, hopefully you still are in touch with family or have a support system if the need arrives. Given smaller families over the past few decades, staying in touch with family maybe even more important. From a financial consideration the old adage from asset allocation is take your expected life expectancy minus your age and that would be the portion of growth stocks in the portfolio, the other part would be in fixed income. For decades the old adage worked beautifully.

Linking to dividend paying stocks, since 2000 the old adage has not worked beautifully because of the drive by governments to lower interest rates. The economy of the world changed and there was a tremendous pressure to keep interest rates low allowing inflation to remain low and try to have more jobs in the economy. There are a number of problems with the job front – technology gives us more but there is a growing income gap between what is known as skilled and unskilled work. Due to this growing gap, governments are going to keep interest rates low for the next 3 years plus or when the job rate falls. In 5 to 10 years the job rate will fall because the baby boom will be retiring leading  to job shortages and a low unemployment rate. The issue from a fixed income point of view is your return owning bonds will stay relatively low. The solution is to ensure your portfolio has a very healthy dividend stock portfolio. The last number of years the rates of return have been healthy, the risk to own the best companies on the market is relatively low and there is little to suggest the next few years are going to be different.

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