In Search of the Perfect Investment

I bought some Waste Management (WM). They pick up the garbage in Indian Wells, CA where I’m presently. They do an exemplary job. I wish had bought them earlier. This is a one-year chart.

WM’s dividend yield is 2.75%.

There is truth in buying stock in companies whose products and services you love. Whole Foods is just getting better every day. I love their new Palm Desert store. Their pizza is excellent. And their people super helpful. Their CEO told Cramer last night that he (the CEO) was increasingly emphasizing digital enhancements for the customer — like home delivery via iPhone. He also said Whole Foods was the country’s biggest user of Apple Pay — swiping your iPhone, instead of your credit card. Faster, easier, etc. May yet inspire me to get the iPhone 6 Plus I’ve been lusting over.

Which industries will deliver the best stock-market returns? History seems to point to an easy shortcut — invest in companies that sell addictive stuff, says an interesting piece in Bloomberg:

Need a Hot Stock? Buy Booze and Smokes

It would be really cool to know which industries are going to thrive and grow and create jobs in the future. It’s also really hard to figure that out ahead of time. If you’re just interested in which industries will deliver the best stock-market returns, though, history seems to point to an easy shortcut — invest in companies that sell addictive stuff.

I learned this dubious lesson by reading, in quick succession, two big new reports: the Brookings Institution’s analysis of the 50 “Advanced Industries” that are supposed to drive job and income growth in the U.S., and Credit Suisse’s annual “Global Investment Returns Yearbook.” The Brookings report tries to look into the future by measuring investment in technological progress by industry — and although most of the 50 advanced industries it identifies are what you would expect, there are some surprises. In the 2015 Credit Suisse yearbook, meanwhile, Elroy Dimson, Paul Marsh and Mike Staunton of London Business School examine 115 years of stock-market returns by industry, and while they document a lot of technological upheaval, the two biggest winners for investors turn out to be decidedly low tech.

An advanced industry, by Brookings’ accounting, is one “in which R&D spending per worker reaches the top 20 percent of all industries and the share of workers with significant STEM knowledge exceeds the national average.” (STEM = science, technology, engineering and math. And R&D = research and development. But you probably knew that.) There’s lots of research showing that technological change drives economic growth, and R&D spending and STEM knowledge are supposed to be proxies for future technological change.

I don’t know of any obviously better proxies, but the results show the difficulty of any such accounting. The list of the very biggest R&D spenders isn’t particularly surprising:

Dig deeper into the advanced industries list, though, and you soon come across industries that don’t seem all that advanced: railroad rolling stock, foundries, petroleum and coal products, metal-ore mining. Are these secret hotbeds of technological change that should command more attention? Probably not. One old-school industry, motor-vehicle manufacturing, does spend a ton on R&D ($48,461 per worker), but those others made the list mainly because there just aren’t that many industries in the U.S. that invest in R&D at all. To get to 50, you have to include a bunch of industries with per-worker spending of less than $5,000 a year. (No. 50, in case you’re wondering, is wireless-telecommunication carriers — which spent just $455 per worker in 2009.)

This isn’t necessarily a problem for the U.S. economy. One thing you’ll notice if you spend any time with the North American Industry Classification System is that it’s backward-looking. Older parts of the economy are divided into lots and lots of industries; newer ones aren’t. So you get railroad rolling-stock manufacturing, which employed 25,200 people in 2013 and generated $3.6 billion in output, counted as an industry on the same level as computer-systems design, which employed 1.7 million people and generated $246 billion.

Yet it’s these newer industries that generate the growth — at least, they have over the past 115 years. In 1900, according to the Credit Suisse yearbook, railroads accounted for 63 percent of stock-market value in the U.S. Now they’re less than 1 percent, and 62 percent of U.S. stock-market value is in industries that were small or nonexistent in 1900. The largest industries by market cap now are technology, oil and gas, banking and health care.

The problem for stock-market investors, though, is that they don’t necessarily get most of the gains from these new industries. Citing Alasdair Nairn’s book “Engines That Move Markets,” the Credit Suisse researchers write that the biggest beneficiaries of new technology “tended to be the `insiders,’ i.e. the innovators, founders and providers of venture funding, along with consumers and society as a whole.”

Shares in railroads, for example, have actually turned out to be a better investment than the industries that partially supplanted it: air and road transport. And the best investments of all since 1900? In the U.S. it’s tobacco companies — a single dollar invested in them in 1900 would be worth $6.3 million today. In the U.K, it’s makers of alcoholic beverages, with a pound invested in 1900 worth £243,152 ($373,500) today.

We’re all supposed to believe that past performance is no guarantee of future results. But given human nature, it seems reasonable to expect tobacco and alcohol to continue to do well — unless tobacco is completely banned, of course. Picking the next hot industry is a much harder task, yet it is a much more important one.

You’ll find the Bloomberg article here.

Don’t do stupid. 

Bob Simon, 73, a renowned war -reporter, was sitting in the back seat without his seat belt and suffered a fatal broken neck and head trauma.

Virtually nothing on the Internet is fact-checked. When I worked at BusinessWeek, we had a whole department of people whose job was to check every story before it went to press. They’d call sources and ask them if they said what the article said they said. They’d check statistics in multiple sources.

No more. The fact-checkers got fired when the print business got whacked by the Internet. Facts have been replaced by opinions. TV network owners find busty, leggy opinionated anchors cheaper, more appealing to audiences. The male anchors push extreme opinions. Bomb ISIS back to the stone age is an easier “solution” than figuring how to deal with that immensely complex problem.

Today any one can pay $5 a month, get himself a website, publish unchecked “facts” and conspiracy theories willy-nilly.

The New Yorker published the classic comment on this 22 years ago:

A wonderful commercial for the iPad. Only 39 seconds. But wondrous. Click here.

Your dentist’s biggest job. Which most dentists fall down on. Their job is not to fix your teeth. It’s to teach you how to take care of your own teeth. This lesson is especially important as you get older and have bridges, implants and failing fillings.

You get decay when food accumulates in places it shouldn’t be. You need to get rid of that debris in any and every way. Dentists can provide you with powerful toothpaste and extra powerful mouthwash. Ask for it.Ask for lesson.

You don’t have your children’s teeth. When you and I grew up, they didn’t have fluoride. Major bummer. Good news: We have implants and sometimes they take.

The high-tech farm.

A farmer ordered a high-tech milking machine. Since the equipment arrived when his wife was out of town, he decided to test it on himself first.

So, he inserted his “manhood” into the equipment, turned on the switch and everything else was automatic.

Soon, he realized that the equipment provided him with much more pleasure than his wife did. When the fun was over, though, he quickly realized that he couldn’t remove the instrument from his ‘member’.

He read the manual but didn’t find any useful information on how to disengage himself. He tried every button on the instrument, but still without success. Finally, he called the supplier’s Customer Service hot line with his cell phone (Thank god for cell phones! Thank God for India.)

“Hello, I just bought a milking machine from your company. It works fantastic, but how do I remove it from the cow’s udder?”

“Don’t worry,” replied the customer service rep, “The machine will release automatically once it’s collected two gallons. Have a nice day! ”

Click!

Harry Newton, who’s convinced most people don’t listen. This makes giving advice as a director on a board or an advisor to a board difficult. Amazon may be different. They seem to listen. They’re helping get my dictionary on the Kindle. Amazingly wonderful company.