In the end of next month or October 31, the government of the United Kingdom including England hopes to dislodge itself from the European Union or EU. The Prime Minister believes it is a simple thing to do, in reality it is more complex than just walking away. One of the simple things which most of us would not consider is the wooden pallet. If you look at warehouses around the country, fork lifts are moving wooden pallets around because it is the easiest method to move from factory to warehouse to shop and depending on the size of the shop, the movement is done by a forklift. The forklift goes underneath the wooden pallet, lifts the pallet up, moves the pallet to a location and goes on to the next pallet.
In England, the process is repeated multiple million of times for 250 million pallets are in circulation across the country with 40 million pallets produced every year. The problem is how are the wooden pallets treated? To combat tree eating insects, wood pallets need to meet the EU’s regulations on heat-treated wood and these regulations were designed 20 years ago. In England, there has not been a problem with the kinds of bugs, other parts of Europe have and has been exempt from the rules because it is a member. Now imagine, before any good is exported from Europe, the pallets have to be treated or they could be rejected by the EU country where British goods were been exported.
The government says it is working on a solution, but given the number of pallets in circulation and they believe the EU regulations do not make sense given the low risk, however if the EU enforces the rules, Britian would be stuck. The rule applies to non members of the EU and Britain would be a non member if it left the EU on October 31. The process costs about a $1.66 and the heating process takes 6 hours.
Linking to dividend paying stocks, it is the simple things that people do not anticipate that make life complicated. Big ideas are great, but it takes a great deal of work and planning to make great ideas work in practice. When you are investing, always ask simple things before you invest – how does the company make money? what does it need to be profitable? how can it sustain its dividends? seemingly easy questions, which can be complicated.
There are more questions than answers, till the next time – to raising questions.