In every country in the world, the political leaders will at some point in time discuss the issue more manufacturing should be done within the borders of the country. This issue is regularly in the news, many elections had the issue as the top issue among voters, recently it was included in President Trump and America First. Politicians hand out tax grants and various incentives to the companies and most of the public agrees or accepts the need to give corporations free money. The companies promise good paying jobs, spin off activities and the community and state and country are better off, or at least the public believes the world is better off with the incentives that without.

In an article by Kate Holton of Reuters, manufacturing in Britain is starting to come back to the birthplace of the industrial revolution. The British founded the modern factories but over the decades, price was the number one concern, which meant factories moved from the developed world to Asia and in particular China. The Chinese government built the infrastructure that it was worth moving production to China and sending the goods back to Britain or the US to sell at a profit, than make the goods in the host country

According to Tony Hague, President of PP Control & Automation, it takes a bit of a seismic shock to make companies re-evaluate strategy, but price becomes fairly irrelevant if you can not get the stuff. In the past 2 years, his company has received more than $3.1 million worth of work that previously was done in Asia.

A survey by industry group Make UK, of the 132 companies participating in the survey 2/5’s had increased their British supply base. It should be noted the amount of people employed is up but automation and robots are being used in greater numbers.

Roger Crozier, owner of a precision stamping company called Brandauer said in previous years he could not compete against Chinese factories that could churn out products at speed, but with investments in automation, robotics and staff training the dynamics have changed. Now the price may be 5-15% higher, but a couple years it was 30-50% higher.

There are perils involved in the costly and time-consuming process of investing in new machinery, finding new suppliers for materials and building out logistics chains, all with a potential recession on the horizon.

Linking to dividend paying stocks, price and margins are important to maintaining profits to reward shareholders. As an investor, you may want the company to do most of its work in the country you live in, but if they do not make a profit will you keep the shares? Robotics and automation will change some of the pricing. What is important to you?

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

One of the facts people in general know about Ukraine is that the country is the bread basket of the world. They might not not why, but if you think about the great plains in the US where the wheat grows, you will know the answer. Parts of Ukraine have been growing grains for thousands of years and the wheat goes to the markets in Europe and Africa. In many countries in Africa the government supports the price of wheat which allows food to be bought by the poorest of citizens. When Russia invaded Ukraine, the flow of grains was cut off.

For months, Turkey and the United Nations have been concerned and trying to negotiate to move the wheat and other grains from the Ukraine to markets. Russia wanted shipments to be halted because that would be a revenue source for Ukraine to buy more defense items.

In an article by Aya Batrawy of the Associated Press, agreements have been reached to allow ships to go to the ports in the Ukraine and deliver grains. That is the easy part to reach agreement. The hard part is every war leaves military explosives in the sea and near commerce generating facilities.

The theory according to Guy Platten, secretary general of the International Chamber of Shipping which represents 80% of the world’s merchant fleet is the grains would be moved through the Black Sea from the Ukrainian ports to Turkey where it would be inspected by people from Ukraine, Russia, Turkey and the United Nations. To journey from the Black Sea to the Mediterranean Sea the ships have to travel through the Bosphorus Strain in Turkey. That is the journey of the ships but in a war how does it work and will the ships be safe?

The grains to be sent include wheat, barley, corn and sunflower oil.

According to Michelle Wiese Bockmann, a shipping and commodities analyst at Lloyd’s List, a global shipping news publication, the big issue for the shippers is how much will be the insurance rates for the ships? A ship typically carries between 20 and 25 seafarers, will they be safe?

Prior to the war, approximately 4 to 5 million tonnes of grain were moving from Ukraine in addition Russian grains were being exported. In May, Ukrainian shippers were able to ship 1.5 to 2 million tonnes in May and June, but it cost more in terms of smaller loads on trains and smaller ships on rivers. Grain is one of those commodities where freighters make a great deal of economic sense to transport it.

Linking to dividend paying stocks, we all hope the normal cycles of the economy go through the normal cycles of economy and peace or stability is normal. Companies can deal with some weather concerns but man made wars are a different thing, because the time frame lasts longer. A weather event while damaging tends to be short in duration (less than a week until rebuilding time). When there are market opportunity people can find alternatives but there are less costly methods to doing logistics.

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

Alphabet is the parent company of Google the search engine and everyday, millions of people go to Google and search something. At that moment the aspect someone is searching for is recorded and if a company can advertise to the person, the ads will come up. Google makes its money selling advertising.

In an article from Reuters, Google’s ad business accounted for 81% of the quarterly revenue with sales of $56.29 billion falling short of expectations of $56.67 billion.

Over profit for the company in the quarter was $16 billion or $1.21 a share compared to the estimated $1.29 a share.

One of the ratios investors look at is costs to sales. Google has been averaging gross profit margins as high as 60%, Google similar to many tech companies has slowed down its hiring to better manage expenses.

Cloud computing is important to Alphabet as Google is the second largest cloud computing company behind Amazon and ahead of Microsoft.

Linking to dividend paying stocks, you can think of companies anyway you wish to, but as investors you want to know how do they make their money and what are their margins. In the case of Alphabet it sells advertising but we all know it as search engine. As the markets become greater segmented, companies need to buy advertising.

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

Even though thanks to search engine such as Google we have more information to be gather and digested, we all tend to generalize. For example oil prices go up, oil and gas companies benefit, which is partly true. Oil and gas producers benefit, however refinery companies may or may not benefit.

In an article by Mohi Narayan, Laura Sanicola and Shadia Nasralla of Reuters, a sudden crash in gasoline prices has dented refiners’profits, although consumers and politicians are benefiting. The crash in prices pushed up inventories in key trading hubs as people consumed less gasoline.

Gasoline is a product through the massive refineries but it is not the most profitable fuel.

Asia’s top fuel exporter is Taiwan’s Formosa Petrochemical Corp will be reducing the operating rates at their residue fluid catalytic cracking (RFCC) units by 5% to produce more VLSFO (very low sulfur fuel oil) because the margins are better. The VLSFO can be sold as marine fuel (ships) or used as a feedstock to produce gasoline later.

Asian gasoline margins fell more than 102% in July to a discount of 14 cents a barrel to Brent crude after hitting a record $38.05 a barrel in June.

Indonesia is Asia’s largest gasoline importer, but the consultancy FGE sees Indonesian declines along with Asia of 240,000 tonnes. FGE expects Asian gasoline demand excluding China to improve marginally between July and September averaging 80,000 barrels a day lower than levels seen during the same period in 2019, as high retail prices weigh in on demand.

In the US, gasoline products that are derivatives of gasoline, was about 8.5 million barrels a day or 7.6% lower than the same time as last year, government data shows.

In refineries there is a 321 crack spread, a proxy for refining margins, it has fallen to the lowest point in the last 3 months at $37.57 a barrel down from $60 a barren in June.

Linking to dividend paying stocks, as a consumer you think about the price, as an investor you want to know the margin to be in profits. If the margin stays high, the company makes money, when margins go down profits are down. In the companies you invest in, learning what the margins are and what they are expected is the key to whether you should hold or look for alternatives.

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

In an ideal world you would also have some choice or alternatives for your suppliers. Most of us are loyal or habit forming and we go to the same gas station, the same insurance company and the list goes on. This is not bad, it is we feel a sense of loyalty to the company, even though the company likely does not feel the same way, but we have a sense of loyalty. For countries, they have the same aspect of loyalty and with that sense of loyalty infrastructure builds up and once it builds up, it is hard to change.

If you use the example of Europe, there are very good reasons why Europe imports gas from Russia as it is one of the biggest producers of gas in the world. Even though Russia has its own methods of doing business, if Russia commits to something the government backs the business. The Russia gas company is called Gazprom and it has pipelines across Russia to bring the gas to the markets in Europe and China. The company operates the same as American gas pipelines without the objections to building where they wish to build.

When Russia decided to invade Ukraine, the west including Europe imposed sanctions on Russia and Russia thought they could live with it, but every once in a while Russia likes to flex its muscles. Typically in the middle of the summer, normal maintenance goes on with pipelines, it is expected because of lower demand. In an article by Reuters, in late July Russia has cut capacity to 20% of gas flows. As much as a country would like, it is very hard to import gas from other countries because of the infrastructure which is built. The gas needs to go through a pipeline to a refinery to be processed and then sent along the way. For Gazprom, the refinery is run by Gazprom – the German companies are the distributors. Germany receives 40% of its gas from Russia, Italy receives more.

The Germany Department of Energy sees no technical reason why the latest reduction has happened or it is political. Russia wants Europe to ease up on its sanctions.

Linking to dividend paying stocks, for large profitable companies they can act similar to Gazprom and Russia but they generally do not need to. The only time they tend to do it when their profitability is at stake. If the management at your company is tending to act like the Russia government, it is time to find alternatives.

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

All stock exchanges have regulators, they are seemingly ensure there are some ethics in the buying and selling of securities, understanding if a broker works on commission to raise commission means more trading. Some securities have very low commission, some securities have have higher commissions and when a broker is disciplined it is often in the higher commission securities. For most investors, buy and hold quality stocks is the method to gain wealth over the long term, but everyone who buys and sells wants to have the big gain almost immediately. Having said that often times, those that run the securities and exchanges will point to the quality of the regulators as one of the reasons why investors should feel comfortable trading on the exchange.

If an investor particularly an investor who holds directly and indirectly a large holding makes a statement about their holding and the stock either goes up or down, it will come to the attention of the regulators. There is a principle that all investors should have information as reasonable soon as possible, this is why companies release press releases to state their earnings at a particular time – usually before the exchange opens or after it closes. It this fashion investors can read the releases and act accordingly. Do the results match expectations?

Elon Musk of Tesla loves to tweet and that can be very good, except he sometimes tweets about the value of his company. As the President and largest shareholder what he says is material, he has tweeted maybe I will take the company private? Taking a company private is always possible but it implies he has the financing to do it and will do it at a premium to the stock price in order for the investment companies to buy the shares for the company. If he wanted to take the company at a lower price, investors would demand a premium and not sell. The tweet has financial implications.

In an article from Reuters, Telsa has received its 2nd subpoena from the SEC about his tweets. Likely he will receive more about his proposal buy out of Twitter. A subpoena means Mr. Musk and his lawyers have to testify under oath to investigators from the SEC. They will make recommendations on penalties and normally there are both financial and trading suspensions. The company said it will co-operate with the SEC – arranging both time frames to appear and documents requested.

Linking to dividend paying stocks, there are rules for the bigger players in the market to be fair to the smaller players. If you one share of a company trading in the hundreds of thousands every day, you can have a view but it will not change the outlook of the company. If you own a hedge fund and accumulate over 5%, your views will be heard by senior management because it could sway other shareholders. If senior management which typically has over 50% of the votes at the Annual General Meeting says something about the company, it needs to be widely told or it is inside information. The regulators are there to ensure the large companies have good ethics and the do not do the same thing as the fly by night security firms.

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

If you watch TV and most people do, what events brings the most people to want to watch TV? The the answers is sports – watching live sports was 95 out of the 100 most viewed programs. If you are a consumer of beer, there are many sports bars or areas where you can eat and drink with patrons while watching TV. If you can not be at the game the next best thing is a sports bar and if you can not be at a sports bar you have your TV at home. If you know the history of FOX, one of the first things they did was to offer the NFL owners a seemingly large amount of money for the rights to show NFL football and eventually the Super Bowl. The ability to show live sports brought viewers and then it was up to FOX to send them to their other shows.

In an article by Tripp Mickle, Kevin Draper and Benjamin Mullin of the New York Times News Service, the strategy of FOX is being replaced by the streaming services of big tech. The streaming services of Apple and Amazon need content and offering sports content will mean people will subscribe to the service for the live sports. The issue is always how much should big tech pay to receive the rights to live sports?

DirecTV has the rights to NFL Sunday Ticket and pays about $1 billion a year, they decided to not to continue which means the price is going up to $2.5 billion annually. DirecTV says it has been losing money $500 million a year (they must have only receive $500 million plus on advertising) but did benefit from the 2 million subscribers.

Apple is the leading contender and President Tim Cook has made the rounds to the NFL and equally important the NFL owners who will vote on the media package. Some of the owners are Jerry Jones of the Dallas Cowboys and Robert Kraft of the New England Patriots.

Other companies which are expected to make bids are Amazon, ESPN+ (owned by Disney) and You Tube (owned by Alphabet).

The biggest media companies such as Disney, Comcast, Paramount and Fox are expected to spend $24.2 billion for live sports rights in 2024 which is nearly double what they spent 10 years ago according to MoffettNathanson, an investment firm that tracks the industry.

Apple started its $4.99 streaming service Apple TV+ in 2019 and has 16.3 million subscribers in the US according to Antenna, an analytics firm for video on demand services. Amazon has 200 million subscribers to Amazon Prime although people can subscribe to Prime Video only for $8.99.

Recently Apple Sports added MLB or Major League Baseball.

Amazon agreed to pay $1 billion a year for Thursday night NFL games an increase of 50%.

ESPN outbid Amazon for Formula One racing for $75 million, a 15 fold increase from the prior contact according to the Sports Business Journal.

Comcast which owns NBC Universal closed down NBC Sports Network and moved the games to Peacock where it aired some English Premier League soccer games.

CBS owns Paramount+ and has shown US league soccer games.

The NBA is with ESPN and Turner through the 2024-25 season.

Linking to dividend paying stocks, sports brings in viewers and many viewers bring its advertising which brings in revenues to make the cycle pay for itself. As long as people enjoy watching sports, advertisers who are looking for a mass market will pay. There will be many delineations to the target audience but in general advertises need to seek consumers. If sports is the way, sports is the way. Where does your favorite team play? given stadiums have a name to them.

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

If you were to look under the hood of any internal combustion engine vehicle you would see a number of brands ensuring the engine runs well. Most of the parts likely have a generic or inhouse ability to make, but many manufacturers including car companies outsource the parts to other companies and the manufacturer puts the parts in correctly. As the car companies evolve from internal combustion engines to electric vehicles, the brand names will and are changing. This means over time, but not tomorrow, the companies that make parts for the internal combustion engine will make less or have to switch to electric vehicle parts. Sometimes it is easier for the manufacturers to find new partners in their manufacturing process.

In an article by Joseph White and Ben Klayman of Reuters, Ford announced it will import lower cost lithium iron batteries (LFP) for its trucks and SUVs from Chinese battery maker CATL.

Ford VP Lisa Drake said by 2026 the batteries should be made in the US, for now they will be made in China.

Ford’s decision to use lithium iron batteries in its best selling North American EV’s is the latest sign that lithium iron’s lower cost is worth the tradeoff in range.

Tesla is offering LFP batteries in its lower priced Model 3. Truck and van maker Rivian is using LFP batteries.

Ford is in talks with the big mining giants of Rio Tinto, Vale, Huayou Cobalt and BHP to secure lithium and nickel for the batteries.

Linking to dividend paying stocks, one of the aspects of being a successful company is making the transition to the new standards. If you remember video cassettes and the technologies were beta or VHS. One became a standard and sold billions of units, one died away until CDs changed the market. Picking the company that becomes the standard is the key, but what becomes standard is seemingly only obvious in retrospective. When companies particularly manufacturing companies announce their new partners you have to evaluate is that good?

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

In some countries around the world, to encourage development some private companies received the government’s blessing to become conglomerates or to be involved in many different industries. At the time, there seemed to be a ration reason by the government, for example in Japan after WW II, the country needed to be rebuilt. Companies that became successful were given responsibility for national interest divisions which the government funded most of the research and development. However through the funding of the national interest division, the company was given a favored status in the areas where there was more competition. One thing lead to another and soon there were a number of large conglomerates in Japan (and other countries) which still exist.

In an article by Makiko Yamazaki, Scott Murdoch and Kane Wu of Reuters, KKR & Co has accumulated shares of Toshiba and believes if the company was taken private and split up to become public again, there would be wealth to be gained. With giant fund companies such as KKR, they have access to capital to with their various funds but need the government’s blessing that it is in the best interests of Japan. To do a buyout would cost around $22 billion and Toshiba said over the past month it has received 8 initial buyout proposals as well as 2 offers for capital alliances that would see it remain listed.

KKR’s competitors are Apollo Global Management, Bain Capital, Blackstone Inc, Baring Private Equity Asia, CVC Capital Partners, and MBK Partners. As well as Japan Investment Corp (JIC) is forming a consortium with domestic private equity firm Japan Industrial Partners to bid.

Linking to dividend paying stocks, at one time conglomerates were seen as too big or too protected by the government, but times change and evolve. Once the protection by the government is seen to lessen, conglomerates are evaluated the same as any other stock and management must perform to the satisfaction of shareholders. If you are a small investor, this means the large funds are expecting the same results as you are. However if the results do not measure as a small investor you are likely to find alternatives, the larger funds are likely to change management and the company from the inside.

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