In every industry there always a new kid on the block or in the market. Sometimes it is a wonder kid with new ideas, but more often it is someone who wants to be in the industry and is backed by seemingly unlimited resources. It is the second scenario which is happening in Hollywood.

In an article by Zaheer Kachwala and Dawn Chmielewski of Reuters, Parmount SkyDance is preparing a majority cash bid for Warner Bros Discovery it back by Ellison family.

The bid will be for the entire company, including its cable networks and movie studio. Skydance recently bought Paramount Global for $8.4 billion. Skydance CEO is David Ellison who wants to be in the movie business. His dad is Larry Ellison who owns 41% of Oracle Corp. The company plays a significant role in AI and as the stock has risen, Mr. Ellison has been the richest person in the world.

Warner Bros is a media giant and some of its assets are HBO Max, the Harry Potter franchise, and CNN.

The media sector has intensifying competition, as tradition players race to gain scale and strengthen their streaming services as TV viewership declines.

Linking to dividend paying stocks, in the media world there is always money to be made with a hit show or movie, and a million ways to capitalize on that success. However, as dividend buyers you are paying for consistency to deliver profits. Sometimes company scale up, sometimes they divest assets, it is always an interest story to hear every quarter.

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

Sometimes the solution seems simple, and the idea will generate interest and it will take over the public’s interest and all seems good. In this following example, the simple idea is the Americans in particular are overweight which means a great deal of health-related costs. If there was a drug to help combat the weight, the pounds would disappear and the people would be healthier. That is a good thing. For investors the issue is who is doing it? and is the government helping?

In an article by Louise Rasmussen, Jacob Gronholt-Pedersen and Maggie Fick of Reuters, one company had a drug that showed many signs it also helped with weight loss. Novo Nordisk, the maker of Wegovy was originally developed for diabetes. In studies, people who were on it also showed weight loss, Novo’s people went back and out came Wegovy. It was one of the first big name drugs to come out, (in the world of drug making, being first is a very good thing because of patents). People started to use it, sales began to soar and so did the stock price. For a time, Novo Nordisk was the stock with the largest market capitalization in Europe.

When there are profits to be made, all companies salivate towards where the profits are coming from and soon Eli Lilly had a drug and it became the leader in the obesity and diabetes markets. Thus has resulted in Novo doing restructuring or 9,000 people were laid off. The number represents 15% of Novo’s worldwide workforce.

Lukas Leu, a portfolio manager at ATG Healthcare, said the obesity market was misjudged. It is much more consumer-driven than anticipated and Novo expanded organizational complexity too quickly.

At the present time the drug Wegovy is done through syringes but there is a pill coming. Eli Lilly’s Zepbound overtook Wegovy in weekly prescriptions in the US earlier this year. The company is expecting profits to come at the 4 to 10% rather than 19 to 27%.

Linking to dividend paying companies, execution is what you are paying for when buying a dividend paying stock which continues to make profits. The ideas are great, but how companies make money from the end user is what profitable business is all about.

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

For millions of consumers, part of the daily routine is to have a cup of coffee or more to start the day and sometimes throughout it. There are multiple coffee shops to choose from, you can buy the beans or instant, coffee products are there to help you. In the depression, there was an expression, brother or buddy can you spare a dime or enough to buy a cup of coffee. Coffee was and is still part and parcel of living in America. Have you ever wonder about why coffee and the business behind it? In a book called Coffeeland by Augustine Sedgewick published by Penguin Press, NY, 2020, the author looks at the history both good and bad of coffee.

After the California gold rush, the Central Valley of California was planted with wheat and soon San Francisco companies were being exchanging wheat for coffee, spices and chocolate and companies such as Ottis McAllister, Hills Brothers and Folger’s were developing into larger entities.

In El Salvador, Mr. Hill had settled into a plantation near the town of Santa Ana and the Santa Ana Volcano. He did not know much about the coffee growing business but there were many books about coffee planting available. In the coffee business just as any agriculture product, access to credit is essential to longevity. The price of coffee beans rose, Mr. Hill borrowed and expanded operations to include a mill, which became the place to wash the fruit from the seed.

Regulations and standards are important in every industry, the coffee industry through the New York Coffee Exchange helped established standard grades of coffee. At first, the standards were on the consistency of the bean and lack of other stuff in the bags. It evolved to what does it taste like? At the time, Brazil was the biggest supplier, they had a very consistent bean but not the greatest of taste. Coffee grown in Columbia and El Salvador had better tastes. Technology in terms of vacuum-packing coffee in tin cans allowed none Brazilian growers to compete in the marketplace. The growth of the advertising business and emphasizing a better taste.

During the war years of WW I, San Francisco merchants, operating in a commercial vacuum, collected their intimate knowledge of every plantation and mill in Central America. By the end of the war, San Francisco merchants had taken control of the Central American coffee trade. They were buying 5 times more coffee than a decade earlier or 12% of US imports and rising.

Another change was where a typical American shopped. For a long-time the grocer and dry goods store was the place to shop, the grocer helped customers from behind a counter, listening, advising, selecting, portioning, weighing, wrapping, tallying, packing and making change.

Neighborhood grocers served people who could walk to the store, or they depended on a steady profit from the items they sold most frequently, especially coffee. Most grocers padded their margins by pushing bulk coffee, which was cheaper than packaged coffee and could be blended and diluted to meet almost any preference and price level.

The war changed things, a new store that was centrally managed, vertically integrated chains of hundreds or thousands of stores, the store that led the change was A&P. The company started as a tea shop, where it could be the tea importer, roaster, wholesaler and retailer and beat other grocer’s by a third. A&P developed a new store, called Economy Stores that grew to 16,000 by 1930.

In 1908, A&P opened its own coffee-roasting plant in Jesey City, it began to import coffee from Brazil and by 1921, A&P was selling more than 40 million pounds of coffee at retail, it had become the largest coffee business – the largest importer, roaster and retailer in the world. The brands were Eight O’Clock, the top selling coffee in the world; Red Circle and Bokar. By 1930, A&P was selling over 100 million pounds of coffee.

If all coffee tasted the same, A&P would have been unbeatable. A&P used Brazilian coffee which was inexpensive and low quality.

Central America typically produced high quality, mild coffee or sweetness in a cup. San Francisco based Hills Bros in 1912 offered 23 varieties that customers had around a thousand choices a coffee for every price and quantity. By 1926, it had consolidated and cut to high-grade vacuum packed Red Can. Hills Bros and Folgers would embark on advertising programs to sell the high quality.

In many ways, coffee was the ideal supermarket product. First, quality advertised brands were usually packaged in brightly colored tin cans that were light by volume and perfect for piling into the eye-filling displays supermarket retailers favored. Second, as a daily drink, coffee was on the list of weekly shopping lists which makes it an attractive bargain item to tout in newspaper ads and circulars. Coffee was the most important branded staple of the American diet that was also produced outside the US. As a result of the depression around the world, coffee was cheap in the US.

For Mr. Hill, his plantation grew from 1,600 acres to 3,000 with over 300,000 trees planted and still operates you can check out the website http://www.jhillcoffee.com

WW II, coffee accounted for 10% of all imports between 1941 and 1945. Hills Bros won a government contract to deliver 18 million pounds of coffee vacuum-packed in 20-pound cans painted army drab.

In 2011, we have a third wave of Americans drinking coffee. The first was made up of big supermarkets such brands as Hills Bros, Folgers and Maxwell House. The second is coffee shops such as Berkeley-based Peets and Seattle’s Starbucks, which grew up in the high-quality mild coffee. And the third was a farmer-obsessed coffee movement made up of boutique roasters and stylish shops.

Linking to dividend paying stocks, from the book, although the author runs into many tangents, all industries go through change and processes and there are many risks and challenges along the way. Not all will survive, but they add their mark as time goes by. It is hard to determine who will be a winner and who will be in business and that is where your homework continues.

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

For millions of consumers, part of the daily routine is to have a cup of coffee or more to start the day and sometimes throughout it. There are multiple coffee shops to choose from, you can buy the beans or instant, coffee products are there to help you. In the depression, there was an expression, brother or buddy can you spare a dime or enough to buy a cup of coffee. Coffee was and is still part and parcel of living in America. Have you ever wonder about why coffee and the business behind it? In a book called Coffeeland by Augustine Sedgewick published by Penguin Press, NY, 2020, the author looks at the history both good and bad of coffee.

In 1928, due to a number of planters including James Hill’s coffee mill, coffee trees covered a 1/4 of El Salvador’s arable land and employed a 1/5 of its population. Salavoran plantations generated per-acre yield 50% higher than Brazil, producing an annual coffee crop than made up of a 1/4 of the country’s GDP and 90% of its exports.

Mr. Hill had arrived in El Salvador in 1889 as a travelling salesman of fabrics from England. He eventually became a tailor and married a lady whose family owned a coffee plantation. Mr. Hill then moved to his farm and became a coffee grower. The next step was to set up a coffee mill and send beans to San Franciso.

400 years ago, coffee was only found in Yemen and controlled by a small group of merchants. The control meant coffee was available in Europe, but it was expensive and not available to the masses of people. In England, coffee and tea were available but they were both expensive because the Dutch through the Island of Java (now days we know it as Indonesia) controlled the spice markets as well as having a monopoly on tea. By 1825, the British East India Company had access to Chinese ports and flooded the British market with inexpensive Chinese tea. Britian became a tea drinking nation, and the Dutch changed Java’s production from tea to coffee.

In the 1700’s and 1800’s, European countries all had colonies around the world. The Europeans moved coffee plantings moved around the world, particularly to Central and South America. Some of the islands of the Caribbean had wonderful soil and weather for coffee plantations and soon the island of Saint-Domingue, which we know as Haiti became the world leader producer of coffee, producing half of the world’s crop. The work was done by slaves.

Haiti had a slave rebellion, and the planters left the country and some of them took residence in Brazil. By the 1830’s Brazil had over 50% of the world’s annual supply with the work of the slave trade.

In the 1880’s the slave trade in Brazil was over and the industry was in disarray because it needed to pay people to do the work and in Java a fungus affected the coffee trees. The production in Java fell from 13% of the world’s market to 5%. This left an opening for other countries who grew coffee, as well as the price of coffee increased 50%.

The largest opening was for Latin American countries to the all-important US market. During the civil war, the military gave its soldiers coffee as well in the 1820’s the US became the first world power to import coffee duty-free or free trade. The free trade in coffee was part of President James Munroe vision of a greater influence in Central and South America or what is now called the Munroe Doctrine. Coffee became a working person drink or there was a growing market in the US as well the US government could influence governments through coffee particularly infrastructure improvements, governance – to ensure US interests are safeguarded and finance – offering loans through development banks to expand coffee production.

Linking to dividend paying stocks, for every commodity, there are multiple stories behind it to be where we see it now. Most of them involve who has the largest market share, who can influence the price and over a period of years can profits be made. After that you can add in government influence, labor markets and booms and busts to shake out the industry. As an investor you need to focus on at what price does the company make money using the commodity.

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

In his second term, President Trump has done many things by Executive Order and within the law, the phrase emergency powers act has often been used. In the past, Presidents had to go through the House and Senate to pass bills and even though President Trump’s party has a majority in each of the legislative body he has gone around them. Time will tell what happens if the Democrats ever have a President, will he or she be able to do the same thing? President Trump’s big economic push has been tariffs. Whether you think they are good or bad, one has to ask is there really an emergency on a broad tariff policy?

In an article by Andrew Chung of Reuters, the US Supreme Court agreed to take up the case the Justice Department appeal of a lower court’s ruling that President Trump overstepped his authority in imposing most of his tariffs under a federal law meant for emergencies.

The Supreme Court begins a nine-month term on October 6 and for the Court, they placed the court on a fast track, scheduling oral arguments for the 1st week of November. A decision will be made before December.

The Act President Trump has used is called the International Emergency Economic Powers Act or IEEPA. The tariffs remain in effect during the appeal to the Supreme Court.

The question is who can impose tariffs Congress or the President? Since the IEEPA was passed in 1977, it has never been used to impose tariffs. It has been used to impose sanctions of governments.

Linking to dividend paying stocks, some of these companies will have operations outside the borders of the US. Many of them will have used existing supply systems to lower costs to maintain margins to make profits to reward shareholders. If you own manufacturing or retail shares, you have likely heard or seen the CFO say tariffs are making an impact on our business. If things change at the Supreme Court those stocks will likely get a bounce in stock price, however it does through concerns elsewhere in the economic system or President Trump will likely have to raise taxes.

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

If you are a dividend investor, automatically you focus on the equities or the stock market. If you are invested in utilities, banks, oil and gas companies, both the stock price and the dividend to equal a total return has done well. However, the alternative to investing in the stock market is buying bonds which is much larger than the stock market.

In an article by Jamie McGeever of Reuters, President Trump’s administration has been focusing on borrowing more at the ultrashort end of the curve, while pushing the Federal Reserve to cut rates. The ultrashort end of the curve is US Treasury bills. Every week there are sales of the 4 week T-bills and the size has reached $100 billion for the 5th consecutive week.

In the article the benchmark 10-yield is the lowest since April’s Liberation Day, while the 30-year bond is backing away from 5%. Investors lending to Uncle Sam for 10 years are getting 4.08%, while investors lending to Uncle Sam for 4 weeks are getting 4.2%. The good news for Uncle Sam is the the $100 billion sale was 2.78 times over scribed or there is very healthy demand.

The big problem is rollover risk. Concentrating sales at the front end of the curve means the government has to refinance a large portion of the debt more frequently. An extreme case of rollover risk was in 2008, when real estate mortgage back securities went into default, all short term paper connected with real estate did not rollover. We are nowhere near that, but a risk is a risk.

Increase T bill issuance has been well absorbed so far, but cash going into bills is depleting liquidity pools and buffers in other parts of the system. The Fed’s overnight reverse repo facility is almost empty, and total bank reserves at the Fed are declining.

No one knows what the lowest comfortable level of reserves for the banking system is. In 2019, a sudden drop below $1.5 trillion triggered significant money market volatility and a spike in overnight rates. At the present time, the reserves are in the $3 trillion area,

The result of moving to the issuance of more T bills is the total outstanding portion of federal debt is 21%, slightly below the historical average of around 22.5% but above the recommended range by the Treasury Borrowing Advisory Committee of 15 to 20%.

As long as there is constant demand for the debt, then the issuance of $1 trillion of new issuance coming soon will not be a concern to the market.

In the world of finance, there are many moving parts and as long as the market has confidence in the system, then it all works. If the market finds a good reason to be worried, then interest rates have to go to ensure demand continues. Politically President Trump can call for lower interest rates but the market will determine what he has to pay. Given interest rates have a direct reflection of dividend stocks, if the government has going to ensure you 7%, would you buy stocks or bonds? Fortunately, the rates are low and should be going down because the economy is slowing, which makes buying a profitable company that can pay dividends a valuable thing to do.

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

Ever since WW II, the world has evolved into countries that have significant advantages to specialize in those manufacturing companies. The advantages allow them to sell products for less than other companies can sell and make a profit on them. The countries allowed lower cost items but shifted its economies to more services and their standard of living improved, so most people were content with the system. President Trump loves tariffs and given he is President has moved the world to deal with tariffs. The world of manufacturing is adjusting to the tariffs, and it takes time before domestic manufacturing builds the items that were being imported.

In an article by Kevin Draper of the New York Times News Agency, if you think of green and yellow tractors, you likely think of John Deere, headquartered in Moline. Illinois. The company has 30,000 employees across 60 facilities across the country. More than 75% of its machines are assembled in the US or 25% of the components are imported.

Those big tractors which harvested the country’s corn, soybean and wheat crops are expensive. Some models cost more than $250,000 which is at rise of over 60% in the past 8 years. The article says at that price farmers and ranchers are looking at used tractors.

Demand for new agricultural equipment is largely determined by crop prices. When prices are high, farmers can buy new equipment. At the present time, prices are low with corn selling for 50% of the highs seen in mid-2022 Soybean prices are down 40%. John Deere expects sales of equipment to fall 15 to 20%.

If you watch YouTube there are videos of farmers attending meetings to try to get government help sooner than later.

Corn and soybean crops yields are expected to reach near-record highs according to the Department of Agriculture. The problem is buyers. The US has a large seller to China, but because of tariffs imposed on it, China has been buying from other countries. In addition, USAID was a large buyer for the crops to be sent overseas, but the President has dismantled the agency, who will buy?

The administration did pass a bill to depreciation costs to be a bonus allowing farms to receive a large tax break for equipment purchases. However, if a farmer is worried about paying the bills, depreciation is not a big help.

The good news for John Deere is the competition includes Kubota, Fendt and Mahindra and those companies manufacture most of their machines abroad which would be hit by the tariffs or be more expensive.

Linking to dividend paying stocks, with every industry there is always good and bad news, is the glass half full or half empty? Why will it change? Will the government help or hurt their operations? As an investor, you may love the industry but concentrate on whether the company makes a profit by focusing on how it makes its money, otherwise you are looking at a long-term holding.

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

There is an old saying, those who live in glass houses should not throw stones. In the world of politics, people try to justify a bad decision with facts. However, often times giving a little time and ability to examine the facts of the case, other examples come forth and one wonders why these examples were never the sword to die on?

In an article by Eric Tucker and Paul Wiseman of the Associated Press, President Trump wants lower interest rates, however the Federal Reserve sees headwinds that makes that decision difficult. The economy is slowing, which is good for lowering rates. but tariffs are driving up costs which makes it difficult to raise rates. One can go through a variety of good and bad aspects which the Federal Reserve makes. President Trump decided to go after one of the Federal Reserve Governor – Lisa Cook.

Bill Pulte, is the director of the Federal Housing Finance Agency which operates Freddy Mac and Fannie Mae mortgage operations. He had his team go through Ms. Cook’s mortgage records and made a criminal referral to mortgage fraud. He also made the rounds including CNBC where he said he was going after mortgage fraud and there was a very clear line in the sand and she signed the documents, because she listed two properties where she was the principal residence.

Ms. Cook’s lawyers insisted she did not engage in fraud.

Since Mr. Pulte’s line in the sand declaration, it is natural for a variety of organization to go through public records, it takes time and effort to find the various documents and sometimes involves some costs to the registrar, but documents can be found since they mortgages are technically public.

One would think that Mr. Pulte, who is on the Federal Housing Finance Agency would have a reasonable idea of the scope of the fraud and how many convictions. It turns out there was one. It also turns out banks typically suggest the customer to check the principal residence to make it easier to give the mortgage. The belief is people will pay the bill on a principal residence, and the bank is protected because it can sell the other property, it is not fraud. Thousands of second homes are listed as principal residences. Perhaps the rules or regulations should be changed, but as a government that wants fewer regulations, will it?

Some of the higher profile people it includes are 3 Cabinet Members of President Trump’s administration, and Mr. Pulte’s father, who is in the housing business, is that line in the sand big or will Mr. Pulte be making criminal referrals to people he knows?

Linking to dividend paying stocks, in the world of politics there are serious issues but sometimes they have a lot of noise because the regulations affect the governing political party. When you listen to the news and it relates to companies you have an interest in, ask is it noise or real policy?

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

When a politician says something particularly if it is slogan, while it maybe nice to hear, you may agree with it, you should not automatically invest in it. An example is President Trump said, one of the ways he was going to unleash the oil industry was to allow it to drill baby drill. This has meant changes in regulations to make it easier to drill and allowing drilling on more federal lands. For those in the oil industry, that can be good thing, but the oil and gas industry is a commodity based which means it is dependent on the price of oil. Too much of a good thing is bad for prices.

In an article from Reuters, CEO Ryan Lance of ConocoPhillips said the company will cut 20 to 25% of its workforce in a restructuring. The price of oil and gas has fallen which translates to cutting expenses including staff, slowing capital spending and reduce drilling.

Costs have risen by about $2 a barrel, making it harder for the company to compete. CEO Lance said the controllable costs has risen to $13 a barrel in 2024 from $11 a barrel in 2021.

ConocoPhillips has identified more than $1 billion of ways to cut costs and improve margins on top of the more than $1 billion it cost savings from its acquisition of Marathon Oil last year. The reorganization should be completed by 2026.

Linking to dividend paying stocks, the 3 largest oil companies in the US – Exxon, Chevron and ConocoPhillips are profitable companies but they still need to retain margins to generate profits to reward shareholders. The process maybe easier to drill for oil and gas, but market prices determine when and how much they will bring on stream to ensure they continue to make profits. Listen to the politicians but invest on the commodity prices determined by the market.

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