Every industry tends to evolve from making things at low cost and low margins to making things with higher costs and higher margins. As the industry the demands for the employees change from human interaction to machine interactions to technological interactions. The first stage humans are needed at a lower wage rate, the second stage workers are paid more and the final stage are the highest paid workers, and somewhere a competitor somewhere is beginning stage one.

In an article by Alex Travelli and Hari Kumar of the New York Times News Service, 30 years ago China was the first stage building things at low costs. The economy and institutions of China has evolved that Apple President Tim Cook said to build the products we need, in America there are a handful of people who could do it, in China there are football fields of talented people.

The competitor is India. For the past number of years, as China has begun to focus on higher margin products, companies have looked towards Vietnam, South Asian countries and India for the lower margin products. India has a desire to be the alternative to China.

The Indian government has paid incentives to companies producing goods in strategic sectors, budgeting more that $26 billion and tried to attract companies who do not want to be only rely on China. India’s goal was to create 100 million new manufacturing jobs by 2022.

There have been some successes such as Foxconn moving the manufacturing of iPhones to India.

Yet, the role of manufacturing in India over a decade has shrunk relative to services and agriculture from 15% to 13%. China’s manufacturing is 25% of their economy.

India similar to China has been investing in infrastructure, however with manufacturing there is a need for skilled workers and many companies have a hard time finding those workers. An example is LiKraft which manufacturers lithium-ion batteries. Viram Bathla said he can buy the equipment, the plant depends on imports and skilled workers. He is playing catchup with companies that have been in business a decade longer.

Even Apple which produces iPhones in India, 20% are coming from India, they would like it to be 30%. There is still much to do.

Linking to dividend paying stocks, while President Trump’s goal of more domestic manufacturing is admirable, the reality is the infrastructure to do it does not exist. For those who believe it is a quick fix, without billions of dollars in investments and a buildup of infrastructure to support the plants, playing catchup is all that can be expected. In the meantime, some companies will announce plans but will they actually do something is the question.

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

Every country in the world likes to have growth in the economy. You will hear it in every election cycle and ideally the growth helps you or supposed to help you. Then you have to do some homework by asking how is this grow measured? What about if more oil is used?

One of the groups that monitors global oil output is OPEC or the Organization of Petroleum Exporting Countries.

In an article by Alex Lawler, Olesya Astakhova, and Vladimir Soldatkin of Reuters, OPEC cut the world wide economic forecast from 3.1% to 3.0% and next year’s expected growth from 3.2% to 3.1%.

The reason for the cuts is tariffs imposed by President Trump and the data it had received. OPEC said, trade concerns would contribute to volatility but kept the forecasts steady.

OPEC’s view is still at the higher end of industry forecasts and it expects the use of oil to continue to rise for years to come. Another agency called the International Energy Agency believes oil use will peak this decade as the world switches to cleaner energy.

One of the countries which has exceeded its quota is Kazakhstan where production rose to 1.852 million barrels per day which is over its quota of 1.468 million barrels per day.

Linking to dividend paying stocks, every week and every month there are statistics coming from agencies both governmental and nongovernmental. Somewhere in the reports you have to determine which do you believe is correct. Logically there should be a cause and effect, for example tariffs on a particular good should mean higher costs which should mean higher prices which should mean a seeking of alternatives. The issue is always when does should meet reality, how much leeway is in the system, what are the reports telling you? When you have an answer, you can then determine whether you should hold or seek alternatives.

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

In every industry there is opportunity. That is a wonderful saying and sometimes it is hard to see, but in the luxury market it is often easier to see. The luxury market has high margins and the companies ensure that there are few sales. If a retail company carries the brands and goes bankrupt, there are not sales on the luxury brands. The luxury brands is also dominated by high advertising budgets for people to aspire to wear the brands and be seen wearing the brands, while others know what the brand means. It takes a great deal of luck, skill and consistency to have a luxury brand.

In an article by Elisa Anzolin of Reuters, two of the biggest names in Italian fashion are uniting and expecting higher revenues, the brands are Prada and Versace which is owned by Capri Holdings.

Versace is known for its bold, baroque-style prints while Prada is known for its minimalist styles. This tends to mean there is little overlap in terms of creativity and customer base.

Capri Holdings reason for selling Versace to focus on turning around Michael Kors brand. Capri Holdings also has brands such as Coach and Kate Spade.

Prada CEO Andrea Guerra told analysts, the acquisition is a long-term project for Prada and aimed at expanding revenues rather than cost savings.

Linking to dividend paying stocks, in all industries there are opportunities for companies to grow, to keep moving forward because there are many alternatives in the marketplace and they all have shoots to pop up, whether they take root and grow stalks is a different equation, but it is possible. When you own dividend paying stocks, the dividends can be reinvested in where you see opportunities and having patience over the long-term.

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

One of the world’s greatest economic success story is China. The success of China has been to uplift millions of people from essentially subsistent farming or they had the ability to grow food to meet their needs most of the time, but little money to spend towards the middle income levels. When China became the manufacturing center of the world, the country had a lack of infrastructure, which is why the best trains and highways in the world are in China. The manufacturing needed workers and people left farms or rural areas to work in the factories which allowed them to cover the basic needs. As people moved to manufacturing the next generation started working in services and the Chinese economy has evolved to greater services and all the institutions behind that. The institutions include universities and colleges which will continue to evolve the economy.

In an article by Vivian Wang of the New York Times News Service, when President Trump imposed sky high tariffs on China, the government believed domestic spending will help in get through the breakdown of trade. That is easier said that done.

Domestic consumption in China was anemic even before the tariffs. The post pandemic economic recovery has been lackluster, factories have been shuttered, and youth unemployment is high. Home prices, the bedrock of many middle-class Chinese families’ wealth have plummeted.

The problem is for most of the workers, it is first generation wealth, and it takes a couple generations before the middle-income group feels they can afford to spend during all economic cycles. In the meantime, people’s spending habits are changing, they are making targeted, cost-effective choices.

The government has used incentives such as trading in for new cars and electronics. It did lift sales.

During a long holiday weekend for China’s Tomb Sweeping Festival, travelers made 126 million domestic trips and spent $8 billion on food and hospitality, according to official data. This was up 6% from the previous year.

The bigger problem for Chinese consumption is not rising prices, but the fact that people are not spending to begin with. Many Chinese companies have been entangled in damaging price wars as Chinese consumers demand lower prices.

One of the reasons why Chinese spending is low, is China has a low social safety net. If you are sick, there are high bills to pay. People also have a hard time accessing education and medical care in the cities. If you retire, there are few pensions.

Linking to dividend paying stocks, all economies evolve over the years, ideally, they evolve to something like US where there are supports throughout life. Taking away the supports means less spending in the economy and more saving for a rainy day. The savings is good for individuals, not so great for the economy as a whole. When you buy stocks, you are hopefully targeting those in the sweet spot of the economy who can and will buy the products and services of the company throughout many economic cycles.

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

During April and May many companies have Annual Meetings which allows shareholders to hear from the senior leadership of the company, vote for the financials of the past year, select an auditor, and any other items management would like to see. Very often if the company made money, shareholders vote with management. One of the reasons shareholders often vote with management is does the company meet expectations or exceed them? With improvement in AI and computing, some companies forecast should be very easy. Others reasonably easy and most given a reasonable stable government and economy, the numbers should come in what Wall Street expects. The last part is what is not happening with President Trump and deciding to throw out global supply systems, to replace it with??

In an article by Chris Hannay of Reuters, companies such as Delta Air Lines Inc and Walmart Inc said they could not offer financial forecasts as they navigate through the fog of a trade war.

Delta CEO Ed Bastian said given the lack of economic clarity, it is premature at this time to provide an updated full-year outlook.

Walmart CEO Doug McMillon said it could not provide guidance on operating income for the quarter because of factors that included tariffs. The situation was fluid. Mr. McMillon said that 2/3s of what Walmart sells is made, grown or assembled in the US. Although assembled often means the parts come from outside the US. In the meantime, Walmart will take it one day at a time.

A side note is in the retail world, advertising campaigns are planned 6 months plus in advance, and ordering is done 3 weeks in advance. If sales go better than expected it is relatively easy to get more stuff. Not being able to plan, says a great deal or they will tend to order the minimum.

Another factor in the retail world is Goldman Sachs has a forecast there was a 60% chance that tariffs would drive the US economy into negative territory. After the tariffs were paused, Goldman decreased it to 45%. One must remember, 60% of the economy is based on consumer spending, throwing uncertainity means more people save or cut back or do less shopping and more browsing which tends to be a self-fulling prophecy that negative growth will happen.

Linking to dividend paying stocks, ideally these are companies that have either a near monopoly or are so ingrained into the economy or law that consumers will continue to buy their products. For example, the law says to drive a car you need to have insurance. Some insurance companies are better than others. Utilities are a near monopoly, there is always alternatives, but most people use the local utility. Ideally, many of your investments have the stability that allows for uncertainty even if comes from the White House.

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

For most of us, thankfully we are not involved directly in armed conflict, but what happens when there is one in a country. From the outside looking in, we know there will mass migration to safe areas of the world, ideally all those leaving have some form of money to ensure travel costs. After the mass migrations which will make headlines, the businesses that are left, how do they function? Louai Al Roumani, Former CFO of BBSF Bank in Syria has written a book about how to function, which can be used for contingency planning if fortunately you are not involved in armed conflict. The book is titled Lessons from a Warzone, Penguin Business, London, UK, 2020.

Chapter 10 Align motivation and never become lax

Most of the book has been about the company’s perspective and how to keep the company in operations through the crisis. The greatest resource of the company is people. The greatest source of issues inside the bank is people. Therefore, it is important you maintain standards of the company and do not allow people to become lax in their attitudes and judgements towards the rules. There will a thousand good reasons to become more lax, but being lax never helps to reinforce adherence to the laws and create a more effective system.

A crisis stretches both people and organizations. It reveals weaknesses and vulnerabilities. How you react, when enter a confrontation, imparts a signal to people about the extent to which you will budge to pressure. People will try, some will succeed but it sends a signal to others, do not bulge to pressure. Remember to align your goals in good and bad times.

The easiest thing to do at all times, when times go wrong, is to blame external factors beyond your control. In BBSF’s case it was the war. Why did you not meet your targets – the war.

The solution is effective communication of your strategic objectives. A handful of KPI or Key Performance Indicators are developed and explained as to their importance.

Linking to dividend paying stocks, in North America we generally think about external events such as weather or medical conditions as the big factor. Then President Trump threw the supply chain into chaos, because he could so you never know.

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

For most of us, thankfully we are not involved directly in armed conflict, but what happens when there is one in a country. From the outside looking in, we know there will mass migration to safe areas of the world, ideally all those leaving have some form of money to ensure travel costs. After the mass migrations which will make headlines, the businesses that are left, how do they function? Louai Al Roumani, Former CFO of BBSF Bank in Syria has written a book about how to function, which can be used for contingency planning if fortunately you are not involved in armed conflict. The book is titled Lessons from a Warzone, Penguin Business, London, UK, 2020.

Chapter 9 Don’t overplan

War or no war, it was really a no-brainer at BBSF, budgets and plans still needed to be done. One of the plans to be done is the Business Continuity Plan (BCP). The plan highlights business processes across all operating cycles and categorizing them by several factors including their criticality and the impact they had on different areas.

The project defined the highly critical operating functions that needed to be undertaken in case of disruption and itemized all the resources required. We reviewed and identified every single activity that took place on several areas.

We did multiple scenarios and tested them several times on different sites. The odd thing what activated it – a snow storm. In times of crisis, it is likely to become more and more difficult to forecast all possible triggers, and any attempt to do so might be both overwhelming and futile. We found it far more effective to focus on assessing the impact of the disruption and train the staff to take the initiative, depending on the actual circumstances.

in planning for the BCP, there is a tendency to rely on the numbers. The numbers do not lie, they are what they are. A possible better approach is The Crisis Planning Model

You always need a plan.

Always focus on the vision and your ultimate goal, but have flexibility in your operating plans. The spirit of the plan should be focused on fulfilling the evolving Critical Success Factors (CSF). What is normal is to change your tactics and be flexible in them to meet the constant vision.

Focus on the long-term

Shock your systems

Be open to creating a strategic rift

Become better at assessing change

Situational leadership approach

Have backups

Linking to dividend paying stocks, you have heard all the cliches – by the numbers, the numbers tell the story, and then comes a crisis and the numbers do not make sense for a time. If you never practice some flexibly, it will be a shock to the system. You will be paralyzed for a brief period of time. We all know it happens, but not on my watch, it happens on everyone’s watch.

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

For most of us, thankfully we are not involved directly in armed conflict, but what happens when there is one in a country. From the outside looking in, we know there will mass migration to safe areas of the world, ideally all those leaving have some form of money to ensure travel costs. After the mass migrations which will make headlines, the businesses that are left, how do they function? Louai Al Roumani, Former CFO of BBSF Bank in Syria has written a book about how to function, which can be used for contingency planning if fortunately you are not involved in armed conflict. The book is titled Lessons from a Warzone, Penguin Business, London, UK, 2020.

Chapter 8 Do more and speak less

As actions become harder, talk becomes cheaper. The author relays a story about a year into the war, one of the principal owner of BBSF decided to set away. What to do? the Board decided to stay in business, but actions speak louder than words. You can say what you want, but people will judge you be what you do or talk is cheap. The company said we were staying and the bank did the same thing from before – pile up the bank notes in front windows.

in crisis management, the principle is that relaying the right information at the right time is always recommended. When announcing a crisis, stating the company’s perspective on it and how it will deal with it usually constitutes the first thing to do. Ultimately it is your actions, not words that matter.

Linking to dividend paying stocks, actions speak louder than words and making a profit over the years is a great thing to be able to do and pay dividends. How it makes it profits is the reason why you invest.

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

For most of us, thankfully we are not involved directly in armed conflict, but what happens when there is one in a country. From the outside looking in, we know there will mass migration to safe areas of the world, ideally all those leaving have some form of money to ensure travel costs. After the mass migrations which will make headlines, the businesses that are left, how do they function? Louai Al Roumani, Former CFO of BBSF Bank in Syria has written a book about how to function, which can be used for contingency planning if fortunately you are not involved in armed conflict. The book is titled Lessons from a Warzone, Penguin Business, London, UK, 2020.

Chapter 7 Cut costs, but don’t slash morale

When an organization faces a crisis that is likely to last for some time, increasing strategic, operational and tactical difficulties will likely lead to some extent of financial distress. Managers are typically drawn to slashing costs – it is easy to do, it leads to an easily measurable outcome and it is a convenient route to fulfil budget profitability targets.

We operate in an environment where decisions need to fulfil the criteria of satisfying SMART targets – Specific, Measurable, Attainable, Relevant and Time-based.

Mr. Roumani suggests asks how cutting costs how it affects your staff morale and your organizational core values. His 4 principles are:

Know your cost-appetite culture – cutting costs is more of an art than a science. Each organization has a different culture when it comes to cost appetite and you need to ensure that your actions are aligned with this culture.

Never save costs by compromising on your staff’s sensory needs or they will not take the extra leap for you when you need them to in difficult times.

Understand your cost drivers – make a list of all your expenses. Categorize them into broader groups, what you are trying to determine what drives each of these expenses. The next step is divided into contractual and non-contractual obligations. This way you will know which is easier to cut.

Some of the expenses need some short term capital increase for longer term cost savings. For example automated temperature controls. No one working at night, lower temperatures, equals savings.

Motivate your good staff, lay off your bad ones – use methods such as etraining to engage your workers, If they do it, they are keepers. In reality, just about everyone knows who the bad ones are even the janitor, nobody asks them.

Keep some leeway – do not operate on the bare miniumum – the idea is to continue operating and being sustainable in the operations. In a crisis, people go for lots of reasons, which is why you do not want to operate short handed for vey long.

Linking to dividend paying stocks, as much as we would like, in investing in a company the company does well, the stock goes up and the dividend is paid and often increased. The reality is overtime stock prices often fluctuate and you will read how your company cuts costs. Do you like it?

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