We all live in a country and hopefully it is peaceful and stable to support your hopes and dreams. That sounds like a soundbite but in reality, there are many countries which it is not true. The most glaring examples are the ones at war or on the verge of war on a continual basis. How does the government function? A real good example is Ukraine.

In an article by Marc Jones and Karin Strohecker of Reuters, when Russia invaded Ukraine all of a sudden from a financial point of view everything changed overnight.

Just a few months after Russia invaded Ukraine, the country’s financial advisor Rothschild & Co handed Kyiv’s debt chief a thick black folder detailing major sovereign debt restructurings for the past 30 years.

In August 2022, Ukraine agreed with creditors to pause payments on bonds. In September 2024, they restructured their bonds of more than $20 billion in debt which will save the country $11.4 billion over the next 3 years. This is important both in terms of the continuing war effort and its International Monetary Fund program.

Initial negotiations between the government and its lenders did not go to plan. The committee of bondholders complained the write down Ukraine was demanding was in excess of the 20% most had expected and risked doing substantial damage to relations.

In August, representatives of some of the world’s top asset management firms and their legal and financial advisors met in the Paris offices of Rothschild & Co. Ukraine long term legal advisors White & Case were there to.

Members of the key bondholders group, representing asset managers such as BlackRock and Amundi explained their demands, that Ukraine start coupon payments repayments, offer a path towards higher principal recovery and keep it simple.

The International Monetary Fund or IMF was represented and their job was to run the numbers.

The solutions was Ukraine offered a GDP-linked bond and creditors were offered the instant coupon payments they wanted starting at 1.75% and rising to 7.75%.

The deal is structured for the bonds to eligible for main bond indexes, therefore easier to buy and sell.

Bondholders approved the result with a 97% support. The bondholders could either stay a few days to watch the Olympics or leave the city.

Linking to dividend paying stocks, in the bond market, stability is the desirable outcome. Payments come and the bond eventually paid off. The same idea falls with dividend paying stocks, if profits are made on a consistent basis, dividends can be paid and all is good. Hoping for stability in all your investments.

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

Companies compete at various price points and as companies evolve they have various fixed costs. If they are a manufacturing type, they will own buildings and equipment, this is both a fixed asset and a cost. Eventually time goes on and sometimes manufacturing changes and the company has not changed the cost structure. The new companies evolve and they have lower manufacturing costs which puts the older one at a disadvantage towards costs. The older one may have goodwill that helps make up or they can charge higher prices, their customers are loyal and a host of other things. In the auto industry, the older companies have the legacy costs and the electric vehicle companies particularly coming out of China have low costs. What will the legacy companies do besides encourage their host countries to increase tariffs.

In an article by Victoria Waldersee and Christina Amann of Reuters, Volkswagen or VW is facing that question and they are considering closing factories in Germany for the first time.

In the case of Germany, one of the advantages and disadvantages is the unions. For many years the unions have been an advantage, but when it comes to cutting costs, different story. In Germany, the structure is a Works-Council made up of unions and Daniela Cavallo, a member of the IG Metal union and head of the VW works-council expects negotiations to be very uncomfortable.

The new head of VW CEO Oliver Blume is considered more of a consensus builder as opposed to the former CEO Herbert Diess who like to butt heads with the unions.

Analysts have in the past named VW sites in Osnabreck, in Lower Saxony and Dresden in Saxony as potential closing sites. The state of Lower Saxony is VW’s second largest shareholder and supports a review.

VW employs about 680,000 people directly has ended its job-security program which has been in place since 1994.

VW which receives most of its corporate VW’s revenues is the first of the brands to undergo a cost-cutting drive to target $15 billion in savings by 2026 as it attempts to streamline operations to survive the transition to electric cars.

At the same time there is an election going on in Germany and VW’s announcement does not help the ruling party.

Linking to dividend paying stocks, it is very easy to get attached to a company which has made profits for years and can pay dividends, then the industry changes seemingly before your eyes. There are many options and giving the size and complexity of VW to the German economy all options will be on the table or there tends to be breathing room. Transitions means many things to investors, but one thing it should mean is looking at alternatives.

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

If you are like the majority of people, you likely listened to some sort of music during the day and definitely during the week. Music does many things including bringing people together which is why free concerts work whether they are performed. For the most intense form, many people go to concerts and festivals and that is wonderful. Another way to listen to music is use the streaming service Spotify.

In an article by Maria Sherman of the Associated Press, the writer discusses how Spotify works. For a musician some sort of music streaming accounts for 84% of the money generated by the music industry in the US. This statistic is from the Recording Industry Association of America (RIAA). For the world, the number falls to 67.3% according to International Federation of Phonographic Industry which tracks global sales.

The biggest streaming platform with a 31% market share is Spotify with a reported 626 million users and 246 million subscribers in more than 180 markets.

Spotify pays roughly 2/3s of each dollar it collects to the rights holders of the music on its platform, paid out between recording and publishing agreements. The rights holders paid the musicians, the rights holders include record labels such as Sony, Warner, Universal and companies such as Merlin which represent independent labels.

For streaming services, subscription dollars are collected in a pool and paid out via stream share, a number Spotify calculates by adding how many times music owned or controlled by a particular rights holder was streamed in a month.

Linking to dividend paying stocks, while everyone listens to music, the real money is made in the most popular musicians’ rights holders. Once in a while, there are news articles about a deceased musician rights being sold and as long as the music means something to those listening, a royalty is received. Every once in a while, a movie or advertisement will bring more people to the artists and royalties continue to be constant. In every industry, there are sectors which tend to bring in more money on a consistent basis easier. In the music it is owning the rights to the music, if you can invest in companies such as this you can listen to the music and collect royalties all day long.

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

Every company in the world offers some free services, they may have started as free because they were additions to the brand but overtime, someone will also consider that is an asset that can be monetized. The process is easier to see in the software world, where there are free add-ons and eventually numbers build up and someone will ask will people pay for the service? If the answer is yes, how much? If the answer is no, will they move to alternative software? No one knows the answer, but people keep trying to add fees.

In an article by Greg Bensinger of Reuters, a good example is Amazon revamped Alexa due to be released before the holiday season.

Amazon plans to charge $5 – $10 a month for the new “Remarkable” version of Alexa. The “classic” version will be free. Alex will use powerful generative AI to answer complex queries.

To ramp up Alexa has taken a lot of work and setbacks, which is why Amazon has turned to Claude, an AI chatbot developed by startup Anthropic. (Amazon has a $4 billion investment in Anthropic).

Alexa has been around for a number of years and can be accessed through Amazon TV or Echo devices. It can set timers, play music, act as central hub for smart-home controls and answer one-off questions. Can it do more?

Bank of America analyst Justin Post estimated in June that there are about 100 million active Alexa users and if 10% opted for the higher fees that bring in $600 million in annual sales. Amazon does not release active users but it has sold 500 million Alexas.

Amazon is the same company which now charges $139 for Prime memberships, is used to be less a $100 a few years ago and more than 76.6 million households have an account.

Linking to dividend paying stocks, finding the correct amount to charge for a service or product is both an art and science. If you get it correct, addition fees flow into the company because people see value. Over time as long as people see value, increasing the fee increases cash flow.

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

We all pay insurance partly because as individuals we have to. If you want to drive, the police will ask you for license and insurance (to see they are up to date). If you have a mortgage, the bank will need the insurance number, or you can find another bank. One thing the insurance companies will do is to ensure that either lessen their risk by reinsurance, but they will know exactly how much it will cost them if they have to pay a claim.

In an article by Noor Zainab Hussain and Carolyn Cohn of Reuters, in August one of the super yachts owned by a billionaire sank in a storm. Some people died, but this story emphasis is on the cost.

The British-flagged yacht the Bayesian cost around $40 million.

The hull of the boat was insured against physical damage by yacht insurance provider OMAC and others including Travelers Companies Inc., Navium Marine and Convex.

The Protection and Indemnity (P&I) which typically covers 3rd party liablity claims incuding for envrionmental damage, injury and death was provided by British Marine.

The hull was likely insured between $40 – $50 million, while the P&I cover would be several multiples larger in the range of $200 – $300 million, according to Marcos Alvarez, managing director global financial institutional ratings at Morningstar DBRS.

For the insurance companies, every time there is an increase in storms due to climate change, rates rise. Premium rates have risen by 4 to 5 times in the past couple of years in parts of the US and the Caribbean. Yacht insurers have cut the amount of cover they provide because of the higher risks.

Linking to dividend paying stocks, in the world of climate change, the insurance industry is on the forefront of examining higher risks. An insurance company collects more money than it pays out or it is out of business and insurance companies do not like risk taking. When you look at climate change, look at insurance premiums or lack of insurance coverage, then make your decision. The insurance companies have a wealth of data to examine to make their decisions.

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

All companies are involved with mergers and acquisitions, it is a way for a company to grow the solidify their markets and occasionally buy assets for less and add value to shareholders. In every large organization there is a group which reports to the President examining potential companies and most of the time the decision is not to go forth. Once in while, the time is to make a decision.

In an article by River Akira Davis of the New York Times News Service, US Steel Corporation’s Board decided it would accept offers to buy the company out. A number of companies in the steel business examined the assets of the company and one thought it was a lifeline for it. Nippon Steel of Japan saw an opportunity: the home market of Japan demand was anemic, the global business of steel is dominated by China and India, buying US Steel could help Nippon Steel compete better. Nippon Steel agreed to a $14.9 billion, a 40% premium to US Steel’s stock price.

Long time shareholders thought it was wonderful and then the backlash began to happen.

US politicians from both parties condemned the deal because of what it represented. At the start of the 20th Century, US Steel was the most powerful Steel producer in the world. The company was the stuff of legends, but the past 30 years have not been great for the company. However, in a politician belief an American company being acquired by a foreign company was not good.

Over the past year, Nippon Steel has said it would invest over $2 billion into US Steel, but still. The race to become President is dependent on some close races that happen to have US Steel facilities in the area.

The union or the Union Steelworkers did not like the deal. It like a deal with a company US Steel had rejected. Cleveland-Cliffs.

In addition, in every merger or acquisition, a limited number of people are in the decision making process but once a decision is made, it can be made public and outreach to stakeholders is done. When the decision was made public, the President of US Steel David Burritt phoned International Steelworkers President David McCall. After the call, Mr. McCall was taken back because he thought he would be in the loop considering the past offer was rejected.

In every foreign investment, there are different agencies which have to sign off to ensure national security regulations are okay and both sides have made arguments to the agencies.

Part of the issue is Nippon Steel sees Chinese steel as the biggest threat while those against the merger see US Steel as being non-American owned as the biggest threat. After the elections in November we will see the outcome of the merger.

Linking to dividend paying stocks, prior to the announcement of a merger, there needs to be confidential information keeping secret until released to the public which means everyone has the potential to see the information at once. Then decisions can be made, some will accept the higher price and move to alternatives. Some will want to maintain a position but smaller as a wait and see but liking the industry. People act in various manners and partly based on length of holding and how attached you are to the stock. That is all perfectly reasonable and happens all the time. When price is the biggest issue, raising the price is the solution. When many intangibles are in the way, then patience is the solution.

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

In every country, who runs the biggest banks and who is on the Board of Directors of those banks are important part of the how the system works. The banks lend money and it not surprising some of the bigger clients are on the Board, although with most companies they always deal with more than one bank. Often times the relationships of the economy can be seen through the Boards.

In an article from Reuters, the relationship between the government and the banks is clearly seen through the policies of the government. In China, because of the economic slowdown and lower property prices, the economy is suffering and one method is to blame corruption.

Former Bank of China Chairman Liu Liange stepped down in March 2023 and was placed under investigation by the anti-graft watchdog accused of accepted bribes of $22.9 million.

Bank of Chain Vice-Chair and President Liu Jin resigned for personal reasons. The state-owned lender said its Board approved Chairman Ge Haijiao to serve as acting President.

Mr. Jin had been President since April 2021 and was previously President of China Everbright Bank from January 2020 to March 2021, and VP of China Development Bank September 2018 to November 2019. Mr. Jin had also worked for state-owned Industrial and Commercial Bank, the world’s largest lender by assets, as head of investment banking.

Linking to dividend paying stocks, clearly Mr. Jin was a rising star in China’s banking world and you can read what you want into why he left, except he left quickly. It is also important to note the Board selected a successor in a quick time. One of the prime functions of the Board is to look at succession plans and access talent in the organization to take over from current management. As you do your homework, you may be attracted to or like the stories of people in the company. As they move through the ranks and you believe they are doing a good job for investors, you own stock. Understand everyone in the company can be replaced and it a crisis they often are.

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

In the theory of business, particularly with a public company, the saying of you can fire the President if they underperform. People say it, they half believe it, as the reality is unless the company is also losing money, it is rare for a CEO to be fired for underperformance, but it does happen.

In an article by John Revill and Richa Naidu of Reuters, the world’s largest food-maker Nestle SA CEO Mark Schneider was ousted in a sudden decision relating to the underperformance of the company. Mr. Schneider was the CEO for 8 years and is being replaced by Laurent Freixe.

Chair of the Board of Directors, Paul Bulcke said the Board had assessed the current environment and together agreed to make the change.

Berstein analyst Bruno Monteyne said the suddenness of the move means it was not a planned transition and was clearly not Mr. Schneider’s choice. Mr. Monteyne suggested that he probably would have managed a smoother transition.

Nestle shares hit a record in January 2022 but since then have decreased. There has been a series of mishaps, earnings misses and guidance downgrades.

Sales volumes increased by 0.1% in the first half of 2024. There were worries about product development with new products taking longer to be devised and rolled out. The virtuous cycle of introducing new products, which generated cash for new products was slowing down.

Freddie Lait, managing director of Latitude Investment Management believes, Nr. Schneider loved to make deals to chase growth, but few worked out or were expensive acquisitions.

The new CEO has pledged to grow organically rather than through acquisitions. Mr. Freixe has worked for Nestle for 40 years is from the sales and marketing side of the firm.

Linking to dividend paying stocks, when a company makes a quick change at the top, it is not unusual for analysts or outsiders looking in to suggest all the things that have gone wrong and need to be fixed. Some of them are true, it is also true at the executive level of compensation, executives negotiate their contracts which means to let someone go early will involve potentially millions of dollars. Is it worth it, maybe or were there other issues?

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

For most of us in the developed world, as long as people have options or reasonable choices, how they make the choices is not really something we spend time thinking about. If people have very few options, then we might be concerned, some will be outraged, and most will think who benefits and is that good? In many parts of the world, the population depends on subsistent wages and hopefully they are doing ok relative to those around them.

If you think about the sugar industry, it has been a very labor-intensive industry since people found they like the final product. Most people likely eat too much sugar, but we like it and when we eat it we do not really think about where the raw ingredients came from.

In an article by Megha Rajagopalan of the New York Times News Service, it seems the sugar industry in Maharashtra, India has not changed a great deal over the decades it has been growing sugar. An investigation by the New York Times and The Fuller Project revealed a wide range of labor abuses. At the heart of the manner is how people are paid. Instead of wages, migrant workers receive an advance each season. They function as loans are repaid through work. The documentation is thin and workers are often in debt which means they need to come back the following year to return to pay off their debts. Workers say they make about $5.00 a day.

Mill owners said the workers have always been paid that way and changing the practice would hurt the business as workers would find it easier to leave and not do the work.

Sugar producers and buyers have known about the practice for years but have not little to change it. One mill profited off the abuses received a seal of approval from Bonsucro. Major brands such as Coke, Pepsi, Unilever and General Mills have used Bonsucro endorsements to bolster the images of their supply chain,

Bonsucro CEO Danielle Morley had been aware of some of the concerns of the workers but no one told inspectors to look for it. Pepsi said relative to its overall sugar buying levels, the amount which comes from Maharashtra is a small amount.

Linking to dividend paying stocks, the companies listed above are some of the most profitable companies on the planet and the margins in the product made from sugar are and still remain high. Even Warren Buffett owns as a core holding Coke. If you owned shares in Pepsi, you would have enjoyed healthy returns as well. Every company which is profitable likely has some element which is not great for everyone, but they are profitable and people in society use their products and services. As an investor you can ask if the company should do more to mitigate the negative, but most investors are concerned with profitability which leads to paying dividends.

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