On the stock market there are lots of moving parts and cycles in the economy, however one thing is certain when former highflyer shares are down, at some point various hedge funds will take positions. The hedge funds will examine the company and if it has good solid bones to build from and underlying value that under the correct positions be unleashed, then that is even better. For other companies, if they are reasonably consistent with their earnings, then they have more freedom to execute their strategic plans. One of those stocks which was a highflyer is Starbucks.

In an article by Svea Herbst-Bayliss, Granth Vanaik and Waylon Cunningham of Reuters, the Board of Directors announced Brian Niccol, the CEO of Chipotle Mexican Grill Inc is taking on the job of CEO of Starbucks. The announcement sent the shares up 20%.

The backstory is in March of 2023, Laxman Narasimhan took over as CEO to engineer a reinvention, but the stock did not respond under his leadership as it went down 25%. As CEO Mr. Narasimhan was under pressure from Elliot Investment Management which owns a $2 billion stake to do things to increase the price of the stock. Another hedge fund with a large holding is Trian Fund Management which has many discussions with Disney.

Starbucks has faced increased competition and slower sales in its 2 biggest markets – China and the US. It was not helped with the working from home as many of its shops were located in or near office buildings.

Over at Chipotle, under Mr. Niccol’s leadership sales have grown every year and the stock has more than tripled. According to Thomas Hayes, Chair of Great Hill Capital, Mr. Niccol is a fixer and a doer and an executor. Mr. Niccol begins work at Starbucks on September 9.

Linking to dividend paying stocks, as long as the company is profitable, investors worry less who is the CEO, but once it loses money then the spotlight is on the executive team. Is it the correct one? how will they get back to profitability? If you own shares in a profitable company, all you need to worry is about the strategic plan and its execution, are they doing it well? There is always a worry, just some are easier to handle than others.

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

If you ever watched Star Trek or know something about it, you will know the main character was Captain Kirk and the other leading character was Spock. The character played by Leonard Nimoy was the science officer and first officer and came from the planet Vulcan. Did you know for many years there was a planet Vulcan?

There is a book called The Hunt for Vulcan written by Thomas Levenson published by Random House, NY, 2015.

Have you ever looked at the sky and wondered how it worked? Perhaps you just looked at cloud formations to see pictures in the sky and were content with that. There are people who wondered and did the next step to try to figure out how things worked. One of the key people was Aristotle from Greece and because he was the first to teach or write it down, all the planets are related to the Greek Gods. In Aristotle’s day, the explanation for the how and the why of any phenomenon related to the planets which people could see was planetary motion: the planets riding on rotating spheres. If you jump to Sir Issac Newton’s time, he came up with a better explanation – gravity. You may have heard of the story of an Apple falling on Newton’s head and he called in gravity. This law could be applied equally to everything in the universe and math and physics developed an explanation.

In the 1850’s Urban Jean Joseph Le Verrier discovered the planet Neptune. His rational for Neptune was Nepture was God of the sea and Jupiter’s brother. Saturn was both Jupiter and Neptune’s brother and Uranus was Saturn’s father. Le Verrier was promoted to head of the Paris Observatory in 1854. One of his tasks was to figure out why the planet Mercury did not confirm to all the other planets direct path around the sun. Mercury deviated a little bit called the perihelion shift. There must be a logical, sound reason and many including Le Verrier thought it was due to a planet or comets interfering with the gravity forces to push Mercury off.

People examined the night sky, most are passionate amateurs, but the professionals vertify. It was the case that an passionate viewer Dr. Lescarbault’s saw something and passed the information onto Le Verrier who confirmed the findings and a new planet Venus’ husband. the lord of the forge or Vulcan was named.

Dr. Lescarbault saw the planet, others said they did, but many could not. However the sky is big and complex, and the best opportunity to verify was during a solar eclipses. Even Thomas Edison was involved in looking at the Eclipse and hoping the clouds did not block their view. No shows are hardly alien to science. Theories predict. Ever since Newton’s ideas evolved to subjecting nature to mathematics, this has come to mean that particular solutions to systems of equations can be interpreted as physical phenomena. More theories arise and the math tries to evolve and many times it does.

A new visionary arrived in the 1905 when Albert Einstein produced 4 new works on theoretical physics including what we now know as quantum mechanics and the theory of relativity. He showed light was not straight, but it bent, if light bends so does gravity. In addition, gravity bends time.

Einstein worked with various math professors to understand the variation of Mercury’s orbit and the planet Vulcan disappeared from the maps in 1915 only to arise in connection to a fictional character on a TV show.

Linking to dividend paying stocks, in investing there are multiple theories on what is the best strategy and if you make money looking backwards, those ones worked. The magic of Wall Street is the only perfect information is past information or history and does history repeat itself. There are definite cycles in the market, but can you capture the top to sell and the bottom to buy? One strategy is to invest most of your money in profitable companies which pay a dividend and although the stocks will go up and down, the dividends can pay you while you wait for the top. In every cycle, at some point profitable stocks will trade at higher multiples than non-profitable stocks and most of the stocks on the exchange are non-profitable ones. However sometimes the percentage of growth is higher, but often with high flyers, they descend back to where they started. Learning never goes out of fashion.

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

Hopefully over the summer, you watch or caught clips of the many athletes at the Olympics. Some of the settings were amazing and highlighted the best of Paris and France. Ideally you were exposed to many different athletic competitions, even though you likely had your favorites and maybe someone who you were cheering for won a gold medal or a medal or a personal best. The competition is one aspect of the Olympics. There are 2 other aspects – city building or spending on infrastructure and product placement or advertising.

In an article by Shelia Dang and Mimosa Spencer of Reuters, part of the cost to hold the Olympics is paid by sponsors and they have exclusive rights to marketing their products and services. In Paris, a new level was brought forth and expect the 2028 Olympics in LA to surpass it.

Most of the people who sat in the stands had a cellphone and the Paris Olympics made the most of it. Winning athletes in Paris received their medals on Louis Vuitton trays before being handed a Samsung flip phone to take a victory selfie. None of that happened by chance.

18 months ago, Samsung began talks with the IOC or International Olympic Committee to plot the product placement drive. The boundary-pushing of wares by high-profile sponsors LVMH and Samsung is illustrative of how sponsors are seeking new commercial opportunities from an event that has strict rules around advertising inside competition venues.

Samsung said the strategy was driving awareness of the new Galaxy Z Flip6 globally. Samsung has not provided details on sales.

At LVMH, online searches grew 43% in the US during the first week of the games according to digital analysis provider Captify. LVMH owns a number of brands including Dior, Louis Vuitton.

Organizers of the Olympics in LA will be embracing the trend of Paris and more as LA is head of entertainment in the US. The games will cost $6.9 billion which will privately funded through a combination of sponsorship, ticket revenue, broadcast and merchandise revenues. The sponsorship total is $2 billion and LA officials say they are at about $1 billion.

Henry Poole, VP of marketing solutions at Excel Sports Management says LA’s reputation as a city that oozes celebrity glamour, wealth and ostentation was a tantalizing prospect for sponsorships.

Linking to dividend paying stocks, most events have sponsorships and if you like the event and the sponsorship you may be glad the companies gave money. As an investor you want tangible feedback that sponsorships actually help sales which helps makes profits to pay dividends.

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

If you are a particular generation one of the more important aspects of growing up was the car or vehicle. The internal combustion engine was invented in Detroit and Henry Ford applied the assembly line aspect to the making of The Model T and soon Detroit was the center of automobile production. As the years went by and particularly the interstate highway building and suburban living, many communities had auto plants nearby or in their communities, these plants provided good paying jobs and many people benefited from the auto industry. There was a famous quote by a GM executive as GM goes so does the US or something similar and in reality that was correct. For those of us outside the auto industry, many of us thought it would continue.

In an article by Keith Bradsher of the New York Times News Service, the idea that no matter what changes the auto industry, it could adapt was born that innovation was done in the US – decades ago, a university lab in Texas, researchers discovered how to make batteries with minerals that were abundant and inexpensive. That knowledge was shown to the world, but the US did not take advantage. Companies in China are now building vast numbers of batteries that are inexpensive and reliable, producing most of the world’s electric cars and many other clean energy systems.

Batteries are one of a long list of how China is catching up or passing the US in its technological and manufacturing sophistication. The list includes pharmaceuticals to drones to high efficiency solar panels.

At the universities in China, a majority of undergraduates major in STEM or math, science, engineering or agriculture according to the Ministry of Education. In comparison, the US data shows only 1/5 of American undergraduates and half of doctoral studies are in these categories.

According to the Australian Strategic Policy Institute 65.5% of widely cited technical papers on battery technology come from researchers in China, compared with 12% from the US.

Two of the world’s largest makers of electric-car batteries are CATL and BYD both headquarter in China. Not surprisingly, China has close to 50 graduate programs that focus on either battery chemistry or battery metallurgy. By contrast the US has only a handful of professors working on batteries. One of those universities is Swarthmore College which only has a limited number of spots to do battery research.

In Central South University in Changsha, it has 60,000 students on campus. The chemistry department is a 6-story building with many labs and classrooms. Peng Wenjie, a professor has set up a battery research company that employs 100 recent doctoral and masters program graduates and over 200 assistants.

Manufacturing makes up 28% of China’s economy compared with 11% to the US. One of the reasons is according to Robin Zeng, chair and founder of CATL, building and equipping an electric-car battery factory in the US costs 6 times more than in China and the work is 3-times longer.

In a recent story about electric car vehicles and Thailand, one of the electric car companies set up a plant in 78 days and had 40 showrooms to sell the cars. Could they do it the US?

All is not lost, the US does lead China in overall research spending in terms of dollars spent and in terms of the share of the country’s economy. R & D is 3.4% in the US compared to China’s 2.6%.

Linking to dividend paying stocks, while 2/3s of the economy involves spending on consumer goods, those goods need to be designed, renewed every year. There are always break throughs, check the latest advertisements which highlight the R & D developments, however the US used to lead in all areas of the economy. Part of spending vast amounts of government dollars on post-secondary education was its links to R & D, is that changing?

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

In all industry there are cycles tied to the quarter or quarters where the revenues tend to be higher for good reasons. The quarters tend to be related to both the school year and weather because it makes a great deal of sense, in the past the quarters were related to agriculture cycle. Given the economies changed, agriculture is less important to the economy, but we all look forward to fresh farm produce at the supermarket. In the classic case, retailers do better in the fall because of the back to school and holiday season. If you were in the retail industry, you need to think months in advance to have the promotions ready for the peak seasons.

In an article by Siddharth Cavale and Lisa Baertlein of Reuters, retailers look at the macro aspect of logistics. The retail industry needs labor peace at the ports and railroads, and they are reasonably happy, as they can spend greater time on the shop or website.

For the all the political slogans of Make America Great Again, most retailers are depended on imports from around the world. Container imports and freight rates surged in July, signaling an earlier than usual peak season for an ocean shipping industry that handles about 80% of global trade.

Jonathon Gold, the National Retail Federation (NRF) VP for supply chain and customs policy, said customers are shopping earlier each year and retailers do not want to be caught back-footed.

Part of the reason is a potential US port strike, which a vote will be held on October 1st. The seaports across the US from Maine to Texas are affected at the negotiations are held between the International Longshoremen’s Association and the US Maritime Alliance.

In the July US container imports registered the 3rd-highest monthly volume on record with 2.6 million 20-foot equivalent units (TEUs), UP 16.8% from a year earlier, in part due to record imports from China, according to supply chain software provider Descartes Systems Group.

The NRF is chair by the CEO of Walmart and includes CEOs of Target, Macy’s and Saks on its executive committee, said it expects a strong August for imports. Walmart is the nation’s largest container shipping importer.

In every market there is a spot rate to cue to go quicker and in the container the world, if there is a threat for a strike on the East Coast, the prices to from China to the west coast rose. The rate went up 144% between April and July but fell back 17% in July. Depending on the talks will depend on prices falling for shipping containers with things for consumers to buy.

Linking to dividend paying stocks, all companies hope for normal conditions to be present and for the average consumer they are. When normal conditions are present, it is entirely possible to make good margins which translates into profits which allows to pay dividends. Built into the margins is the possibility of higher costs when alternatives have to made. Often alternatives are linked to logistics and there are multiple methods to find alternatives, hopefully larger companies have contingency plans built in. For your investments, how do companies adjust to contingencies?

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

In every industry there is a wealth of information that is readily accessible to make decisions. We all try to simply the basic decision, but it should be based on a wealth of information. It is up to the decision maker to decide what information is more important and what information is more subjective. A classic case is in the movie the Big Short, the New York traders after going through realms of data and understanding what could go wrong, if something did go wrong. The traders went on a road trip to Florida to visit subdivisions and a strip club where the strippers were buying condos with no downpayment. The traders visited mortgage traders to see how the system was working and investment bankers who was buying and holding the paper. The underlying assumption was the mortgage market was strong and there was an expectation the government would ensure very few mortgages lost money. It was a big if, which is why many did not see it, but the facts were the facts.

In an article by John Kemp of Reuters, what is going on with the oil markets or crude oil. Is the price going up or down?

Commercial stocks of crude and refined products in the advance economies belong to the OCED or Organization for Economic Co-operation amount to 2.761 million barrels at the end of June.

Stocks were down 120 million barrels (-4%) below the 10-year seasonal average and the deficit had widen from 74 million (-3%) at the end of March.

US crude inventories declined in each of the 5 weeks since the end of June by a total of 19 million barrels according to the EIA’s Weekly Status Report.

Typically, US crude inventories decline in July and August as refineries ramp up processing to meet elevated demand for gasoline during the summer months. (People go driving for holidays, did you or your neighbors?) But the seasonal depletion this year was the largest since 2019, and among the largest in the past decade.

Most of the depletion occurred at refineries and tank farms in Texas and Louisiana along the Gulf of Mexico, the most closely integrated with global oil markets.

Hedge funds and other money managers have been increasingly bearish about the outlook for petroleum prices. The primary concern is the deteriorating outlook for the global economy and petroleum consumption.

Purchasing managers surveys and freight data have shown the 1st quarter rebound in manufacturing ran out of momentum in the 2nd and 3rd quarters.

A valid expectation is current prices and positions are consistent with a broad economic deceleration, a mid-cycle slowdown dampening petroleum consumption and halting or reversing the depletion of inventories.

If the slowdown does not happen and depletion continues, prices are primed for a rebound towards higher prices.

Linking to dividend paying stocks, if you worry about commodity prices it is really about supply and demand, if you own a dividend paying stock then you need to ask at what price does the company make money? If the price is higher, profits will be higher, if the price is lower it is best to move to alternatives which would do better with lower commodity prices. All investment decisions in hindsight could be relatively easy to make, it is the homework which helps you pick the winners and to try to avoid the losers. Part of your homework is to look at industry specific publications to see trends.

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

If you were in the economic development position in your local city, one of the things you would love to have is the headquarters of a large company. That combined with other government offices helps to ensure the economy of the area will be less affected by economic cycles than other areas. The company headquarters typically brings spinoffs as accountants and lawyers will tend to be nearby, hotels will be built as people travel and the list goes on. In addition, often head office companies or their founders will contribute to the social life of the community with both donations and whatever they are interested in. For example, one of the Waltons in Bentonville, Arkansas likes to trail ride and has teamed up with Wal-mart to have great trails in the Bentonville area. It has become another reason to visit Bentonville.

In an article by Rebecca F Elliot of the New York Times News Service, Chevron, the second largest US oil company is moving its headquarters from California to Houston, Texas.

Chevron’s ties to California date to the 1870’s and was known as Standard Oil of California. Chevron has people where the oil is and presently has over 7,000 people in the Houston area compared with 2,000 at its San Ramon headquarters. San Ramon is near San Franciso and in 2022, Chevron did a sale leaseback with the space, perhaps the writing was on the wall.

Linking to dividend paying stocks, there are multiple trends which happen in all industries, and when a corporation moves for its best interests, someone else loses. It could be the real estate market which has to absorb the space, homes for sale, the corporate dollars for social events, there can be an affect, and hopefully new companies evolve and will take its place. This is part of the American Dream and in some places it works well with little disruption, in other places they are in a time slowdown until somebody discovers them again. As an investor, you are more of the optimistic side because it can happen and does happen on a regular basis which is a good thing for the economy in general.

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

If you watch the clips about the 10 wealthiest women in the world, on top of the list is a French lady named Francoise Bettencourt Meyers whose family owns shares in the beauty company L’Oreal. The company makes cosmetics for people with the overwhelming majority from women products. If you own shares in a drug store company, you know that cosmetics have large margins and equally important the buyers believe they are getting good value for their money.

In an article by Dave Graham and Dominique Patton of Reuters, L’Oreal announced it is buying 10% of Swiss skin care firm Galderma. L’Oreal is buying into because Galderma is a leader in the booming injectable cosmetics market. The stake of $1.6 billion Swiss francs will be funded through available cash and credit lines.

L’Oreal knows the company well, for it was originally owned 50% by Nestle and 50% by L’Oreal. In 2014 L’Oreal reorganized and sold its stake. The 10% is coming from Sunshine SwissCo AG a group lead by Swedish private equity firm EQT, Abu Dhabi Investment Authority, and Auba Investment Pte. Ltd.

After WW II, the baby boom was created and now those people are senior citizens. With all senior citizens, the skin is less flexible and the beauty industry idealized form says injectable products that can reduce wrinkles such as fillers and neuromodulators which include botox are a must for a portion of those seniors.

L’Oreal CEO Nicholas Hieronimus said about half of Galderma’s revenues come from injectables. The market was worth $10 billion last year.

The penetration rate of these procedures already stands at mid-single digits and it could easily double in the next decade.

The global esthetics market is predicted to grow to $25.9 billion by 2028 from $15.4 billion last year according to Markets-and Markets research.

L’Oreal is positioning their stake in Galderma as strategic to working on research and development for technically the companies are competitors and will remain as strong competitors.

Linking to dividend paying stocks, large companies have access to capital, logistics and product placement but all markets evolve and there are competitors trying to fight their way on the shelves for consumers. The access to capital means all large companies can have strategic positions in companies as they wait till the correct time to buy them and continue to make profits. This time frame can be a luxury for small and medium sized companies but a normal course of action for the large companies.

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

In the world we live in there is a rule for business, if there is enough profit to be made someone will be involved in the product or service. While much of the world revolves around the line between right and wrong, there is considerable money to be made if an organization goes over the line. If you own shares in the company, you want it to be on the further side of the right side, but somewhere in the background the line may have changed over the years. This rule of being on which side of the line has existed since the East India Company of the UK was the most profitable company in the world when it moved from importing tea from India (it is the reason why many people in the UK drink tea) to selling opium to the Chinese for silver. In the UK. Every time there is a sanction imposed by one country, a firm will use its expertise in logistics to find a solution to sell the product at a higher price. Another example is after the US sanctioned Iranian oil, a firm in Switzerland bought the oil because in their minds the Swiss government had not agreed to the sanctions. The oil went to refineries in Japan and Europe. The most recent example is AI chips from the US.

In an article by Ana Swanson and Claire Fu of the New York Times News Service, as most people know the latest great potential is Artificial Intelligence or using great amounts of data to find potential solutions. The great amount of data means a need for great amount of computing chips to manage the data. The best computing chips in the world are made by the US company Nvidia.

The US government beginning in October of 2022, has set up one of the most extensive technological blockades ever attempted: banning the export to China of AI chips and the machinery to make them.

The bans have made it harder and more costly for China to develop AI, but given the vast profits at stake, businesses around the world have found ways to skirt the restrictions.

AI holds promise to make the world a better place, it can also be used by the military to control the population to a greater extent and most of the world hopes it does. As well as to develop weapons to attack or defend the country.

In the US the agency leading the sanctions is called the Bureau of Industry and Security which oversees the government’s growing trade restrictions. One of their many tools is the entity list, which companies cannot export products from the US to a business on the list unless they obtain a license.

Companies are always looking for loopholes in the rules and one of them is for companies to reroute business through new partnerships or overseas subsidiaries which are not on the list.

The bureau has tried to adapt, tightening its penalties and forming a Disruptive Technology Strike Force with law enforcement and the intelligence community to pursue technology theft and illegal procurement networks.

An example of the process is Nettrix, one of China’s largest manufacturers of AI servers. The company was formed by former Sugon executives as Surgon was on the list not to do business with. Nvidia, Intel and Microsoft were partners with Sugon when the US was encouraging business relations with China. US officials met with Nvidia executives in 2021 and 2022 to discuss how China were using their chips. Nvidia stopped shipping the A100 chip. Nvidia came up with a solution to downgrade the A100 to A800 and this was within the government’s parameters and Chinese companies bought as many as possible. In October of 2023, US government regulations changed and Nvidia stopped shipping the chips.

There are less powerful chips than the A800 and those computer chips are being shipped to China. This has encouraged China to boost their strength in technology and innovation or make it in China, although for the moment, the US leads China in AI chips.

Linking to dividend paying stocks, owning shares in a profitable company is a rare thing because most companies on the exchange do not make profits. However, everyone has a potential to grow or do something and ideally you should watch from the sidelines as they try to do their thing. If they succeed, by being on the sideline and doing your homework if their sector does better than expected you will know which ones to buy. There are and always will be competitors to companies making money, someone will say I think I can do better or we can work on their weaknesses and that is a good thing. fortunately a good profitable company has the resources to buy the same companies and bring synergies to the profitable company. As an investor, you want this to happen and for the company to stay profitable.

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