In the corporate world, once someone achieves the CEO’s position it is going to be very difficult to remove the person. There are a number of reasons which included in many public companies there are no controlling shareholders which means the CEO has to make the institutional shareholders who control the company very disappointed. The CEO reports to the Board, a good CEO ensures that whoever is on the Board they are in constant communication with the CEO, and in reality for most of us, firing a friend is never easy or you may want to give the benefit of doubt because maybe the cycle turns and the CEO will produce great results. When you read a CEO is leaving before his time is over, something drastic has happened and the person generally leaves with a substantial money in his pocket to smooth the transaction. For most employees, they accept the range in which they are employed at, at the CEO level the contracts are negotiated and at the time the Board wants the CEO.

In an article by Sydney Ember and Niraj Chokshi of the New York Times, the CEO of Boeing, Dave Calhourn is stepping down at the end of the year.

The company is under pressure for various safety measures including the grounding of Max aircraft, a door flying off during an Alaska Airlines flight and the FAA is clearly not happy.

Boeing is considered a jewel of a company and has a duopoly with Airbus, the two airlines dominate the commercial aircraft industry with a 95% plus share. Boeing also has a division for planes with the US military. In the world of airlines, being the CEO of Boeing is generally a sweet position. The 2 divisions produce aircraft for the world and more and more people are travelling, airlines need aircraft. In normal times, that translates into profits and dividends.

At Boeing, there were other management changes and safety is the most important issue at Boeing. Remember the slogan at Ford – quality is job 1.

CEO Calhoun tried to put a good face to the announcement saying he has been CEO for 5 years and is 67 years old, but the announcement was made in late April rather than waiting until the May annual meeting. In later reports, Mr. Calhoun will leave with a $24 million payout.

Linking to dividend paying stocks, when you own a stock, you own a piece of the company and can vote at the annual meeting, companies similar to ProxyVote make voting easy. The votes are for the election of the Board of Directors, Appointment of auditors, Advisory votes on executive compensation and Shareholders proposals (shareholders from 1 to many shares can contact the company to go determine who a shareholder proposal is done, but it is possible to have the concern addressed). In addition, shareholders can go to the Annual General Meeting (AGM) and ask a question. For most of us, unless the company is a disappointment, we tend to vote as management recommends, not always but most of the time. If you own shares, you should vote. If you cannot go to the AGM, you can listen online (virtual AGMs are here to stay) or listen to the conference call the company has with analysts.

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

If you ever heard of Ray Dalio, Chief Investment Officer of Bridgewater Associates, you may know he has You Tube videos on the cycles of the economy. All economies go through cycles and all companies go through cycles. Most of only really know when the bottom and top was, Mr. Dalio’s company has been very good at understanding when they are actually happening. If the market is at the bottom, buying is a very good thing; if the market is at the top, selling is very good thing. Mr. Dalio’s company has an excellent track record of outperforming the markets.

In an article by Keith Bradsher of the New York Times News Service, China has been going through a cycle and is near or is at the bottom, what should Premier Xi do? Introduce a new program with a fresh slogan – new, quality productive forces.

The idea is to spur innovation and growth through massive investments in manufacturing and research and development.

China has a forum called the China Development Forum which was started in 2000. The Forum explains the plan released by the Premier to corporate leaders. The corporate leaders have a question and answer series with Deputy Ministers and sometimes the Premier.

The Premier encouraged the Chinese people to replace old cars and household appliances, but there was no word if the government was offering incentives to consumers.

Thanks to the downfall in housing prices, consumer spending has fallen. One of many problems in China is real estate represents 60 to 80% of the average household assets. Real estate prices have fallen over 20% and people are struggling to meet mortgage payments as well as consumer spending is down. If we go back to Mr. Dalio’s economic cycles, countries move from industrial to service countries, and when a country goes into a service economy, the value of real estate is related to consumer spending. China has a glut of real estate and declining prices. China’s manufacturing more that double the share in the US of the economy.

Partners outside of China had questions about how China’s financial industry will keep the property industry going in the midst of local government cutbacks. But for now, the emphasis in China is on strengthening the supply and quality of goods and not on worrying about demand.

Linking to dividend paying stocks, similar to countries companies go through cycles and it is easier to make cuts to spending to maintain margins. Most of us love the company to grow, but management needs to make cuts if needed to ensure when the cycle allows for growth, to maintain profits to pay dividends. Often when there is a downturn, there is a new slogan for the future, is that happening at your company?

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

The quarterly profit projection is the expectation set by Wall Street to determine how a company is doing? good, bad or how is it executing its plan? If the company beats the expectations, the stock tends to go up; if the company does not beat expectations, the stock should go down; if the company execution of the business plan does not measure up, then the stock should go down. Given all the potential downs, senior management want to exceed expectations no matter what the economy is doing.

In an article from Reuters, FedEx after reporting higher quarterly profits, the shares went up. The street was happy to see a higher operating margin at Express, FedEx’s largest unit.

Parcels are a way of life for millions of Americans, which is why 171 million people belong to Amazon Prime which offers free shipping. At FedEx, the Express unit is seeing lower demand and to save costs it parked aircraft, reduced flight hours is trying to fly fewer jets.

In terms of buy back of stock, the Board has plans to buy $500 million in this quarter, part of a $5 billion share buyback program.

Analysts at JP Morgan Chase & Co., noted FedEx hits all the high notes this time with lower capex (capital expenditures). a reloaded buyback program and a beat in Express in view of low expectations.

CEO Raj Subramaniam said, weakness in global trade continues to constraint demand in the international business.

Linking to dividend paying stocks, the expectation is these companies will be steady as she goes companies continuing to make profits and pay dividends. Steady as she goes is a good strategy for these companies, because if it grows to fast, expectations of the next quarter will be less growth. Sometimes the emphasis is on growth, sometimes the emphasis is on little growth but good margins. For the bulk of your investments, the emphasis is meeting the expectations of the street.

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

One of the reasons as an investor you want to buy dividend stocks is because they have the ability to raise prices. If prices are rising all and sales continue on the same path, revenues should be higher. Raising prices is more of an art than anything else because companies need to ensure the value the consumer believes is in the price, stays with a higher price. If the item was in the luxury category, it is easier to raise prices. If the company competes on price, then raising prices is much harder to do.

In an article by Madelline Ngo of The New York Times News Service, when grocers raised their prices were they price gouging? The Federal Trade Commission (FTC) wrote a report saying large US grocery retailers took advantage of supply chain disruptions to beat out their smaller rivals and protect their profits during the pandemic.

During the pandemic, many places were closed which changed the normal supply chain operations. The FTC noted some large firms pressured suppliers to supply them first over competitors. Food and beverage retailers posted strong profits during the height of the pandemic and continue to do so today. The prices that were pushed up during the pandemic have remained even though the supply system has been fixed.

Small grocers had a problem getting supplies during the pandemic. Large companies not so much.

Using public data on profits in the grocery retail industry, the FTC found that in the first 3/4s of 2023, food and beverage retailer revenues reached 7% over total costs. That was up from 6% om 2021 and 5.6% in 2015.

Food costs affect everyone which in an election year makes it an election issue. Besides food costs the potential $25 billion merger of Kroger and Albertsons is held up.

Linking to dividend paying stocks, one hand as an investor you like the fact that some companies can increase their prices, on the other hand if you are a consumer, you like it less. In many areas of the world, the idea of having or achieving a balance is important. Perhaps the dividend increases and the increase in the stock price more than pays for the increased consumer prices.

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

If you think about spring time, eventually a plant or two will come up because at some point the earth warms and trees and plants begin to grow. One of the plants could be tulips because they are normal spring time plant. If you like tulips, and most people do, you might have seen the huge fields of tulips in the Netherlands. The Netherlands has a long history with tulips, for investors there is the time tulip bulbs were bid up to hundreds of thousands of dollars and came crashing back. For now tulips can be bought at garden centres or places such as Home Depot. Similar to all industries, AI is coming.

In an article by Mike Corder of the Associated Press, an AI robot nicknamed Theo but produced by H2l Robotics is used to search those massive tulip fields for diseased tulips. The robot is the size of a sports car with caterpillar tracks and costs about $272,700. The company H2L has made 45 of them.

Erik de Jong of H2L Robotics, says artificial intelligence helps them to identify sick flower and very precise GPS co-ordinates allows them to pinpoint the flowers that need to be destroyed.

The software in the robot has thousands of pictures of tulips and as the camera examine the tulips it looks for the diseased ones and pulls them up. In the past, the job was done by a disease spotter, but they are harder to find and train.

Linking to dividend paying stocks, in every industry looks for better ways to do all the jobs in the company, some will take a little more time to envision how it can be done better and with less expense to find a true alternative. Thus every company is changing and as AI continues to grow or be seen more, there will be greater possibilities to use AI in the production facility.

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

If you examine the history of just about any town or city, there has been grants or incentives for the largest employer to locate in the community, it could have just happened but it was likely the result of the City officials, the Mayor, the State Representative, Senator to offer incentives to the employer to locate in the community. All of them believed the long-term effects of the employer – whether it was a manufacturing company or educational institution or government facility was good for the community. The same line of thinking happens with pro sports facilities, there seems to be a government grant needed.

In an article by Alexandra Alpher and David Shepardson of Reuters, the Biden Administration passed the 2022 Chips and Science Act to boost semi-conductor output with $52.7 billion in funding including $39 billion in subsidies for semi-conductor production and $11 billion for research and development.

Intel received nearly $20 of the $52.7 billion which it is using to build 2 new factories and modernize an existing plant in the Phoenix, Arizona area. Intel also has a plant under construction in the Columbus, Ohio area and does research and development in the Oregan area.

According to the Semiconductor Industry Association, the share of global semiconductor manufacturing capacity in the US had fallen from 37% in 1990 to 12% in 2020. The big winner has been Taiwan.

Other companies receiving grants include: GlobalFoundries $1.5 billion to build a semi-conductor chipmaker in Malta, NY. GlobalFoundries is the 3rd largest contract chipmaker.

Awards for Samsung and Taiwan’s TSMC are expected to be announced soon.

Linking to dividend paying stocks, when manufacturing companies decide to enhance their capacity, there is a tremendous opportunity to take advantage of grants for most counties and states in the country. There maybe a few which are not involved, but very few. The reality is most locations have a grant attached to them somewhere, whether to stay where they are or expand existing facilities. If the companies you invest in do not take advantage of grants and subsidies, they are often leaving a competitive advantage on the table, is that good?

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

Everyday we turn on the light switch and expect the lights to turn on and part of the reason is the Grid of electricity that has been developed. It has increased our expectations and most of us would have no clue what to do if the grid did not operate. However, things are not as perfect as our expectations believe they are. In a book called The Grid – The fraying wires between Americans and our energy future by Gretchen Bakke, published by Bloomsbury Publishing, NY, 2016, the author examines the history of the Grid and is it the best solution for the future?

What happened in 1969?

Part of the business model was improvements in technology meant increased plant efficiencies. There is a limit due to physics. The second law of thermodynamics, and its corollary Carnot’s theorem. dictate temperature ratios limit the amount of work any given fuel can be expected to do in a heat engine. A tradition power station changes fuel into heat. The efficiency tops around 50%.

The closer a steam plant comes to 40% efficiency, the more routine maintenance it needs, thus most plants run around 34%.

OPEC raised oil prices, which meant electrical bills went higher rather than stayed very low. The dreaded word of conservation happened across the system.

In Washington, slowly with the Carter administration and then with the deregulation of Reagan, one of the forms of regulation from the government was long-term guarantees coupled with assured profit on investment. Governments did this because electricity for all was seen as a public good.

Historically utilities money when people used electricity, the more we used the more money they made. Now they do not. They make money by transporting power and trading it as a commodity.

The conservation movement lead to decreased consumption. The brand new power plants are smaller, more dispersed and more variable than anything the grid has seen. In addition more solar panels on rooftops, wind farms providing variable power. Some of the construction of farms of solar panels or wind are owned by investment firms. Those investments tell a viewer which parts of the grid is falling apart. Money flows into investments, money does not necessarily go to the upkeep of old, lumbering power plants which is the backbone of America’s electrical generation facilities.

If we jump into the present, there are many micro systems and in places such as California, new homes are encouraged to have solar panels on them. This is a good thing and over the years, every utility company has figured out either the electricity is sold to the grid and the home owner pays the bill, but receive a chq or net metering and if the home owner uses more pays the difference or receives a credit. It took a number of years to determine what to do with micro systems.

Many utility companies installed smart meters, they can be read without someone coming to the house, but the other thing they do is which is more important for the utility. The data produced by the smart meter is proving essential to the creation of predictive models of electricity use, minute by minute. This allows the utility to monitor and distribute the electricity better and can ask large consumers of electricity to ramp down consumption for a few hours to balance the grid. Network enough of these power-savers into a flexible smart piece of software and you have your platform.

The demand-response capacity, called DR in the business, not only brings energy saved into the mix of resources available to grid operators, when enough of these are scattered but existing resources are networked together it is possible to create what is called a virtual power plant.

At the beginning of the invention of electricity, there were many micro grids primarily large users who could do it themselves. When electricity prices fell, they were change to a system with central making power, as prices rise, more and more large users are making their power or a reversal to what the system was. The issue is who pays for the upkeep of the infrastructure? There will be challenges in the future.

Linking to dividend paying stocks, for generations one of the safe investments was utility stocks because they operate in a monopoly situation. The companies together with the government saw electricity as a greater good and ensured the system made profits to pay dividends and ensure electricity flowed to all parts of the area. Most of us use electricity every day and our lives dependent on it which is a good thing. Utilities are changing and have changed and many investors, including me own them for their dividends. Similar to other industries when prices go up, people look for alternatives. As investors you want to ensure there is not enough alternative the company does not make profits, but so far many utilities have paid dividends for generations and able to increase the dividend.

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

Everyday we turn on the light switch and expect the lights to turn on and part of the reason is the Grid of electricity that has been developed. It has increased our expectations and most of us would have no clue what to do if the grid did not operate. However, things are not as perfect as our expectations believe they are. In a book called The Grid – The fraying wires between Americans and our energy future by Gretchen Bakke, published by Bloomsbury Publishing, NY, 2016, the author examines the history of the Grid and is it the best solution for the future?

There are actually 3 distinct grids, one for the west, one for the east and Texas. More than 70% of the grid’s transmission lines and transformers are 25 years old and the average power plant is 34 years old. The design of the system was to produce large quantities of electricity in a big, centralized power plants. Both wind and solar power, which are useful to have, change the system because solar is decentralized power, and wind power is harnessed in relatively remote areas where there are few people. Once the design of the system was competed and operational, the companies which supply the centralized power plants – the oil, gas, or coal, interests, the railway companies which transport coal, the mining and oil and gas companies all have vested interests in keeping the system as it is.

Electricity is a force, it cannot be boxed or stored or shipped, it is always used the same instant it is made and the speed it happens is milliseconds.

From the start of the grid, it was designed to make money (which is one of the reasons to buy utility stocks).

In the early days of electrification there were many micro grids, and it was made and marketed to those that could afford it. The idea of electricity to all consumers was hinged on how to grow the system – encourage consumers to use more power by selling they stuff that needed to be plugged in. For example GE selling the refrigerator and then the electricity to run the electricity.

In the early years of electricity, in 1902 there were 815 city-owned and -governed municipal power companies in the US and it was growing by a hundred a year until 1907 which attributed to 30% of the power supply. The other 70% was made by private companies – most traction companies to run their streetcars, trains, industrial manufactories and commercial buildings.

Within 20 years, the 8 largest holding companies in the US controlled 75% of the electricity market. Much of this change is linked to Samuel Insull who spent his first 20 years working as Thomas Edison’s personal secretary.

Understanding electricity cannot be stockpiled, it cannot be stored, it is difficult to count and accurately bill. It requires a highly trained workforce to manage and to serve people the company needs to bear the cost of building and maintaining its infrastructure.

Unlike other monopolies, the secret to making a fortune off electricity was to lots of different kinds of customers in order to provide sufficient demand to run a large, centralized station 24/7.

Mr. Insull moved to run the Chicago Edison. The competition was 18 other companies central station electricity providers in Chicago’s downtown Loop along with 500 private plants. The problem was Chicago Edison’s 3,200 kilowatt plant produce power for 5,000 customers in the downtown, but demand fell drastically during the evenings or the electricity was in use 5.5% of the time.

How did he increase the customer base? First step lowered the price of electricity from 20 cents a kilowatt in 1897 to 10 cents in 1898 and lowered one cent a year till it reached 2.5 cents a kilowatt in 1909. This increased the customer base to 200,000 by 1913 or 10% of the population of the city.

To land the manufacturing companies which produced their own electricity, he lowered the price to 0.5 cents a kilowatt for off-peak power. At that price, given the maintenance, upkeep and necessary costs to maintain a private system, companies moved over.

The process made money, because the plant had to operate no matter the demand or the most serious problem of central station management and by far the greatest item of cost is interest on investment. Thus, selling more kilowatts the interest cost per unit fell because the cost was spread across a larger number of units.

This strategy to grow the absolute number of people served and amount of electricity consumed was to last into the 1960’s.

Mr. Insull’s other idea was to build more, bigger and more efficient power plants. He used government regulation to protect his interests from competition and to insure long-term low interest construction loans.

The big power companies Southern California Edison, Detroit Edison, United Corporation followed the same business models and consolidation was seen in the Investor owned utilities.

5 years after Insull arrived in Chicago, Chicago Edison owned every electrical company in the Loop. He also owned their generating stations and they were all shut down and replaced by a largest power plant in the world at Harrison Street. Efficiencies improved from 2.5% to 20%.

Linking to dividend paying stocks, buying investor owned utilities has been and continues to be in many dividend producing portfolios. While very inexpensive electricity maybe a thing of the past, it is hard to imagine not being hooked up to the grid and paying a monthly bill. As long as the regulators give yearly raises to electricity companies, they will be a good investment.

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

In every industry, the government pays an important role, for business ideally it is a supporting role, but not always. In the world of government, various political issues rise up and some form of regulation is called for to save the souls of the young people. For those of us who pass being young but not young at heart, often times the regulations called for is just noise, but to advertisers it means something else. Every since the introduction of the internet, the segmentation of media which appeals to groups of people has become ever more concentrated.

In an article by Shelia Dang of Reuters, if the US government tries to ban or lessen the impact of TikTok, then advertisers will need to advertise somewhere else. TikTok is a social media company which is owned or controlled by a Chinese company – ByteDance and in the government’s eyes that is connected to the Chinese government. For some that means Chinese government control.

The more important aspect is TikTok appeals to young people, and young people spend money which interests brands and advertisers. TikTok’s main rivals are Meta’s Reels and You Tube’s Shorts.

While advertising budgets are planned in advance, brands can quickly place or pull ads on social media to reason to events. Insider Intelligencer estimates TikTok will generate $6.8 billion in US ad revenue in 2024. The issue is would young people switch to the competition?

Linking to dividend paying stocks, all industries have alternatives it is often the leading market company has a dominance, but things can change sometimes management makes mistakes, the government changes the rules, and in the internet age, things can change quicker than before. For your investments, ensure you have reasonable and easy to achieve metrics of how the company is doing to making profits to pay your dividends. If the metrics are reached, you can do little until the next quarter and the dividends will allow you to time to do the things you want to do.

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