Branding and you are the brand, you likely have heard or seen these words before. Branding for consumer goods is for the consumer to identify with that particular brand for reasons that benefit the consumer. For the company, if consumers love the brand, they will pay and continue to pay a premium. If it works, companies make and continue to make billions. If it does not, companies have problems.

In an article by Christopher Rugaber of the Associated Press, consumers are changing the way they shop. After the COVID 19 pandemic, packaged consumer companies increased their prices and consumers paid, they love the brands and were willing to pay extra. This resulted in consumer-packaged companies reporting higher sales, higher profits as margins stayed the same or were increased. Something is changing at the grocery stores.

Consumers are switching to store-branded items or buying less snacks. Consumers have noticed shrink-flation which is the price remains the same, but the package contents have been reduced.

Samel Rines, an investment strategist at Corbu, in 2021 and 2022 many companies including PepsiCo, Kimberly-Clark, P&G, raised prices stemming from supply chain disruptions and the Ukraine-Russian war. Fortunately, many consumers received extra money from the government to tackle higher prices. That money is long spent, and an example is Unilever. The company had raised prices up 13.3% of average across its many brands (Hellman’s mayonnaise, Ben & Jerry’s ice cream, and Dove soaps). Its sales volume fell 3.6%. In 2023 prices were raised 2.8%, sales rose 1.8%.

In instances, consumers have alternatives and more are using them.

Linking to dividend paying stocks, in your homework to determine whether to buy a stock or not, you want to know can the company raise prices to reflect inflation, without losing market share and maintaining margins? It seemed in the packaged food companies the answer was yes, now we are seeing maybe not. If companies cannot raise prices, then they have to cut costs in the manufacture and distribution of their goods. Is there enough costs to cut? How will the companies boost sales – typically more advertising is required or a cost. When you see companies not being able to pass on higher prices, look for alternatives where they can.

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

Sometimes people believe investing in the stock market is similar to gambling and in reality, parts of it can be. There are parts which require doing your homework to try to ensure you do not lose money, but sometimes the terms of gambling are often used in sound bites because they seem to fit well. Outside of the stock market, legal gambling is a method for governments to collect taxes.

In an article by Wayne Parry of the Associated Press, the American Gaming Association noted the total gambling was up to over $110 billion.

Going to a casino remains the bread and butter of the gambling industry. Slot machines brought in $35.51 billion, table games brought in $10.31 billion up 3.5%. Sports betting was up 44.5% to $10.92 billion. Americans legally wagered $119.84 billion on sports up 27.8% from the previous year. Part of the increase was more states allowed legal betting.

The top states for sports betting was New York at $1.69 billion followed by New Jersey and Illinois where over $1 billion was bet.

Internet gambling generated $6.17 billion up 22.9%. The top state was Michigan with $1.92 billion followed by New Jersey and Pennsylvania.

Casinos paid an estimated $14.42 billion in taxes up 9.7%. Nevada is the top gambling market with $15.5 billion in revenues, followed by Pennsylvania at $5.86 billion and Atlantic City at $5.77 billion. The strip in Nevada are the largest casinos, the next largest casinos by revenue are Resorts World in New York, MGM National Harbor in Washington, DC, Encore Boston Harbor and Borgata in Atlantic City.

Linking to dividend paying stocks, while there is a significant element to gambling on the stock market, gambling means win or lose and in a casino the house always wins. If the house always wins, think about buying the owner of the casinos. One method to ensure you win more than you lose is buy profitable stocks which pay a dividend. The stock market will fluctuate, but the dividend and the P/E ratio of profitable stocks tends to be higher than non-profitable stocks. When non profitable stocks have the same P/E ratio or above, most analysts believe a correction will result or the price of the non-profitable stock will fall. One of the best methods to avoid this is try not to buy these types of stocks, for this is when deploying money on these types of stocks is gambling.

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

In the spring of the every year, people are graduating from post secondary institutions with dreams of landing their first job in the workplace and hopefully have a long association with work. Many years ago, having very few employers was a good thing and people tended to stay within a company although their jobs likely changed every 2 to 5 years. If you were not changing jobs in an effort to move up, your career was likely to stagnate. Whether that was good or bad, was an individual choice. Now days, if you have not worked for a variety of companies, there might be something amiss, till you find the correct one. One of the prime jobs has been a consultant with the large consultant companies McKinsey, Bain, Monitor, LEK, AT Kearney and Oliver Wyman. How do you pass the interview and work for the company and then for its clients directly?

One method is to understand how the interview process works and how to succeed at it. Recently read a book called Case Interview Secrets written by Victor Cheng published by Innovation Press, Seattle, 2012. You can also view http://www.caseinterview.com.

When you are evaluating a company to buy or not, there are processes to go through and they do not change. Profits = revenues – costs does not change no matter the size of the company. Sometimes asset values increase and that can make up for revenues not being higher than costs, but that is rare. For example, a business maybe in an area that went into decline and now 20 years later the real estate is worth more because of a decision by a government agency to build a convention center type building, but that was likely 10 years of hope to make a profit.

In Mr. Cheng’s book, various decision trees are made available and how to make assumptions. If you listen to Aswath Damodaran on stock valuation, what assumptions you make are the key to the answer. The important aspect is defending your assumption, what is the growth rate and why? what the comparable and why? Since we do not know what will happen, what your assumptions are will be a key to projection in the future.

What you can do is breakdown how the company makes money? what is the competition? and can the company raise prices?

In Mr. Cheng’s book starting off with a hypothesis and having the ability to make changes or recognize changes in the hypothesis is a key. In the corporate world, asset allocation is important, does the company spend money on A or B or C? what growth rate is best? what growth needs to be achieved? can the company do a better job than the competition? should we buy the competition? is it better to do it internally? There are always multiple questions that can lead to a decision or deciding not to do something. Only in hindsight do you know the true answer, based on what has happened in the marketplace however decisions need to be made.

Linking to dividend paying stocks, there are many people who analyze stocks and the wonderful thing is people come to different conclusions. The market says who is correct. For the average person, it is best to start with and try to stay with profitable companies than can pay a dividend. The reason is overtime the market will value profitable companies with higher multiples or you will be worth more, in addition you will be paid a dividend along the way. Which industry you should start with generally depends on your source of income for it that industry you can easily watch the players. As your wealth increases, you can easily diversify.

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

Recently a YouTube video was seen with the topic of how indebt the average American was. The person said according to the Federal Reserve statistics, the average credit card debt was $6,000 and climbing because the average person was making minimum payments. There are many things you can do with a statement, one the person asked why are savings so low? another person might say whoever owns the debt is likely a good investment because the average person is making minimum payments. This article is about the owners. The 3 big companies of credit cards are VISA, Mastercard and American Express or Amex. They all have slightly different business models.

Amex is a closed loop company which both issues and processes its own information. They charge merchants a higher price to accept which is why very popular retail companies tend not to accept Amex, but high spend retail places do. VISA and Mastercard issue their cards through banks. It used to be banks had to take one or the other, but now days, in many banks you can have either.

VISA and Mastercard provided the infrastructure to run the process, which is why debit cards work, the banks pay a fee to VISA and Mastercard for their infrastructure.

In an article by Anirban Sen and Michelle Price of Reuters, Capital One Financial announced they will acquire Discover Finanical Services in an all stock transaction valued at $35.3 billion. Discover shareholders would receive 1.0192 Capital One shares for each one Discover share.

Capital One is valued at $53.2 billion and is the 4th largest US credit card market by volume in 2022 and Discover has a market capitalization of $27.6 billion is number 6.

In turns of assets, Discover was the 27th largest bank with $150 billion in assets according to the December Federal Reserve data ranking insured US banks, with Capital One was the 9th largest at $476 billion. The combined entity would jump to 6th largest US bank.

Discover Financial model is closer to Amex as it process its own cards. If merged with Capital One and Capital One switched from Mastercard and VISA, it could process its own cards and that would be worth $600 million a year in potential savings. ($300 billion x 0.2 percent fee). Capital One believes the number would go to $1.2 billion by 2027.

According to Jeremy Kress, a University of Michigan professor of business law, the merger would be the first test of bank merger regulation since the Biden administration’s executive order on promoting competition in 2021.

The agency titled the Consumer Financial Protection Bureau noted in mid-February, small banks and credit unions tended to offer cheaper rates than the largest 25 credit card companies across all credit score tiers. The agency has a view on bank mergers.

Linking to dividend paying stocks, as an investor you like near monopolies because the company can regularly produce profits to pay dividends. However, the political world likes the illusion of choice or competition. In some industries the barriers to entry keep the near monopolies, in other industries other viewpoints need to be taken into consideration. In the meantime, Mastercard and VISA offer terrific margins.

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

If you think about the airline business, there are 2 global giants which control 95% of the market and they are Boeing and Airbus. Boeing is based in the US and Airbus is based in France and the UK. At the moment, thanks to COVID, airlines are flying more people and ever before and have the need to expand and update their planes. Both Boeing and Airbus offered the new improved version and both companies have a 10 year plus backlog of orders to build planes. As an outside looking in, you might think there is opportunity in the marketplace, but a giant bank account will be needed.

In an article by Lisa Barrington of Reuters, there is an outsider looking to break into the market and it is the Commercial Aircraft Corporation of China (COMAC). The company has unveiled the C919 which is certified within China and 4 planes are flying with China Eastern Airlines.

COMAC will invest tens of billions of yuan over the next 3 to 5 years to expand C919 production capacity. At the same time, the company is going through the process of being certified with European Union Aviation Safety Agency (EASA) which started in 2018. (with safety regulators time is expected to play a large role).

COMAC has 2 passenger products: the ARJ21 regional jet and C919 which seats from 158 to 192 seats. The airliner competes against the Airbus A320neo and the Boeing 737 Max 8 models.

Linking to dividend paying stocks, whenever there is an industry with high demand and great margins there will be some competition. At first the competition will compete on the margins or offer immediate delivery rather than delivery next year. Then the competition will gain traction and maybe more market share which means the established companies will use government regulations to slow down the competitors. After that happens, which may take a few years then we see how the marketplace react.

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

When you are analyzing a company, two of the most important elements are to determine how the company makes a profit and what are the margins, then there are questions about how sustainable are the margins. When you analyze a country, it is slightly different, the most important element is how to people earn a living? In the developed countries, services is a very high component, for example in the US, about 2/3’s of the GDP is based on people shopping and all the services comprise that endeavor.

In an article by Chris Gallagher and Akiko Okamoto of Reuters, they examined the Japanese economy and similar to the US, about 70% of Japanese work for smaller firms in the services sector and people are cutting back for a variety of reasons. In general the Japanese yen has fallen in price making imports more expensive, wages are not going up, prices have gone up and people are paying their debts down. Individually for people to pay their debts is a good thing, collectively if the economy is dependent on people buying things, not so good.

Hideo Kumano, chief economist at Dai-Ichi Life noted although consumer prices have risen substantially, consumer spending has not moved in the same direction.

Economic output fell 0.4% on an annualize basis in the last quarter of 2023. This marked the 2nd straight quarter of contraction and meeting the definition of a recession.

In January, Motoyuki Shikata, Chief Strategy Officer of retailing giant Aeon, told analysts customers were becoming more sensitive to higher prices.

Ryohin Keikaku, which owns the Muji brand of clothing and household goods stores President Nobuo Domae says price increases have become a balancing act. Customers have accepted increased prices on some items but not all.

Linking to dividend paying stocks, after you have determined what makes the company money to be able to pay dividends, you can find antidotal items to help you determine how the company is doing. An example is if you own shares in Mastercard and/or VISA, if you hear people are making minimum payments on increasing size debt, then that is good for the company, if the company is not writing off higher debt levels. The ideal is for a healthy number of people to use their cards, pay the minimum plus and continue to use their cards. One way to see this is when you go shopping how will the customer pay? Often times what is good for the individual is not necessarily good for the economy, you need both the savers and spenders to be active.

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

In all markets there is the high end and the low end of the market. Companies have to pick one or the other to compete because in the high end, companies sell less units, but the margins are higher per unit. On the low end, the company sells as many units as possible as the margins are low. All low-end companies want to capture some of the margins of the high-end unit companies and often times changes in technology make it possible.

In an article by Keith Bradsher of the New York Times News Service, the government of China has gone full throttle in the EV market. The government encourage companies to make EVs in China, offers discounts for buyers, state companies own the raw materials to bring them back to China to go into the EVs and Chinese buyers are buying EVs.

China’s BYD has emerged as the leader in EVs with 80% of its sales are in China and each of the last 2 years, the growth has been over 1 million vehicles. The 20% of sales will increase for BYD is building assembly lines in Brazil, Hungary, Thailand and Uzbekistan. There are plants ready to go in Indonesia and Mexico. At the moment, BYD is not in the US because of Trump era tariffs, but BYD does sell buses in the US. (will the tariffs still be in place with the Mexican plant?).

BYD is leading China’s export push in electric cars and has built the world’s largest car carrier ships to transport them. The BYD Explorer 1 brought 5,000 cars from Shenzhen (where BYD is headquartered) to the Netherlands.

The city of Shenzhen is the hub of China’s electronics industry and BYD has tapped into it.

The company was founded in 1995 to make batteries for Motorola, but Chair Wang Chuanfu dreamed of making cars. His first vehicles were terrible, but they have gotten better over the years. In 2016, Wolfgang Egger, an Audi designer and his team redesigned the vehicles.

In 2020, BYD introduced the Blade battery. The batteries replace the industry’s standard chemicals in rechargeable lithium batteries – nickel, cobalt and manganese with cheaper iron and phosphate at a fraction of the cost. BYD sells cheaper models than Tesla with more limited range, but every year technology evolves.

Linking to dividend paying stocks, markets and companies evolve in every market because at the top end are the best margins. The companies that focus on the lower end need to keep costs low, but with technology can move to higher margins items. The companies at the top begin to see their margins squeezed and then the market dictates what happens next. With your investments, one of your homework checklists is to ensure the margins you bought at are remaining constant or you should look for alternatives.

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

If you live outside a large city or have roots in rural areas, the economic drivers of the economy tend to be agriculture because the land grants allowed settlers to receive land for free if for 5 years they showed improvement on it. After the agriculture becomes the institutional uses such as government offices, educational uses such as public and high schools and maybe a college, then services to the people of the area. Once in a while an industry has developed and has lasted for decades and everyone expects the industry to last for more decades. Then the reality of manufacturing decades before and what manufacturing takes in the present time days changes because of innovation and technology. It is blow to the small town the manufacturer leaves because it will take decades before something replaces it.

In an article by Michael Hill of the Associated Press, the rifle called the Remington has invented and made in the town of Ilion, New York which is about 30 minutes north of Cooperstown (home of the National Baseball Museum) in upstate New York. Eliphalet Remington founded the company in 1816 and it has a long history of making rifles. Within that long history, the manufacturing plant expanded and just about everyone in town either work for or knew someone working for the company. The plant covers 34 acres and a million square feet of red brick industrial buildings.

The company announced it was shutting down the plant and moving operations to La Grange, Georgia which is halfway between Atlanta, Georgia and Montgomery, Alabama. Companies offer many reasons, but one given was the state was friendlier to the firearms industry. This typically means the government is trying to stay out of their business or asking softball questions.

Linking to dividend paying stocks, all companies are started somewhere and if successful expand over time. In the internet age, we have seen many companies can operate from anywhere and larger companies have operations in more than one setting, partly as a risk management process. When the company moves, for perhaps all the correct economic reasons, people are left behind and it will be a few years before they adjust as some will start small businesses, some will retire, some will move and eventually some outsiders will come in and see the town for new opportunities, but that takes time. The closing of the plant is considered doing what is the greater good or the best interests of the company and this year there will be more mergers and acquisitions and some of that will be driven by cutting costs. As investors you accept the decisions to ensure the company remains profitable and can pay dividends.

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

If you think about the island of Puerto Rico, you might think about an island where there is plenty of sunshine all year around. This could be an opportunity to help the island be more self-sufficient. However you also might think about lost opportunities.

In an article by Danica Coto of the Associated Press, Puerto Rico is a US territory that most of the time, the US Congress can play a role but it seems to be 1 step forward and 2 steps back. The US Department of Energy and the Federal Emergency Management Agency (FEMA) recently released a report which said it could be possible for Puerto Rico to be off fossil fuels by 2050.

The power grid of Puerto Rico is complex, isolated, reliant of imported fuels and vulnerable to extreme weather events including hurricanes. Power plants that generate electricity rely on coal, oil and natural gas with renewables accounting for 3%.

Decades of operational, maintenance, and financial challenges have resulted in a system that lags far behind accepted reliability levels. (An example of this was after Hurricane Maria, a contract was given to a small power company in North Dakota and they were going to fix the system?)

The agencies want to change the number because the poverty rate in Puerto Rico is about 40%. The US territory has recently come out of the biggest US municipal bankruptcy in history.

One solution offered is new federally funded program that will subsidize residential rooftop solar and battery storage systems for up to 30,000 low-income households on the island. Homeowners who quality can start applying on Feb 22.

Linking to dividend paying stocks, often times government subsidies or supports are needed to fix serious problems. Companies have to supply the materials and some of the money will be profits. Governments release the information on which companies are supplying the solutions and potentially you could read the releases and see if it is material to possible investments.

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