In the early 2000’s, Professor Aswath Damodaran on talking about valuation, used to say people to justify a growth projection used to say China or the Chinese market can be used to justify their valuation number. In some cases, that was correct, China emerged as the number 2 economy in the world and if the company made transactions it was possible. One area that tended to be correct was in Hollywood movies, but times have changed.

In an article by Claire Fu, Brooks Barnes and Daisuke Wakabayashi of the New York Times News Service, it seems the big blockbuster movies from Hollywood can no longer depend on China. The Chinese market is still important, but if you consider Aquaman and the Lost Kingdom. The studio made $1.2 billion worldwide on the first Aquaman and China represented about 25% or $293 million. Expectations were high, marketing budgets were spent and the movie brought in $60 million in its first few weeks down from $90 million.

In 2023, no US films ranked among the top 10 highest grossing movies despite movies such as Mission: Impossible, the Fast and Furious and Spiderman franchises. In 2012, 7 of the top 10 were US Hollywood movies.

Part of the reason is China produces more high-quality movies that resonate with domestic audiences. The top 2 movies were Full River Red and The Wandering Earth II.

Hollywood once viewed China as a market where they would always make money. Consumers are spending less on movies and box office sales have are below pre-pandemic levels.

Linking to dividend paying companies, all markets mature and local companies mature with the competition so the quality demanded is the quality produced. Many industries do not have wide barriers to entry and with technology, it is possible to do the same thing as the big players. The growth in capacity is a good thing in general, but sometimes companies lose market share and begin to lose margins or profitability. If the reason you are buying an investment and the seller says we can capture 1% of the Chinese market, remember the golden rule of investing – try not to lose money.

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

All companies around the globe do strategic planning as they decide to vertical or horizontally integrate their company. The companies have their core business and then decide to enhance something or capture a different piece of the market. Only after the merger goes through does the issue of how much did it add to the company is found out. There are potential savings and potential growth, but the execution of the plans is done after the merger.

In an article by Nishit Navin and Chris Thomas of Reuters, Japan’s Sony Corp scrapped plans for a $10 billion merger of its Indian unit with Zee Entertainment which would have created one of South Asian biggest TV broadcasters.

Sony submitted a brief to the Indian Stock Exchange asking for a $90 million termination fees for alleged breaches of their merger agreement and emergency interim relief by invoking arbitration. Zee denies the claims.

While neither statement said what conditions were breached, what is known is Sony did not want Zee Chief Executive Punit Goenka at the helm of the merger company because Mr. Goenka is the subject of India’s market regulator. Sony want Mr, Goenka out before the merger, Mr. Goenka wanted to leave after the merger as he denies the allegations.

If the merger had gone through Sony and Zee would have a portfolio of 90-channel plus.

Sony said the collapse of the merger would not expected to have any material impact on its estimates for the year.

Linking to dividend paying stocks, similar to many things in life, people and who they are the big factors in any merger. A company can have great assets or great potential assets, but does the other side want to work with them or is there a culture situation. Often times in startups, the culture is much different than older mature companies, but older mature companies have access to credit or potential to grow the business. People still count.

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

When you buy a share on the stock exchange, you own a piece of the company and that entitles to a number of features such as using capital gains if you sell at a profit or capital loss if you sell at a loss. For taxes, capital losses can be carried forward to lower capital gains in the future. You have a right to vote at the annual meeting for the Board of Directors, executive compensation, the auditor and ask questions at the meeting. Sometimes people who want change to policies will submit questions in advance and the company will offer advice on whether to vote for or against a proposal. If you never voted, there is often an option to vote for management’s recommendations. Some stocks are widely held or there are no controlling shareholders, but if the company makes money on a consistent matter, the odds are the institutional shareholders will vote with management, individuals will tend to vote with management.

In an article by J Edward Moreno of the New York Times, Exxon Mobil is suing 2 activist investors to prevent their proposals from coming to a vote of shareholders.

All companies have rules and regulations to submitting questions before shareholders, and generally it is time sensitive, meaning at some point the materials must be printed and mailed to shareholders so the questions need to be done before that point. The shareholders filed their questions before the deadline, but Exxon does not want to submit the questions.

Exxon has filed a suit in the US District Court for the Northern District of Texas (ExxonMobil is headquartered in Houston), accusing the shareholders of abusing the process for proposing shareholder votes because the proposal would mean the company’s existing businesses would be diminished. The shareholders want Exxon to speed up the process to become carbon neutral.

Under the securities law, Exxon says they have the ability to toss petitions that deal with matters relating to the company’s ordinary business operations. Exxon says the proposal does not seek to improve ExxonMobil’s economic performance or create shareholder value.

The company asked the SEC to offer an opinion but it was informal and subject to interpretation and for that reason it has gone to the courts.

Linking to dividend paying stocks, if a company makes money and can increase its dividend on a consistent basis most shareholders will vote for management. When the company does not make money, then all the complaints and issues with the company will surface and shareholder fights will result, likely new management will be the outcome. When a company makes profits, often shareholders will overlook the negative aspects to the company and hope overtime technology will improve outcomes.

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

Most of us live and work in a small geographic area and because we do, we all tend to have a regional basis towards investing. It is not a bad thing, but it is reality. However, as we travel and read we often see people doing the same thing elsewhere. In business, ever since accounting was invented and profits mean profits, wherever in the world you are, the principles apply.

In an article from Reuters, the European Central Bank (ECB) policy makers in December appeared confident that inflation was back to target but saw plenty of risks that still warranted steady policy and high borrowing costs according to the minutes of the meetings.

The ECB left interest rates unchanged and made in clear no further hikes were coming, but it was too early to discuss cutting rates. The minutes said there was no room for complacency, and it was not the time to lower its guard. A need was seen for continued vigilance and patience and for the maintenance of a restrictive stance for some time. The task has not yet been completed.

Investors are expecting rate cuts, but the bank noted it needed to push back against market expectations for rapid policy easing, even if there was unusual uncertainty around the inflation and economic growth outlook.

If the ECB was changed to the Fed would you notice any difference?

Linking to dividend paying stocks, one of the reasons to invest in these types of stocks is the rules for investing are the same throughout the world. You may stick to where you live because it relatively easy to monitor those companies, particularly if you are a user of those services. Companies around the world need to have revenues exceed expenses in order to make profits which means doing your homework can be consistent no matter where you are in the world.

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

Every year, the smartphone becomes more woven into our daily lives and every year the features make the smartphone become a necessity into our daily lives. For the makers of the phone and the providers of the service, this makes the continuous monthly payments of consumers a joyous sound. Soon people will think of necessity services as housing, food and cellphone service. This makes the companies that receive the continuous monthly payments as worthy of your investment dollars. In the smartphone world, the leaders are Apple and iPhone and Samsung Electronics which produces the Galaxy phones powered by Android which is owned by Google.

In an article by Michael Liedtke of the Associated Press, the new smartphones which have been available for sale since January 31 include AI features. Naturally the better technology comes with an increase of price, in the case of Samsung S24 Ultra a price increase of 8% to $1,300. The Apple iPhone Pro Max also increased prices.

Among the features is live translation during phone calls in 13 languages and 17 dialects. The S24 will introduce Google’s Circle to Search feature. You can use your finger to circle snippets of text, parts of photos or videos to get instant search results about what has been highlighted.

Another feature is to point the camera at an object and have a summary about what is captured by the lens.

The increasing use in smartphones comes after OpenAI thrust the technology into the mainstream with its ChatGPT bot.

Linking to dividend paying stock, it is easy to say that a profitable company has to embrace new technologies, but some are a given and others are a nice thing to have. As the year passes since ChatGPT was open to more of the population, consumers have raised expectations the AI will be used to make better products and services. Does it?

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

There is an expression which shows lets see the numbers or show me the money. What it means is there is always a method to express optimism, but sometimes reality is different. For example if the you say the economy is doing well, but 40% of the people cannot pay an unexpected $1,000 bill. It is good that people are working and have some money, but can it last? What shocks would send people, because living often means there will be shocks from unexpected expenses.

In an article from Keith Bradsher of the New York Times News Service, he observes car production set records, restaurants and hotels were increasing full and construction of new factories surged. All those are good things until you look behind the numbers. Deep discounts helped car sales; dinners chose cheaper meals (the cheeseburger rather than the Big Mac) and less expensive hotel. Many factories ran at half capacity, during COVID they were at a quarter or less.

China’s economy rose 5.2%, but that was from almost no growth for 3 years. The real estate housing market prices continue to be 20% lower which is not good for previous buyers and developers wanting to pay back billion dollar loans. China had a one child policy for a number of years, now that policy is hurting it as the population ages and it is expected China’s population will decline.

The government has spent money on infrastructure which helps people move around except most infrastructure leads to more debt because public infrastructure is not taxed and makes no money.

Linking to dividend paying stocks, every company around the globe can point to optimism otherwise they would be selling or winding down their business. When a company is profitable and can pay dividends there is true optimism to keep doing what it is business to do. It is important to be cynical when you hear the results, but optimistic after you have done your research or looked behind the numbers.

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

In the world there are slogans for power – the ying and yang; who is up, who is down; and the list goes on. The point is if there is a win-lose, somebody needs to be on the winning side and the other side is the loser. If you are involved in sports, you will see it weekly, if you are involved with people sometimes you need to learn. Often times at a workplace it is who is moving up and who is not moving up? The same dynamics happen in politics and in world politics.

In an article by Antoni Slodkowski of Reuters, every year there is a gather of many leaders of companies and countries in Davos, Switzerland. You could say it is the United Nations of the business world, if corporate leaders are talking to each other, then although there are competitive pressures, companies are not going to the extreme.

An important person who has regularly attended Davos is Chinese Premier Li Quing and this year the message was different that in the past. In the past, China was growing and using its clout around the world and offering its currency as an alternative to the US dollar. This year, the reality of the Chinese economy is it is sluggish recovery from the pandemic, a real estate slump and long-term growth prospects are slow, China is opening its door to foreign investment.

Premier Li said the economy was meeting expectations, but the expectations are lower than in the past. The world needs healthy competition to enhance co-operation and innovation, the removal of barriers to competition and co-operate on environmental strategies.

Choosing investment in the Chinese market is not a risk, but an opportunity.

At Davos, 2,800 leaders from 120 countries including 60 heads of state were due to participate at the annual meeting. (Bloomberg TV covered many interviews and they can be seen on YouTube)

Linking to dividend paying stocks, when a company consistently makes a profit and can pay dividends it starts at a higher confidence level and many companies would like to partner with or do joint ventures with the company. The profitable company is the top dog, when a company does not make profits, they stress the need for co-operation and being open to new business.

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

All industries change over the years to different markets and companies must shift to meet the demands of the customers. In the world of oil and gas, particularly gas has changed from heating homes and making electricity (less expensive than coal) to liquefied natural gas (LNG). The shift generally involves heavy infrastructure spending which limits the number of players involved due to the cost of the refinery plants. The refineries can easily cost into the billions of dollars, so when politicians say they want more, who is paying for them?

In an article by Arunima Kumar and Arathy Somasekhar of Reuters two large gas companies have decided to merge to create the largest independent US natural gas producer. The 2 companies are Chesapeake Energy and Southwestern Energy. The larger output from the combined company will improve the company’s position as it relates to unlocking and securing additional LNG opportunities according to Matt Portillo, an equity analyst at Tudor Pickering & Holt.

Thanks to shale production, US gas production has jumped well above domestic demand, pushing up inventories and reducing profits at gas producers. Most of Southwestern production is in Appalachia’s shale formations in the US East and in the Haynesville shale basin close to US LNG export plants in East Texas and Western Louisiana.

New to the industry are gas plants being built on the coast in Mexico. About an hour’s drive south of San Diego, California is Ensenda, Mexico and the Energia Costa Azul a $2 billion liquid natural gas refinery is being built which will connect to gas pipelines to send the LNG to India, China and wherever else there is a demand. With this refinery and others in the planning stage, Mexico would become the world’s 4th largest exporter of gas, although most of the gas will come from the US. Each terminal is expected to be in operation for decades.

If the deal goes through, shareholders in Chesapeake will own 60% of the company and its likely the company will be changing its name.

Linking to dividend paying stocks, companies change to reflect changes in markets. In a commodity-based business, supply and demand are the key to the reason for changes. When supply for domestic markets, prices fall and companies look to export or in this case LNG to stabilize and grow their revenues. Similar to many industries, it is easier said than done because of infrastructure concerns. In this case where the refinery plants are and where the commodity is found. It is often less expensive to merge.

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

If you work in the hospitality sector, you were seeing good things because people were travelling and seeing the world. Flights were booked solid and the earnings for the airlines were bullish and even the airline makers had large back orders to satisfy the future demand. Things were going good and then a cabin panel door blew up a plane.

In an article by David Shepardson of Reuters, the Federal Aviation Administration (FAA) launched a formal investigation into the Boeing 737 Max 9 after a panel door came off from an Alaskan Airlines plane. The plane was leaving Portland, Oregan when the door came off, the door was found in suburbs and the plane went back to Portland to make an emergency landing.

Boeing has delivered 171 planes to Alaska Airlines and United Airlines and the planes were grounded, pending safety inspections.

Boeing said in a statement We will cooperate fully and transparently with the FAA and NTSB investigations.

Similar to automakers, Boeing does not make most of the parts but assembles them. The supplier of the door is Spirit AeroSystems Holdings Ltd. Boeing was treating the issue as a quality control item. Alaskan Airlines and United Airlines will need revised inspections and maintenance instructions from Boeing that must be approved by the FAA before the planes can fly again.

Transportation Secretary Pete Buttigieg said the only consideration on timeline is safety.

It is noted in an article by Liz Alderman of the New York Times News Service, Airbus delivered more aircraft and cemented more deals than Boeing in 2023 for the 5th straight year.

Linking to dividend paying stocks, in 2023 Airbus and Boeing had record orders for planes to be delivered in the future. In 2019 all Max aircraft were grounded for 20 months. Just when the sky seemed to be sunny for the airlines and airline makers, an incident happened. The stocks went down and should bounce up again.

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