One of the reasons to invest in large profitable companies is they either have a moat (barrier to entry) or a near monopoly which allows them to raise prices on a regular basis. The increase in prices translates to increased revenues and protection of the profit margin which benefits the shareholder. When a large company does a merger, often times a government agency will be examining it to ensure the competition still exists. In the mind of the executives there is always direct and indirect competition because the public does have choices.

In an article by Diane Bartz and David French of Reuters, Exxon the biggest oil company in the US announced a merger with Pioneer Natural Resources of $60 billion for an all stock deal. The President and founder of Pioneer Natural Resources would be working for Exxon. On the political scene, the White House including the President want lower gas prices for consumers to help keep inflation down. What will gas prices do? The reporters talked to 5 antitrust lawyers and they believe the deal will go through.

The Federal Trade Commission (FTC) is likely to face an uphill battle to challenge the acquisition. The reason the oil and gas companies argue that they do set the price of the commodity (in this case oil and gas) but the price is set by supply and demand forces in a vast global market.

Andre Barlow, an antitrust attorney with Doyle, Barlow and Mazard PLLC, said the deal with Exxon and Pioneer is related to production and exploration and will be easier to defend. Exxon was to increase its production in the Permian basin, not decrease.

The FTC has not challenged a major merger of oil and gas producers since BP $27 billion acquisition of Atlantic Richfield in 2000. The FTC agree to drop its objections after BP offered to divest oil production acreage in Alaska.

The Permian basin spans west Texas and eastern New Mexico, Pioneer has 9% of gross production, while Exxon is number 5 with 6%, according to RBC Capital Markets.

The FTC allowed Chevron to complete an acquisition of PDC Energy and now Chevron has 40% of the Denver-Julesburg basin.

David Kass, a finance professor at the University of Maryland and former FTC antitrust economist said regulators have to show they have conducted a thorough analysis of Exxon’s deal for Pioneer.

Linking to dividend paying stocks, when large companies do mergers and acquisitions they have to fact in both the economics of the deal and the political reality. In some governments, the administration encouraged or did not stop mergers, in other administrations there was going to be a review by the government. Large companies and the association play a role in financing of politicians, but that does not mean they automatically approve what the large companies want to do. In politics, people want to be re-elected and sometimes political considerations can vary. With any merger, the why does the company want to do it is the issue.

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

In the world of politics it is up to the politicians to make the agenda and to implement their agenda. The agenda will help some companies, it will be neutral for some and others will see as hurting their interests or ability to make money. After the agenda is set, it is up to the politicians and Secretary of Departments to sell the agenda to the people of the country. If more think it is the right approach, they will be reelected and have another agenda. If people do not like the agenda, it is time to change governments. In Washinton, President Biden has a less than positive approach to China. Maybe that is good, maybe not so good, but Biden has a policy.

In an article by Tripp Mickle, David McCabe and Ana Swanson of the New York Times News Service, a year after the Biden administration took its first major step toward restricting the sale of semi-conductors to China, it has begun drafting additional limits denying Beijing the technology critical to modern day weapons.

Since July, the big chip makers Nvidia, Intel and Qualcomm have pressed their case that cracking down on China would have unintended consequences. The lobbyists have talked to Secretary of State Blinken, Commerce Secretary Raimondo, done the rounds with think tanks in Washington, and urged leaders to reconsider additional chip controls.

One of the topics has been: at the moment, chips are dominated by American-designed; by isolating China, you will force them to come up with Chinese-designed chips.

Lawmakers are confused because Washington committed $50 billion to the industry through the Chips and Science Act. The money helps pay for more manufacturing chips in the US and the 3 companies have announced plans to build in Arizona, Ohio and New York.

China accounts for 1/3 of the global semi-conductor market and more than $50 billion in combined revenue for Nvidia, Intel and Qualcomm. The chip makers suggested that too many controls on China will mean less revenue for them and the need to cut costs – either people, research and development or the plants in swing states.

Linking to dividend paying stocks, most dividend paying companies like to have it both ways and there is a benefit to them either way. The companies are large enough to dangle carrots in front of the politicians and allow them to say whatever they want but not do whatever they want to. With legislation there is always the unintended consequences of their actions.

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

In every economy, there will be lottery sales because people like winning money. However if the economy is not as good as it was, lottery sales increase because winning a lottery gives people hope. The odds of winning did not change, but the need for hope increases.

In an article from Reuters, China’s lottery sales in August soared to their highest level for any month this year amid mostly gloomy data about the economy.

Nationwide lottery tickets jumped 53.6% in August to 52.96 billion yuan (roughly $10 billion), the official Xinhua News Agency reported, citing data from the finance ministry.

Youth unemployment has increased to a level China’s statistics bureau abruptly stopped reporting the number. The reason given the agency sought to optimize its data collection methodology.

One commentator on Weibo said the worse the economy is, the more lottery tickets will be sold.

Linking to dividend paying stocks, rather than buy the lottery ticket, the opportunity is to buy stock in the company that prints the lottery tickets. The demand increases more lottery tickets are sold and the company receives increasing revenues. In all cycles of the economy there will be companies that benefit, it is the investors job to find the companies that continue to do well no mater what the cycle is.

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

One of the advantages of owning a large profitable company is when face with competition which seems to be challenging their lead, the company has the ability to use its cash and credit to buy a company or companies to shore up their leadership.

In an article by Jeffery Dastin of Reuters, Amazon said it will invest up to $4 billion in the startup company named Anthropic in its effort to compete with growing cloud rivals on AI.

Amazon’s employees and cloud customers will gain early access to technology from Anthropic as part of the deal, which they can infuse into their business. Anthropic will rely primarily on Amazon’s cloud services, including its future AI models on large quantities of proprietary chips.

Amazon will not gain board seats or will own a minority of shares of Anthropic.

In addition, Anthropic agreed to work on developing technology for Amazon’s inhouse Trainium and Inferentia chips.

Adam Selipsky, Amazon’s Web Services CEO said the pact will help make Anthropic’s models beter, will help make our chip technology and our AI infrastructure better.

Dario Amodei, Anthropic’s CEO said his company has obtained the money in a way that allows it to prioritize safety and allows us to scale up our models.

One of AWS’s service is called Amazon Bedrock, a service that has attracted thousands of users to start building AI applications.

Anthropic, founded by former OpenAI executives including Mr. Amodei, is one of a series of companies building generative AI systems that can draft content as if a human created it. Anthropic has aimed to distinguish its work by training AI to adhere to moral values.

Anthropic clients include: LexisNexis (legal data analytics company), Bridgewater Associates (investments) and Lonely Planet.

Linking to dividend paying stocks, when you buy one of these companies you are buying a profitable company and they have the ability to remain in leadership in their business because they can do mergers and joint ventures to continue to make money. The companies rarely invent the next best thing, but they capitalize on the next best thing to maintain and increase sales. As a dividend investor you can watch what they are doing and determine if you believe they are doing the right thing.

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

If you recall the past summer, one of the images that you may have thought about was the wildfires. Perhaps you read about them; perhaps you were in an area where smoke was in the air; perhaps you saw the fires on a news feed or perhaps you or someone you know was in the area affected by wildfires. If you own stock in an insurance company, you are wondering what the losses are? The wildfires are seemingly become larger and they seem to be more of them. What is the solution?

In an article by Kelvin Chan of the Associated Press, there maybe some good news on the horizon which includes some form of early detection and sending resources to find small fires.

Firefighters and startups are using AI-enabled cameras to scan the horizon for signs of smoke. A German company is building a constellation of satellites to detect fire from space. And Microsoft is using AI models to predict where the next blaze could be sparked.

California’s main fireighting agency this summer started testing an AI system that looks for smoke from more than 1,000 mountaintop camera feeds and is now expanding it statewide. The system is designed to find abnormalities and alert emergency command centers, where staffers will confirm whether its indeed smoke or something else in the air.

The cameras provide billions of bytes of data for the AI system to digest. While humans will need to confirm any smoke sightings, the system will reduce fatigue among staffers typically monitoring multiple screens and cameras, alerting them only when there is possible smoke or fire, according to Phillip SeLegue, staff chief of intelligence for the California Department of Forestry and Fire Protection.

It has worked, a battalion chief received a smoke alert in the middle of the night, confirmed it on his cellphone and called a command centre to scramble first responders to the remote area. The small fire was put out and it did not become a large fire.

San Francisco startup Pano AI takes a similar approach, mounting cameras on cell towers that scan for smoke and alert customers including fire departments, utility companies and ski resorts. The cameras use computer vision machine learning, a type of AI. The images are combined with feeds from government weather satellites that scan for hot spots and other data sources such as social media posts.

For fighting forest fires, technology is becoming essential said Larry Bekkedahl, senior vice president of energy delivery of Portland General Electric, Oregon’s largest utility and a Pano AI customer. PGE has 26 Pano AI cameras.

Using AI to detect smoke from fires is relatively easy said Juan Lavista Ferres, chief data scientist at Microsoft. The hard part is having enough cameras in remote places. Microsoft is developing AI models to predict where fires are likely to start. They fed the models with areas that have burned previously along with climate and geospatial data.

German startup OroraTech analyzes satellite images with AI. The company has launched mini-satellites about the size of a shoebox into low orbit, about 1,000 miles about the Earth’s surface. It hopes to send up 8 more next year and have 100 satellites in space.

CEO Thomas Grubler said because we know exactly where the fires are, we can see how the fires will propagate. What fire will become larger and which ones should stop on their own.

Linking to dividend paying stocks, over the past few years fire have caused billions of dollars in damages and when they approach towns and cities, insurance companies have to pay claims. Using AI will limit those claims which is why there is a ready market for the data the companies are collecting and projecting. In the insurance world, there is a need to pay claims, the less they pay the more money the companies make giving the risks they insure. As a dividend investor some of the most consistent companies are utility companies, one question you might ask them is what AI systems they are using to limit their losses due to fires. If you remember PG & E in California and possibly Hawaiian Electric might have to pay fines for fires.

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

In the 1970’s, the marketing campaign to sell Florida oranges had a catchy tune about Florida oranges and Florida sunshine. Given the fewer hours of sunshine in the northern part of the US, a drop of Florida sunshine was needed, as well as Florida sunshine made the cold winters better. There are many other areas of the world which grow oranges including California and South Africa, but Florida oranges were being sold to the northeast consumers.

In an article by Kate Helmore of Reuters, the notion of buying Florida oranges is beginning to drop off. In 2004, Florida exported 240 million 90-pound boxes of oranges annually. This year the number has fallen to 16 million boxes. The reason for the decline is a disease called huanglongbing or citrus greening.

The Asian psyllid carries the bacteria when the bug eats the leaves of the tree. The bacteria chokes the flow of sugar and minerals in the phloem, the vein that transports nutrients. In humans it is similar to plaque building up in the veins which restrict blood. Effectively the tree is being starved of nutrients. The problem is the symptoms look like routine nutritional deficiencies, but in 8 to 10 years the trees stop producing fruit and die. A healthy tree can live for 50 years.

Citrus greening is a worldwide problem, Brazil the global leader in orange juice production in facing record low inventory according to CitrusBB, the leading industry group. The disease has affected groves in Texas and California.

In Florida, there are also problems with hurricanes which uproots millions of trees or left the groves underwater. According to the Department of Citrus, Florida lost $247 million in the last hurricane.

If you think about Florida, you think about sunshine and people want to live in the Orlando area where most of the orange grooves are to be found. The price of land in Florida in Orange County has increased from $181.7 billion in 2022 to $203.8 billion in 2023 according to the newspaper Orlando Sentinel.

In 1996, 800,000 acres were given to oranges and grapefruits, in 2022 the inventory was 375,000 acres. In 2012, the value of the orange crop was $1 billion, now it is $358 million.

The industry employs 33,000 people and provides an economic impact of $6.9 billion including $150 million in state tax.

Researchers at the US Department of Agriculture and the University of Florida and others are working to fight the citrus greening.

One solution is feeding smaller amounts of fertilizer as the tree can absorb smaller amounts over a longer period of time. As well as using the orange tree to develop genes to be more disease resistant, however that is long-term solution.

Linking to dividend paying stocks, marketing will only ensure the sales go but that is not a long-term solution. Sustainable products for the long term are necessary and if you invest in companies that offer solutions over the long term then they can produce profits over the long-term which can pay dividends to your over the long-term and no matter where the orange juice comes from you can afford it.

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

In the world of Wall Street, investment banks ability to generate high profits is dependent on the market rising over the long term as well as new issues coming to market. This year the new issue market or the IPO market has been slow and Wall Street firms have laid off investment bankers. There was hope for a really good quarter when Arm, a chip maker headquartered in London, England sold shares into the Nasdaq Stock Exchange.

In an article by Erin Griffith and Don Clark of the New York Times News Service, when Arm went public, the shares increase in value or traded up. This lead to the notion that other companies may want to sell shares into demand from investors.

Arm is owned by SoftBank. The company was founded in 1990 in Cambridge and sells blueprints of a part of a chip known as a processor core. Arm’s chip designs are used in smartphones, but the company says its chips can be used in the Artificial Intelligence or AI wave sweeping the world.

SoftBank of Japan bought Arm in 2016 for $32 billion and retains a majority stake after the IPO. In 2020, Nvidia reached a deal to buy it for $40 billion, but British regulators said no.

CEO Rene Haas noted Arm is diversifying to place its technology in myriad of other products equipped with some level of computing power, including cars, consumer products and data centers. The company is not receiving any proceeds from the offering since all the shares sold were owned by SoftBank. The company does have $2 billion in cash and short-term investments.

Linking to dividend paying stocks, there are many different parts of the stock market and as your dividends grow you have the option to buy various products. Some are wonderful, some you want to stay away from, but for a market to operate lots of products are needed. When a company goes public and its price goes up, it was considered to be undervalued or people believe in the long-term growth of the company. With dividend paying stocks you believe in the long-term operations of the company to stay profitable and with profits come higher stock prices.

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

When you buy a dividend paying company, your outlook should be for the long term and that means through different economic cycles. Ray Dalio of Bridgewater Associates among many people have You Tube videos about economic cycles and the fact is they exist. The key to knowing about economic cycles is trying not to put all your money at the peak and when there is a downturn. The idea is when the economy is not so good, but there are signs it is improving and ride the wave. How to know when the cycle turns without looking backwards is the tough part. The point is profitable long term companies invest and should be investing for the long term.

In an article by Brooks Barnes of the New York Times, Walt Disney Co’s CE Bob Iger announced Disney will spend up to $60 billion on theme parks and expansion of the cruise ships.

Josh D’Amaro, chief of Disney Parks. Experiences and Products said Disney owns 1,000 acres to develop on across on its existing parks.

In 2022, theme parks generated $10 billion in profit up from $2.2 billion a decade ago.

The $60 billion is double what Disney spent on parks and cruises in the past decade.

Disney is expanding parks and cruises, however its other divisions are not doing as well as in the past, ESPN has less viewers because fewer people have cable TV, this has meant costs to cable companies have gone up, advertising down and the cost to the big sports has gone up ie NFL, MLB, etc. What is good for the sports team is not necessarily good for ESPN.

In the movie industry, the movies which were released were not giant blockbusters, although the movie library has many potential stories to tell.

Disney+ streaming service is losing money, but Disney is hopeful 2024 will be a profitable year.

The good news at the theme parks, once someone arrives, spending per guest has risen 42% since 2019 partly on higher ticket prices, food, merchandise and hotel rooms.

In the Disney Cruise Line part of the company, the company added a new port on a Bahamian Island, in addition to the one private island they own. The company will have 8 ships in their fleet. (having gone on a cruise, it is an enjoyable one).

Linking to dividend paying stocks, on one hand there will economic forecasters suggesting rough seas are ahead and to play it safe. On the other hand, profitable companies need to look at 10 years down the line to ensure they will capture the growth in the economic cycles. For the companies you own what plans do they have? how much do they typically implement?

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

In every country there are think tanks and conferences about what could happen if things progress the way they are. It is not necessary bad or good, just about possible options and politicians will need to make choices. Sometimes the choices are not going to earn votes at the moment, so it will not happen, but papers are written and acknowledged.

In an article by Belen Carreno of Reuters, in a paper prepared for the European Union meeting in October, the EU could be dependent on China similar to the way it was dependent on Russia.

In 2021, the year before Russia invaded Ukraine, Russia supplied 40% of its total gas consumption, 27% of oil imports and 46% of coal imports.

To stop and change the supply chain has taken billions of dollars, consumer inflation, higher interest rates, lower growth projections. With the voters accept the same in the future?

The EU paper is about the goals to be carbon neutral by 2050 and one of the methods will be to use more lithium-ion batteries, fuel cells, and electrolysers which are expected to multiply between 10-30 times in the coming years.

Linking to dividend paying stocks, these types of papers suggest or project possible government actions or regulations in the future. It could happen or something could change, what would happen if Russia withdrew from Ukraine? or a new technology becomes commercial? there are many options, one aspect as an investor you wish to examine is what companies would benefit from the changes. Most will not be changing overnight but it is possible to start a list of companies to watch overtime. When the companies are profitable, it would be time to buy and hold. The reports are part of your continuing homework to determine what options to do if the changes happen.

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