In many instances you will like a product or service and that is good for you as a consumer. If you are an investor, you want to know about the business model and how the company makes money. If it is easier and you understand how profits are made, it is worth considering. If the company does not make money, you should be patient and see if it can make money.

In an article from Reuters, Twitter is a social media site and millions of people use it and they like it. However, as a business, the business model is to make money for advertisements. If you use Twitter you can see how many ads are coming onto your feed and the value for you. Last year, Elon Musk, who is one of the wealthiest people on the planet bought Twitter for reasons that made sense to himself. In mid July he reported Twitter’s cash flow remains negative because of a 50% drop in advertising revenues and a heavy debt load.

In March, Mr. Musk believed Twitter would be cash flow positive by July, his forecasts are way off. However as one of the wealthiest people, he could cash in some Tesla shares and pay off the debt.

Twitter’s annual debt payment is $1.5 billion

Twitter in the last 6 months has let many employees go in an effort to cut costs. Twitter has reduced its non-debt expenditures to $1.5 billion from $4.5 billion.

Twitter was on track to post $3 billion in revenue down from $5.1 billion in 2021.

Linking to dividend paying stocks, if a company does not make money you can be very patient before you consider investing. There maybe reasons why you want to invest, but being patient saves you money. In the meantime, Twitter has more competition including from Meta’s Threads. We all read about companies and we gain an interest, but being patient means to do your homework before and have a medium to long term view. If you miss the short term jump, so what? you are more interested in will the company be functioning in 5 years. If a company is not cash flow positive do you think it will be operating?

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

Before the internet, how people who made movies were paid was a relatively straight forward process, although Hollywood does have a history of creative accounting. Not all movies make money and the ones that do help subsize the cost of those that do not. In Hollywood and around the country where there are movie film hubs, being in the industry from a non acting job can be a good paying job. There are superstar actors with large salaries and the rest of the people doing a better than middle income job. There are hundreds of people who work around and within a movie and they are the ones on strike.

The strike is by the screen writers or the Writers Guild of America and SAG-AFTRA unions and they are after 3 aspects – a wage boost, a greater participation of income from streaming views and protection against replacement by artificial intelligence or AI.

The Director’s Guild has signed a 3-year agreement and they cannot be replaced by AI.

In the music industry, if a song is heard on the radio, the radio station sends money to the record company who sends money to the artist or residuals. In the movie industry the residuals are good for TV and DVDs, but less for streaming services. As more people stream video content, the residuals are less, will people pay more for the service to give higher residuals?

In terms of AI, you may have heard or you will hear more every year that many jobs will be affected by AI, the jobs known as the creative ones are only now coming to the forefront. In one interview, a suggestion was for people in the background to be paid for one day, then their image would be CGI or AI for the rest of the movie. It is hard to make a living as an extra if that happens. We will see what happens, but we will see more job changes in the near future.

Linking to dividend paying stocks, ideally you want the companies you invested in to embrace the latest technology to benefit the company. The rise of the technology means many people will be displaced or jobs changed and there are few solutions for them, when we look at the government in Washington, some of them live in different world. From an investor perspective, you want the company to embrace change and move with the new funding models to generate profits to pay dividends.

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

Part of every company is trying to grow both organically or externally which means to buy another company. The senior management examines the strategic plan and finds a company that fits and offers a price that will keep the talent in the company as well as market share. Then the world sees it and makes a judgement, part of the judgement will come from the stock market if the companies are publicly traded, and part will come from the government or regulatory bodies. If you remember the movie Pretty Women staring Richard Gere and Julia Roberts, away from the romance the Richard Gere character was trying to buy a ship building company to sell the assets. One of his negotiation tactics was to say I will tie up the approval for the next ship in the naval appropriations department and you will have no money to build ships. (this is the reason why Senators receive funding from hedge funds, sometimes they are needed to slowdown or speed up the process).

All governments have the ability to regulate and sometimes it seems they go through the motions and the results are a given, but once in a while, the process seems to work.

In an article by Mattt O’Brien of the Associated Press, about 18 months ago, Microsoft offered to buy Activision the maker of video games for $69 billion. A merger of 2 giants meant that regulators had to sign off and the competition wanted to ensure Microsoft would allow Activision games to be played on their systems. The competition is Sony’s Playstation versus Microsoft’s Xbox. The Presidents of Microsoft and Activision agreed to allow Activision to be played on Sony’s Playstation and a US Judge agreed with Microsoft’s case and the merger will go forth.

There are other hurdles to overcome such as the regulators in Europe, but the die is cast for the merger to forward. If you think about the revenues of the movie industry, the gaming industry is bigger. Microsoft has been spending and bulking up on cloud storage for corporate clients and it turns out a large user of the cloud is gaming, so this deal works on many different levels in the world of Microsoft.

Linking to dividend paying stocks, all large companies have legal and government relations staff which work with the government. If the competition is threatening their profit centers, the government relations staff tries to influence legislation to ensure the company maintains its margins. They also find avenues of regulation which the competition has to jump through hoops to fight on the same battlefield. Regulations can be helpful to profitable companies and while they may say they want less regulation, they want more for the competition.

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

The Blue Whale is biggest animal on earth and are about 100 feet in length. Everytime it opens its mouth to feed on 7,900 lbs of krill a day, it is the largest single feeding event that has ever happened. Blue whale calves take a year to be born, weigh 3 tons and gain 200 lbs a day for the first year of their lives. Everything about a blue whale is big. Before people used fossil fuels as a light source, the number one source of fuels came from the blue whale. The commercial whaling industry brought the 250,000 to 300,000 whales down to 1% of the blue whales that exist today. In 1931 the whaling industry caught 29,400 whales. In every industry, the term for the biggest clients are whales because they generate the biggest income for the company. The reality is every industry wants and cultivates the biggest clients or whales of the industry. In the investment industry, while most of the clients are legitimate, there are always one or more than are less than legitimate but they are whales.

In an book called Billion Dollar Whale by Tom Wright and Bradley Hope published by hachette books, NY, 2018, there was a relatively young man named Jho Low who was able to raise and spend money like a billionaire while using the money from the government of Malaysia as his piggy bank.

The story is an investment fund called 1MDB which could and can be a terrific method for any country to use. The intent of the fund is to place money generated from commodities mined in the country into a fund that can be used by the government to generate income to assist the general public. In simple terms, if you have a fund which generates income for you, you can choose to reinvest it, spend it on you or help the communities in which you live or a combination of the above. Governments receive royalties and some of the money is invested, it should generate a return for the country without having to raise extra taxes. it can be a win-win for everyone in the country.

The reality is often it is not, as in many countries bribing the elector is how some governments stay in power and then can use their geopolitical influence depending on how close or faraway, they are from the G7 countries.

In Malaysia, the country was semi democratic or at least held elections that were not decided 10 minutes after the election closed (that happened for a leader who is now no longer living). For elections that depend on hand counting of ballots, it is impossible to know who won 10 minutes after close of the elections. The leader of Malaysia was semi-democratic and the government of US saw him as an ally in the region. This encouraged US companies to do business in Malaysia.

The conditions were correct to step in Jho Low, the book outlines while he came from a wealthy family, it was not billionaire status. His family sent him to the schools in England and the US to meet wealthy people and to make connections. Mr. Low while not a party animal ensured he was party fixer or the organizer who takes credit for ensuring his new friends have a good time. Mr. Low also determined how he could meet those people who have access to purse strings particularly in the Middle East. With the rise of the price of oil, leaders of countries in the Middle East became wealthy and many of them plans or ambition to improve their countries. With enough money they could, but it also meant others would siphon some of the money to themselves.

Jho Low was everyone’s friend, but few truly knew him beyond his reputation as one of the greatest spenders of money the jet-setting class had seen in a generation. For a number of years who was interesting for the authors of the book was the ease with which he made everyone believed he belonged. Part of the reason he lived larger than life was he was the product of a society preoccupied with wealth and glamor.

Mr. Low convinced the President of Malaysia to put him in charge of the 1MBD and part of the funds went to the President and his wife’s lifestyle in particular his wife’s shopping habits. A famous example is the wife of the Philippines’ President and shoe collection. The wife of Malaysia liked designer handbags and diamonds on a meager Presidential salary. Mr. Low ensured bills were paid without the President asking where the money was coming from.

Mr. Low ensure 1MBD had the high profile addresses, even when he could barely afford it. He often suggested to people in high places he could introduce them to other people to do business with them or as a fixer. Why the money managers and bankers needed Mr. Low was a guestion rarely asked. After Mr. Low had access to 1MBD’s money he spent over $10 billion on lifestyle – gambling, yachts, payoffs, real estate, art, parties, and movie studios. In an ironic aspect the movie Mr. Low financed was Wolf of Wall Street or a crook of Wall Street with very good skills. If you have watched the movie, some of the lines are famous because they are said all the time but often refer to real industries not very early industries.

If you think about professional sports teams winning the league championship, there is often champagne being sprayed around. In the book, Mr. Low has a habit of spraying champagne at his many parties. If the parties are covered by the press because celebrities are invited and you see them in the gossip pages, should you be investing in those companies? Are the principals in it for the long term or short-term fun? Whose money is being spent? Money that was being worked hard for or someone else’s money or other people’s money (OPM)? The gossip pages can help make connections to what you invest in and what you do not invest in? If you see people that spent money like no tomorrow, giving to charity, ask how much and what percentage of their wealth for generally it is done to fix the image.

In the book, when the whale has money to spend, there were many Wall Street Bankers and everyday bankers in many countries willing to move the money around for a healthy fee. For a time, the Wall Street bank of Goldman Sachs was bringing 20% of its fees from Malaysia, is that a good thing?

The interesting aspect is what happens when the leaders decided the gig is up? For the most part $10 billion was written off by the Malaysia government, those that were caught working for the firms were let go, fines were paid, some assets seized and people stayed out of jail although the citizens of Malaysia would have to earn the money back though higher taxes.

Linking to dividend paying stocks, with these types of stocks, you want steady as she goes. If you see excessive displays of spending of money it is time to seek alternatives or get away fast because at some point there will be restructuring and addition time will be needed to break even.

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

In every industry where profits are made there are fakes for the industry. We often think about fakes in the fashion industry, because most people have an idea of the brand but not specific details which makes the brand the brand worth paying for, this allows people who buy fakes to show them off as real. In the world of fakes, there are lawyers that are armed with copywrites and trademarks that spend time working with the police to try to shut down the manufacturers of the fake items. However fakes have a big advantage, the price is less, much less and the owner can believe or aspire to be the real thing which means fakes will continue.

One book which was written about the phony things is Genuine Fakes by Lydia Pyne pubished by Bloomsbury Sigma, London, UK, 2019. Ms. Pyne’s take on the world of fakes is to ask the question what happens when a fake becomes more famous than its orginal? If we really examine the world around us, genuine fakes are a lot closer to us than the art or fashion world.

Each of us tends to try to eat 3 meals a day or something similar. When we eating whatever food we enjoy the reality is a healthy portion of the enjoyment is how does it smell? If it smells good, then our taste buds help accent the food and we enjoy the food even more.

One food you may have eaten is bananas. Do you know the history? The banana was introduced during the Philadelphia Centennial in 1876 which attracted over 10 million visitors. After the event bananas became a staple in people’s diets and by 1929 bananas accounted for 50% of the exports from Central America. In helped that one company controlled the market and for years it was on the best dividend producing company lists – United Fruit. The story continues, in the 1860’s people were used to an artificial flavor of banana flavored foods. However in 1876, the banana tasted like a banana and not the artificial flavor one. Food scientists through the chemical companies began to market isoamyl acetate compound as banana flavor which meant when consumers ate bananas they tasted the isoamyl acetate and all was good. The yellow bananas of Gros Michels and Cavendishes which we eat reflect the taste of long ago.

There is a company called International Flavors & Fragrances Inc which supplies the food industry to whatever flavor and smell consumers desire which will help them buy the products. If you wish to go to local store and see what flavors of Jelly Beans come in and you will know about the trends in the industry.

Collectors will pay for rare books and some of them are in museums. A rare book is the Grolier Codex which is a book that allows people to read and understand Maya civilization. There were 3 books in existence till a 4th was discovered. Was it real or fake? When the Spanish took control of the Mexico and countries in South America, they were looking for gold and silver, but the other aspect was to convert people to Christianity. For the Spanish bishops, it meant ensuring that the world was seen from an European standpoint and not from the hundreds of years the Mayan’s ruled the area. To understand the thinking, the Catholic bishops believed that God could only be reached through the Catholic Church and they had to bring the heathens to the correct message. The Bishops used the Spanish army to destroy the writings of the Mayan because it conflicted with their message. Maybe the heathen were not really heathen, maybe they knew just as much or more than the Bishops? The Spanish Bishops won the power struggle and Codexes were destroyed. A Mayan codex was found, was it good or fake? When the Spanish were sending items including gold and silver to Spain they were also sending back fakes because the artisans started making fakes for the Spanish who were unsophisticated buyers. (If you are interested in collecting books, the Grolier Club is the private society of bibliophiles with dedicated interests in the history of bookbinding, book printing, and books in general.) After 40 years of testing and debating, the 4th Codex was determine not to be fake but real.

Linking to dividend paying stocks, one thing that is never fake is whether a company can pay a dividend or not, if they can and the dividend goes into your account, then it is a real as it gets. In investing there are many fakes or possible fakes and there is an entire group ready to take your money to pump and dump stocks. Whenever there is a hot market, there are companies pushing their possibilities, their maybes, but generally they will not amount to much. One of the most important rules on the stock market is try not to lose money, buying profitable companies that pay dividends helps you do this. You can admire the fakes at the museum, not in your house.

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

In every industry where profits are made there are fakes for the industry. We often think about fakes in the fashion industry, because most people have an idea of the brand but not specific details which makes the brand the brand worth paying for, this allows people who buy fakes to show them off as real. In the world of fakes, there are lawyers that are armed with copywrites and trademarks that spend time working with the police to try to shut down the manufacturers of the fake items. However fakes have a big advantage, the price is less, much less and the owner can believe or aspire to be the real thing which means fakes will continue.

One book which was written about the phony things is Genuine Fakes by Lydia Pyne pubished by Bloomsbury Sigma, London, UK, 2019. Ms. Pyne’s take on the world of fakes is to ask the question what happens when a fake becomes more famous than its orginal? If we really examine the world around us, genuine fakes are a lot closer to us than the art or fashion world.

When Rome ruled the Greek makers of pottery were the top of the line and those who were becoming wealthy knew that having the in pottery was important, fake art was sold. When Christianity was forming, some of the bones of the important figures were important for churches in Europe to possess, not all the bones were from the important figures. These examples show fakes have been in society for generations and will continue to be because the objects resonated with the audience and the audience wanted to believe.

One of the many things the wealthy do is buy art, if the artist is famous, over time the value will appreciate. If the artist is not famous, the buyer should like the art. Sometimes the artist which does the forging is very good and in the art world, the Spanish Forger’s work was some of the best. In many museums, the Spanish Forger’s work is to be found. The Spanish Forger work was in the 1500’s, but it took till 1970’s to build up the authenticity of the detail the Spanish Forger used which results in people collecting the Spanish Forger’s work and prices rising.

If you ever wandered through fields or streams as a young person, you likely picked up stones and skipped them. Depending on where you were walking, it was possible to see a picture on the stone of a fossil from millions of years ago. Likely most of the fossils were not collectibles but people for generations have looked for fossils to help explain how life can to being and what happened millions of years ago. Many large cities have Museums of Natural History and Universities have archaeology departments, think Indiana Jones movies. Sometimes the desire to believe you have found something that will change the course of thinking outweighs what you have found. In one case in Germany, 2 professors planted fake fossils for the another professor to find in the hopes of bringing down his ego. It backfired, the professor believed he had found something important and wrote a paper or book about the subject and had it published. Then he found it to be fake and had to spend considerable time buying the copies back. Next time, you are at the museum ask how the fossil finders determine it was true or how fakes were and are done.

Technology is a wonderful tool and it is used to create conditions that can occur in nature. One example is diamonds. Real diamonds are found in parts in India, Brazil, South Africa and Canada and since the late 1800’s, the control of diamonds has been through the De Beers which through various organizations sets prices and amounts of diamonds given to traders and retail stores. De Beers marketed a diamond as a diamond engagement ring which many couples bought and became standard. Many people have heard and believe a Diamond is Forever.

In 1970, GE was able to produce synthetic diamond or non-natural diamond because the process of understand what pressures the earth used to make diamonds was understood and could be and was replicated. This changed the market and De Beers monopoly changed although it still controls 35% of the diamond markets and synthetic diamonds are used in drilling for minerals in the earth’s crust.

Linking to dividend paying stocks, when something is popular and making money, various companies with like sounding names will emerge from the shadows hoping to lure investors’ money to their holdings. The overwhelming majority of the time the like sounding names will only have the hope not the reality of the company making profits. When it comes to buying be open to the like sounding names, but only buy the company which actually makes profits.

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

In the stock market, everyone knows prices go up and down and when they go up people get excited and when they go down, you might bargain shop. The bargaining shop is the toughest aspect because the stocks went down for a reason and you have to ask yourself has the reason changed and more importantly do people know about it that they want to get back in the stock. The homework you do to analyze the company allows you to determine what the reasons for decline are and if a turnaround is possible. The other part of do investors want to get back in the stock is much harder because the industry is not likely on the front page of either the news section or the business section.

In an article by Jeff Sommer of the New York Times News Service, he notes 3 of the big cruise companies – Carnival Corp, Royal Caribbean Cruises Ltd, and Norwegian Cruise Line Holdings Ltd are among the top 10 stocks in the S&P 500 this year.

Each of the cruise lines had astonishing gains for the first 6 months according to FactSet:

Carnival up 134% in the first 6 months, but down 63% since the start of 2020.

Royal Caribbean up 110% in the first 6 months, but down 22 since the start of 2020.

Norwegian Cruise Lines up 78% in the first 6 months, but down 63% since the start of 2020.

If you owned stock in the cruise lines in 2020 you lost money because of the pandemic – the ships were not sailing. The companies survived by taking on enormous debt loads and paying sky high junk bond yields. In 2022, the finances stabilized and this year the stock is up because the companies can pay down debt and return to steady money-making operations.

Carnival CEO Josh Weinstein said the company’s business levels are approaching 2019 levels for the first time since the pandemic. Carnival expects to pay $8 billion in debt by 2026, down from a peak of $35 billion in 2023. If all goes well, the bonds will reach investment grade levels again.

Linking to dividend paying stocks, cruise lines show the classic signs of what happens when customers can not use the services, debt levels go up and when customers come back debt levels decrease. From a dividend paying investor it is too early to buy shares, but when debt levels become investment grade, there will be stability in the stock price or less risk.

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

When ChatGPT was introduced to the general public, the public embraced the tools and it is the fastest growing consumer application ever and boasts over 1.5 billion monthly visits or is one of the to 20 websites in the world. The issue for the average investor was how was the company using AI to become better – productivity, analytics and better companies?

In an article by Yiwen Lu of the New York Times News Service, we are starting to see and understand how companies are using ChatGPT.

Mark Austin is the VP of data science at AT&T, the company noticed the developers were using ChatGPT, he switched to more secure version from Microsoft called Azure Open AI Services. This service allows businesses build their own artificial intelligence powered chatbots. AT&T started using it and their internal service is called Ask AT&T. Developers are using it as well as customer service representatives to summarize their calls. Productivity has increased by 20 to 50%.

Generative AI can produce its own text, photos, and video in response to prompts, capabilities that hep automate tasks such as taking minutes and cut down on paperwork.

Companies such as Amazon, Box, and Cisco have unveiled plans for generative AI powered products that produce code, analyze documents and summarize meetings. Salesforce, Slack and Oracle have announced new products.

Microsoft invested $13 billion in Open AI, the maker of ChatGPT. In January, the cloud based service of Microsoft Azure made the service available to customers who then access OpenAI to build their own version of ChatGPT. 4,500 customers are using the service.

The cost for the service charged by Salesforce is $360,000 annually with the cost rising depending on usage. Microsoft charges based on the version of OpenAI technology charges as well as usage fees.

Panasonic Connect, part of the Japanese electronics company Panasonic began using OpenAI to make its own chatbot and usage has grown to at 5,000 questions a day.

Linking to dividend paying stocks, the profitable companies have the ability to use the latest technology and they do. It is one of the many reasons, they tend to retain their leadership position and ability to generate profits. Last year at the AGMs people were asking how are you using AI, next year will what levels of productivity and profitability did the company make with the new tools? As an investor you expect the company to be current, but more than current ensuring it can and is profitable.

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

For the past 30 years one of the relatively easiest jobs was the head of the Central Bank of China because there was only one concern – how to handle the growth in the economy. China emerged as the manufacturing hub of the world, the country invested billions in infrastructure and the economy was a seemingly dominate player in the global economy. Then the world begin to change, companies moved operations out of China to southeast Asia including Vietnam and India. The movement became a tidal wave during COVID and many do not expect the return of continuous growth in China. Years ago, manufacturing moved from the US to China and those states were stagnate for decades, will China do better?

In an article by Kevin Yao of Reuters, the People’s Bank of China (PBOC) appointed Pan Gonsheng to the top political post at the central bank points to growing concerns in the country’s leadership over systemic risks in its sprawling financial sector.

Mr. Pan will be in a position to takeover the top spot with Governor Yi Gang steps down at the end of his term.

In the financial world, the challenge to financial stability is debt, local governments have about $9 trillion of local government debt backed by the property sector. The sector accounts for about 25% of economic activity.

Mr. Pan took on the role of China’s top foreign exchange regulator, managing the world’s largest foreign exchange reserves of $3.2 trillion. He is known for being tough on currency speculators and was involved with state banking reforms, tightening property market and fintech regulations and in banning cryptocurrencies.

Mr. Pan has been appointed as the central bank’s party secretary. Mr. Pan studied at Cambridge and Harvard Universities.

Linking to dividend paying stocks, for many years growth in the Chinese market was a given, but times change, world conditions change and something in China will need to change. Hopefully Mr. Pan can work well with President Xi Jinping who has surrounded himself with yes men, but that is a different story. There are always good people trying to do their best, and as investors you want to give them the latitude to help solve the problems but reality matters, debt matters. As an investor, you might look to other countries besides China for better opportunities.

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