It is not unusual for companies to form partnerships and if one ever gets into trouble, the other company can help them out of the trouble. At some point, after the trouble company is back on its feet, it will want to run its own affairs without the partner’s influence. The changing relationship means the controlling company has to both want to and have a desire to step back, if they do not then the relationship can go south or not work as expected. There was a good example in the news.

In an article by Maki Shiraki and Gilles Guillaume of Reuters, 2 decades ago, Nissan was in financial problems and needed help, Renault bailed them out and the Nissan people needed to receive approval from the Renault people to made decisions. It helped that Carlos Ghosn was the Chair of Renault and approved the deal. When Mr. Ghosn left Renault and operations changed at Nissan, the Nissan people wanted control back.

It took 4 months of intense talks but the relationship between Nissan and Renault will be changing as Renault will reduce its stake in Nissan to 15% from 43%. The 28% will go into a French trust which overtime will be sold.

Nissan and Renault will have a 15% cross share holding that will allow Nissan to exercise its voting rights which previously it was unable to do.

Nissan sells more vehicles than Renault, and the new agreement will allow Nissan to focus on the US, China and emerging markets.

Nissan and Renault have pledged to pool more resources into key projects in Latin Ameica, India and Europe involving marketing, vehicles and technologies.

Linking to dividend paying stocks, one of the reasons people like their banker is access to capital, one of the reasons people do not like their banker is limited access to capital. When people feel the company is in good shape they want to access capital according to their strategy not someone else calling the shots. There is a fine line to walk. With dividend paying stocks, these are ones with access to capital because they make profits and partnering with other companies is a good thing for it. Often times those with the gold make the rules, and those without gold need to agree until they receive their own gold. In addition, recently a shareholder voting card was received in the mail to vote for or against management – if you receive one exercise your vote.

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

In 2021, the world was in a shutdown because of COVID and oil company profits were nonexistent. In 2022, the world opened up and needed oil and gas to move around and profits are now historically high. With the turnaround the biggest companies or the 7 sisters have all benefited with the biggest companies benefiting the most.

In an article by Sabrina Valle of Reuters, the biggest oil company posted a $56 billion net profit in 2022 or making $6.3 million a hour. During the COVID pandemic, Exxon Mobil made deep cuts which meant the 2022 profits were bigger.

In 2022, Exxon distributed $30 billion in cash to shareholders.

Exxon’s cash flow from operations increased to $76.8 billion up from $48.1 billion in 2021. The company typically maintains a $30 billion in cash or cash equivalents.

The company’s spending on new oil and gas projects was $22.7 billion up 37% from 2021. CEO Darren Woods said the number could rise to $25 billion.

Linking to dividend paying stocks, the oil industry has been a very good to invest in for a long time and it appears the case will continue for the next few years. One of the industries which benefit the oil and gas industry is the car companies and it will take a number of years before EVs come close to Internal Combustion sales. If everyone on your block has a EV, then the tipping point has likely passed and it is possible demand for oil and gas will drop.

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

In the 1950’s a President of GM says as GM goes so does the US. The statement has changed but GM remains the biggest vehicle company in the US. GM remains an important company, but the given the cycles of GM the statement as GM goes so does the US is not true anymore. If you want to see how the auto companies are doing, then GM should be examined.

In an article by Paul Linert and Joseph White of Reuters, GM had a good quarter and forecast stronger than expected earnings for 2023. The company expects to maintain pre-tax margins between 8 and 10%.

GM plans to build 400,000 electric vehicles, as it depends on trucks and SUVs for sales and profits.

The company expects to cut $2 billion in costs in 2023, some of the costs will be employee but they are looking at attrition or reducing new hires. GM has 167,000 employees.

GM is the number one sales leader of trucks, in terms of sales of Chevrolet and GMC trucks, GM expects to sell about 15 million trucks up from 13.9 million.

GM expects to full year operating earnings to be $10,5 billion to $12.5 billion or between $6.00 and $7.00 a share.

On capital spending, GM expects to spend between $11 billion and $13 billion in 2023, up from $9 billion in 2022.

The average selling price of a GM vehicle was $51,000

Linking to dividend paying stocks, everyone has their favorite or bell weather stocks to see how the economy is doing or could be doing. Many of the stocks tend to be age dependent as the economy moves through various cycles. An older person may take an auto company, a younger person might take a technology company, but they end up all dependent on one another. Auto companies are big technology users, and the interdependence can be easily seen. It is good to have a favorite or bell weather companies, sometimes you will own them, sometimes you will watch how they are doing. If your bell weather companies are doing well, then it can easily mean your attitude or confidence level will be higher as you wait for the next earnings season to verify your opinion.

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

In the economic texts, you will learn about supply and demand, but the next step is to learn about different demands. People tend to use demand as an all-encompassing word but in reality, there are different demand lines. There is slow growth demand, high growth demand, average demand, pent-up demand and almost everything in-between, which leads to wondering what type of demand does the company believe it has?

In an article by Aishwarya Nair and Abhijith Ganapavaram of Reuters, US airlines expect strong travel demand that drove record 4th quarter revenues to continue, but economic uncertainty and higher labor and operating costs could cloud the rosy outlooks.

Airlines are cashing in as consumers snap up tickets following a pandemic-induced slump. This is pent up demand or people were told not to fly, but then when they could, even though prices increased people flew for both personal and business travel.

American Airlines CEO Robert Isom said post-holiday bookings surged, underpinned by domestic and short-haul international flights. We expect strong demand to continue in 2023 and anticipate further improvements in demand for long-haul international travel this year. (He is talking about 2 different demand levels).

In addition to higher labor costs, there are higher costs of rents (airlines lease or rent landing slots at airports), landing fees. There is also the cost of fuel (similar to consumers buying higher mileage vehicles, so do airlines) expect to rise 1.5 to 4.5%.

Mastercard believes the pent-up demand for travel will diminish going forward.

China’s reopening may boost international travel, but demand remains uncertain and US airlines face challenges cashing in.

Linking to dividend paying stocks, owning these companies you expect them to make profits and reward their shareholders. When the CEO discusses the business, he/she will say demand, your task is what type of demand and how does that translate into profits?

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

If you think about risk management, one of the areas which comes up is insurance and insurance companies. We hear that storms are becoming more severe than what they used to be, and a cynic would say that means higher rates by insurance companies. It could be true,

In an article by Federica Urso of Reuters, the global insurance giant Aon noted natural disasters caused global losses of $313 billion, less than half was insured.

Losses from natural catastrophes covered by the insurance companies amounted to $132 billion, 57% above the 21st century average, leaving a global protection gap of 58%.

The gap was one of the lowest on record because many of the costliness disasters occurred in countries with mature insurance markets such as US and Europe. The biggest contributor was Hurricane Ian which caused insured damages in a range $50 – 55 billion from total economic losses of $95 billion. Ian is the second most expensive natural disaster the insurance sector has faced.

In Australia, there was $4 billion in insured losses linked to floods.

In Europe, Aon believes 31,300 people lost their lives with 2/3s linked to severe heatwaves.

Linking to dividend paying stocks, a number of years ago, once read a report from a farm-based insurance company saying last year we had fewer barn fires, which means the company had a surplus. In the insurance world, people buy insurance, hoping they will never use it and if they do not, the insurance company makes money. If your insurance company does not practice and push preventive measures, then it is time to find a new insurance company to invest in.

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

During the months of January and February, there are reasons why people in the northern half of the US go to the southern half of the US, and many of the reasons have to do with weather. It typically gets cold in the northern half and people desire to escape the cold for a little while. If you do not leave, heating bills rise as well as the need for heavy jackets, hats and gloves. If you go outside, you can be prepared, but if you stay indoors, you expect to be reasonably warm.

In an article by Keith Bradsher of the New York Times News Service, the northern part of China is facing cold temperatures without the heat of the natural gas. The reason is complex but there is no shortage of natural gas in China.

China had a very tight shutdown COVID policy and to do that cities and towns used resources for mass testing. The testing cost money which means many towns and cities budgets are not enough to pay employees, let alone to maintain adequate supplies of gas for homes.

When gas prices were low, the national government helped to ensure there was a lid on heating bills. In the winter, gas prices have gone up as demand as increased and municipal and provincial governments have cut subsidies for natural gas. As a result, gas is effectively rationed, people have enough to cook but not enough to heat the home.

Another issue is with pricing regulations – Chinese regulations strictly limit what municipal and township gas distributors can charge households but are allowed to pass on higher prices to industrial and commercial users. This effectively means homes are cut back and greater gas goes to industrial and commercial users who can pay more.

Linking to dividend paying stocks, all systems have a flaw or can have a flaw if circumstances change and who is to blame and who fixes the flaw is the solution, At the individual level, remarkably few people want to take the blame, or the problem becomes complex which results in nobody is to blame. Sometimes regulations drive actions, it is important for companies to work with the government to have the best outcomes no matter the outcomes.

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

It used to be that the most important aspect of a U.S. Senator’s job was to cut ribbons and mingle with senior businesspeople as they tried to solicit funds for their campaign. Nowadays it seems whenever there is a public relations problem the Senators will call the company to try to put them on the spot to score a political point or two. Perhaps there is a balance between the two actions but one wonders.

In an article by Diane Bartz and Moria Warburton of Reuters, the Senators were actually interested in how does one buy a ticket to one of the most popular singers – Taylor Swift. Ms. Swift’s singles and albums when released jump to the top 10 and crowd the top ten for a number of weeks. After making an album, a singer traditionally goes on tour to promote greater sales and to make money for them. The selling of records or downloads has decreased for singers but touring generates income for the singer.

US Senators slammed Live Nation Entertainment’s lack of transparency and inability to block bot purchases of tickets, during a hearing to determine what caused the problems. Live Nation’s Ticketmaster has a 70% share of large concert sites.

Joe Berchtold, President and CFO of Live Nation, apologized to fans, the artist – Ms. Swift, and said we need to better. Some examples of next time is staggering the sales over a longer period of time and doing a better job of setting fan expectations for getting tickets.

The issue was more than 3.5 billion requests from fans, bots and scalpers overwhelmed the website.

Linking to dividend paying stocks, when things go well and most of the time they will, there are few critics. When things go badly, the critics will come out of the woodwork and express an opinion on multiple sites. What does the company do and how do they react? If you are satisfied with the way the company reacted, you can hold on, if you believe the company did not do the correct response, it is time to seek alternatives, for the response will happen again.

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

In many areas of the economy there are and will be conflicting possible outcomes in the macro context. We all know that the world’s temperature is changing, some places for the better, some places for the worst. What we do not know is when it changes and how does it affect all the normal activities in the places for the worst. For example, agriculture depends on rain and melting snowcaps to replenish the rivers which can be used for irrigation. If there is less rain or less snow, then there is less water for irrigation. The issue is billions of dollars in infrastructure are in place to produce the agricultural products and companies cannot just move unless there are decades of less rain. There is a time lag between what once was a very good model to one that is broken. Sometimes governments can help with the solution.

In an article from the Associated Press, the country of Brazil had an election, and a new President was taken office. The last President believed that business or industry could do no wrong and whatever it wanted, it was allowed to do. The new President has a different vision and new regulations are coming in quickly.

One example of the President’s action was to appoint Joenia Wapichana, Brazil’s first Indigenous woman in charge of the agency charged with protection of the Amazon rain forest and its people. During the reign of the previous President, huge swaths of the rain forest was cut down to become agricultural land. Was this good or bad, we will not know but we do know the rain forest contributed to the earth’s atmosphere quality. One could argue that the process of clearing the land was bad, but the growing of crops is good.

Linking to dividend paying stocks, in all countries when governments change some policies change and companies dealing with that country have to adapt. It is normally better that the company tries to do the correct thing in the first place, or the process of adaption is the changing of buzzwords and a few people the company deals with. When a government, similar to company changes, the management picks a signature item to show changes are being made. In Brazil, the change in the Amazon Forest is a signature piece, how it turns out is a different story. When management changes in the companies where you invest in, what policies change? how does the new management show the new direction? If you agree, you can do little or nothing, if you disagree then it is time to find alternatives.

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

As an individual investor, you have many choices in which to invest. Often times you will hear a commentary about a company and put it on your mental watch list. Then you may read about the company and be impressed with the CEO. Although one person does not make a large organization, they help set the tone and if they deliver impressive results on a consistent basis, so much the better. The CEO of a successful company will be invited to many events including those put on by investment bankers which discuss the future of their industry. The events are covered by the business press and it is easy to highlight a successful CEO or investors have an attachment to the CEO. What happens when that CEO steps down from day to day operations?

In an article by Lisa Richwine and Dawn Chmielewski of Reuters, the CEO of Netflix stepped down to become Executive Chairman. Netflix was the N in the FANG stocks. FANG stood for Facebook, Apple, Netflix and Google or some of the big tech biggest companies. All the companies have grown to become very widely held by institutional and retail investors.

Netflix is the stream service which disrupted how people see movies, it was the most successful company and became number one. Due to the success, streaming is part of every movie distributor including competition from Disney, Amazon, Peacock, and other cable companies. Similar to cable companies, they depend on having hit series and for Netflix – the Adams family – Wednesday and the Glass Onion were hits.

During the lockdown of COVID, people watched more TV on their screens and growth in Netflix boomed, after people returned to work, the growth rates slowed. In the last quarter, Netflix added 7.66 million subscribers and while it was a very good result, it was less than previous years. Netflix has come up with a cheaper, ad-supporter service to retain viewers.

Linking to dividend paying stocks, with many of these companies they have been in existence for decades, which means they are used to attracting good people and the people in the leadership come and go. When people come and go, the change often means little change in the outlook for the company. CEOs tend to last 10 years, if the CEO continued to deliver good results, few people will consider investing in the company because of the CEO. In every organization, one of the important elements of management is evaluating the talent in the organization and ensuring as many good people stay and be promoted as possible. Some will leave because there is only one CEO and their track has stopped, but does the remaining people have the drive to continue to make profits for the company? if they do, while people leave the company happens, as a shareholder you have to do little or nothing. Sometimes it does not work, see Disney, but most of the time it tends to workout.

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