In the basic economic texts, the basic supply demand curve is learnt often guns vs butter. In many industries supply demand is the key to understanding how the industry works in terms of costs. One of the easiest ways to see how the supply demand graphs work is with basic commodities which trade on the LME (London Metals Exchange) or the COMEX (The Commodity Exchange). On these exchanges commodities are traded by those in the industry who want delivery or users and speculators trying to figure out whether demand or supply will be the most important aspect of the year and do not want delivery.

In an article by Mai Nguyen of Reuters, one of the industrial world’s basic materials is copper. The metal is very good conductor of electricity and heat which means anyone living in an urban environment is dependent on the uses of copper. The biggest country which uses copper to produce products is China. This means those trading copper watch the Chinese demand very closely – now only is demand up or down, but how sustainable is it?

In recent years, China had a policy of closing its country down because of COVID and due to its government structures, it had the ability to enforce the closures. China is reopening which automatically means demand should go up because the factories can be reopened. With the shutdown, not only less demand was seen, less copper was imported which means the stock piles of copper are down. In the bonded warehouses the companies held 4 days of global consumption rather than the normal weeks. That alone should produce greater demand to rebuild the stockpiles.

In China, the biggest holiday is the Chinese New Year where millions of people have family gatherings, and many are held at their ancestors’ hometowns. The travelling is good for hospitality and tourism, not so good for industry production. However, after the Chinese New Year celebrations are over, China tends to move towards normal production and then true demand will be seen.

Linking to dividend paying stocks, in the commodity markets it is easier to see supply and demand and the price of the commodity. In every industry, supply and demand plays a role in prices which means translates into public consumption. If the industry you invest in has fewer players in the market, it is easier to determine how they are expected to do. If expectations are reported and the company beats or exceeds expectations, there is little reason to sell or do. If the company does not meet expectations, more homework is required to why.

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

In America there is an industry of consultants who seem to watch what will the fed do? For every country around the world, there is a central bank which tries to balance the needs of the economy growing and not growing too fast to cause other concerns such as inflation. There are plenty of examples to examine and all of them have varying degrees of success. Sometimes the central bank does not want to let the market decided the outcome.

In an article by Naomi Rovnick and York Banceli of Reuters, the Bank of Japan has maintained ultralow interest rates. There were valid reasons to do so as COVID policies of shutdown both the economy and borders meant the bank had to do something. Recently Japan reopened its borders to tourism to bring in money from seeing the many wonders of Japan, you might remember Japan hosted an Olympics or built massive infrastructure for tourism activities.

Analysts believe a policy change is inevitable at some point given the Japanese inflation is at 41-year high and the cost of keeping borrowing down continues to rise.

Expectations are yields will move higher to entice cash back home and investors now have to adapt to potentially sustained fall in demand for Japanese global bonds.

Total holdings of foreign bonds by Japanese institutional investors, excluding Japan’s $1 trillion reserve portfolio, reached $3 trillion at its peak. The expectations are demand will be above $2 trillion.

Linking to dividend paying stocks, in every market there are demand and supply issues, sometimes investors from other countries see bargains at the home country, sometimes investors domestically see bargains at home. There are multiple government agencies and investment banks examining the demand and supply issues. Sometimes the answer is the cost to maintain the status quo is too expensive and needs to cutback, or the alternatives are the solution people really do not want. Watching costs and seeking alternatives is a normal thing to be doing for your homework.

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

On Wall Street there are financial regulations which tries to make the trading of stocks reasonably fair for investors of all sizes. In reality, the greater your access to capital, the more likely the President or CFO will return your call. However all public companies tend to put out press releases to state something material will happen at some time before or after the trading day. In this fashion, if you are interested in that particular stock, you can read the transcript or hear what the person has to say and make your decision. The larger your access to capital, the greater the opportunity for the company to ensure someone in the organization is on the call.

In an article from Peter Eavis and Kalley Huang of the New York Times News Service, in the era of social media, in 2018 Elon Musk sent a claim that he had financing to take Tesla private at $420 a share. The shares were trading in the $375 area which means it was a 20% premium.

On that day, investors reacted with more than 29.8 million shares traded, much higher than the normal 8.85 million.

Mr. Musk had sent the notice via his Twitter account, which has a lot of followers and mentioned he had secured financing. The deal for the total number of shares would total $71 billion. The buyout when compared to the previous largest at $32.11 billion would be larger.

In a normal takeover, a company would have gone to various investment banks to line up access to credit, what type of lending facilities, and to potential large buyers of stock to show how his company has a terrific future ahead just as a private company rather than a public company. As well, the various law firms would be engaged and there are many which specialize in mergers and acquisitions to be on the correct side of the law. For Mr. Musk he talked to one buyer – Saudi Arabia’s Public Investment Fund.

If you watch and rarely participate in the action of stocks worth less than the price of hamburger, depending on the flavor of Wall Street, news releases are sent on a weekly and sometimes daily basis which are less than half true. The promoters push up the price of the stock, sell and wait till the next time the flavor is popular. For example, it is not impossible to find gold in mining companies, the really difficult part is finding a gold mining company that can find gold at commercially viable deposit. At the moment, the flavor is AI but it will change in a month.

What actually happened late in August of 2018, Mr. Musk said the company would not go private and remain public. This led to institutions running to the SEC saying they should be compensated for buying Tesla shares. They want money from Mr. Musk. Mr. Musk has to prove he really had access to the funds or secured the funds or face penalties including fines and for a time, Mr. Musk stepped down as Chair as well as he needed a lawyer to review his tweets.

Linking to dividend paying stocks, there are rules and regulations to make the markets reasonably fair to all investors. When people break the rules, penalties come forth – from fines, to losing face, to having to regain trust again. Ideally, it should rarely happen with a large dividend company because they know and follow the rules. If you see you company not following the rules, it is time to find alternatives.

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

Over the years, we have seen many frauds some of them famous such as Madoff and Ponzi, some of them similar to Enron and Worldcom, but very few people have quantified how much fraud there is.

In an article by Alexander Dyck published in the New York Times, Professor Dyck believes 1 out of 10 public companies in the US is committing securities fraud, costing investors $830 billion a year, but most of it goes undetected.

Professor Dyck, who teaches finance at the University of Toronto used the real life situation – the collapse of accounting firm Arthur Anderson and the need for its clients to find a new auditor.

Before Enron, Arthur Anderson audited about 20% of public companies as clients as well as had consulting contracts with many of them. Mr. Dyck found that after the companies changed auditors, the rate of fraud detected was higher. Mr. Dyck believes when the auditors looked harder, they found a lot more stuff.

The issue is how much of it was material which meant the companies had to report to the public?

To measure fraud post-Anderson, the academics examined financial misrepresentations uncovered by auditors, as revealed by securities class action lawsuits; enforcement actions by the SEC; SEC securities fraud cases and restatements of financial results that did not involve clerical errors but related to judgement by management.

To arrive at the $830 billion annual cost of fraud, the authors used other published estimates and costs of disclosed and undisclosed frauds, applied the loss of 1.6% of the market value to the total capitalization of the US equity market.

Linking to dividend paying stocks, as investors we tend to believe the dividend paying stocks have less fraud because the profits tend to be manageable. Part of the reason is related to reporting earnings every quarter and management wants to look good, if the profits of the company are reasonably consistent which allows for profits to pay dividends, many people will be satisfied with the results. When there is a big change, more people will ask the questions why and how and management will have to answer.

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

After WW II, the economy did not shrink it expanded and many soldiers came back and started families. In their parent’s time an average family was 8 plus because some of the children died in infancy from a variety of childhood illness, medical advances slowed the number. During the expansion of children, the average family was about 5 and these children are called the baby boom generation. The sheer number caused expansion of schools and then post-secondary schools and the workplace. In present time, the baby boom is retiring and that is both good and bad news for the economy.

In an article by Ian McGugan, in 1981 there was 14 people between the ages of 60 and 64 in full time work for every 100 people aged 20 to 24. Now the people between the ages of 60 and 64 is 45 out of a hundred working people.

The number means when companies layoff people it is quite possible that the older people in the company take a buyout leading to retirement. The retirement means more opportunities for younger people. This is good news for the economy because if people are retired and receiving a pension, they have income which is good for the economy in general.

The tougher problem for the economy in the future will be health care costs which as people aged their bodies will break down to some degree. Older people in general need access to health care. The other issue is the ratio of people drawing from pensions to those paying into the pension system means there is an in balance which will need to be corrected with possible higher premiums for those working. Those problems will come as the baby boom generation continues to age.

For the time being, the prospect of a hard recession is a little lower because of the pensions of the baby boom generation. What happens is most people in their 60’s are not establishing households and the economy of households and the spending around the house helps generate growth in the economy. If those in the 60’s are staying put and not buying, there is less demand.

Linking to dividend paying stocks, for the next few years the worst aspects of the economy should be less because of the baby boom population retiring and eligible to receive both private and government pensions. There will be great opportunity to care for the seniors in the health care companies which means some of the companies can be bought and held for many years, just use your homework to find a good price to enter.

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

When COVID happened, China adopted a policy of shutdown of the area in which cases were discovered. The shutdown affected normal life including the economic engine of the Chinese economy. China’s President has been losing the reigns of the shutdown and allowing people to move freely again. The freedom was opened up the economy and this has been translated on to the stock market.

In an article from Reuters, foreign investors are slowly coming back into the Chinese stock markets. MSCI China has gained 50% since November while the Hong Kong’s Hang Seng Index is up 47% against roughly 6% for the world’s stock exchange.

Analysts attribute most of the gains to short-covering and fast money, leaving the slower institutional money to drive the rally further.

Ken Peng, head of Asia’s investment strategy at Citi Global Wealth expects greater inflows into the Chinese markets and is bullish on Chinese equities.

JP Morgan Asset Management is in the process of raising allocations to Chinese equities for its institutional clients.

Linking to dividend paying stocks, as a dividend buyer you will miss some big rallies because the emphasis on buying is the long-term payments and capital appreciation. There are speculators which help ensure liquidity in the market and they have up years and down years, because there is no consistency with speculation. The idea is then do your homework and have patience the reason you bought comes forthwith. In this fashion you try to avoid the number one rule, try not to lose money.

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

Most of us are bias and that is okay. We are bias towards the region we live in, for if it is good enough to live there it is good enough to invest there. We often miss the opportunities that happen outside of our area. Most people do not have access to unlimited funds, which means trying to keep life reasonably simple means to invest in companies in our regional area to keep a watch on them. The reality is many countries outside of where we live have stock markets and they all perform in very similar fashion. One country is Qatar.

In an article by Hadeel Al Sayegh of Reuters, if you watched some or all of the FIFA World Cup, those stadiums were in Qatar. Now that the excitement has passed, Argentina won and seemingly more normal things are happening. Qatar being in the Middle East has access to oil and gas revenues and is the world’s largest LNG exporter.

IT services firm MEEZA is expected to raise $249 million in January with the selling of 50% of its shares on the Doha Stock Exchange.

The encourage more listings, the Doha Stock Exchange allows companies to offer a price range to test investor appetite and determine pricing.

Osama Ali, HSBC’s head of global banking in Qatar, noted 6 more companies may go public through IPOs in the next 18 months.

Foreign investors are still banned from taking part in IPOs, but they can buy and sell shares listed Qatari firms.

Qatar is classified as an emerging market by index bench marker MSCI. The market capitalization of the stock exchange is $158.2 billion, and the local competitors are Abu Dhubi”s $718.8 billion and Riyadh’s 2.72 trillion.

Linking to dividend paying stocks, when you buy these companies, you want to be able to have relatively simple rules on when you should sell, for you bought them both for their yield and potential capital gain. The idea of having simple rules is knowing when to sell or find alternatives and a simple way is for you to buy companies you deal with on a regular basis. When you do that, you tend to have regional bias, but that is ok. When you are doing your homework to examine alternatives you can find very good companies in other regions and other countries, fortunately they all are trying to do similar things, which makes it easier as an investor.

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

Every industry is dependent on an economic activity which drives the sales of the business. The classic example is the steel industry and car companies. The more cars are sold, the more steel is needed and the greater the raw materials which make steel are needed and the process continues. If the car market is depressed, less steel is needed, which means less raw materials are needed and the process continues. In the investment banking business, the economic activity is mergers and acquisitions. The top investment bank on Wall Street is Goldman Sachs and they are laying off people.

In an article by Saeed Azhar and Scott Murdoch of Reuters, Goldman Sachs laid off 3,000 people. That scale of layoffs is the largest since the 2008 financial crisis. The 3,000 plus is from a total workforce of 49,100. If you work for an investment bank, you live for the bonuses. Bonus are expected to fall 40% from last year. If the investment bankers are laying off people so are the M&A law firms.

Global investment banking fees nearly halved in 2022, fees were $132.3 billion in 2021 and $77 billion in 2022, according to Dealogic. The total value of M&A had slumped 37% to $3.66 trillion after hitting an all-time high of $5.9 trillion in 2021.

IPOs fell to $517 billion, the lowest level since the early 2000’s and a 66% drop from 2021.

Linking to dividend paying stocks, all industries have an economic activity which drives the market. In the above example there is a large market, but it has not as big as it was the year before. Money is made, but it is not the printing of money for everything you do. The deals are more selective and customers are less loyal, down markets is when customer loyalty is put to the test. In up markets, the institutions can try other companies, in the down markets, the investment bankers are bidding on deals they previously were too busy. In your investments, which economic activity drives the market and how does the major companies react to new business?

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

Somewhere in the marketplace are people trying to discover or implement some new changes to an industry and that is a good thing which organically happens. Once in a while, some of these changes become mainstream or available to everyone which means existing systems have to change. Lagging behind the changes are the regulators partly because the industry is made up of large and small companies. A change in the regulation needs to affect all companies, not just the big ones who can move easily adjust to regulation changes. The larger companies have people keeping up with the regulations (often their people help write the regulations)

In an article from Reuters, The US Federal Aviation Administration (FAA) is proposing a requirement that passenger and cargo aircraft in the US have 5G C-band tolerant radio altimeters or install filters in 2024.

Verizon and AT&T in June voluntarily agreed to delay some C-Brand 5G usage until July 2023, as air carriers work to retrofit airlines to ensure that they will not face interference. There were concerns that 5G service could interfere with airplane altimeters.

Airlines for America, a trade group representing American Airlines, Delta Air Lines, United Airlines, and others, noted carriers are working diligently to ensure fleets are equipped with radio altimeters, but global supply chains continue to lag behind current demand.

Wireless group CTIA said the FAA’s schedule for altimeter updates is reasonable and practical. 5G in the C-Band co-exists safely with air traffic.

Linking to dividend paying stock, in this example the telecom companies are bringing 5G to the masses to do more on the smartphone and on your laptop that is a good thing. The technology may or could have an impact on existing systems because of the operations and what consumers expect and what they are receive is a little different. The government tries to correct the situation with new regulations, but before the regulations can be implemented there is a time delay. The time delay is for both large and small companies, but the large ones benefit the most. Government regulations while not a bad thing, tend to help large companies, as an investor you like that.

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