In 10 years or less, the average vehicle sold will be electric, but we are a long way from there, however the present leader in EV market is China. There are a number of reasons but the primary one is Bejing is similar to LA – they are built up in bowl like areas where pollution sits until the wind blows it out. Bejing as capital allows government officials to want to have less pollution EVs are a partial solution. All the major car companies have subsidiaries set up in China to sell into the EV market.

In an article by Nick Carey and Giulio Piovaccari of Reuters, according to LMC data while fully electric cars make up an average of 5% of models for foreign carmakers sell in China, they account for 30% of Chinese carmakers models.

The formula for success in China has changed, consumers want EVs akin to smartphones where the emphasis is on connectivity and apps rather than performance – to the extent the EV makers such as Nio have a built-in selfie camera in some models to appeal to younger buyers.

Within the above market, the bankruptcy of Stellantis’s Jeep joint venture in China could spell trouble for other global automakers whose output has plunged over the past 5 years in the world’s largest car market, as domestic players rapidly takeover. On October 31, the joint venture between Stellantis and Guangzhou Automobile Group (GAC) has ended although earlier this year, Stellantis was discussing increasing its stake from 50% to 75%. A spokesperson for Stellantis noted the Jeep dealership in China is still operational and Jeep is committed to it.

According to LMC Automotive, capacity utilization at its plants has fallen from 43% to 13%. At those numbers profitability is not going to be reached.

Part of the reason is the markets have changed from the foreign carmakers right to win to where there is far more level playing field according to Bill Russo, head of consultancy Automobility Ltd in Shanghai and a former Chrysler executive.

Part of the problem with capacity has been the Chinese government’s response to COVID 19 by locking down parts of the country which has also caused a semi-conductor shortage to build the vehicles.

Linking to dividend paying stocks, companies are brand loyal, but customers are not always brand loyal. The brand gives an edge to begin with. but if the consumer is more features driven, they will switch to other brands. If consumers are seeing their vehicle as an extension of their smartphones, then you have to notice the different brands of smartphones and see how consumers switch between the brands. A car used to be a status symbol does that change. We all look to the big companies to see even if consumers change their habits, somehow money flows into the big company, if it does at healthy margins allowing for profits and dividends, as shareholders we do not have to do anything but enjoy the ride.

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

The lifeblood of every economy around the world is credit. Who has access to it and who does not. The government needs banks and one of the most important banking regulations is the reserve requirements. The banks of every country need to maintain a level of liquidity versus the number of loans they have outstanding and can lend. In times of recession, the reserve tends to be higher, in times of booming economy the reserve tends to be less, the rest of the time the government departments are trying to do a balancing act.

In an article by Ellen Zhang and Kevin Yao of Reuters, the Central Bank of China is cutting the amount of cash that banks must hold as reserves for the second time this year which has the effect of releasing $93.3 billion in long term liquidity.

The idea is banks would lend more money or offer more options to businesses which are struggling because of lock downs imposed by the government. The issue is having more money to lend does not necessarily mean more money is lent.

The cut by the Central Bank will lower the weighted average ratio for financial institutions to 7.8% and will affect all banks except those implementing a 5% reserve ratio, while lowering banks’ annual funding costs by $1.1 billion.

Linking to dividend paying stocks, all economies that are market driven are similar in terms of loans are given out, loans are repaid, and the leverage means the economy functions. In order to see how the economy is doing, seeing what the reserve requirements from the Central Bank to the banks is a good indication of how things are really going. For your investments, you need to know what government regulations help and hurt your investments, which is why every week the government issue reports which tells you the big picture and you can distill it to your investments.

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

When you own shares in a company, at every annual meeting you vote on executive compensation, the auditors and approving the financial statements. When you vote for executive compensation, who they are and what you pay them are public knowledge and worthy of discussion on how they are doing.

In large corporations with many shareholders, the Board chooses the new President and if the leaving President is leaving on a good note, they often have a say in their replacement. In the case of Disney, Bob Iger was the President and by all accounts he did a good job which meant he moved to the Chairman of the Board and had a say in his replacement.

Recently the replacement Bob Chapek was let go, although he was likely handsomely compensated. Then the columnists offered their views. One opinion is from Gus Carlson and he offers the comment:

There is a basic guiding principle that every company leader must understand. Know your core business.

Mr. Carlson believes Mr. Capek did not get it and moved Disney away from its core business of creative storytelling. Mr. Capek took budget and power out of creatives’ hands, treated talent poorly, insulted loyal customers, embroiled in fights that he did not need to and promoted people who were loyal to him but not on creative storytelling business.

After Mr. Iger resumed the role of being President, he sent a memo to all employees, saying I fundamentally believe storytelling is what fuels this company and it belongs at the center of how we organize our businesses. In the meantime, Mr/ Iger is looking for a new President in 2023.

Linking to dividend paying stocks, when you own the company, you follow the company, but you are not a manager. In order to keep your shares, you need to see the company is fulfilling its business strategies around its core business. As a shareholder when the company does something and you see the announcement, you can ask yourself how does it fit their core business? perfectly aligned? somewhat or padding someone’s pockets? How you answer the question means you do something or look for alternatives.

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

Everyone who invests is interested in alternatives to the stock market, whether it be real estate, art or collectibles or even crypto currency. Just because you are interested does not necessary mean you ,do because while there are similarities there are also differences. In the world of crypto, some have embraced it, some major banks help move money around and people similar to Warren Buffett says stay away. This means similar to all investments doing your homework is important. When the market or potential market was relatively small you may have heard the names of bitcoin and others. One exchange which rose to prominence was FTX.

In an article by David Yaffe-Bellany of the New York Times News Service, James Bromley, a lawyer at Sullivan & Cromwell in New York said a substantial amount of assets have either been stolen or are missing.

FTX is based in the Bahamas and was owned or controlled by Sam Bankman-Fried who also owned Alameda Research a crypto based hedged fund. Billions of crypto went to the hedge fund which invested in other exchanges.

The reason why FTX is in the news is Mr. Bankman-Fried was worth over $26 billion dollars and now he is in millionaire status. Although it seems FTX or Alameda Research bought real estate in the Bahamas for executives to live. If you follow the NBA Basketball, the Maimi Heat played in the FTX Arena, it will be renamed.

The trustee in bankruptcy is John Jay Ray III, who having oversaw the biggest bankruptcy in the US or Enron, said the FTX was the worst he had seen in his career. The top 50 creditors are owed $3.1 billion.

Linking to dividend paying stocks, when you invest you believe you will be repaid or be able to sell if and when you wish to. FTX went bankrupt but the stock markets continued to have good days because they are large and more interested in the future of the economy, this is good for investors. With all investments, the first rule is try not to lose money, then it is the risk reward calculation. For those with a low-risk reward calculation, receiving dividends from your investments is a good thing. When you receive money, you have alternatives what to do with it, but you should not have to worry about not being able to sell or finding new alternatives.

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

If you are a sports fan, it is likely you have at least once been to a restaurant or bar to watch TV and having a beer. Having a beer and watching sports seems to go together or in many countries around the world they have a wonderful relationship. The biggest sporting event of the globe is the World Cup and billions of people will have watched a game. If you owned a company that was mass market appeal, being a sponsor is a very good thing. For the right to be a sponsor, companies pay money to FIFA and plan their massive promotions and advertising campaign around the event.

In an article by Philip Blenskinsop of Reuters, imagine if you were an executive at Budweiser. The brewer has been a World Cup sponsor since 1968. The rules are a little different in Qatar, the country only allows alcohol in ticketed events surrounding each of the 8 stadiums. Budweiser is owned by AB InBev of Belgium and its Chief Executive Michael Doukeris said the tournament would be a great opportunity to showcase its non-alcoholic brands.

The World Cup is to begin AB InBev has done all the logistics of sending its supplies to Qatar and then the announcement was made to ban the sale of alcohol at all of Qatar’s stadiums. What do you do?

In the article, people have gone back to the contracts to see whether the FIFA-Budweiser contract anticipated the possibility of change or who pays the supplies and logistics of the beer?

Mr. Doukeris said AB InBev focus this World Cup has been on the 70 markets around the world that do allow beer sales and there is a promotion across all AB InBev brands. The decision in Qatar hurts but not too much.

Linking to dividend paying stocks, there are many strategies and processes to follow and having alternatives is one of them. Through your homework you rationally picked the best company for you, life changes something either for you or the company and because you can easily sell, you move to other alternatives. The important aspect is ensuring you have alternatives, it does not mean you have to do an action, but you ensure if the companies you invested in are not performing as well as expected you move to another one. That is easier said than to do, for you picked the company for a reason, you rationalized your decision, you invested some time and energy to know more about the company, it is hard to sell unless there is a very good reason. If you bought for the dividend as long as the dividend is paid and hopefully raised, then you can do nothing – that is a good strategy. If the dividend and profits are threatened, you can do something – but what alternative do you do?

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

When you are young and nothing in the world can hold you back, if you have a talent or a passion for a sport you likely want to play that sport professionally. You love it, however as you age a little, the issue is do you have the skills to compete against the best in that sport. Most of us do not, but you can still enjoy playing and watching sports. Fortunately for the owners, there are millions of people who enjoy watching sports on TV and that is the prime reason why a sports franchise has increased in value. The TV contracts are larger and most major league teams will make money before a ticket is purchased. If you are an owner, you like that. As a fan, you want your team to be competitive and be able to challenge and possibly win the championships, but as a fan often the journey is more important than the destination.

From your dividends you make on your stocks, you have the ability to do something with the money. Some can afford to buy a sports team both for personal reasons and to increase the value of the team if and when it is sold.

In the Ghostbusters movie there was a song saying who are you going to call? If you are wealthy enough, you can call an investment firm called Galatioto Sports Partners (GSP).

In an article by Andrew Willis, the founding partner was asked during the summer at an investment conference in Manhattan, how is his business. Mr. Galatioto said, I have never been busier, capitalism is a wonderful thing, it produces more and more billionaires.

GSP received its start in the 1990’s, raising money for team owners as bankers with Lehman Brothers. They decided to leave Lehman Brothers to start their own firm. The potential owners of the teams had assets, but they were tied up and needed help in arranging loans to close the transactions. The success of the firm is they have advised team owners in every North American league and in Europe they help the soccer teams.

GSP helps owners to understand what teams can be – they are media business, a data business and real estate business rolled into one and thanks to the sports pages are always in the news.

Linking to dividend paying stocks, similar to buying an individual stock, it is important what it is and how it generates its revenues and potential revenues. Some teams have an incredibly loyal base of fans who consume tickets and merchandise. Ever watch a sporting event and it seems everyone has a home team jersey on? How much was the jersey? how much was the tickets? and you will look at the home team a little differently, although you can still cheer for them. Then you can leverage the assets to create even more.

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

In the recent midterm elections, some politicians were saying the US budget needs to be cut and they had various methods to do. The suggestions ranged from social security to raising taxes, very little was said about government subsidies.

In an article by Joseph White of Reuters, Chief Financial Officer of GM Paul Jacobson in a conference call to investors, GM expects federal subsidies between $3,500 and $5,500 an electric vehicle would add to GM pretax profits. The subsidies help make the difference between the combustion fleet and the EV fleet very comparable by 2025 profitable.

This year the profits expected which will be between $ 13.5 to $14.5 billion will come from the combustion fleet and go to fund the annual capital spending between $11 and $13 billion.

On GM’s most profitable lines including GM pickups and SUV with internal combustion engines or ICE, the margin is double digit.

The subsidies offered by the Green Energy Act and the Inflation Reduction Act would boost EV’s margins to ICE margins.

GM trails Tesla, Ford and Hyundai in EV sales this year, but expect greater production in both the US and China from 2023 to 2025.

Linking to dividend paying stocks, most profitable companies benefit from government subsidies. The subsidies come in for a particular purpose and companies like them so they tend to stay around even when from the outside the subsidies could be cut. From the inside, subsidies are a very useful addition and companies get used to having them. If the government stops some there are usually other avenues to find addition subsidies for governments have money for designated purposes. In the non-profit world, grant seekers are very adaptable, same for the corporate world.

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

If you ever read books around the times of Sherlock Holmes, the air was a character in the story because it was a mixture of fog and coal pollution. At the time of Mr. Holmes, the dominate way to heat the homes of London was coal so it was not surprising it made into the literature and songs – I received a lump of coal for Christmas. Coal replaced candles for heating and eventually making electricity which replaced coal, but coal has always had a negative aspect of pollution when it is used. One of the earlier solutions was to make the smokestacks higher so more it would be dispersed by the winds be blown away from the coal plant. Jumping to current days, coal is still on governments’ minds as seen at the recent COP27 or Conference of the Parties held in Egypt.

In an article by Eric Reguly, the issue of coal has been on the agenda for the past 27 years and likely will continue to be on the agenda. The good news is the 75 countries which represent 95% of the total coal consumption have pledged to reach net zero emissions by 2050 to 2060.

The bad news is the demand for coal will continue into the future as evidenced by the war in Ukraine delayed the closure of coal plants in Europe. China is building 100 new coal plants, as well as 100 new coal plants are being built in the rest of Asia. The reason why coal plants are being built is simple: they are relatively easy to build, coal is plentiful and equally important inexpensive, and the lifespan of a plant is 30 to 50 years. One of the reasons why coal is plentiful is companies such as Glencore have built an infrastructure system that allows it to make billions from coal mining and exports.

Linking to dividend paying stocks, similar to everyone you will have concerns as person. You want to live in a relatively clean environment and all that entails. When you are investing, you want to invest in profitable companies that can pay dividends for you to enjoy the environment. Energy companies meet demand and prices allow profits to be made, the companies may go in and out of national favorites but as an investor you concern is legally making money. When the laws change, you can change, as long as the government keeps the laws, so much the better. In the next few years, you can see how the alternatives are doing and when to change if change is needed.

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

We all know who Bernie Madoff is – he was the former head of the SEC and a Wall Street Investment firm that was producing consistent returns for years no matter how the markets fluctuated. In the end it was all an elaborate scheme to bring in new money to get Peter to pay Paul and it worked for 15 years. Bernie ended up in jail for 50 years.

In Minnesota, another Ponzi scheme was run almost as big as Madoff, before it collapsed in 2008. Thomas Joseph Peters was convicted of a $2 billion fraud and is in jail. Mr. Peters company declared bankruptcy and has been in the courts since.

In an article by James Bradshaw and David Milstead of the Globe and Mail, the lawsuit alleged that Milwaukee based Marshall and Ilsley Bank and a smaller bank helped facilitate a Ponzi scheme run by Mr. Peters between 1999 and 2008.

The issue is the corporate model the bank understood what Mr. Peters company did and what Mr. Peters actually did such as the bank moved tens of millions in and out of corporate and personal accounts were not measuring up to one another.

The Judge found that although the Bank of Montreal bought the Milwaukee based bank in 2011, M&I destroyed computer bankup tapes in 2010 and 2011 that likely contained documents and some tapes that contained evidence. The bank falsely told the judge all the tapes were gone.

A jury found the present owner of the bank, Bank of Montreal needs to pay a fine which amounts to $1.1 billion.

Linking to dividend paying stocks, when a company goes into bankruptcy it will take a long time before there is any type of payout. If you own such an investment you need to cut your losses and move on. In the above case, it is now almost 2023, the bankruptcy was 2008 and only cents on the dollar will be recovered. Every downturn in the economy shows there are frauds in every state and many people are just trying to make a little bit more. It is easier to buy a profitable company that has paid dividends over the years and let the company do the work legitimately. Losing money takes the compound interest of real gains and as an investor you love compound interest. Years ago, the author was helping managing my parent’s funds, my investments were in the growth side of the market, my parents were in dividend funds, who was making more money with less risk? my parents, I switched over to enjoy compound interest.

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