Reading the book, A First-Class Catastrophe – the road to Black Monday by Diana B Henriques published by Henry Holt and Company, NY, 2017 and the book is about regulations, new products and the fight over who should regulate the new products.

When the stock market began it was dominated by individuals and to accommodate the individual requirements, systems were built up. They include timelines such as buying the stock took 5 days to change hands or cash is needed in the account. Throughout the decades for the most part the regulations worked. Over time, the institutions such as mutual funds, pension funds developed and became larger. The funds would have different timelines and demands on the exchange for example if you sold 50 shares in the market, the price would not change but if you begin to add zeroes to 50,000 shares and sold into the market, the price will change. If the systems are not updated to accommodate the big players, the insiders would notice and take advantage of (and they did). The larger players demand transparency and electronic trading. The exchanges need to cope with the changes.

With the rise of the large players, they needed to ensure they are protected from the ups and downs of the stock market and a whole new trading feature is developed – the financial futures. With the growth of the financial futures, it affects the markets because of use of stop loss features. If the stock market goes down, sell off X %, if the stock market goes down further, sell off X %. Who buys when the market goes down has been the big question for it turns out many institutions act like individuals when the market makes large moves upwards and downwards. Behind the scenes the exchanges fought over the regulations, how much regulations are needed and profits to be made with financial futures. The 2 exchanges are the NYSE and the Chicago Mercantile Exchange or the MERC.

One very interesting story on the Merc is the only commodity that does not trade is onions. The story is back in 1955, a farmer Vince Kosuga decided it was a good time to corner the market in onions. He bought onions across the US and hoarded them, he also teamed up with a trader in Chicago to buy futures and then puts to profit on the hoarding and at that time when people bought futures they took delivery of the good. He then flooded the market with the onions and the puts rose in value.

The national regulator of the commodity exchanges is called the Commodity Futures Trading Commission or CFTC and they banned onion trading, and it is still banned.

Linking to dividend paying stocks, when you buy a stock there are rules and regulations behind the scenes and with every rule and regulation, there will be people who want more regulation and people who want less. Within the rules and regulations are new products which meet a demand and similar to the grocery shelf where new products come and go, so do financial products come and go. It is a never-ending story and regulators are some steps behind. When the markets are up, more new products will come to the market, that is when as an investor you like to jump in and make profits, but cycles come to lose the money just as quick, and your objective is try not to lose money.

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

Every successful company builds up goodwill and the larger it becomes the more the government comes to rely on it to be successful. The company knows this, the government knows this and if the company has issues which the government wants solved, the government often directly or openly indirectly help the company. In some industries it is easier to see and in the news is a really good example.

In an article by Dominique Vidalon and Tassilo Hummel of Reuters, in France the union CGT has been striking for more money against the refineries of ExxonMobil and TotalEnergies SK. (the biggest oil company in France is called Total). The walkouts and unplanned maintenance at the refineries had more than 60% of France’s refinery capacity shutdown. This has resulted in gasoline shortages at the gas stations with over 31% of service stations having supply problems.

In France, the unions are large and have considerable sway in the political system. It is not uncommon to see massive demonstrations lead by the unions when they do not like government policy. Esso France has told the press it has offered 6.5% raises and a bonus of $4,022). The union wants 10% pay increases and the bonus. France’s Prime Minister Elisabeth Borne announced the government was prepared to take action if necessary to ensure the refineries produce gasoline and the trucks can distribute the gas throughout the country.

Linking to dividend paying stocks, when companies are successful, they make profits and can pay dividends which is good for shareholders. On the other side of the equation is some workers will feel they are not compensation as well because …. or how the pie is sliced is an issue. With successful companies, management often has the government on its side because of the size and scope of the company operations. This can be good or not so good, depending on the situation but it is the reality. Elections matter for the continuing health of the company.

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

Throughout history there are many examples of countries turning inwards or accepting people not exactly like them, it is the story of immigration policies. The story is reflected in how many see outsiders, how people see the job situation, and a wide variety of other emotions. Often countries seek a balance although weighted towards who is a natural citizen or who people think are natural citizens. Somewhere in the early 1400’s, the most outward country was China and it sent ships around the world, then a new emperor came to power and closed the country for 200 years. The world would be different had a different emperor come to power.

Japan is an island or a country made up of islands and when a country is an island, it can easily or seemingly easily close the borders. For centuries Japan was a relatively closed society, it opened up and then was beaten in WWII (along with Germany) and slowly opened up again in 1980s. When COVID stuck the world, Japan closed its borders and now 2 years afterwards it is slowly opening up.

In an article by James Griffiths of Reuters, people want to visit Japan and when Japan finally eased up its travel restrictions, searches by Hong Kongers for flights to Tokyo and Osaka soared 650 and 1,000% respectively according to travel agencies.

For Americans, going to Japan given the high dollar to yen conversion is relatively inexpensive. Sometimes a high dollar is an advantage.

Prime Minister Fumio Kishida is partly counting on the return of foreign tourists to help boost the economy. The government hopes to attract $34.5 billion in tourist spending over the next 12 months. Government data shows hotel employment down 22% between 2019 and 2021. More tourists equals more employment in the hospitality trades.

The tourists expected to come to Japan will likely coming from Hong Kong, South Korea and Taiwan. The source of 30% of visitors and 40% of total inbound consumption is China, but China still has many restrictions on travel. In 2019 a record 31.8 million tourists visited Japan.

Linking to dividend paying stocks, we all have some notion to be inward or outwards because it can mean no change or little change. It can mean people not respecting the unwritten rules which allow people to gather. There are many variations, but for the company to maintain and grow profits it has to be somewhat open for change, are your investments open?

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

When you think about the economy, what do you think about? If you said manufacturing, tech services, schools, civil servants, you would not be wrong, but the real answer to the US economy is shopping or retail. The economy depends on people buying things – restaurants and shopping or going out to buy something. The biggest retailers in the US are some of the biggest retailers in the world and they employ many people. The most important season in the shopping season is from Black Friday to New Year’s including Christmas and Boxing Day. If the retailers do not make their money in that season, they will not make their money in the winter months of cold. One method to gauge how the season is expected is to examine hiring expectations.

In an article by Siddharth Cavale and Uday Sampath Kumar of Reuters, the people at Reuters asked the large retailers about their hiring expectations. Walmart wishes to hire 40,000 people with 91% in the stores and 9% for the warehouses. Last year, Walmart hired 150,000 new workers with many of them full time status.

Party City is gearing up for Halloween with 20,000 seasonal staff as gatherings are expected to increase from the last few years.

Michaels Companies is expecting to hire 20,000 people, all in store.

Bain and Co expects holiday spending to be $915 billion up 7.5% from last year. To meet the demands the retail sector will add 680,000 workers compared with 700,000 last year.

Linking to dividend paying stocks, when you buy a stock you have expectations the past will repeat itself and the future will continue to be good. There are many methods to access what the future will bring and hiring expectations is one of them. How does your investments handle the busy quarter they have?

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

There is always one in the group which tends to underperform even though it has some wonderful assets. In the world of global banking, the underperforming bank for the moment is Credit Suisse which is one of the largest banks in Europe and one of Switzerland’s global systemically important banks. On the strength of the last two characteristics, investors could easily analyze the bank and determine it to be a buy and hold situation.

In an article from Reuters there is a however, the bank has been hit by a string of troubles. It had to raise capital, halt share buybacks, cut its dividend and revamp management after losing $5 billion from the Archegos collapse and failed financer Greensill. The good news is both Swiss regulator FINMA and the Bank of England in London where Credit Suisse has major operations, have noted there are no major recent developments in bad credit.

In the banking world, there is always a bank which either wants to be a leading bank or lends too much money to a group that when markets turn or cycles turn down, they move from profits to write downs.

Linking to dividend paying stocks, often investing in a bank is similar to investing in a utility because they are large enough in size the government seems to have their backs, if write downs are too much. If you can avoid owning the bank shares and not losing your money the other banks perform similar to utilities. Not every company in the sector is the same, there are differences and even though the business model is simple for banks – lend or give credit and receive interest and your money back, sometimes the lenders forget about receiving the money back, they love booking the loans and receiving a few interest payments for their bonus payments. Ask how are bonuses received when a lender misses payments?

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

All companies operate on a cycle and if they are in the retail environment, they will have special days or special items which encourages shoppers to go the stores. You can easily think about Prime days with Amazon, Black Fridays for Christmas season specials and a host of other items. Many companies have or market items for a particular holiday and over the years the holiday is linked to the retail item.

In an article by Michael Levenson of the New York Times News Service, around Easter you will see advertisements for chocolate bunnies. The premium chocolate bunny is made by Lindt, a Swiss chocolatier. The bunny comes in a gold foil with a red ribbon and Lindt spends a great deal of money to encourage people to upgrade and buy their bunny.

Success brings copies or similar looking items and in Germany, the discount chain Lidl stocks bunnies in a gold foil to sell chocolate bunnies. The Lindt people did not like the copying of their bunnies and went to the Swiss Federal Supreme Court to make their case. The Court agreed with Lindt and told the German company to destroy the chocolate bunnies in stock, which Lidl responded we do have any because it is a seasonal item.

Lindt sells over 160 million gold bunnies a year and other companies including Godiva, noted they try to ensure the chocolate bunnies do not look like the Lindt bunnies. The Lidl bunnies had a yellow or green ribbon rather than the red one. Lindt is a global manufacturer of chocolates and has many lawyers protecting what it believes are its trademarks.

Linking to dividend paying stocks, all successful companies have teams of lawyers to ensure the brand they sell is not copied by everyone else. Lawsuits are normal part of operations and if they are not suing, there is something wrong. Individually you are not likely to be regularly sued, but successful companies are and how well they protect their trademarks is important to understand.

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

We all live in a particular region and once you are established the normal reaction is to use the local goods and services and begin to believe they have your best interests at heart. If you live in the New York City area, one of your suppliers is Con Edison. The Edison part of the name is from Thomas Edison who invented the light bulb. Companies in the utilities business will use whatever power source which is less expensive over the long run. All methods to generate electricity have high capital costs (which helps keeps competitors away) but once the building is in operation the costs to operate fall drastically. Examples are hydro plant on a river, a nuclear plant, building solar and wind facilities. In terms of coal plants once they became expensive, companies switched to oil, then natural gas.

Con Edison had a large green energy power generation aspect to their business, including highlights on the webpage. In an article by Christopher Steitz and Tomas Escritt of Reuters, Con Edison has decided to sell the division to Germany’s largest power producer. The deal is for $6.8 billion and will vault RWE from solar being 3% of their US portfolio to 40% and become the 4th largest renewable player in the US behind NextEra.

RWE is financing its purchase through a $2.43 bullion convertible bond with Qatar Investment Authority (QIA) eventually allowing QIA to become a 9.1% shareholder in RWE. QIA is a major shareholder in VW, Deutsche Bank and Porsche.

Con Edison was going to issue $850 million in new shares this year, but that is off the table.

Linking to dividend paying stocks, the business model is what is important when you buy or consider buying into utilities. The high capital costs limits competitors and with a regulatory monopoly, the company can generate electricity for years to come and make a profit to pay for dividends. Oil rich investment companies such as QIA understand they may derive their profits from the oil industry, but they need diversification into renewables or utility like companies. It is good for the average investor too.

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

In mid September, the Prime Minister of the United Kingdom changed from Boris Johnson to Liz Truss. The new Prime Minister decided to make a change on taxation and to show she was in charge of the economy. It is normal for new leaders to put their stamp on the administration for they will have both talking points and signs of change for the better in the house of public opinion.

Prime Minister Truss’ plans including cutting taxation and increasing public borrowing. In normal times the markets may have rolled their eyes and continued with the normal business. However in the past few years because of the pandemic, governments around the world including the one in Britain have borrowed massive amounts of money (for reasonable reasons) but financial markets are more interested in how debt will go down. The result of the plan or mini budget was the borrowing costs went up.

In the world of pension funds over many years derivatives have built up to try to protect the pension funds from losing money no matter how the markets perform. One of the methods to protect the total fund is liability-driven investments (LDI) which is a hedging type of strategy.

In an article by Carolyn Cohn, Tommy Wilkes, and Carolina Mandl of Reuters, the LDI market has grown and has $2,47 trillion – which is more than 2/3’s the size of the British economy. The issue is because of higher borrowing costs, the government bonds or gilts needed to be sold to meet margin calls as the LDIs positions needed collateral or where underwater derivative positions where the value is less than on a fund’s books.

The Bank of England (BoE) stepped into the market with about $100 billion to buy long term gilts or government bonds. The central bank pledge to do whatever it took to bring financial stability. The financial markets achieved a level of stability and margin calls stopped for the pension fund industry.

Britain’s central bank is now in the unenviable position of having postponed its plans to sell bonds, resulting in monetary loosening, and at the same time tightening it with higher interest rates.

Orla Garvey, a fixed income manager at Federated Hermes, noted this leaves the long gilts vulnerable.

Linking to dividend paying stocks, all politicians can do what they feel is necessary and investors will react, if they react negatively, they will quickly raise cash in their portfolios. If they do nothing, then the politicians have managed to do it right. Over the course of the pandemic, we have seen governments use the central bankers in a more proactive manner and that is both good and bad. For every organization, eventually debt has to be paid, however sometimes emergencies happen. Ideally as in the case of Britain, the Prime Minister has taken some of the measures of the budget off from being implemented and believes in stability of financial markets. When this happens the financial markets of investors rule and the future outlook is better.

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

Everyone on Wall Street has a system, sometimes it works sometimes it does not. However, if it works more than somebody else money moves into that space till it does not work that often. One system that everyone believes works is access to inside information that is material to the company. Depending on what the company does, as an individual you can watch companies in their daily actions if their strategic plans are working or not working, but to move the stock something has to be called material. Most people believe members of Congress who have many closed-door meetings with company CEOs and then can trade stocks on the information have information that could be material.

In an article by Larry MacDonald, 2 new etfs going through the regulatory bodies would track the stock picks of US Congress members and their families. The funds would be called Unusual Whales Subversive Democratic Trading ETF and the Unusual Whales Subversive Republican Trading ETF.

There are subscription websites including capitaltrades.com, housestockwatcher.com.

We also know as campaigns become more expensive every year, the people who are running are wealthier every year which means many have stock portfolios. One Georgia Senator spent about a hour of his day monitoring his portfolio.

Congress members have to report their trading every 45 days, but failure to do so has a token penalty.

In a book, one of the more successful Senators in the 50’s used to give shares to ensure votes. That should not be allowed now, do not know if it is.

There is a bill before the Congress to ban stock trading and ensure members of Congress either use blind trusts or buy mutual funds or ETFs, which would seem much more reasonable that the system which exists.

Linking to dividend paying stocks, every once there is a new system to beat the market and we all want to beat the market and become wealthier. Unfortunately, the best method is to use the power of compound interest over the long term and your will be wealthier. Dividends and capital appreciation work well as a tried-and-true system.

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