After a company lists on the stock market, besides doing an excellent job for shareholders, one of the other functions is to pay attention to what the market wants or thinks it wants in the future. For example when there is a low interest environment, having debt to take advantage of the low rates is a good thing. If interest rates went up, debt would be bad and the company would be penalized for too much debt. All companies look to the future to see what the world may look like and how they will continue to look after customers and do the right thing for customers and shareholders.

In an article by Aishwarya Nair of Reuters, Ford Motor Company said it will boost spending on electric vehicles to $50 billion and run its EV unit separately from its legacy combustion-engine business.

Chief Executive Jim Farley said Ford plans to build more than 2 million EVs in 2026 or EV will be about 1/3 of the production and rise to 50% by 2030. The EV unit will be run by Doug Field.

The stock market has put a premium on Tesla stock and Ford splitting into 2, while making practical sense also allows some of the premium the market gives to Electric Car manufacturers to Ford stock. The reason why it makes sense is the component makeup of vehicles is different as electric vehicles use less parts than combustion engine cars.

Linking to dividend paying stocks, while the first priority of any company is to run the business to make a profit and then pay dividends, all companies examine their share price relative to the competition. Company management sometimes wonder how to ensure the stock price is very comparable or why the market values one company more than another. Could it do what the market is rewarding while making common sense for management?

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

A month or so ago, if you had diversified your money around the world, besides your home country, you likely thought investments in Europe, China and Russia was a good thing. In terms of Russia, the country does have about 150 million people, besides the Middle East has oil and gas reserves and is close ready markets in Europe and China. The big companies such as Gazprom and Sherbank (2 out of every 3 businesses has accounts at Russia’s biggest bank), are profitable and stable as investments.

Then Russia invade Ukraine and now according to an article from Reuters, because of the sanctions, foreign investors can not sell their holdings. The Bank of Russia put a temporary halt on payments and major overseas’ settlement systems stopped accepting Russian assets.

Foreigners (non Russians) held about 3 trillion rubes $28 billion worth of OFZs or ruble-denominated sovereign debt out of a total market debt of 15.5 trillion rubles. Foreigners held 19.7 trillion rubles in Russian shares as on July 1.

The world’s largest settlement systems, Euroclear and Clearstream are no longer accepting Russian assets. Settlement systems are a key part of the global financial system, holding trillions of dollars of assets for banks and investors and settling on their behalf.

Linking to dividend paying stocks, the shut down of the financial systems to force Russia to stop the war in Ukraine maybe a once in a decade or more lifetime event. It is the reason, even though diversification is a wonderful thin. There are risks going outside of the country, but there is always a risk inside your country. In a functioning economy, access to credit is necessary otherwise the system breaks down. As investors clearly the ultimate goal is peace and stability.

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

For generations and maybe centuries, if you wanted to deposit excess cash, gold, etc a tax haven such as Switzerland was the place to go. The banks loved money and the government encouraged once the money was deposited into an account, it was off limits to any other country. During World War I and War II, the country remained neutral which meant both sides went to Switzerland to deposit assets. The growth of tax havens around the world were modelled on Switzerland.

If you think about countries around the world, some have been well run for the mythical average person and some the leaders have used the treasury as their personal bank accounts, much of the money headed to Switzerland, it was safe, secure and the laws meant the other country would have a very difficult time to receive the money back. It was a surprise to Russia and the world, the Swiss government has a line in the sand.

In an article by Nick Cumming-Bruce of the New York Times News Service, Switzerland noted it was departing from its usual policy of neutrality because of the unprecedented military attack by Russia on a sovereign European state. Switzerland cherishes a reputation for neutrality that has established Geneva as home to the United Nations, including the UN Human Rights Council and as a place where countries around the world can negotiate peace in their conflicts.

Swiss national bank data showed that Russian companies and individuals held assets worth more than $11 billion in Swiss banks in 2020. As a hub for the global commodities trade, Switzerland also hosts numerous companies that trade Russian oil and other commodities.

Linking to dividend paying stocks, Russia, China and the US are the three most powerful countries in the world which means they have both military and economic activity. When in comes to taking sides, for most of the world it is very hard because it is important to have economic activity with al the countries. Goods and services flow, In the war with Russia and Ukraine people have to take sides and causes pain on both sides. Often times, people do not have to take sides and hope for peace as economic activity continues. Do you have a line in the sand for your investments outside of not making profits or paying dividends?

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

If you run a business, one of the decisions you have to make is prices of goods and services, while consumers expect prices to bounce up and down in a supermarket, generally companies only have one opportunity to raise prices. The decision process involves what the company thinks the market will bear, their profit margin; the costs of the product and when the prices were raised the last time. If a price has been stable for a number of years, often there is a change to increase prices and the market share will remain because the customer has little choice.

In an article by Jeanna Smailek of the New York Times News Service, at the present time corporations are discovering people are willing to pay for the goods and services they want to buy. Most people have heard about the supply system bottlenecks and expect prices to go up. How much before it bothers the consumer, only the market will tell you. At the moment, corporate executives have a window of opportunity to increase prices to cover costs and to expand their profit margin.

Rental car costs

Everything related to automotive seems to be increasing in cost and rental cars are the vanguard of that trend. Joe Ferraro, president of Avis Budget group said the rental a car market has more demand than supply. The margins are increasing and the group is competing on the quality of service not the price.

Tire demand

Richard J Kramer, CEO of Goodyear noted, it is a really very very good constructive pricing environment that we have seen right now. Goodyear tracks 9 competitors and 7 of the 9 have announced price increases. Goodyear expects profit margins to be up because of price increases.

Sizing up beef costs

The restaurant chain that includes Outback Steakhouse is planning to raise prices by 5% across its brands to cover labor and food costs as well as find efficiency improvements to increase its profits. Christopher Meyer, CFO, said the 3% increase was too small. Prices were stable since 2019. The efficiency includes simplifying its menu and cutting food waste.

Recovering profits in food

Shake Shack’s Katherine Fogertey CFO, said prices increased in October and another price increase is expected in March. Normally prices increase 2% a year, but this year it is 7%.

Pricier hotel rooms

If you are planning to go to Vegas, Wynn Resorts CEO Craig Billings believes the company has strong pricing power on rooms, food and beverage.

Donuts

Josh Charlesworth. CEO of Krispy Kreme, increased prices with double digit price increases. The cost of labor may go up, but the company had locked in prices for key ingredients such as sugar and oil for the year. If prices go up it will tend to add to margins.

Linking to dividend paying stocks, one of the elements you look for in a company is does it have the ability to raise prices. It seems this year, many companies are in the position to raise prices and that is good for the company. The price increases cover costs but it also increases margins which translates into profitability and that is a good thing for investors. From an investor viewpoint, you like when the CEO or CFO says sales will increase at higher prices and higher margins.

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

When a country goes to war, it has to ensure the people who live in the non evading country attempt to go about their normal lives. Russia troops moved to the Ukraine, but in the rest of the country – the regular things that need to be done are continued. The garbage is picked up, the water works, groceries are bought, children go to school and parents go to work. The idea for the country in this case, Russia, to tell the people the normal things need to be done, while the members of the military sacrifice for the greater good of the country. When the war is over, something better will be the outcome. (whether it is, is always debatable)

In an article by Carolyn Cohn and Lawrence White of Reuters, when Russia invaded the Ukraine, the stock market fell, the Russia ruble (their currency) fell and the government put a restriction on Russia people taking all of their money out of the bank. For the large institutional players, the Russian government is trying to ensure they do not sell assets and take the money out of Russia. This means billions of dollars worth of securities held by foreigners in Russia are at risk of being trapped.

If you think about the S&P 500 index funds we can invest in New York, the Russia stock markets have similar index funds and millions of people own them.

In a matter of weeks, Russia has turned from a lucrative bet on surging oil prices to an uninvestable market with a central bank hamstrung by sanctions, major banks shut out of global payments system SWIFT and capital controls choking off money flows. The west is hoping not to send troops but make life very hard for the mythical average Russia.

Linking to dividend paying stocks, on one level as an investor you are thinking it is very good the west is using financial measures against Russia for in the past there was a limited price to be paid by the country. Perhaps these measures will be the new normal and leaders of the countries will need to think twice before they act. As an investor once the war is over and the financial controls come off, the assets of Russia will be low and with high oil prices money can be made.

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

We all hear that we live in a global environment and diversification is not the next state or the other side of the country, but globally because customers can and do buy. Companies such as Amazon make it possible to buy from around the globe and when it works everyone says that is great. When it does not, it the case of a war, then the issue is how much exposure or risk does the business have in the countries at war? The day before the war, people thought the company was doing good at diversification, the day of the war and the days afterwards how could you do business in the countries at war? The reality is all countries produce income and people can buy stuff, why would you not be in the countries?

The biggest banks of the world are in New York and given credit is the lifeblood of every economy, the question analysts’ have is what is the exposure to the Ukraine and Russia? In an article by Elizabeth Dilts Marshall of Reuters, the answer is it is an unknown? The exposure by the US banks is $14.7 billion which is low compared to the banks in Italy, France and Austria which has more than $42.5 billion in exposure.

Citibank says its total exposure is $10 billion, which was higher than expected. The new number took into cash held at the Bank of Russia and other financial institutions, revers repos and additional exposures to Russia counterparties.

JPMorgan analyst Kian Abouhosssein said transparency on exposure by banks to Russia is low. Most banks do not give net exposures. He wrote in a research report, the US banks’ derivatives exposure risk and the impact that sanctions could have on their wholesale payments business is unknown.

Citi, JPMorgan and State Street likely have higher risks owning to their large global revenue exposure.

Linking to dividend paying stocks, diversification is a wonderful thing, the theory being when one industry group is up, another one may be down and vice versa, you need to stabilize your returns. On Wall Street, the street often decides that one sector is not going to be growing as much as return to safety of profitable companies paying a dividend are good. It is the reason why you own them, every once in a while, Wall Street says you can make more money buying a profitable company than buying one only on possible growth. Try to have the best of both world with the best profitable companies who increase their dividends.

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

If you think about opioid pandemic, you might think about the Sackler family and their company Purdue Pharma and you would be partly correct about who is to blame. The reality is there are multiple players who should have known or done something because Purdue Pharma was the manufacturer of the drugs, the next step is the distributors to the pharmacies around the country and then prescriptions written by doctors. In many situations there are many players and that is why it is complicated to pin down blame and hold someone accountable.

In an article from the Associated Press, Johnson & Johnson or J & J, Amerisource-Bergen, Cardinal Health and McKesson finalized countrywide settlements over their role in the opioid addiction crisis. The settlement is money or $26 billion and will flow to states beginning in April. The companies were waiting for getting participation from a critical mass of state and local governments, for example California will receive $86 for programs. The states that are not included are Alabama, New Hampshire, Oklahoma, Washington and West Virginia they are working on their own deals.

Linking to dividend paying stocks, with settlements in the billions and the companies seeming not missing any financial steps or reporting one time earnings decline, the opioid crisis for a long time was a very profitable business for the drug companies. However, since all the companies had to pay it shows that times can change and companies are seemingly accountable for their actions. While there always is a great desire to make profits to pay dividends, breaking the law is never good.

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

If you wish to buy stock in a company that is in the natural resources business, always determine the company’s biggest commodity and the outlook for that commodity. If the outlook is good, growing then you can be happy about making a good decision. If the outlook for the commodity is indifferent, then wait because the profits of the company depend on the commodity price.

In an article by Praveen Menon of Reuters, the world’s biggest miner of iron ore and other minerals, the Anglo-Australian miner Rio Tinto reported its best ever annual profit and a record full year dividend of $16.8 billion boosted by higher iron ore prices and strong demand from top consumer China.

CEO Jakob Stausholm noted the balance sheet is the strongest it has been for 15 years. Rio Tinto declared a special dividend of 62 cents a share and a final dividend of $4.17 a share. A year ago, the dividend was $3.09 a share.

China which accounts for more than half of Rio’s revenue said it would prevent excessive hoarding of iron ore.

Linking to dividend paying stocks, commodity based stocks are wonderful when the price is high, but similar to most things in life diversification matters when the price goes down. Unless you develop a habit of following the underlying commodity, find companies where you can easily folllow the prices of the inputs and has the ability to raise prices when commodity prices increase.

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

If you were asked what is one of the sexier cars on the market? on the list you likely find Porsche. Porsche is wholly owned by Volkswagen, but the top shareholders believe if they take out Porsche from VW, the shares of Porsche would rise higher than VW.

In an article by Victoria Waldersee, Jan Schwartz, and Christopher Steitz of Reuters, VW is seriously considering bringing an IPO for Porsche. The IPO could be valued at $130 billion compared to the current market value of VW at $116 billion.

In 2009, VW acquired Porsche resulting in the Porsche and Piech families holding 31.4% of the shares in VW and 53% of the voting rights.

VW is considering list 25% of Porsche.

Linking to dividend paying stocks, all companies buy and sell companies for a wide variety of reasons and stock market theories, but in the end they are are trying to unlock shareholder value which they do not see reflect in the present shares. Sometimes the market likes conglomerates, sometimes it likes stand alone companies, at present the market like companies with some debt; if interest rates go towards 5% the markets will like companies will lower debt. There are many cycles in the markets and management has to pay attention to the cycles. It does not necessarily change the company, but highlights what it does and continues to do. As an investor you will see management making changes to reflect what the market wants, otherwise someone will begin to buy shares to unlock shareholder value.

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