In early January a trial involving Elizabeth Holmes and her company Theranos ended with Elizabeth Holmes found guilty of fraud. Essentially, her product which involved taking a little blood was going to revolutionize the blood taking industry. It was a great pitch, no more needles, her machine would do the work in less time and customers would be happy. The only problem is the machine never worked or partially worked, however venture funds from the San Francisco (the Bay) area invested heavily into her company.

In an article by Erin Griffith of the New York Times News Service, Ms. Holmes was suggesting this was more than a health care company it was a tech company. Ms. Holmes used the mentorship and credibility of tech industry heavy weights Larry Ellison and Don Lucas to raise money from others. She used the startup playbook of hype, exclusivity and a few of missing out to win over later investors. (The judge in the case allowed the defense lawyers to suggest it is common in Silicon Valley for promoters to engage in overly optimistic puffery. Any statements that were not entirely truthful were about the future. It is what investors wanted to hear) Except the machine did not work.

Don Lucas was a Silicon Valley venture capitalist was on the Board of Theranos from 2003 to 2013, was involved with more than 20 investment vehicles that backed Theranos. They included his son’s venture firm, Lucas Venture Group, PEER Venture Partners and trust and foundations associated with members of his family.

Mr. Lucas introduced Hall Group, a real estate firm that put $4.9 million into Theranos. Mr. Lucas’s nephew’s firm Black Diamond Ventures invested $5.4 million. Other Silicon Valley funds were ATA Ventures, Beta Bayview, DCM, IVP, and Drapper Associates. Wealthy families such as heirs to Amway, Cox Enterprises, and Walmart invested.

For a while, the start company of Theranos was receiving money from some of the smartest people on the planet and they were seeing the value go up, except for the machine did not work.

Not everyone invested, in the book Bad Blood by John Carreyrou, he writes Bijan Salehizadeh of Highland Capital Partners decided not to invest because Ms. Holmes was unwilling or unable to answer most of his questions. For a number of years, people would say to him Theranos is the hot thing and passed the unicorn valuation of $1 billion, how could you not invest?

Linking to dividend paying stocks, sometimes there are technologies that can and do change the way we do things, however there will be many that promise to do so but do not catch on to the public. It is difficult to pick the winner, however with dividend paying stocks, you can ask how many years has the company been profitable and paying dividends? If the answer is 10 or 20 or 30 years plus, it safe to predict they will continue to pay dividends in the future. The risk of losing money is small, the reward of dividends and higher multiples on profitable stocks is high.

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

In every market where sales and margins are high, there will be and is competition. It is always important to remember that because all over the world, people are examining markets and trying to determine how to capture some of that margin in the sales in order to be profitable. An example is the electric truck, which is coming in the future.

In an article by Joseph White of Reuters, the world of the electric truck will be changing in the near future. You may have heard about Tesla and Rivian who stock all climbed on the announcements of a truck. Then the big companies stepped up to the plate, Ford announced the Lighting and has since doubled its production. The other major players in the truck business is GM and Dodge Ram which is coming in 2024.

GM came out with a $35 billion electric vehicle strategy being in 2023 and starting with the Chevrolet Silverado pick up truck. GM CEO Mary Barra announced at the CES technology conference in Las Vegas the first phase will be the $39,000 WT work truck that will be delivered to a limited group of commercial fleets. In the fall of 2023, consumers can buy the truck but the price tag will be $105,000. If you want a truck for less, wait a year until 2024 and other versions will be released.

If you love the shape of the Hummer, then you will like the new Silverado.

GM’s strategy is to win in the long run, by developing dedicated electric vehicle architectures and vertically integrated battery and motor production chain, then launching models in high volume by the middle and end of the decade.

Linking to dividend paying stocks, the wonderful thing about business is there are different strategies that can and do work. A long term strategy requires the ability to have large resources behind you, a short term can be to capitalize on a trend and stretch it out into the future. In the end can the company make good margins and turn a profit which can pay shareholders? when you buy shares, you are buying into the company’s strategy until you disagree with it.

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

If you think about Oklahoma, besides the Broadway show by the same name, Oklahoma is a staunchly conservative state with a history of drawing people in search of wealth from the land. Oil and gas are produced, cattle are raised and two major Universities among other things produced top ranked college football team Oklahoma University and Oklahoma Sooners.

According to an article by Simon Romero of the New York Times News Service, one of the biggest growing business is in the agricultural field – producing cannabis. Greenhouses are popping up all over the state because every since the state legalized medical marijuana 3 years ago, Oklahoma is the easiest place to launch a weed business. The state now boasts more retail cannabis stores than Colorado, Oregon and Washington combined. In October, Oklahoma eclipsed California as the state with the largest number of licensed cannabis farms – more than 9,000. The average farm has about 25 employees or over 200,000 workers.

In Oklahoma just about anyone who wants a medical card, about 10% of Oklahoma’s nearly 4 million residents have a card.

The other reason why an influx of stores is the barrier to entry is $2,500 versus close to $100,000 in most states. For a very conservative state, state officials have taken a fairly hands-off approach. Because of the growth, groups representing ranchers, farmers, sheriffs and crop dusters have joined forces to call for a moratorium on new licences. They cite climbing prices for land, illicit farms, strains on rural water and electricity supplies. (those are almost blue state reasons).

Adria Berry, the director of Oklahoma Medical Marijuana Authority, which oversees the industry and reported nearly $138 million in revenue from retail, state and local taxes in 2021 from the sale of cannabis, believes the moratorium is not likely.

Why are people starting business in Oklahoma? money – growers can grow cannabis for $100 a pound, and then turn around and sell it for $3,500 to $4,000 a pound in California and New York State. The big multi companies are not in Oklahoma because too much competition and selling out of state is not 100% legal. The end result of too much competition is prices fall, some farms go bankrupt and consolidations happen till money can be made.

Linking to dividend paying stocks, in every market there are barriers to entry or moats, some of them are relatively small and some of the moats are large. As an investor, it is easier to invest in industries with large moats (ask Warren Buffett) however all business operate under the same basic principles. The lower the barrier to entry, the more people who will come into the industry but there will be more money losers, although there are great stories involved. As an dividend investor you want to read the stories, but have money coming into your brokerage account on a regular basis.

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

In all countries, the politicians either directly or indirectly encourages businesses to expand their businesses and when it works everyone is happy and looking forward to the future. However in the economy cycles happen, things beyond control happen and then what does the government do?

In an article from China, the government has encouraged the major developers to build hundreds of thousands of apartment buildings across China. In some cases, there are ghosts cities where developers built but hardly anyone lives there, one wonders about the cash flow deficits. The question is how do the private property developers who were essentially following the government’s desire stay in business given the cash flow problems.

In 2008, governments around the world took stock in banks to keep the economy afloat because mortgage back securities had little value. Property prices were not rising and people could not keep up with payments so defaults were the result. In China, the government has made it easier for state backed property developers to buy up the distressed assets of debt laden private peers.

The way that will be done is, if a state backed developer buys distressed assets, it will not be counted as debt under rules that cap borrowing. The 3 red lines policy restricts the amount of net borrowing property developers can raise each year by placing caps on their debt ratios.

A state backed developer in theory has the resources of the taxpayer in their back pocket.

Linking to dividend paying stocks, all profitable companies are in constant contact with governments because government regulations impact the business. the issue is not what a government can and will do when expansion is the norm, but what they do when there is a downturn. How well does the company you invest in work with the government?

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

If you think about North Sea oil what country comes to mind. Likely you said the UK, but in reality the biggest beneficiary of North Sea oil was Norway. The government put much of the money in a pension fund which is one of the world’s largest funds owning 2% of all stock market holdings. The fund has tight restrictions to ensure it remains that way when the North Sea oil runs out.

If you were to think about electric vehicles sales, which countries would you think of? In an article by Victoria Klesty of Reuters, China is the biggest overall car market but Norway with a population of 5.4 million has the world’s highest proportion of electric vehicles. Thanks to taxes on gasoline power vehicles, more than 2/3’s of new sales in Norway were electric vehicles.

If you think about the climate of Norway (think about the movie Frozen) and then consider if electric vehicles are viable there, they are viable anywhere.

In Norway, electric vehicles do not have the taxes than gasoline power vehicles have. Also there is a tax on gasoline power vehicles coming into the cities. These tax breaks is expected to drive the proportion of overall electric sales as high as 80% in 2022. In 2025 there is suppose to be no or very few sales of gasoline power vehicles. 176,276 electric cars were sold.

Tesla has a 11.6% share followed by VW with 9.6% according to the Norwegian Road Federation.

The most popular brands were the Tesla 3, then the hybrid RAV 4 from Toyota and the VW ID.4.

Linking to dividend paying stocks, in every country tax considerations play an important role in decision making. If taxes are greater in one industry, then people will seek alternatives. If the industry which you own shares in is heavily taxed, unless the profits are great, it is time to look for alternatives.

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

Most of us like the bank we use, however if it made a mistake and put more money into our accounts than normal, what would you do? We all know what we would like to do, but what would you do?

In an article by Amanda Holpunch of the New York Times News Service, the British bank Santander UK (parent company is Santander of Spain) made a computer mistake paying tens of thousands of people on Christmas Day. About 75,000 people received mistaken payments.

The banking system as it is, meant Santander send money to multiple banks, the payments were from the 2,000 commercial and corporate customers, somehow duplicate payments were made.

The bank can easily or reasonably easy access is own customers, however it needs the help of others to recover the money. What is not known is how banks will deal with customers who have spent the money.

When the banks make a large deposit by error and the person does nothing, the banks have used the law to arrest people on fraud and theft, but what about smaller amounts?

Linking to dividend paying stocks, the error by the bank shows how interconnected the world is and that is a great thing when everything works well. We have seen supplier issues because we contract out rather than do more things in house. It can be a concern, but things are not likely to change, the interconnections are likely to become greater as time goes by.

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

Every day and month and year will bring more and more solar and wind projects on stream across the world. From an investor point of view, the electricity generated will be sold in the grid, every day and after the up front capital costs, the solar and wind act similar to utility stocks. The rate is regulated by state agencies which tends to go up each year and investors receive their dividends. As the country moves towards more solar and wind, where they should go is a good sign of good things to see in the future.

In many areas of the country, there was surface mining to bring what is down in the ground to the surface. The process is to either dig very big holes in the ground or remove the top of hills and mountains to remove the mineral. In Appalachia the large concentration of coal meant millions of acres of land were used for mining. What happens to the land afterwards?

In an article by Carey L Biron of Reuters, there are proposals to bring solar farms to essential waste land and boost economic fortunes in the area. If the areas have large solar farms, the farms can pay municipal taxes which can improve the lives of the people in the area.

In the article two companies Sun Tribe and Dominion Energy are proposing enough solar farms to power 30,000 homes.

The US government formally began looking at putting renewal energy installations on distributed land including mines and toxic landfills. Since then RE-Powering America’s Land program has mapped more than 100,000 potential sites covering more than 44 million acres and helped establish more than 417 installations producing 1.8 gigawatts of electricity. (Think of the agency as similar to the US Geological Survey which determines where minerals are located).

Linking to dividend paying stocks, we all believe the country is large and it is, but over generations parts of the land has been misused. We can look at agriculture (where early settlers planted crops, the nutrients in the soil was depleted and the solution was move west). In many states because of the farmers moving west the country was populated. For generations we took out minerals from the earth, it is good news to see some of the lands will be used for solar farms. For dividend investors as long as the electricity is being provided, how it is provided does not matter, but when the sun shines and the electricity is produced, it is a good day.

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

All manufacturers hope to make their products correctly the first time and quality control is very important. Without good quality control, the company has to pay for manufacturing costs twice, which is not good. All the savings the engineers found on the production is wasted. Many years ago, American auto manufacturing was so bad, Japanese automobile companies rose from the depths of sales. The reputation of American manufacturing took many years to change and billions of dollars in manufacturing and advertising dollars.

In an article by Hyunjoo Jin of Reuters, Tesla recalled 475,000 Model 3 and Model S electric cars to address rear-view camera and trunk issues. The National Highway Traffic Safety Administration (NTHSA) announced vehicles from 2014 to 2021.

The problem is the camera does not work well because the harness maybe damaged by the opening and closing of the trunk lid preventing the rearview camera image displaying. Drivers have become use to using the cameras rather than the rear view mirror and side mirrors. Car companies introduce new technologies every year and the CES (Consumer Electronics Show in Las Vegas) is a great example to see what could happen. How people use the technology is what engineers need to determine.

Linking to dividend paying stocks, all companies have manufacturing issues, everything rarely goes perfectly, but if the manufacturing issues become a concern and is material companies have to report the concerns. Fortunately in this case, the operations of the vehicle is not affected, just using some of the features. In this particular case the option is to use the side and rear view mirror, but once we start using a piece of technology we want it to work all the time. Change happens to us all, we expect it, want it, embrace it and complain when is does not meet expectations.

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

The US shopper drives the economy for about 70% of the GDP is related to some aspect of shopping or people buy lots of stuff. For the retailer, selling the merchandise at reasonable margins is an art and science. There are formulas to follow, it is an art because people are involved and when the customer leaves with the merchandise hopefully they are happy. Life is good.

In an article by Siddharth Cavale and Arriana McClymoe of Reuters, the only thing not so good on the horizon is the return policy. Retailers wanted to encourage sales because of all the stories about supply chain problems they decided to extend the holiday purchases return policy from 30 days to 60 or 90 days. Analysts expect returns will be in the $112 billion to $114 billion in the coming weeks. The online returns are expected to be $43 to $45 billion.

The issue is does the return policy included shipping costs, cleaning fees and repackaging which means margins go down for retailers.

Consider a sweater price at $100. Most retailers margin on the sweater is 33% or $33 (when the sale is on they reduce the margin). If a shopper purchased the sweater on line, the margin drops to $17 because of shipping fees, according to Alix Partners report from May 2020.

If the customer returns the sweater to the store and it is not resold, the retailer loses $25 in margin. The lost margin goes to $31 if it had to collect from an on line purchase and return it from a customer’s home to distribution centre.

Linking to dividend paying stocks, when you look at retailers stock and see how they benefited from increased holiday (Thanksgiving to Christmas) sales, consider the costs of returns before you jump for joy.

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