The word inflation is beginning to raise its head and inflation means higher interest rates and higher interest rates mean alternatives to stocks. It is never ending story line because it is true. One of the reasons it is true is the world is awash in bonds.

In an article by Marc Jones and Tom Arnold of Reuters, they took a look around the world to examine the debt levels of countries. Everyone knows about the G7 countries and how much debt they have, but what do other countries debts look like. The reason it is important are 2 fold: they push up borrowing costs and cuts the premium existing debt offers investors compared to the ultra safe and liquid US Treasuries.

Bank of America estimates emerging markets will sell more than 3/4’s of a trillion dollars worth of debt this year – $210 billion by governments and $550 billion by corporates.

Brazil and South Africa are countries whose combination of persistent weak growth, rising public debt, very steep yield curves with very high long-term real interest rates has become a big source of concern said David Lubin, Citi’s managing director and head of emerging markets economics. Mexico might also be on the list.

Ricardo Adrogue, head of Barings sovereign debt and currencies group, said we could be at the door of a big, big economic boom. Some of the these countries that seem hopeless today could actually be okay.

Some of the countries might not be so lucky, such as Ethiopia who is about to become a test case for the new Group of 20 Common Framework debt relief plan, which stipulates private creditor debt must also be restructured, meaning the government has to default.

In May, Belize was expected to default in May. In June and July Laos and Sri Lanka have key payments. JPMorgan lists 16 countries at risk for defaulting from Cameroon to Tajikistan sitting on $61.4 billion in debt.

Tellimer’s senior economist Patrick Curran has a list which includes Jamaica, Tunisia, Ecuador, Sri Lanka, Belarus, Ethiopia, Laos, Bahrain and Oman.

Countries such as Mexico, Jamaica, Panama, Mauritius, Montenegro, Jordan, and Fiji where tourism accounts to 10% of GDP, will wonder whether vaccines will come quickly enough to save their busy seasons this year.

Linking to dividend paying stocks, many large corporations have operations outside America and there are always good and bad aspects to it. The good is more goods and services are sold and the company has a diversified income streams which allows stability in earnings. The bad is not all companies operate the same or similar to America and risk and returns come into play. Unless the company has moats or is near monopoly, running a profitable company over the years requires good management and execution a strategic plan on a consistent basis.

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

If you think about the office workers in the big downtown office towers, most of the people who came to the towers worked from home. How did they do this? One method was to use Zoom, as well as other access to the workplace, but Zoom allowed meetings to happen. It was possible that people could have called in, but meetings are more effective if everyone can see each other. Facial expressions tell stories.

In an article by Michael Liedtke of the Associated Press, Zoom’s growth is tapering off. The issue will be what will Zoom look like in one year’s time? President Biden has announced every who wants a vaccine can get in by the end of May and companies are looking at the real estate they pay and saying I want some bodies in them. It does not have to 100% all the time, but 70% is expected. Who stays home and who comes will be issues companies have to figure out. In the meantime, Zoom announced their year end results.

Zoom finished January with 467,100 customers with at least 10 employees that were paying for the subscription version of the its service. This was an increase of 33,400 customers, but below the gains of 63,500 and 183,500 in the previous 3/4’s of operation during the pandemic.

Zoom posted revenue of $882 million in the quarter or $2.65 billion for the year. That was 4 times more than the previous year. Profits jumped from $15 million to $260 million.

Zoom is introducing new services such as internet phone for voice-only calls of which it has 10,700 customers.

The company has $4.2 billion in cash and a stock price around $400 which allows them to merge or buy another company.

Linking to dividend paying stocks, while Zoom is not dividend paying it did benefit from a trend in society and almost overnight it was a success story. The trick with dividend paying companies is they are profitable over many years and can pay dividends. Sometimes you buy growth, but for dividend buyers you are buying profitability over the long term.

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

One of the best successful investors over the years is Warren Buffett, he controls the company called Berkshire Hathaway Inc. and every year he sends out a letter or press release of how he feels the economy will do in the future. Considering the holdings of the company which is based in Omaha, Nebraska including BNSF Railway, Geico car insurer, Dairy Queen ice cream and See’s candies. Berkshire Hathaway also has a sizable stock portfolio including $120.4 billion of Apple.

In an article of Jonathan Stempel of Reuters wrote an article about Mr. Buffett’s annual letter to investors or press release.

Berkshire Hathaway bought back $24.7 billion in stock, as he considers it undervalued and he is optimistic the stock will increase in value. His conclusion to the letter is Never bet against America.

He called the investment in Apple, the BNSF Railway, Geico and insurance and Berkshire Hathaway Energy the crown jewels or core holdings. The net income for the company was $35.84 billion in the quarter and $42.52 billion for the year. Operating income fell 9% to $21.92 billion.

In terms of cash or cash equivalents, Berkshire ended the year with $138.3 billion.

In 2016, Berkshire bought Precision Castparts Corp and until people stopped travelling it was a good buy. Since the pandemic the company has laid off 40% of its workforce and Mr. Buffett took a $9.8 billion write down of assets.

Linking to dividend paying stocks, Mr. Buffett over the years has great success in buying companies that are near or function similar to monopolies because they have wide moats or large barrier to entries for the competition. The companies tend to produce excess cash which Mr. Buffett can use it on a regular basis to help bail out companies that have slipped a bit but should have the ability to generate cash flow. The formula works because of the excess cash flow which can be redeployed into other businesses. Over a period of time it is an excellent formula to pursue.

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

Sometimes you can read reports or books for seemingly different reasons and they have a part of a chapter as background and it means something more than what the author had likely desired. Recently read a book called In the Wake of the Plague (about the Black Death) and how the world was changed written by Norman F Cantor, published by Simon & Schuster, NY, 2015. In the book, the focus is on what happened in England, but the reality of Europe was similar to matter where a person was.

90% of the wealth of England in 1340 lay in land. Of this land, 40% was owned by the king and royal family and the high aristocracy that usually carried the titles of duke, earl, baron or lord. Another 30% was held by ecclesiastical officers (the church) and corporations. About 30% was held by rural upper middle class who came to be called the gentry, the remaining 2% was in the hands of free peasants, later called yeomen.

In England, before the Black Death there was about 1/2 million people in the gentry class. In 1400 that number was half. The family income varied from the equivalent of $50,000 to $3 or 4 million. The lesser gentry was sometimes called esquires. About half the gentry were considered knights to be Sir … If a person was a Knight there were other duties such as increased military and tax liabilities, extra hospitality and entertainment budgets. If the King toured the country, he often stayed at Knights’s homes.

Marriage, the production of progeny (or male heirs) and inheritance were the core of gentry life. If the King favored the gentry family, he often added lands or income. In the country a person could increase the wealth by good estate management. In the gentry class and above, a good marriage is one in which the bride brought in a dowry to the new family. If the family was fortunate to have children to inherit the estates, it was possible for the estate to remain intact for centuries.

When the Black Death was over, many people died including those that would typically inherit the estates, this lead to many squabbles which meant send in the lawyers. One of the beneficiaries of the many deaths was the need for common lawyers to settle out the issues. The lawyers became so expert in doing the things that needed to be done that a body of real estate law was created and largely remains in tact today.

The other beneficiaries were the women of the gentry class. The common law had a procedure for protecting widows, partly because the gentry landlords engaged in serial marriages with wives who died like flies in childbirth and were often gone by 30 years of age. The law said every widow had a right to “dower” or 1/3 of the income of her husband’s estate until she died. Within 40 days of her husband’s demise, she was suppose to leave the family estate, but at least she had income to live off. With these rules or laws, people lived lives around and with them.

Linking to dividend paying stocks, the most important aspect is the stock continue to pay a dividend, then it can be spent, saved, buy more assets, go towards an inheritance and continue the family name, but it all starts with income on a continuing basis. It may not be overnight riches but it can be lasting and fulfill your and your families desires both in and out of the grave.

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

Sometimes you can read reports or books for seemingly different reasons and they have a part of a chapter as background and it means something more than what the author had likely desired. Recently read a book called In the Wake of the Plague (about the Black Death) and how the world was changed written by Norman F Cantor, published by Simon & Schuster, NY, 2015. In the book, the focus is on what happened in England, but the reality of Europe was similar to matter where a person was.

The nursery rhyme Ring Around the Rosies, a pocketful of posies, Ashes, ashes, We all fall down was about the black death, fortunately by the time people sang about it very few memories were around.

In terms of this blog, the aspect of the book that was interesting was about Europe’s wealth. It was in the hands of about 300 families and 4 dozen were in England. The wealth of the Dukes and Princes was very likely a billion dollars in today’s money. In England, the House of Lords, Parliament’s Upper Chamber was composed of the head of each billionaire high noble family, a heir, and 30 bishops from the Church.

The impact of the plague was individual rather than collective. Their cash flow was so high, their lifestyle so lavish, that they had a significant influence on the economy.

The pace of life these nobility set and the luxury goods they cultivated also had the effect of pressuring the less affluent nobility to imitate them as far as their more constrained resources allowed. Living on credit because as common among the landed class as it is in American society. The Florentine (Florence, Italy) and southern France bankers allowed huge debts to run up at very high interest rates. The banker’s loans were ultimately safe if given to the highest of aristocrats because of their immense wealth made repayment possible. However when King Edward III defaulted on his loans a number of Florentine banking houses went into bankruptcy.

The strange way the Black Death affect the awesome Plantagenet family. When Princess Joan died, she did not marry into the Spanish Castile Royal family. Although the political connections of marrying into the Royal family were never regained, it did allow John of Gaunt to inherit the vast dukedom of the Lancaster which shaped the events of English history. The folks were content was the Florentine moneylenders, John of Gaunt was to remain solvent and retain his leading billionaire lifestyle. In the next segment, interesting research on land will be presented.

Linking to dividend paying stocks, in every society there are wealthy people and they set the news and make the headlines for their concerns. Most of us roll along with the ebbs and flows of society, but the basics of money are the same, the wealthy often operate on credit, but they have income to pay it back. In your lifestyle, you can ensure that income comes in on a regular basis to help you pay back the bills of the banks if needed or buy more income producing investments.

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

Most people know that in 1492 Columbus said the oceans blue and discovered the Caribbean for Europe. The first few years were relatively peaceful until ships starting bringing back gold and silver and then Spain sent in the Conquistadors to takeover Mexico and Peru and transfer wealth to Spain. This made Spain the wealthiest country in the Europe and for a number of generations Spain was the most important country in Europe both economically and given Spain was Catholic, it had a big impact on the Catholic Church in Rome. What most people never ask is why did it take until 1492 before Columbus sailed the ocean blue?

In watching a video of Knights Hospitaller and Siege of Malta, there was a good explanation. For generations, the trade route for spices and other goods from India and Southeast Asia came up the Red Sea through the Nile and ending at Venice where it was distributed by merchant fleets. Venice was the distribution city. If you think about Shakespeare’s Othello, this is the setting in Venice. For generations, the trade routes worked for both Christians and Muslims. Then something changed.

The Ottoman Empire expanded through north of Turkey to the Balkans and controlled the trade routes in the Mediterranean control was both by land and sea and thus the cost of goods increased and when prices increase, merchants and citizens want an alternative.

The alternative was at the other side of the Mediterranean Sea between Spain and Morocco is the Straits of Gibraltar. It had not been profitable or desirable to look to the Atlantic Ocean because no one really knew what was there besides ocean. There were many theories including the world was flat and people would fall off the edge. Was it true? how many came back? Ships were built to travel along the coast and in the Mediterranean Sea not the Atlantic Ocean and everyone knew there was and can be storms. There can also be clear sailing.

At some point, there was a decision that the Mediterranean was too hostile to continue the same routes and alternatives needed to be found. The old route was not worth fighting over because the rate of return on capital was falling to negative.

At the time of Columbus, Spain was not a rich country, but there was stories and growing evidence there were riches out there somewhere. In our time, we would say Venture Capitalists took a risk on Columbus’s journeys and won big. On subsequent journeys, the Incas gave the Spanish gold to go away, but when it reached Spain, Spanish dollars danced in the Treasuries counting houses and Spanish troops were sent to bring back the gold. The stories of privateers and capturing one ship from the Spanish and bringing it to England or the Netherlands allowed the captain and financiers of the journeys to be millionaires and set up the advances in the arts and business in the countries.

Linking to dividend paying stocks, the Europeans call the time Europe went into the Atlantic Ocean the Age of Discovery and similar to many ages, the reason why it started was to find alternatives or to find more wealth elsewhere. In our society we continually do this – think about the alternatives when the pandemic hit stay at home stocks similar to Zoom and software companies to do the things companies used to do in office buildings. Finding alternatives or trying to maintain healthy margins is a normal thing in business and why there is constant change.

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

If you consider the baby boom generation, they are getting older and many are or will be in retirement years. The wave of people which is wonderful if they have a good retirement including dividend producing income, also comes with the reality that as a person ages, hopefully wonderfully, their body will break down. It may be physically, it may be mentally, but at some stage the body tends to break down.

In China, the country had a one child allowed for a number of years, the upside of the policy is that many Chinese are getting older quickly and what will they need as they age – retirement home living or home care. In an article by Alexandra Stevenson of the New York Times News Service, China’s looming elder-care crisis provided an opening for fraudsters and Ponzi-like investment schemes. By 2025, more than 300 million people in China will be 60 or older, according to the Chinese government. By 2050, that number is estimated to rise to half-billion.

Traditionally, Chinese families have take care of elderly parents (if you only watched the Disney movie Mulan – the ancestors song). However in the wake of the one-child policy and mass migration to the big cities, fewer people can care for the greying population. The most vulnerable are known as the “3 nos” – no family, no financial support and no ability to work.

What is the government to do? one would think as a Communist government the government would subsidize housing, but the government is not that communist. The government has turned to the private sector to build retirement housing, however the month bill averages $1,500 a month, but the average income to pay is $535 a month. There is a short fall.

The result of the shortages is numerous schemes to pay monthly to secure a spot in an retirement home. The problem has become so widespread, Chinese top judicial bodies have labelled the retirement industry one of the sectors hit hardest by what they call illegal fundraising. China Central TV, the state broadcaster, recently called retirement investment funds with high returns a “fairy tale”.

Linking to dividend paying stocks, the reason to invest in them is to increase wealth over time or when you are ready for retirement or in retirement, you have options. Hopefully you have other income – private pensions and combined with the government pensions you have an ability to afford private care if needed. With money there is always the opportunity to have fraud, your task as an investor is to be skeptical with high returns, but expect consistent returns over a long period of time. Have relatively easy methods to ensure you can leave your money, are the companies profitable? can they pay their dividend? then you can sleep well at night and have money when you need it.

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

One of the advantages of investing in a company is to vote for management compensation, the auditor and management concerns at the annual meeting. Every company spends a great deal of time and effort at the annual meeting and shareholders can ask questions. It is something you can do and something you should do.

In an article by Edward Waitzer and Toby Heaps, the make up of the biggest owners is changing. According to a Havard study, 3 companies hold 1/10 of the the world’s securities are have $19 billion under assets. The 3 companies are BlackRock, Vanguard and State Street. In 1998, they held 5.2%, in 2017 it was 20.5 % and if trends continue the number will be 40% by 2040.

The 3 companies are beginning to be more visible in attempting to influence corporate conduct. If you were on the Board of the companies, ensuring the management recommend votes is very important to the annual meeting. If the Board were to ensure the big 3 voted in their favor, along with other institutional investors doing the same, votes would very easily pass.

The authors explained passive investment is not neutral and what the companies say they are going to do, what timeline they give to the company and how they vote can be a mismatch. The issue is many people give the funds the vote by default, sometimes it should not be that way.

Linking to dividend paying companies, the large index companies hold all these companies in their indexes and likely will vote for the management 999 out of 1,000 times, and maybe more. As an investor you are concerned about continuing to be profitable and pay a dividend, but similar to people around the world, you might want to ensure the company has your values and is increasing them. You picked the company for a reason, besides it is profitable, maybe because you think it can be leader in making the world a better place. Ask at the annual meeting.

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

Whenever you invest, the choice is always what are the alternatives and how much risk there is. If the alternative is to by a Triple A bond yield 10% or invest in the stock market and hope, you might logically pick the bond. However in our reality, interest rates are close to 0 and one of the most important people who have a say on interest rates is Federal Reserve Chair Jerome Powell.

In an article by Howeard Schneider and Ann Saphir of Reuters, Mr. Powell said interest rates are not going up soon. Mr. Powell testified before the US Senate banking committee, the proceedings are televised and the words of Mr. Powell are analyzed in many reports afterwards. In the hearing, Mr. Powell said expect us to move carefully, patiently, and with a lot of warning. (if policies change to raise rates, it will not be a surprise).

The Fed has helped the economy through a $120 billion in monthly purchases of bonds both government and corporate. The policy is continuing for the forseeable future. Mr. Powell talked about the missing 10 million jobs, not pressure on the economy expanding. Mr. Powell recognized reality by saying the economic recovery remains uneven and far from complete. In the Washington Post, there is a running total of the number of people vaccinated. Mr. Powell said the economy or the return to normal depends on the number increasing to much higher numbers.

Linking to dividend paying stocks, with low interest rates investing in profitable companies which pay dividends is a very good alternative. If and when interest rates go above the average dividend yield, then money will flow to alternatives even though some do not debt. The world has $23 trillion in government spending and we still have low rates, perhaps dividend paying companies will never go out of style.

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