Boeing for the past number of years has been the biggest contributor to GNP of selling goods outside of the US. Think about all the manufacturing companies in the US and Boeing’s planes were the biggest contributor or Boeing sold many planes per year.

Boeing’s new plane the 737 Max was on track to continue being the number one exporter in the country, then a couple of crashes happened and the problem was in the computer system. All the countries followed the US and grounded the plane. Thank goodness for COVID meant that Boeing had lots of time to fix the problem. The 737 Max was going to be the cash cow for Boeing for the next 10 plus years.

In an article by Rachit Vats and Eric M Johnson of Reuters, Boeing secured its firs 737 Max order in 2020. Due to COVID, Boeing has received 445 cancelled orders in 2020. It does have a back log of $409 billion in aircraft.

Boeing sold the plane to Poland’s Enter Air. Brokerage company Jefferies said in August, it expects Boeing to deliver 138 aircraft in 2020 down from 380 in 2019.

Linking to dividend paying companies, although the 737 Max is expected to be the cash cow for Boeing, the company is large and diversified enough to deliver airplanes to the domestic,military and space markets. The company continued although not at a pace expected. Boeing has the capability to continue to make profits even though its cash cow was down. It was good news for Boeing to sell some planes and once people feel safe on a plane and can and will fly for business and leisure travel, the stocks will do better. For your investments, how diversified are you companies, could they stand to lose their cash cows?

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

When you think about the global supply system, one of the most important aspects is the containers that move from manufacturing plants to trains to ship yards to ships to trucks to distribution points around the world. The biggest company in the container shipment is a Danish company called Maersk which has 20% or 1 in 5 containers shipped worldwide.

The company has grown to a variety of divisions and in a press release in early September the company announced it was reorganizing its operations. The company had been under pressure from investors to change from a conglomeration to a leaner more focused company.

The company had sold its oil and gas division to Total (the 4th largest oil and gas company in the world, headquartered in France) in 2017.

The company has many brands and its Damco freight forwarding business and Africa-focused carrier Safmarine will be interated into Maersk by the end of the year and the brands will cease to exist.

Maersk has 80,000 employees, between 26,000 and 27,000 will be affected but that does not mean most will lose their jobs. There will some consolidation into back offices and marketing.

Linking to dividend paying stocks, while those of us in North America pay more attention to North America headquartered stocks, investors around the world worry about the same things for companies around the world. Sometimes being a conglomerate is a wonderful thing, sometimes it is not. There is not magic solution but as long as a company is making profits and can pay a dividend, there are less concerns. When the company loses money as world conditions change, then investors around the world will examine is this that best solution? or could something for focused work better?

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

When COVID arrived and the solution to slow down or try to stop the pandemic was to social distance, this meant parts of the economy had to be shut down. The biggest parts of the economy was the travel. hospitality and entertainment. We were all told to stay closer to our homes and if possible work from there. It has been a credit to thousands of companies that work from home can and does take place. For those who companies shut down, the stimulus package gave a $600 a week jobless benefit. The package ended and Congress has been negotiating for a new package. The President wanted to give something, so he signed an Executive Order for $300 from the federal government and some from the state government (understanding many states are running record deficits, they did not sign on).

In an article by Christopher Rugaber and Leah Willingham of Reuters, they examined the details of the Executive Order. The $300 the President signed comes with a host of restrictions and bureaucratic hurdles which means more than 1 million people will receive nothing.

Across the US minimum wage is low and there is a threshold to receive the $300, the jobless must be receiving more than $100 in state benefits to qualify. In addition, the person who is jobless must certify the reason why they are jobless is because of the coronavirus.

Eliza Forsythe an economist at the University of Illinois calculates at least 6% of the people receiving state aid or 840,000 Americans will not qualify for the $300 federal benefit because they earned too little. If people were working in the gig or were on contract, they will not qualify.

Some states are raising their minimums up to $100, so all qualify for the $300. However in states such as Mississippi the minimum payment is $30, Nevada is $16 and Connecticut is $15. The concern is how long will the benefits need to be paid?

Linking to dividend paying stocks, if you own these the idea is the income allows you to top up your other income or you can live off your dividends. For those with limited options, the politicians often present shiny new objects to the public, but similar to most government programs the details or how the program is implement is key. If you have dividend income, that is wonderful but understand the system is not fair to everyone and the COVID has shown many warts in the system. Will they or should they be changed? do not know, but understanding tends to be the start.

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

If you listen to President Trump, the US has stalled the Chinese manufacturing machine because of tariffs and shifting jobs from China to the US. If you examine reality, something else is going on.

In an article from Keith Bradsher of the New York Times News Service, the manufacturing sector of China has come roaring back.

The question is why? China does have a low cost, skilled labor and a very efficient infrastructure system which is very hard to overcome. The secret sauce has been the banking sector. The biggest banks are state-controlled and they have been offering extra loans to cope with the pandemic.

The Chinese government through the banks offered companies extra loans even if the companies did not need it as well as the government issued partial rebates on taxes and other government mandated taxes that together exceed 3% of the company’s sales. The government want to ensure good companies did not fail because of needing a bit of cash.

If you consider what families across the US and Europe working from home, their entertainment and travel budgets went to improvements of the house. Whether that was computing screens, stereo systems, power tools and home saunas. All of which are made in China.

In the article, the stereo system Trueanalog President Philip Richardson said China has the largest supply system of the parts you need to make a speaker, and China has the most stable, affordable labor force. Why would he move operations out of China?

In terms of the Chinese Yuan, the currency has remained weak relative to the Euro and US dollar. Foreign economists believe the state banks were selling Yuan and buying dollars or euros to prop up their currencies. The government says they are committed to maintaining a most stable value for the currency.

Linking to dividend paying stocks, no company exists in isolation. The manufacturing plant opens up but it needs parts to put together or a supply system. It is possible to make every part yourself but most companies as they grow in size and need to have lower costs find it is best to outsource your parts. An ecosystem of suppliers builds up and as long as the manufacturing company is successful, all will be good. As sales go, will the suppliers stay with the lone company or want diversification? Time will tell but some diversification is better than none. As you make your investments, look at the supply system and logistics to help understand the long term potential for success.

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

Before COVID, the Chinese economy has been on a growth rate seemingly forever as the economy grew 10% plus a year. Anything less was a bad year, and that is one of the reasons there are ghost cities in the China. (cities built for 100,000 people but only 5,000 live in them). China also some of the best infrastructure in the world in terms of high speed rail, roads which cross the country, and connections to ports through various countries which China helped build and finance. The building of infrastructure around the world has meant Chinese demand was a prime determination of the price of raw materials.

In North America we expect the data released by the government to be accurate, although political parties will spin the details anyway they wish, but the data is accurate. We do not know 100% what the
Chinese data is, but if the 4 of China’s 5 largest state-owned banks said they have increased their provisions against bad debt to brace for future losses, one can reasonably say the Chinese economy is slowing down.

With China, there are many reasons, some have to do with trade with the US; some have to do with some plants have left China, not to locate to the US but to other South Asian countries; with COVID there was a global shutdown and people and companies stopped or slowed down shopping while we came to terms how to proceed.

In an article in Reuters, the Agricultural Bank of China (Ag Bank), the China Construction Bank (CCB), Bank of Communications (BoComm), Bank of China Ltd. (BoC) and Industrial and Commercial Bank of China (ICBC) all reported increased loan losses.

The ICBC is the world’s largest commercial lender by assets; the CCB is the second largest lender by assets.

Net interest margins ranged from BofC at 1.82% to ICBC at 1.98% and AgBank at 2.14%.

Non-performing loans were generally increased by 1.5%

Chinese commercial banks overall posted a 9.4% drop in first half net profit to 1 trillion yuan or ($190.8 billion) according to the China Banking and Insurance Regulatory Commission.

Linking to dividend paying stocks, in the US the big banks have taken billions of dollars in write downs for possible losses, but in China they may not be able to do that as the shareholder is the state and the state does not want to report perfect numbers. At some point all investors have access to the same numbers and what you see or do not see is your view for the future. As an investor you need to be somewhat cynical, but if profits come in which translates into dividends optimism will reign.

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

If you listen to some of the economic advisors to President Trump, particularly at the Republican convention, you would may think the economy has turned around and we are going to have a V shaped rebound. In every economy, credit and access to credit makes the economy forward or backward. In a recession, bankers stop giving loans to small and medium sized businesses, even those that could be expanding. This action causes the economy to contract even more, which suggests one method to determine how the economy is doing is looking to the big banks of the country and access to credit.

Generally the big banks, which are the banks too big to fail, have a great impact on the economy both in the cities where their headquarters and back offices are, for those jobs tend to be steady. Most of the time working for a bank means a job for a number of years. The banks make money, the determination is how much and relative to each other.

COVID came along and the heads of the banks said as best they can, they will not lay off anyone in 2000 because it is the wrong thing to do. However, with people working for home bank executives and other executives around the economy are determining people roles or staff can be cut. Management has been surprised that people working from home can be productive as they come to the office. Sometimes more productive because the lack of commuting, people work longer hours for the same salary.

In an article by Elizabeth Dilts Marshall. Anirban Sen and Imani Moise of Reuters, it is expected that banks will trim their payrolls by 5 to 10%. Most of them will say it is part of a strategic plan but in reality the reason is they can. In a related article Coca-Cola is offering buyouts as it slashes jobs. Expect more large corporations to cut payrolls because they have more people than we need, which is the opposite effect if the recovery was a V shaped. Banks are suggesting the recovery will be more of a L or W, time will tell.

Linking to dividend paying stocks, in the service economy the biggest expense tends to be people and all companies are using or examining artificial intelligence and digital solution to cut costs to use less people. (one bank uses AI to predict based on income and expenditures to their accounts who will make and those who will likely miss a payment). Everyone at the institution thinks it is the correct thing to do because the layoffs will affect the other person. As an investor, you want the company to continually examine costs to keep them low to ensure profits come on a regular basis to pay for the dividend. The investor in you and the social person tends can conflict particularly if you know someone, but life goes on.

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

When you are looking for dividend paying stocks, you are looking for utility type stocks which has the ability to pay dividends every year and if the stock has growth that is a bonus. One area of focus is waste disposable companies because they sign contracts to pick up and dispose garbage. The contracts do not say how much, but we do know if people recycle more, that aspect the city can gain some of its money back from the garbage contract. The waste disposable company picks up both – recycling and garbage.

In an article by Paolo Satnalucia and Nicole Winfield of the Associated Press, they examined the amount of garbage collected in Italy. Italian researchers estimate that during the month’s of Italy’s lockdown in March and April, production of garbage fell 500,000 tonnes or 10%. The bad news is given the use of masks and gloves, garbage is expected to rise 300,000 tonnes. The Italian Institute for Environmental Protection and Research expects the new garbage will offset the old garbage.

If you think about shop and delivery at home, the packages come with plastic because that is a good way to protect the goods inside from the handling which must be done. The bad news is the plastic ends in thee garbage and some of it gains entry into the water systems. If you think about the some of the pictures of the Italian coastline and the Mediterranean Sea, Keiron Roberts, an environmental research fellow at the University of Portsmouth in England, says because of rain and runoffs at garbage sites, no area of the Mediterranean Sea where plastic has no impacted the shoreline.

In 2018, Italy’s National Center for Research reported the presence of microplastics on surface seawater off Italy’s coasts was comparable to the Great Pacific Garbage Patch. (there are You Tube vidoes to see people try to clean up the plastics in the Pacific).

Global sales of face masks is estimated to increase from $800 million in 2019 to 166 billion in 2020.

Linking to dividend paying stocks, in one of the classic movies The Graduate, Mr. Robinson says to Ben while he is in laying on a raft in the pool says the future is plastics. With more home deliveries plastic plays a role and cleaning up plastics will have to play a bigger role when people want to go to the sea again. One day, one of the chemical companies will figure out how to make plastic breakdown naturally, but for now there will and are companies that need to pick up garbage and clean the garbage from the oceans. Recurring income is the connection to a profitable investment.

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

We have just passed the summer months of July and August and for most people in the US it has meant relatively good weather, most of the time. It might be too hot or too dry, but not too cold. At some point people want to travel for day trips or weekend trips or a week or two. Most of the travel would have been by a car or truck. It is wonderful to have a car to travel the open road.

If you work in the auto industry, the desires for travel have not changed, but how travel is done is changing. If your family lives in the suburbs, one of the needs is a car because transit is not very good or one has to give yourself extra hour commuting both ways. But the closer you live to the city, the car may be nice but not necessarily a must. There are options to use car sharing apps – Uber or Lyft and at the present time comparing costs, there is very good reasons not to own a vehicle.

If you think of the iconic names in the car business, Ford comes near the top of the list. Most people will have heard about Henry Ford who started the company, and maybe the great grandson Bill Ford is the Executive Chairman and the Ford family owns the Detroit Lions NFL football team.

In early August, Bill Ford announced a new Chief Executive Jim Farley will lead the Ford Motor Company. Besides the COVID situation which has reduced commuting and demand for new vehicles, there is a change from internal combustion engines to electric vehicles going on in the industry. At the moment, the biggest competition is in higher priced vehicles. This leads a problem for the older vehicle makers, the internal combustion engine takes more parts to build than does the electric vehicle or they can not be built in the same factory. If you think about vehicles today, often the company could produce more than one car on the factory. The base was the same but the interiors were different, which lead to different pricing of the cars. To build electric vehicles will need new plants and they have to keep producing the internal combustion vehilces.

In an article by Tom Krisher of the Associated Press, Mr. Farley worked for Toyota, joined Ford to run its marketing division in 2007, had been promoted to the chief operating officer and equally works well with Mr. Ford.

There are many challenges for Mr. Farley: he is trying to achieve a 10% profit margin in North America; seeking immediate material and warranty cost improvements, fixing under-performing businesses, maximizing opportunities in commercial vehicles and outperforming the industry in rolling out new models.

Ford is a 117 year old company and Mr. Farley said its competitors are Amazon, Baidu, Tesla, Apple and Toyota. He did not say GM and Fiat Chrysler.

In recent years, Ford had gone to selling trucks, SUVs and cars under the Lincoln brand but fewer cars one would see in the suburbs. Mr. Farley wants to add a more affordable products in a profitable way.

Last year Ford profit went down $3.6 billion as it lost $2 billion in the first quarter, but did better in the 2nd quarter with a $1 billion profit. Mr. Farley has his work cut out for him.

Linking to dividend paying stocks, as individuals you can like or love the story of the automobile companies and hopefully over the years you have driven as many brands as possible and you like one more than others. Vehicles are part of life and will not be changing, it was ironic the price of gas fell to some of the lowest levels in years and the public did not buy because of the public health order to stay at home. There are many challenges to every industry and the competition changes in ways most of us do not think about. Did you think Amazon was a competitor of Ford? When you buy dividend paying stocks, you have the luxury of buying time before changes impact the company, but changes do come so that is why doing your homework and staying abreast of alternatives is a good thing.

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

In times of summer and COVID, one of the books being read is one titled London written by Edward Rutherfurd published by Fawcett Crest, NY, 1997. The book is a history of London, England through the fictional lives of a family. Generally the family is not the main characters of the chapter but through their profession is on the edge of power.

The context of the characters are both are merchants, for in 1066 England most people did not have money, the non rich were a combination of slave, serf, freeman who pays rent and generally living in the country. The nobles tended to own the land, the merchants need loans to buy goods, in order to sell them to repay the loans and make money to do it all again. That was a normal part of business and always will be.

In the chapter, the author adds a piece about chess and debt. The characters are playing chess and in chess you have to think 5 moves in advance. The writing goes as follows:

Two people are talking:

Who, generally is stronger, a man with cash or a man with debts?

Answer a man with cash.

Suppose that man owes you a debt and can not pay?

Answer He will be ruined.

But then you lose what you lent him?

Unless I seize all he is in payment, but if that is worth nothing, then I lose.

So as long as he owes you money, you fear him?

I agree, consider what if this man can in fact pay you what he owes, but chooses not to?

Now you fear him because he has your money, but since he can pay, he does not fear you.

I agree

Suppose you need that money badly. He offers to settle for less than he owes. Do you take it?

I might have to.

Indeed, you might have to. And now, do you agree, he has made money out of you? Because of the debt owed, he was stronger.

It will depend on whether he wants to do business with me again.

No it will depend on many things. On timing, on whether you need each other, on other opportunities, on who has the more powerful friends. It is a question of hidden balances. Remember this: Men trade for profit. They are driven by greed. But debt is about fear, and fear is stronger than greed. The true power, the weapon that defeats all others is debt.

Fools search for gold. The wise man studies debt. That is the key to all business.

Linking to dividend paying stocks, at the moment debt for companies can be had for very low interest rates, should a company add more debt? If they can afford it is the answer. If the debt is to pay shareholders, that is a one time event, how will the debt be repaid? Debt is always a double edged sword – it can be very useful and not to use debt is silly. However, too much debt means Chapter 11 bankruptcy hearings. Debt can and does change relationships, use it wisely.

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