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.

For many years, the global supply system has been focused on China doing the manufacturing and loading the products in containers that can be shipped by ocean, then rail and finally truck to the distribution place and finally go to retailers and eventually the consumer. The supply system has made more efficient and billions of dollars in infrastructure are seen in ports around the world. The supply system allowed companies to save money or spend less, do their design and engineering in Europe and the US and manufacture in China. President Trump did not like it and wanted more manufacturing in the US and set out to change the supply system Has it worked? Did companies rush to set up operations in the US?

In an article by Sumeet Chatterjee, Yimou Lee, and Anthony Esposito of Reuters, the supply system is changing but not the way the President Trump talks about the changes. One of the most popular devices is the iPhone by Apple. Apple does not do manufacturing, they contract it out to other companies such as Foxconn Technology Group and Pegatron Corp of Taiwan.

The companies could have move operations to the US, but they chose to go Mexico to increase their operations. The Trump administration is exploring financial incentives to encourage firms to move production facilities from Asia to the US, Latin America and the Caribbean. The USMCA which the President talks about during the election promotes more locally sourced inputs for tariff-free exports to the US.

In 2017, the President said Foxconn would build a $10 billion plant employing 13,000 in Wisconsin making LCD panels. In 2019, the company downgraded the size of the plant. In April it said it would make ventilators in a partnership with Medtronic.

In Mexico, Pegatron are expecting to announce billion dollar expansions to their plants to build chips and other components. Foxconn is expected to make TVs, servers and parts for the iPhone.

Foxconn is also building a billion dollar plant for iPhones in India.

Foxconn Chairman Liu Youngway told an investor conference on August 12, the world was splits into two and his firm is working on two sets of supply chain to service the two markets. The world factory no longer exists and 30% of its products are made outside of China. That number could rise.

Linking to dividend paying stocks, all over the world if any company is very dependent on one market for the bulk of its revenues there is always a risk. Whether the risk is natural disasters (hurricanes, etc) the economy, government stability, and the list goes on. Diversification of revenues is a good thing unless the company has a monopoly or monopoly like structure such as a utility where it can pass along extra costs every year. During the election campaign, there will be many statements about a perfect world, the world is not perfect but try to separate reality for fiction.

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

In November, the country votes for the President and during a Presidential election someone or some country has to be the badman. For President Trump, he suggests China is the bad company, what will be the result if he wins. Will he impose sanctions on China that actually work? or will he say he will be outside of a few plants being announced global supply chains will be basically what they are now?

In an article from Reuters, the China Banking and Insurance Regulatory Commission (CBIRC) has approved a wealth management joint venture between US asset manager Blackrock, Singapore state investor Temasek Holdings and China Construction Bank (CCB) as China gradually opens up its financial sector to international firms.

China is the world’s second biggest economy after the US and top global financial players have long sought to increase their presence in the growing Chinese economy. France’s Amundi SA, Europe’s largest asset manager and Bank of China Wealth Management won approval to set up a joint venture. UBS and JPMorgan Chase are setting up majority owned China ventures.

Chubb Insurance has increased its stake in Huatai Insurance Group to 46.2% becoming the biggest shareholder of the Chinese firm.

Linking to dividend paying stocks, elections in every country are important but they come and go. Where can companies grow their business remains and where growth is happening, large companies will be enhancing their operations. In your investing, look beyond the elections for they are short term blips, what is the growth of the company and how does it make profits? Focus on the important things and life will be easier to handle.

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

If a medium sized business wants to go the next level, to be national in scope, part of the process with be to find more capital or more money. For a long time, part of the process included listing your shares on the stock exchange through an Initial Public Offering or IPO. At the moment, there is another vehicle called SPAC. In an article by Neal Boudette and Kate Kelly of the New York Times News Service, an example of how SPACs are being used to change the traditional method.

SPACs or Special Purpose Acquisition Company or similar to Venture Capital Funds except with a SPAC the issuer raises funds from investors with no set goal other than to deliver a return on investment or give the money back. If you invest in the SPAC you are essentially investing in the manager of the fund and hoping they do a great job. The time frame is the manager has the funds for 2 years.

One of the hottest stocks on the stock market is Tesla. If Tesla is hot, then maybe investing in other electric vehicle makers is also a very good idea. In the article, Lordstown Motors of Lordstown, Ohio is developing a electric pickup truck. The model is out and they need funds to bring it to production. If the truck works well, the company does have orders. The President of the company is Steve Burns. Mr. Burns has team up with a SPAC for $650 million in financing and a listing on the Nasdaq exchange, without the SPAC the listing on the exchange would have taken 1 and half years, with the SPAC the listing is happening in months. Mr. Burns is focusing on fleet sales of the commercial truck market and says orders have climbed from 15,000 to 27,000 since the announcement of the SPAC. If the company made and sold 27.000 vehicles it would have potentially $1.4 billion in sales. Does a company buy from Lordsdown Motors or the competition of Ford, GM- Chevy or Chrysler Ram trucks? Why would the big 3 not have electric vehicles?

SPAC transactions with the automobile business have so far raised over $10 billion according to Kristi Marvin who runs the data site SPACInsider.

Remember, the SPAC makes back its money when it sell some or part of the shares during the IPO, when the market is not hot, the valuations fall. Some companies will succeed, some will not. It is the nature of change in an industry.

Linking to dividend paying stocks, it maybe the Lordstown Motors is able to start production and produce vehicles which is a good thing. The issue will how many vehicles can and will it sell to be profitable, understanding the costs to build an electric vehicle is much less than an internal combustion engine vehicle. When you purchase a dividend paying company, you should have an idea of what the number is and how the company can do the sales volume on a consistent basis year over year. Once you know some simple benchmarks you can determine do you keep your shares or look for alternatives.

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

When most of us in North America think about automobiles, we tend to think about Detroit and the 3 big companies GM. Ford and Chrysler-Fiat. The companies have operations around the world, but we are bias and look to the home market first. There is another market where all the big auto companies have operations in, which is China. The Chinese market does not have 100 years of personal ownership of autos such as the US does, they are a more recent market where automobiles are available and can be purchased by the average mythical family. In newer markets, innovation tends to be the rule. While Americans want power and trucks and SUVs, the Chinese market is more focused on electric vehicles. Partly they do not have the infrastructure for gasoline and electric can be plugged in.

In an article be Norkhiko Shirouzu of Reuters, GM is overhauling its Chinese lineup with greater emphasis on electric cars and smart-driving technology. The reason it is important to GM investors is China has been providing a fifth of its yearly profits.

GM is bring up an electric vehicle for Cadillac as well as Chinese brands such as Baojun and Wuling. Along with Buick and Chevy vehicles, GM sold 4 million vehicles in 2017 and 3.1 million in 2019. Part of the the reason for fewer sales is the tough competition in the marketplace, the formerly very inexpensive and poor quality Chinese vehicles of Geely Automobile Holdings and Great Wall are still inexpensive but the quality has improved. (Consider Toyota and Nissan (Datsun) when they introduced their vehicles to the US, they were inexpensive and not great quality. Now you would not say that).

The Chinese market is over 25 million vehicles a year and GM has a 12.2% share.

New GM China boss, Julian Blissett said in the next 5 years, more than 50% of our capital and engineering will go towards the electrification and autonomous-drive technology. The reason is the electrification of cars is going to happen much faster in China than the US.

Linking to dividend paying stocks, eventually all auto companies will be producing electric vehicles in the home market of the US and technology companies will play a significant role. In the old days, the auto companies would have bought the technology companies but will it be the other way around? Companies adapt to what consumers will pay for? we will be looking to China to see what the new automobiles will be like for American consumers. We do know, electric vehicles are less expensive to make than internal combustion engine vehicles because they have less parts. Will prices go down for the average car or stay the same with higher margins for the auto companies?

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

We are in the midst of elections and generally the elections are something the would be politicians would try to find a cause they can rally the base to vote for them and after the election, things would go to normal. The bogey man is not a simple solution and life continues.

In this election, the nastiest is coming and does come from the top. Trade Advisor Peter Navarro might say the President is working 24 hours on the issues of the day, but in reality he watches too much TV and tweets about what he feels is wrong. You would thing the most powerful person in the US, could pick up a phone and call the President or Chairman of the company and sort things out, but he tweets.

In an article by David Shepardson and Jan Wolfe, the President tweet people should not buy Goodyear Tires because the company has a policy that political attire is unacceptable for the workplace.

Goodyear is a $15 billion company making tires said to be clear, we have a long standing corporate policy of zero tolerance for any form of harassment or discrimination. The company asked its employees to avoid workplace expressions of support of political campaigning for any candidate or political party.

Because of the President’s tweet, Goodyear shares fell 6% but rallied back to where it started from. If the President was not the President, what he did could be called a Securities and Exchange violation.

The local Senator Sherrod Brown said it was absolutely despicable that the President would call for a boycott of an American company, based in Arkon that employees thousands of US workers.

Linking to dividend paying stocks, this year the election is going to be nasty and companies will feel the wrath of one party or the other for misdoings. In the past, companies could avoid saying much, but this year they have to proactive to protect themselves and hope once the election is over, things of this nature will not happen again.

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

In the early 1990’s one of the books which made the best sellers list was by John Grisham. It was similar to his other books, well written moves quickly and based on what could be the truth. The story of the Pelican Brief (made into a movie starring Julia Roberts and Denzel Washington) was someone was killing off Supreme Court judges so new Supreme Court judges could be appointed to make the correct decisions. In this book, the prime reason was a case was coming to the Supreme Court about drilling for oil in the Mississippi Delta where oil and gas was expected to be found but existed a Pelican bird sanctuary.

If you were cynical about the Trump administration, you would say all areas of the US which has resources should be open for business. In part that is true, the administration under the Department of Interior has made resource extraction seemingly its first priority. It is interesting under the Trump administration 14% of the hydro is now comes from solar and wind. As the cost to the utilities goes down and more wind and solar facilities go up. President Trump said he loved coal, but it is expensive and many coal companies have filed for Chapter 11 bankruptcies because natural gas is less expensive and utilities who are biggest customers switched from coal to natural gas.

During COVID two things have happened to oil production, the health reason for staying at home has dropped the demand for oil as commuting slowed down and roads were drive able to those who needed to commute. The second thing is production based on fracking for oil has decreased as expected. The first years of the Trump administration brought a boom in the bringing oil from Texas and North Dakota, however those wells are drying up.

One of the areas of the world, where there are oil and gas reserves is the Arctic, but until now it has been very expensive to bring the oil out due to weather conditions. The global warming including the Arctic makes some of the Arctic more accessible, there are big problems but one was a number of years ago, some of the land was declared to be the Arctic National Wildlife Refuge in Alaska. Essentially the animals were allowed to be free range of people or no oil and gas drilling and then the pipelines to carry the oil and gas to refineries and ships to be sent south to California to be refined.

In mid August, in an article by Brad Plumer and Henry Fountain of the New York Times News Service, Interior Secretary David Bernhardt finalized plans to open up part of the Arctic National Wildlife Refuge in Alaska for oil and gas drilling.

There are on going problems with the Arctic, people believe there is oil and gas in the Refuge but not sure how much. In order to justify drilling, one needs to find a major discovery. In 2017, the Trump administration and Republican in Congress included in the tax bill authorizing the Interior Department to establish a plan to sell leases in the coastal plain. The agency must conduct at least 2 lease sales of 400,000 acres each by the end of 2024. As part of the process the Department of Energy conducted a review of the potential environmental effects of drilling. Their recommendation was for oil and gas leasing of 1.5 million acres of the coastal plain.

Do not expect any rush to drilling because environmental groups have been lobbying investment banking and Goldman and JP Morgan Chase have said they will not directly finance any oil and gas drilling in the Arctic. The other issue is no seismic data has been done on the Refuge lands so if the Trump administration was expecting upwards of $1.8 billion on the leases, the reality might be closer to $45 million. What companies would bid? All the major companies have signed on the Paris agreement.

Linking to dividend paying stocks, at one time there was a clear distinction between the economy and the environment and people voted for the economy. Now the economy is a mixture and there are jobs to be found and created in the environment and people want both. There is a transition, however both sides need to be considered. It is not one or the other, the economy needs both for its citizens to live, work and play. Many dividend paying companies have embraced both, they gain more of their energy from renewals which is a good thing it is less expensive in the short and long run. Cost matters.

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

There are old songs about coins in your pocket including brother can you spare a dime; pennies from heaven; penny arcade and the list goes on. It was a normal thing for people to have some money in their pockets to pay for vending machines, laundry, allowances, the tooth fairy and the list is endless. Then came COVID and as we shutdown, people did not want to deal with cold hard cash or dollar bills. We started using debit more, pay companies such as PayPal, Square, VISA, Mastercard all benefited from increased volumes. What we do not have is coins in our pockets.

In an article by Sarah Skidmore Sell of the Associated Press the Federal Reserve announced in June that the supply system for coins has been severely disrupted by the pandemic. The issue is not the coins themselves but the circulation because businesses and consumers are spending as usual. The US Mint and Treasury Secretary Steven Mnuchin have urged Americans to use coins or turn them in to banks for help for now. At some point the coin supply is expected to normalize.

Brian Wallace, Chief Executive of the Coin Laundry Association noted we provide a basic service, people need to do their laundry. About 56% of the laundromats take quarters as the only form of payment. 89% take quarters as some form of payment with cards, loyalty programs or mobile payments as an alternative.

Quarters were easy to access, go to the bank or the supermarket and they would give you quarters. The Federal Reserve put restrictions on the coins and supermarkets were not accepting cash for a few months, many are now.

Linking to dividend paying stocks, there are many things in our lives which we think as routine as something that always happens until there is a roadblock. Similar to all things in life, in takes time to figure things out but they can be. One of the reason to invest in dividend paying stocks is they should have the ability to weather some time as they sort out the concerns. If the company has been profitable for a number of years, it should have the luxury of time to figure out the roadblocks, if not you need to find alternatives.

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

Very often there are cycles in the investing market, because some industries are more tied to weather than others. One can think about farm implement dealers, they do not sell many machines during the middle of winter. What does a farmer do with it? There are other industries such as home building, in over half the country there is the winter weather. Winter weather means it is cold outside, this means when you look towards home information such as projected home starts you can think about buying the companies which build housing or the suppliers such as Home Depot and Lowes. This year COVID happened and those who typically live in housing have been rushing out to Home Depot and Lowes.

In mid August, Home Depot reported its biggest rise in quarterly same store sales in at least 2 decades. In an article by Uday Sampath Kumar of Reuters, Home Depot recorded an amazing sales growth of 23.4% per store, analyst’s were expecting 10%. Sales increased to $38.05 billion and net income increased to $4.33 billion or $4.02 a share. All very good news as analysts were expecting $3.71 a share.

The stock fell on the very good news. Why because with Wall Street the issue is not what have you done, the issue is what will you do? Home Depot had a record same stores sales, will they repeat it? Now that people have repaired, add on, bought more items from Home Depot will they do it again? The answer tends to be the next quarter will be less. Seth Basham of Wedbush Securities said We will see a slowdown the question is the degree to which the slowdown occurs.

Sometimes when companies perform too well, the stock market punishes them because the expectation is they will not likely repeat it. Sometimes when the company performs badly, Wall Street likes it because there is hope to perform well. In Wall Street there are a lot of depends.

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