In late December, the Board of Directors of Boeing met and decided CEO Dennis Muilenburg had handled the crisis of the 737 Max Jetliner wrong and for the company to regain the confidence of the travelling public, he had to go. It was not that he could correct the software but as the face of the company, he seemed not to give the empathy the public was seeking. It seemed to the public, the CEO was overly optimistic when the 737 would be flying as opposed to saying when we all governments signed off on the safety, we will fly. If you were flying would you be comfortable flying on a 737? You maybe but it would likely be in the back of your mind, no.

The stock market react positively to the news, however much effort will need to be done.

Linking to dividend paying stocks, companies similar to Boeing have many revenue streams, for Boeing they have other planes, they are involved with NASA, they are involved in the defense industry and President Trump increased that budget, so although the 737 Max is important for the years to come, Boeing is still a large and important company to the government of the US. In addition, Boeing major competitor is Airbus which is an European based company, can you imagine the US not having an aircraft company? The company has many elements going for it, but if the CEO does not make its customers and suppliers have confidence then changes had to be made. If you own the stock, watch for the better because the stock seems to have a bottom for now.

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

For dividend investors, you have to look at utility companies because they have monopoly like competition and utility rate boards who tend to give the utility an increase in rates every year. For the companies, all utilities have an ongoing appetite for capital and one firm they all look towards is Zimmer Partners LP and its founder Stuart Zimmer. The firm Zimmer Partners is a $9 billion hedge fund and is focused on energy and utility companies.

The President and CEOs tend to meet the hedge funds at conferences and as large shareholders, each President and CEO needs to know what is the intention of the fund. One such case is a utility called Fortis which is headquarter in Newfoundland but owns utilities across North America including ITC Holdings in Michigan. According to Andrew Willis of the Globe and Mail, Zimmer Partners owned a large share of ITC and when Fortis bought the shares, Fortis pitched an exchange of ITC for Fortis. Zimmer said no.

Over the years, the relationship has grown through attending conferences and industry events and the respect of Zimmer Partners and how the utilities work has been strengthened. At one event, Mr. Zimmer said he was open to increasing his size of his position in Fortis.

Fortis’s goal was to take the risks of equity financing off the table over the next 5 years, by accelerating our equity needs today and presenting the market with one large deal. The way it worked was Fortis negotiated a $500 million stock sale to Zimmer Parners and then worked with a syndicate of 11 investment banks to sell $690 million of shares at the same price. Fortunately for Fortis the public offering sold quickly.

Fortis saved money on commissions with the sale to Zimmer and Fortis was able to cancel plans to raise $1 billion from what is known as at the market or ATM. An ATM allows a company to bring in cash constantly by quietly selling small amounts of equity on a daily basis.

Linking to dividend paying stocks, in the financing of companies there are many options and similar to the individual if a company can save money by using the resources to its advantages that is a good thing. Companies such as utilities have an on going capital requirements, they need to be well run and use hedge fund owners for the purposes the hedge fund owners find mutually agreeable for the long term term.

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

As investors, you invest in corporations and hope to generate income and capital gains, in makes you a little bias towards corporations not paying too much tax. The President decided to cut taxes for corporations and some of the wealthy,

In an article by Jeff Stein and Christopher Ingraham of the Washington Post, a report by the Institute on Taxation and Economic Policy, examined 400 of America’s largest corporations and their average tax rate was 11% of their profits. The 11% is roughly half of the official rate established under President Trump’s 2017 tax law.

Similar to individuals, corporations receive deductions, tax breaks to lower the bill. Included in the 400, were 91 corporations which paid no federal income tax. One of the effects of not collecting tax is the federal deficit rose to nearly $1 trillion. In October, the US Treasury Department announced the deficit had grown $205 billion or 26% in the past year, even though their was strong economic growth. Corporate tax revenue fell from $300 billion to $204 billion in 2018.

For investors, much of the extra capital went into record stock buybacks, which helps increase share prices without requiring new investment or hiring. .

There were a few companies such as Activision Blizzard which makes video games received a refund, they had $447 million in profits and received a tax refund of $243 million of an effective tax rate of -54.4%. The US Treasury noted negative corporate tax rates can occur because a corporation carries back excess tax deductions and/or credits to an earlier year or years.

Linking to dividend paying stocks, as investors you want the company to make a profit and pay dividends. As a citizen you want the company to make profits to pay a reasonable share of taxes, outside your tax bill will tend to go up. There should be some sort of balance, perhaps the balance is tilting too much towards corporations, but with this data, you need to see what will happen next year.

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

A number of years ago, there was books and articles about how high frequency traders were getting a little closer to the stock exhanges in order to very quickly analyze and make trades on the information they received in less than a second. For most investors, it was interesting but whether you received an extra cent or not did not matter, for most investors buy something to hold it for longer than a month. If you are buying for the dividends, your holding can be years.

In an article in Reuters, a rogue trader has been misusing audio feeds from the Bank of England news conferences. The Bank of England had been using a third party supplier (not usual) but the third party was compressing the sound and sending the feed to high-speed traders who could have a 5 to 8 second head start.

The Bank of England has identified the problem, identified the supplier and possible court cases are being examined. The Bank of England said this was wrong, the supplier was not identified but the Bank of England has blocked their access.

The intention of the audio feed was as a backup in case the official video feed of its news conferences failed.

Hedge funds have long sought to steal a march on their rivals and have an edge to produce better than than market indexes.

Linking to dividend paying stocks, in every industry there are people trying to get the edge and depending on the trading you do, that is what you have to do. Last year my funds were up 20% which is a good number with low risk. Sometimes the best solution is the solution which has worked over the year. Buy profitable companies which pay a dividend and they will trade at a higher multiple because they make money.

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

Most of have a vehicle or access to a vehicle and we know a little about the auto industry. Some of us have the vehicle we drive and the one we wish we could, if money was no object. If your brands were Fiat, Chrysler, Jeep, Dodge, Peugeot, Opel then they will be owned by the same company. In an article by Eric Atkins of Reuters, Fiat Chrysler and PSA (formerly known as Peugeot) will be merging in an all stock merger.

The results will be the 4th largest auto maker and the hope is the company can save $ 4 billion on costs. 40% of the savings would be achieved by sharing vehicle structures and powertrains; 40% will come from purchasing efficiencies. The rest will come from marketing, information technology, and logistics.

At the moment, the company has said no job losses, but there will be plant excesses for the combined companies sold 8.7 million vehicles but has the capacity to produce 14 million vehicles. A focus of the company will be develop cleaner vehicles to sell to Europe and China. At the moment, Carlos Tavares the CEO of PSA and soon to be the CEO of Fiat Chrysler PSA said the brands will stay in their countries of origin – Italian brands in Italy, French brands in France, American brands in the US and German brands in Germany.

Linking to dividend paying stocks, all companies can and do go through mergers and acquisitions, when they do you have to ask why did the company make the decision and for you was it a good one. If the answer is yes it is good, then you can hold or you can see if the company achieves the efficiencies it says it will do. If they do not, then looking for alternatives is a good thing.

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

All economists need data to look back in order to project into the future and some of the most important data from the government is how is the housing market doing? The good news as reported by Lucia Mutikani of Reuters is US homebuilding increased more than expected in November and permits for future home construction surged to a 12 and half year high as lower mortgage rates continue to boost the housing market.

From the housing market, there are a number of expectations, one anyone who buys a new home must also furnish it – need appliances and many other things. Likely the owner will need a vehicle or they are spending money in the hopes their neighborhood will rise in value over the years. Often times, those buying a home are seen as stabilizing force because the bank has determined their stream of income has the ability to pay the mortgage until renewal in a few years.

The other piece of information was manufacturing – although the GM plants boosted automobile plants; Boeing is still having problems with the 737 Max Jetliner and has slowed or stopped production.

For housing the seasonally adjusted rate is 1.365 million units. As expected at this time of the unit, there were more starts in the South than the Midwest and Northeast. Although it is good that single family housing is being done, the reality is many Americans can only afford to rent and multifamily buildings did jump 4.9% to a rate of 427,00 units in October.

Linking to dividend paying stocks, every month there is new data to examine but you need to look at a snapshot to ensure your personal view of the world or the economy is what is happening. The home building index and the manufacturing output gives you an indication of what is happening. It is important to note the economy is heavily oriented to services and retail shopping, but all indexes gives you the ability to see a trend. Is that a good trend? If yes then you may not have to any adjustments to your portfolio. If the trend is no, then you need to check if the profitable companies you own can continue to pay their dividends.

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

Planes are an important aspect to the US economy providing billions of dollars to the export market and allowing US carriers to add more routes to carry more passengers. For Boeing, the 737 Max was expected to allow Boeing to be their cash cash for the next decade, but there is something wrong and Boeing has suspended production of the plane. In an article by Eric Johnson and Tim Hepher of Reuters, they decided to look at which companies supply Boeing and are being affected by the suspension of manufacturing.

In Wichita, Kansas, Spirit Aerospace they make the fuselages for Boeing. (Think of the auto companies who put together the parts which are outsourced from somewhere else). Their production was 52 fuselages a month rising to 57. Boeing will try to conserve cash,w but not paying suppliers which means Spirit will have to layoff some of its employees.

Boeing has 680 suppliers which feeds into the 737 Max. At this point, no one is confident when the program will restart which means uncertainty for the suppliers who will deal with the potential loss of talent, access to capital and the ability to start production to what Boeing wants when the plane is a go.

About 80% of Boeing’s closely guarded recurring costs in building the plane (the plane sells for $40 to $50 million but costs somewhere in the $10 million range) involve payments to outside suppliers for parts. These suppliers tend to pay all the upfront costs and get paid within 90 days of delivery to Boeing. What are the smaller, less diversified shops to do?

Linking to dividend paying stocks, big diversified suppliers of systems such as avionics and landing gear such as United Technologies or Honeywell will be relatively insulated because they deal with Boeing and its competitors including Airbus. They also have lucrative after sales parts and repair services. The larger companies have important relationships with Boeing but it is not their own source of revenue. For your investments how dependent are you for one large company?

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

At the end of every year, there are projections for the next year and with every projection 50% are going to be correct and 50% are going to be wrong. In an article by Caroline Valetkevitich and April Joyner of Reuters, the company they work for, Reuters, looked at 14 major financial institutions and found that 10 have overweight ratings on industrials or financial sectors. Another cyclical sector, consumer discretionary was the next most recommended sector followed by information technology.

Last year at this time, the same analysts were recommending defensive-leaning health care followed by technology. Then the recommendations went to utilities and consumer staples.

It was not a bad decision because the defensive portfolio outperformed the market for 9 months and were up 28%.

If you were bought the S&P Technology Index it was up 45% in 2019, communication was up 32% and financials were up 29%

If you consider the year, it was one of low interest rates, it took a long time to do the Phase I of the China trade policy. the economy is doing well which is good for the consumer continuing to buy goods.

Linking to dividend paying stocks, we do not know how well the stock market will perform over the course of the year, however we do know if you buy profitable stocks that pay dividends you should be well protected and you can go in confidence your money is well protected.

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

The US markets hit new highs and that means one of two things – either it will set a new high again or the market will decline. How much a decline no one knows. If you believe the markets will decline, then it is good to take profits and be willing to buy something else at a lower price which has the ability to climb upwards whatever the markets do. Most of my portfolio is buy and hold, till something better comes along. There is a portion which is situational, if a company is being bought out and there is a fight or more money will be needed to be offer, it is possible to buy into the stock. If the proxy fight says if you vote yes, you will receive a bonus of either cash or money, it is possible to buy and receive the money. Given the bulk of the portfolio has dividends, after dividends are paid and there is cash in the account, more shares can be bought, which means you can always pay attention to the markets just you do not have to trade every day. It could be twice a month, you have the luxury of time.

If you believe in selling and waiting for the decline, the lesson of the past, is that stocks have declined 10% of more, however you will need to be very disciplined to buy into the market to take advantage of those declines. This means if you want to sell, you still have to know what is a good price and the expectations of why the price will tend to go up. It is very similar to your Holiday or Christmas shopping, all retail stores have sales, are they the best sales or it is advertising? Is the sale just taking a portion off the normal markup or is the sale needed to move inventory? For example if a company typically marks up prices 50% so a $10 item costs $15 and then has a 25% sale or the item is $12.50, it looks like a sale but the store is still making 25% on their $10 item. There is a savings over the normal price, but is it the best sale?

When someone goes into cash, they are often looking for the bottom of the market, but no one knows where the bottom is until stocks have climb. All analysis is based on the past, and you will eventually hear the market made its bottom, two weeks ago and now we are on the recovery stage. This tends to mean, those waiting for the bottom, miss the bottom. At they ready to invest? because usually the line is not straight upwards but trends over the month. Personally I find it better to own some shares in order to continue to pay attention to the companies which I have a bias in. If you watch the companies and the sector, you will know whether a down quarter is making a few dollars or half a billion or a billion dollars, depending on the size of the company. You continually need to do your homework to have the confidence to buy again.

Linking to dividend paying stocks, markets go up and down, but if you buy profitable companies that pay a dividend and be ready to hold them. There are many times the market rewards profitable companies to trade a higher multiples than pure growth stocks. The higher multiple plus the dividend makes you wealthier at the end of the year and that should be the number one goal, to try not to lose money.

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