At the moment, you can not own it, but soon major institutional money will be snapping up shares of Aramco. The Saudi oil complex is going public and according to Bloomberg News, the shareholders will hold this company for a long time. The reason is Aramco had net income of $33.8 billion in the first 6 months. The company makes more money than Apple, JP Morgan and Exxon Mobil.

Among the most important facts: the company has almost no debt and enjoys production costs running at a fraction of the industry standard. The downside, the government of Saudi Arabia depends on Aramco to finance social, military spending as well as the lifestyles of the princes. The stock market listing of Aramco was suppose to happen in 2018 but looks like it will happen in 2019.

Aramco generated adjusted cash flow from operations of $52.1 billion in the first half of last year when Brent crude averaged $53 a barrel. Royal Dutch Shell generated cash flow of $21 billion despite pumping a quarter of the oil and gas Aramco produces.

In terms of dividend payments, Aramco paid a cash distribution of $13 billion in the first half of 2017 while Exxon paid $6.4 billion and Shell paid $7.8 billion.

The great news for potential Aramco shareholders is it costs Aramco $4 a barrel to pump oil and gas, the corresponding numbers for Exxon and Shell is about $20.

Linking to dividend paying stocks, Aramco has two of the main attributes an investor is looking for in a company, no debt and very low cost of production with a high sale margin. At the moment the price of oil is about $67 a barrel. This means although Aramco is only selling 5% of the company, the dividends will be safe, secure and owning this stock is a long term success story.

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

There is an interesting book about the subject and it was made into a movie staring George Clooney in 2014, the book is called The Monuments Men by Robert Edsel published by Center Street part of the Hachette Book Group, New York, 2009. In the book, Mr. Edsel outlines the importance the Nazis gave to the looting of art and how an unlikely group of Allied Heroes was able to recover most of the art. In the war, the last thing Generals worried about is saving the landscape, they are worried about defeating the enemy. If the enemy takes positions in sensitive areas, then it is their fault that something happens to the setting. After the battles are over is a time to worry about historical buildings and what is in them.

The book highlights the unlikely men who lead the search for and recovery of art which was systematically taken by the Nazis. The men had knowledge of art and history and generally were not expected to shoot a rifle because they were after art. In countries such as Italy and France, if you were to visit the country a visit to a museum or see the art in the street is expected and millions of tourists do that. Both countries ensure artists have grants to do work every year, in the US the use of private funds is consider more important. Society is different, one is not better, just different. The Monuments Men worked with the army to try figure out where did the Nazis put the art? they worried that planes dropping bombs might destroy some of the art. they worried when the Nazis retreated they would destroy the art they could not bring with them. Similar to all research, one needs to do great amount of homework and have some lucky breaks. For example, after months of trying to find leads where the art was stored, one of the Monuments Men had a toothache. He went to a Dentist, the Dentist said you should meet my son in law who is in the art world. His son in law happened to be Goerings man in France who arranged all the art movements. He knew where the storage facilities were and they would go to caves, salt mines, castles (the castle Disney used for Sleeping Beauty) in mountain hideouts away from the average German.

Another concern was as the war was ending, the Russians were coming towards Germany and included in the front lines was the Trophy Brigades. Their job was to find and seize enemy assets, looted or otherwise. Stalin expected to be restituted in kind in gold, silver, carved marble, and works of art for what his people had lost. The Americans believed the works of art should go back to France and Italy or whatever over European country it had been taken from – part of the reason for fighting Germany was to return Europe’s soul to Europe. Similar to most things in life – many people have different agendas and looking at the situation.

Linking to dividend paying stocks, eventually when something is stolen or looted the average person finds out. They may not be aware during the time, but they can sense something was wrong. It is credit to society that most of us try to stay within the laws or rules and regulations and we expect our institutions to stay within the law. When a company is profitable and can continue to pay dividends, it often has the ability to stay within the rules and regulations. Sometimes the rules and regulations help the company by providing a moat which is a good thing for investors.

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

In emergency planning, people are asked if there was a fire coming your way, you have time before needing to leave what would you do? The first answer is look after the people, then your personal identification and finally stuff? what stuff would you take and that leads to artwork or pictures. It is the same thing in the war.

In World War II, the Nazis besides taking over countries, systemically looted the art and valuables of the country they took over. Part of it was Hitler had a dream to build a giant museum in Linz, Austria dedicated to German and Germanic art. In the process before the war, the Nazi sent art experts to countries around Europe to identify what art was in the public museums and the art that would be taken. The other aspect of taking art is financial. Depending on the artist, depending on the quality, art can appreciate in value. The Germans would take all the known masters and the art favored by senior members of the Nazi party. At the same time, any art, valuables or property owned by Jews was taken and shipped to Germany. In Germany, the trains carrying Goring’s art had higher priority than supplies or weapons for the troops.

There is an interesting book about the subject and it was made into a movie staring George Clooney in 2014, the book is called The Monuments Men by Robert Edsel published by Center Street part of the Hachette Book Group, New York, 2009. In the book, Mr. Edsel outlines the importance the Nazis gave to the looting of art and how an unlikely group of Allied Heroes was able to recover most of the art. In the war, the last thing Generals worried about is saving the landscape, they are worried about defeating the enemy. If the enemy takes positions in sensitive areas, then it is their fault that something happens to the setting. After the battles are over is a time to worry about historical buildings and what is in them.

In the past to the victors went the spoils, as long as gold has a value, countries have gone to war and taken gold. The Spanish did it with Mexico and Peru for a time making the country the wealthiest in the world; Napoleon took art from St. Petersburg and Moscow as well as many treasurers from Italy; there are plenty of examples and continues to be plenty of examples of country looting another. The Nazis were more blatant about it. They even tried establishing new laws and procedures to “legalize” the looting activities.

Linking to dividend paying stocks, while some stocks have a history dating back to an era known as robber barons, because the rules were much more relaxed, now days we have rules and regulations. These rules help differentiate companies willing to break the rules and regulations and those that should and try not to. Ideally, the companies you invest in live by the rules and regulations and have a healthy profit margin which translates into profits and consistency of dividends.

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

 

When the President Trump tweets news media has to pay attention and so do the public relations side of companies. The President likes positive news and in his backyard is the Washington Post newspaper. The paper is owned by Jeff Bezos who owns the largest share in Amazon and this year is the world’s richest individual. Mr. Bezos owns the Washington Post through a personal investment and the holding is not part of the Amazon group. However, the President does not really mind because he often tweets about Amazon. In an article by Spencer Soper of Bloomberg News, the President has tweeted about Amazon and its payments to the US Postal Service.

The US Postal Service is an independent organization and its mail rates are set by a commission. This means the President can influence but can not direct the service. It is also true, with more and more people using email, the amount of mail has gone down. While we all like to get mail, most of us consumers do not regularly use it. We pay out bills on line and a host of other things.

In the article, the US Postal Service says in regards to the President’s claim, it is legally prohibited from charging shippers less than its delivery costs. Also, taxpayers do not directly support the Postal Service’s operations.

David Vernon an analyst at Bernstein Research who tracks the shipping industry estimated in 2015 the Postal Service handled 40% of Amazon’s volume. He estimated Amazon paid $2.00 a package which is about half what it would had to pay UPS or FedEx.

Linking to dividend paying stocks, when the President speaks or tweets, organizations have to pay attention to the tweets often to correct the facts. If it relates to their organization it will need to send out press releases in order to get its story in front of the news organizations to be reported. In the meantime, the President may have gone on to a different subject. This aspect of seemingly bouncing between subjects makes President Trump’s term interesting to say the least. In the past, President use to phone corporate President to get their views of the subject and then go to the public in needed.

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

 

When a person sees the US trade deficit at its highest level since 2008 as reported by Lucia Mutikani of Reuters it is easy to believe the President is correct in imposing tariffs on China. Although in this case what looks easy is actually much more complicated and that is the problem with the President and tariffs. Tariffs and politics have always been intertwined for most countries in the world, if the consuming broad middle income buy more goods and services that originate in the host country, that will stimulate the local, regional and national economies. The choice is to buy from another country.

If you go back to the start of the US, the big exporter of goods was Britain and Europe. In more recent times, the global supply chains believed China could make basic items and the cost to import them would still be much cheaper than to make it domestically. If you go into a dollar store or Wal-mart or many other department stores you will see the items are made outside of the US. The same thing with your phones, consider Apple which prided itself for many years as having no production facilities in the US. The software was designed and continues to be designed in the US, but production is done in Asia. This leads to a trade war – to change the trade deficit more production needs to be done in the US and do you believe it will happen.

In terms of the US and China tariffs, China will target items that fall in President Trump’s base of political support. By targeting those items, the idea is to push the price up to be less competitive which can bring in alternative suppliers.  Who do you believe will  blink first? In the meantime, the stock market will be prone to fluctuate.

Linking to dividend paying stocks, many of these companies have embraced the supply chains that exist and have benefited from it. For the President to win, some of the companies will have to change and knowing people do not like to change, companies also do not like like to change a winning formula. The good news is many dividend paying companies have been earning profits and paying dividends for years and will be able to manage their way through the maze. It may mean some of the money the President gave corporations by reducing their taxes they will set up one production facility or upgrade one, but keep the other aspects of the supply chain very healthy.

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

There are many movies about Jesse James for they robbed stagecoaches and banks after the Civil War. It was time of many changes and recently there was a movie made in 2010 called American Bandits: Frank and Jesse. The movie did not have great reviews but it does have a few interesting lines. After the Civil War, people went back to whatever they did and the military (the Yankees) administered the southern states. One aspect the military imposed was no preaching, no voting, no ability to sit on a jury, no ability to be elected to office; or very few rights. One could easily argue the Army had to put these measures into place to keep the peace and allow society to change. One of the consequences of taking away peoples rights was the population half supported and cheered the actions of Frank and Jesse James. When they robbed the Army of the payroll, people said good. If the James needed safe homes, they were easily found. Eventually times would change.

Linking to dividend paying companies, many dividend paying companies take over or merge with other companies. There are many reasons, but sometimes how they merge rustles feathers to make the execution of the merger less than desirable. There is no magic portion to merge companies, however larger organizations should learn how to do it better than most. If the company has a poor track record, then the merger should keep the monopoly and margins stay high, all shareholders will benefit. If margins fall after a merger, it is time to find alternatives.

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

 

According to an article by tom Krisher of the Associated Press President Trump who loves to cut regulations for businesses wishes to change the EPA auto gas-mileage standards. The Trump administration believes anything the former Obama administration did was bad, is going to allow car companies not to meet the standard of 36 miles a gallon by 2025. The reality is automobliles contribute to pollution because of many people need to drive a vehicle everyday. The options for transit, bikes and walking are poor so people drive. One of the best methods to cut back on pollution is raise gas mileage standards. While industry may not love it, as a consumer you do not need to fill up the gas tank as much which saves you money.

In the world of gas regulation, California is the biggest state for auto sales and people driving. Another aspect because of the mountains on the coast, the wind does not move the air as much as it does it other states. California over the years has set its own rules and due to its size of market the automobile companies have complied with their number. The EPA or Washington tends to agree with the California number. If the President changes the EPA number, auto companies will have two numbers which makes their lives more difficult. Unlike writing, a change to plants takes years to make one way or the other – it is harder to change the production plant than a piece of paper.

Linking to dividend paying stocks, in general business likes less regulations, but they want enough to keep out some competition. There is always, it depends sometimes business likes regulations, sometimes business would prefer less. However in terms of collection of data, business always likes more.

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

 

In a column by Nick Turner of Bloomberg News, shoe maker and fitness company Baltimore based Under Armour revealed its fitness app was hacked. In 2015, Under Armour bought the software company MyFitnessPal in an effort to become the biggest tracker of fitness information. The idea was to expand on the company’s roots in athletic apparel and accessories.

The good thing is million of people use it, the bad thing is owning an data-centric business meant the information was vulnerable. Under Armour has enlisted security firms to help with its investigations and to beef up security. In the meantime it is asking users to change their passwords.

All companies collect data, it helps them make decisions. At issue is how is the data protected so only the company can use the data. In Under Armour’s case it appears they are doing the correct thing, however the stock price did fall 5% until they announce they have implemented tighter security controls of their information.

Linking to dividend paying stocks, all companies deal in data – big data and the more information they can collect the more they can use it for one purpose or another. There is no easy method except to note if there is a breach of data, the stock should fall at least 5%. What the company does about it, will determine the next direction of the stock.

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

In Southwestern US, the continuing shale oil production has lead to increasing energy self sufficiency. Shale oil production has benefited from technology uses and fracturing to unlock the oil in the shale. In an article by Clifford Krauss of New York Times News Service the good news is the oil can be unlocked and according to Sven Del Pozzo an expert of the Permian Basin at the energy consultancy IHS Markit – some of the wells are monsters and tremendously profitable. Those are music to ears of investors. The merger of Concho and RSP Permian for $9.5 billion will mean the company with 27 rigs will be the area’s largest drilling and hydraulic fracturing operation on 640,000 acres.

The good news is oil is being produced, the bad news is pipelines to ship the oil to the refineries lag behind. The use of rail helps but is more expensive. The price of oil lead to companies laying off workers, now they need field workers and truck drivers. On Wall Street, when oil prices were closer to $100 a barrel, it was easy to make money with prices of $60 to $70 it is good but not great.

More the giants of the oil industry Exxon Mobil has 275,000 acres in New Mexico and over the next 5 years expects to spend $50 billion on oil and gas production.

Linking to dividend producing stocks, it is hard not to have either the pipelines or oil companies in your portfolio. As long as there are wells which are tremendously profitable they are a long term hold.

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