Every business is regulated by an agency or department, sometimes companies love the regulations because it can keep competition out or at bay. Sometimes companies hate the regulations because it limits what they can do or want to do. However, most companies accept whoever is in power because there are limits to what they can do about it. In the financial world who the Fed Chair is important because banks loan out money hopefully at low rates and charge higher rates to customers and the difference is the spread. Ideally it is always in the banks favor.

In an article from Reuters, President-elect Trump had an interview with NBC News’ Meet the Press with Kristen Welker. It was a wide ranging interview and one of the many questions Mr. Trump was asked was will he ask Jerome Powell to step down to appoint someone else? Within the agencies and boards that report to government, there are some appointments that carry longer than 4 years, some as much as 10 years, with the idea they need to be apolitical or make the best decisions possible without political considerations. Although the results are political, the decisions are not supposed to be. In the case of Fed, no politician wants higher interest rates, they like low ones. However, in the struggle to keep the economy moving in the correct direction – interest rates go up and down.

Fighting with the Fed Chair, will score some political points, however the financial community will not like it and bondholders will not like it and they vote with their bond positions on a daily basis. In addition, Mr. Powell is a former private-executive and a registered Republican, which means Mr. Trump would be fighting against his supporters.

Linking to dividend paying stocks, there are many variables in investing and not liking someone is a short term reason, however through compound interest real money is made with the advantage of time. Sometimes you need a disrupter and sometimes you do not, it tends to be a balancing act particularly on the level of profits and ability to pay dividends. All companies are affected by government, but most want a long-term good relationship with the government.

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

Every day on the calendar is called something and most are days for a very select group of people. Their organization has petitioned the government to name a day for them and the government does because it creates goodwill. The organization is happy with the result and all is good in the world. Some days happen because of where they are in calendar year. Thanksgiving is one of the busiest times people see their families, which allows Christmas to travel less or somewhere else. After spending time together on Thursday, people went shopping on Friday for an outing. The malls always need a reason to sell merchandise helped with discounts for Christmas shopping and Black Friday was born.

In an article from Reuters, from an investor point of view, it is not whether a day is named after something or someone it is does it increase sales? It turns out yes they do. Americans spent roughly $10.8 billion online on Black Friday up 10.2% from last year. On Cyber Monday, they spent another $13.3 billion up 7.3% from 2023, according to Adobe.

According to data firm Facteus, which tracks online and instore spending in the US analyzing data from banks, credit unions, payment processors and fintech companies. Amazon increased sales 6% from a year ago. Walmart was up 3% while Target and Best Buy saw declines.

The top performers China based Temu and Shein.

Linking to dividend paying stocks, as an investor is important to have some cynicism in you – while you hope for the best, you want to see results. There are many organizations that can give you results to see how your company executed their strategies, you need to ask did they? If they did and you are relatively happy, then keep on holding the company. If things are not as good, one of the aspects is looking at alternatives.

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

If you were to ask a typical person about the auto industry, they would likely talk about Detroit and the car companies that led manufacturing for decades of Ford, GM and Chrysler. For a long time, the center of autos was Detroit. However, other countries have their versions because autos are made around the world. One city is Turin, Italy.

In an article by Eric Reguly of the Globe and Mail, Fiat’s Mirafiori factory in Turin, Italy produced over 30 million vehicles turning Fiat into a global brand.

In its heyday, the plant made over 1 million vehicles a year, and had 60,000 employees. They worked in a city within a city, think of the Rouge plant of Ford. Today, the plant employs 10,000 people.

Not so many decades ago, Mirafiori represented the industrial might and engineering savvy of Italy, which is the 2nd largest manufacturing power of Europe. The site covers 500 acres and all the features of automobile design, manufacturing operations and testing the new cars.

In 2004, then Fiat President took over a nearly bankrupt Fiat and reduced the number of platforms of vehicles from 19 to 6 by 2012. Car development times were cut in half. New models were rolled out and market share rose to 33%. Fiat was ambitious and profitable bought Chrysler.

A few years later, Fiat Chrysler merged with PSA Group of France which made the Peugeot. The parent company changed its name to Stellantis.

The company made money in the pandemic and stock prices increased. Now things are much tougher as market share has fallen in the US from 14% to 8%. What will the company do?

Linking to dividend paying stocks, for a long time Fiat was the powerhouse in Italy and all was good for everyone. Then sales fell, the company was restructured, did well and is not doing as well. For every company, you can be a fan or believer in the products but as an investor profits matter. When profits are low, as much as you like the company ensure you are viewing alternatives.

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

We all depend on food to eat and other the years some very large agriculture companies have emerged in the world of agriculture commodities world. The big four companies are ADM or Archer-Daniels Midland, Bunge (based in Paris), Glencore (based in Switzerland) and Cargill. All these companies have their roots in the grain trade and if you ever drive across the wheat belt you will see their names on elevators where farmers bring their grain to be sold around the world. The companies are vertically integrated and diversified into countries around the world.

In an article by Kate Helmore of Reuters, Cargill one of the world’s largest private companies is looking to slash costs as prices for corns and soybean hits four-year record lows. the company’s revenue dropped to $160 billion for the 2024 fiscal year, down from $177 billion in 2023. Less than 1/3 of its businesses met their earnings goal in the last fiscal year.

The focus of the layoffs is at the managerial level – to streamline the organizational structure by removing layers, expanding the scope and responsibilities of our managers and reducing duplication of work, noted Brian Sikes, Cargill’s President and CEO.

Linking to dividend paying stocks, all companies have to watch costs in their companies. It does not matter how much revenues are brought in, examining costs is a yearly expectation. In theory as a private company, it is easier to cut costs, but you are dealing with people and dealing with people you know is a tough decision. As a public company, from an outsider’s perspective it is easier to get buyin for cuts, as analysts will offer suggestions that can be done. Expect all your investments to have cuts and whether commodity prices are up or down, cutting costs is part of the business.

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

Later this month, the President elect will become President, and corporate America is looking forward to it. One of the groups particularly optimistic is the M & A industry from investment bankers to law firms to consultants. The present Biden administration has put more regulatory or guidelines before they would approve deals. The optimism is it will be easier for deals that are announced to go forward and be done.

If you are a long-term shareholder, somewhere along the line the company has made mergers, so great, some good and some terrible. Determining which is which is a hard process except when looking backwards.

In an opinion article, Robert Tattersall of the Saxon funds reviewed the new book The M & A Failure Trap: Why most mergers fail and how the few succeed. The book is written by professors Baruch Lev and Feng Gu.

Their process was to create a database of 40,000 M&A transactions from 1980 to 2022. Then they isolated 42 variables which might have an impact and did a regression analysis to which of them had any predictive value.

The authors came up with a success as defined by achieves above industry-average growth, a positive stock price return and no goodwill write-off all during the 3-year period after the date of the transaction. The authors found 75% of the transactions failed to meet expectations.

The authors started with 42 variables and brought them to 10. If you want details read the book.

The 10 are:

1. Deal size – negative and increasingly so as the size grows.
2. Buyer’s goodwill growth as a result of the transaction – less than 5% is neutral, more negative
3. Conglomerate merger – same industry is neutral, different negative
4. Hight stock percentage in acquisition payment – more than 80% is negative
5. Foreign target – domestic is neutral, foreign is negative
6. Buyer’s long term debt growth – the more debt growth, the more negative
7. Change in buyer’s return on assets over previous 3 years – could be positive or negative
8. Buyer’s market-to-book ratio – higher is better
9. S&P 500 change over previous 12 months – it is better to buy after a decline
10. Number of buyer’s acquisitions over 5 years – prior experience at integration is good

Linking to dividend paying stocks, companies that are profitable can both grow internally and externally through M&A. The ability to finance is easier when the company is profitable and sometimes shareholders hope their is a M&A to increase the value of the shares. However if 75% of M&A do not work, perhaps if your investments are involved in one, you might want to look at alternatives.

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

When John D Rockefeller started Standard Oil, he started in the refining business. Eventually he did a deal with railways to transport the oil at cheaper rates to his refineries. Finally, his company finished the vertical integration by drilling for oil. To have a less expensive price than railways, Standard Oil built refineries to bring the oil to his refineries. Most people when they think of the oil industry, think of the drilling for oil and the pumpjacks that are in places where they find oil. However, the real issue is the refining of the oil to various products such as gasoline, diesel fuel, jet fuel, chemicals to build plastics, and all the other uses. Much of the how the refinery works depends on the sulphur content and similar to maple syrup how clean the oil is.

In an article by Florence Tan, Siyi Liu, and Robert Harvey of Reuters, if President-elect wishes to impose a 25% tariff on everything coming across the border from Canada and Mexico, he can. If he does there will be options for the oil producers in Canada and Mexico as well as consequences for refineries in the US.

The US accounts for 61% and 56% of crude exports from Canada and Mexico respectively according to ship-tracking data from Kpler.

Canada and Mexico export mainly heavy-sulphur crude that is processed by complex refineries in the US and most of Asia. A large Indiana refinery near Gary. which is south of Chicago recently spent $3.5 billion to upgrade to meet the supply of oil sands oil from Canada. If tariffs were imposed one would expect it to refine less oil.

After the oil is found, it needs to be transported by ship or train or on a pipeline, there are some refineries in the US which only take oil from a pipeline.

In Asia, the refineries are capable of handling the high sulphur oil and LSEG analyst Ann Pham said it would be expected if tariffs are imposed more Mexican and Canadian oil would go to Asia.

In Europe, Spanish refineries could take more Mexican crude, but it is more likely Asia could easily absorb any volumes not sold into the US. Exports of Mexican crude oil to Europe has averaged 191,00 barrels a day with 81% going to Spain. Canadian flows are 85,000 barrels a day.

Linking to dividend paying stocks, oil companies in general are some of the most profitable companies on the planet and have paid dividends for hundreds of years. It is not likely to change anytime soon particularly when the price of crude is expected to stay in the $70 range. If President-elect Trump decides on a 25% tariff across the board, a simple solution will mean complex decisions in the marketplace.

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

In business, there are supply chains and while most consumers will go to a retail store, those retail stores receive supplies from somewhere. In the world, there have been and are countries where the supplies can be received for less than it costs to do it locally. Every country has its advantages and disadvantages, however it is the one that you live in and make a living which is the best one. The difference between cost of acquisition and cost of selling is profit or margins. All businesses want the highest margins at a stable environment or for a number of years the situation remains the same. Every since the 1990’s, the cost of manufacturing and the ability to send the items to the US has been lower in the US. (If you ever watch a show similar to Shark’s Den – one of the sharks will say I have connections to China, we can lower your costs and increase the margins, if you choose me to invest in your company). When the entrepreneur says yes, he or she is buying into the supply system.

In an article by Alexandra Stevenson and Paul Mozur of the New York Times News Service, one of the inventions which is changing business is drones. In the world of inexpensive drones, the company US Skydio was the big hope. The defense industry and police agencies preferred a US manufacturer and Skydio was their first choice.

Skydio receives its supplies from various parts of the US and China. When President elect Trump said he would impose tariffs on China, China imposed sanctions on the US and severed the companies access to essential battery supplies. The move stops deliveries for Skydio’s customers including the US military.

The message from China, hit us with tariffs, we will hit you too.

The last time President Trump was in power, Beijing was fairly careful to meet the tariffs that the US put in place, said Jude Blanchette, a China scholar at the Center for Strategic and International Studies in Washington, DC. This time around, China will flex its muscles

China has been working on an unreliable entity list to penalize companies that undermine national interests. China will take steps that potentially choke global access to critical materials.

For many companies that rely on China than China does on them, Beijing has the ability to exact major pain. for example: Skydio has spent years building a supply chain outside China, but remained reliant on one crucial item: batteries.

Linking to dividend paying stocks, every company has supply chains and managing supply chains or logistics is important to maintain margins for the company to make profits. Likely your investments have many suppliers and that is a good thing until the President says it is not so good. Will they change and why would they change is the issue? How does your company protect its margins?

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

In less than a month from now President elect Trump will be President Trump and then the buck stops with him. On the campaign trail he made many promises, some will be examined, some will be worked on, some will be done, and some will fail. Often times the more specific the promise, the harder it will be to say he has done it. As with every government, there will be good things with the government and there will disasters and something in-between. As investors you have to try to figure out how the government will affect your investments.

In an article by Lisa Friedman of The New York Times News Service, one of the specific promises President-elect Trump made would be to cut electricity prices in half within 18 months of taking offices.

That type of policy would have an effect on electricity utilities who are some of the best dividend companies in the market. Utility companies are regulated and every year go before a government agency in charge of pricing and policy for the companies. Often the utility companies will say our costs are X, we expect to capital costs of Y and we need an increase of Z. The regulatory board goes through the numbers and determines the new electricity rate for consumers. Will they cut it half? highly unlikely.

The Trump administration says they can lower prices by boosting oil and gas production, which is already at record levels in the US. President Trump plans to approve new drilling projects (releasing more federal lands for drilling), approve more pipelines and get rid of environment protection regulations that the industry says increases costs.

Industry experts do not see prices being lowered, unless the economy goes into a recession or is shut down similar to COVID. (Given the appointments, it is not likely the Trump administration will shut down the economy).

Ed Hirs, an energy economist at the University of Houston does not believe prices will be lower.

Most energy analysts agree if supply increases, it is possible for prices to drop but the US is part of well-integrated oil market, and the no 1 factor that drives prices is global conditions.

If it did, Edmund Crooks, vice chair of the America for Wood Mackenzie, an energy consulting company said that would invite different problems. Getting the price low would make it unprofitable for energy companies to drill. Energy companies would shut down production till prices rise.

Linking to dividend paying stocks, for companies that are based on a commodity the important element is what does the cost of product need to be to ensure a profit? Commodity companies are based on supply and demand and when one changes the price moves up and down. Unless President Trump plans to subsidize consumers, which his party does not like, it is hard to imagine prices falling in half and energy companies making profits.

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

For every investor, once you have savings you need to put it somewhere – it could be under the mattress if you thought the banks would fail, but since the banks have insurance, you are protected. You could leave it in a savings account, but the rates are very low. An alternative is money market funds which invest in Treasury bills back by the government. The fund will not be lose you money but it does not make a lot of money, however it is safe and secure.

In an article by James McGeever of Reuters, there is a record high $7 trillion of cash in money market funds.

Many strategists assume this massive pile of cash will start to shrink now the US Federal Reserve is cutting interest rates and investors seek alternatives. Will it move?

The road is lined with people trying to call the impact and timing of cash moving off the sidelines, says Adam Farstrup, head of multiasset, Americas at Schroders.

Money market balances have increased by nearly $40 billion since the Fed starting cutting rates in September, according to the Investment Company Institute, a global funds body.

Given the high levels of uncertainty surrounding the year ahead the environment is likely to be remain cash friendly.

James Camp, managing director of fixed income and strategic income at Eagle Asset Management suggests much of the money is not dry powder by rather as a permanent capital stock used for liquidity management.

In other words, the cash is likely to remain in money market funds.

Linking to dividend paying stocks, in every portfolio it is good to have liquidity if you think you will need to the money, however as trading settlements have changed to one day settlement, much of the stock market is liquid. It then becomes a choice. when you consider legendary investor Warren Buffett has billions in Treasuries (he owns 3% of the outstanding) what you choose will not be wrong. If you examine long term charts of owning Treasury bills and profitable dividend stocks, you will see dividend stocks outperformed. The reason for the outperformance is the dividends are paid, plus over the long term profitable companies tend to raise their dividends and including stock buybacks the share prices tend to increase as well.

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