If you think back to the moving of the supply system from the US to China and other countries around the world, there were many reasons given. The people worked hard, but accepted lower pay rates. The supply system transportation had greatly improved, and it is always amazing to walk around stores such as Walmart, the items made in China, put in a container, placed on a ship, go across the seas to a port then either put on rail or a truck and eventually to go to a store at a very low price. How does the company make money? From a consumer point of view, it does not matter. One of the reasons why the system worked, was the low union rate in China and other countries. But every once in a while, unions actually exist in other countries.

In an article by Jin Yu Young and John Liu of the New York Times News Service, some workers at Samsung electronics went on 3 day strike. The Nationwide Samsung Electronics Union represents more than 31,000 workers or a quarter of the work force at Samsung Electronics.

Samsung is South Korea’s biggest private employer and has been one of the world’s largest maker of memory chips, which helps computers and other electronics equipment store information. The company is also a leading manufacturer of logic chips, which makes computers run. The number manufacturer is Taiwan Semiconductor Manufacturing Co.

For decades, Samsung was known for its aversion to organized labor and unions. Only in the past few years has Samsung allowed unions.

Linking to dividend paying stocks, most companies do not have unions for reasons. When they were founded the founder did not want unions and often when companies are small and medium sized everyone tends to know everyone one. As the companies expand, the linkages fall away and people want a larger share of the pie, assuming the company is profitable or the if the founders are living a lifestyle different than the workers. There are many reasons, however once a union is in place it is up to management to work with the union. For your investments how are labor relations?

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

If you happen to go for a drive this summer, you will still see many smaller towns with cinemas because after the movies were invented, they needed a place to be seen. All over America, cinemas were built and for generations they were part of the fabric of the community. People went to the movies, had dates, socialized before and after. Then came the internet and changes slowly happened and then fast internet came along and streaming and the whole industry changed.

In an article by Brooks Barnes of the New York Times News Service, one of the premier names of the movie industry recently changed hands. The Studio was founded in 1910 and the owner was consider a Hollywood mogul. For many years, the value of the company increased and the last time Paramount was sold it went for $10 billion in 1994 or about $22 billion in today’s dollars. The company was recently sold to Skydance for $8 billion. The owner of Skydance is David Ellison and Redbird Capital. Mr. Ellison is a movie producer and the son of Oracle founder Larry Ellison who invested $6 billion of the $8 billion. One can expect Paramount to be a client of Oracle.

The assets of Paramount include: Paramount Studios, TV company CBS, 2 streaming services including Paramount Plus, cable networks such as MTV, Nickelodeon, BET, and Comedy Central.

Mr. Ellison and Redbird Capital founder Gerry Cardinale believe they can turn Paramount around using technology, cost efficiencies and synergies. They believe the can use the assets, plus storytelling in movies to increase the value of the company. Paramount has a wonderful library of films and a long history of making films the public would pay to see.

Linking to dividend paying stocks, all great companies have wonderful assets and those assets are constantly leveraged to keep customers and increase the customer base. Just because a company has wonderful assets it does not mean they can be complacent. When you examine the companies you own, what assets do they have and why are they still valuable? and will increase in value?

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

The first storm of the season, Beryl went through the Caribbean hit Mexico and moved north to Houston and across North America. In Houston, 2 million people lost electricity which in a city known for humidity means no air conditioning for a few days. Companies had warnings and the good folks who restore electricity came from the surrounding areas to get Houston back using electricity. To be sure there were many people who suffer from the hurricane.

In an article by Desmond Tiro of the Associated Press, in another part of the world, the rains have been falling. All plants need water to grow but too much will kill the crop or dramatically reduce the yields. In Keyna the rains have been falling for weeks and small farmers crops are being destroyed.

The rains in Kenya have increased the levels of water behind dams, and led the government to order residents to evacuate flood prone areas and bulldoze the homes to those who do not want to leave.

The government of Kenya has estimated that flooding has destroyed crops on less than 1% of the land, however on much of the land of over 100,000 acres it was small farmers doing the work. The farms provide a livelihood to the families and some extra cash to buy things. The excess rains means greater reliance on the government, if it exists.

Similar to every other country in the world, parts of the country receive too much rain, other parts are not receiving enough and when there is too much rain, the water causes erosion and eventually flows to the oceans. If the soil has not used water conservation methods to allow the water to be absorbed by plants into the soil, the problem tends to get bigger.

Linking to dividend paying stocks, weather patterns change and are changing and governments are slow to react. Many years ago, soil conservation was practiced until the desire for greater efficiency using machines was the answer. The greater efficiency meant greater use of fertilizer to allow the plants to grow and it is seemingly a never-ending cycle. With the land, there is some sort of balance which needs to be done or it will get out of whack. Sometimes efficiencies are great things, sometimes they tend to be short term solutions.

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

There are always exceptions but a general rule is the more wealth you have the more conservative you tend to be in politics. That does not means as your wealth increases you automatically vote for the more right wing parties, it just means the center right parties tend to understand and address your issues more closely. You have accumulated some wealth or likely own property including stocks and bonds so have a vested interest to maintain and grow asset values. A political party that tends to happen, you tend to like.

In the UK, the Labour Party tends to represent those who work for someone else and want to accumulate assets but feel they need government help to do so. In a polarized elections, the Labour Party tends to say tax the wealthy (what is defined as wealthy tends to be lower than people in the tax bracket, who say they are just getting by). The Labour Party in the UK says some elements should be rights and if it is a right, the government should be doing something about it. If housing is a right, that means the government should be a developer for people. The party running against Labour tends to believe more in individual abilities to rise to the occasion.

In an article by Sinead Cruise and Huw Jones of Reuters, the Labour Party in the UK defeated the Conservative Party and business is okay with it. Part of the reason is the new Finance Minister is slated to be Rachel Reeves formerly an economist at the Bank of England and has backed policies that will help the financial community be protected or will do no harm in the city’s global competitiveness.

Before Brexit, the financial community in England was the number one financial services to both Europe and the global. After Brexit, firms have moved outside England and Amsterdam in Holland has over London to become Europe’s top share trading venue. This dominance by the Amsterdam Stock Exchange started in 2020.

A study by PwC for the City of London and TheCityUK published in May estimated the total tax contribution of the financial and related professional services was $192.5 billion or 12.3% of the total UK tax receipts.

It is pretty simple really, business wants certainty, said Naresh Aggarwal, associate policy and technical director of the Association of Corporate Treasurers.

Linking to dividend paying stocks, often politicians have a view at least during the elections which says about things in the past but does not always reflect reality. It is reasonably easy for opposition parties to pick on the high growth areas of the economy, at one time it was the financial services where incomes and living were above normal. There will always be some of that, but things tend to move in cycles and reality does not always reflect myth. When politicians get into power, they have to face reality and often they moderate and then business can deal with them. It is good when parties send signals to business that certainty will be the dominate feature.

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

In every town and city, there are economic development offices and the most important aspect is to examine the assets of the area and try to enhance them to provide greater opportunities for the community. Often times, there are a wonderful assets built in a different era, the company evolved and left the assets. In today’s world of greater jobs in services what could they become if money was available to do it. Sometimes we think that most of the opportunities are taken, but there are still many if you are willing to dream and have access to capital.

In an article by Eric Reguly of the Globe and Mail, a new Canadian aviation company, Centerline Airport Partners has bought a airport in northern Italy and has plans to invest in other underused airports around the world.

Centerline bought 51% of Parma International Airport which is halfway between Bologna and Milan in Italy’s wealthy industrial heartland. Pharm is home to Parmigiano-Reggiano Cheese (many people use it in pasta dishes).

Centerline agreed to pay $19 million over 3 years for its stake with the Emilia-Romagna regional government. It also plans to upgrade the airport by 500 feet to allow Boeing 757s to land. This would be along the plans to boost passenger traffic from 125,000 a year to 700,000 a year. In comparison Rome’s airport handled 4.5 million in May. The expectation of the plans is if you build it they will come. The other airlines will move flights from Bologna and Milan or use the airport as a catchment area and easily move people around Italy. Presently Ryan air has 2 or 3 flights a day.

Centerline was formed 2 years ago by Andrew O’Brian who was most recently the CEO of Reach Airports, a joint venture between Munich Airport International and Caryle Group and others. Centerline is raising $50 million to $100 million in its first financing round. Other airports the company is looking at are Aarhus Airport in Denmark and the Jacqueline Cochran Regional Airport in Southern California formerly Thermal Army Airfield which is in the LA area.

Linking to dividend paying stocks, in every industry people see potential assets to be expanded to grow to take move to the next level. The risk of course is the need of capital, and many upgrades for others to see their vision. This is the stuff of great entrepreneurial stories and losing money, because there is reason why no one upgraded in the past. Just because an airport is upgraded will the airlines move flights to it? how are connections to the other cities? Dreams and visions of underused assets are wonderful. It could work or not, but it seems the owners have institutional connections to private equity money and that helps. For a dividend investor, the story is a big risk because just because you build it, will they come? is not a great answer. It could be a wonderful story, and in a few years’ worth looking at, but sometimes there is great value in underused assets.

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

Governments around the world have agendas and over the course of years some countries will be in favor and some will not be. In the case of Russia, a couple years ago, Russia invaded Ukraine and the war is still going on, and the European Community and others including the US placed sanctions on Russia. Many businesses sold their operations to Russian companies, some with the expectation in a couple of years we will once again be partners. Russia has a population base to sell to and in many instances the country can be profitable. The war has continued and the sanctions have not stopped the Russian government actions. What should happen?

In an article by Valentina Za and John O’Donnell of Reuters, the Italian bank UniCredit has ongoing business in Russia and is challenging the terms set by the European Central Bank for the bank to cut its exposure to Russia. UniCredit is going to the EU’s General Court to get a ruling.

UniCredit runs a retail bank in Russia, said it was seeking clarity and certainty on the actions it needed to take. Similar to most courts, the application should take a few months before the ruling.

Italian Foreign Minister Antonio Tajani welcomed the complaint, saying he shared the need for clarity. The ECB must take into account the situation in which Italian companies operate in Russia in compliance with EU sanctions. Hasty decisions merely risk damaging Italian and EU companies.

After Austria’s Raiffeisen, UniCredit has the biggest exposure to Russia where it runs a top 15 bank among European lenders. UniCredit’s bank is profitable, and it has cut its exposure from 91% ownership to 65% with further reductions planned.

The difficulties in selling its shares are there is a lack of potential buyers and Moscow imposed their restrictions. An exit has to be signed off by President Putin and Russia’s Central Bank has to give approval. Another Italian bank Intesa Sanpaolo did receive the authorizations is still trying to finalize its exit.

Linking to dividend paying stocks, often these companies operate in many countries which is good for diversification of buyers. While each country maybe similar in the sale of goods and services, each country makes their own decisions which businesses have to adjust to. Ideally in the company’s biggest market, the strategic direction of the company and government tends to compatible and as long as they are, you have few worries.

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

In the world of investing, there are 2 types of investments with lots of subcategories, passive or active investing. Passive investing has grown is linked to buying the index of the stock market or index of part of the stock market. As an investor you buy a share in the fund which mimics the index and if the index does well, you do very well. If the markets are not performing well, then you do not do well. Active investing is paying a manager to use analytics to go through all the stocks in the market and pick a select few and based on the theory of the manager he or she outperforms the index or the stock market. If they do, because the fee is higher, you do not mind because the manager outperformed the market with their stock selections. If they do not do as well as the index, in the back of your mind you will think I should have bought the index and been better off.

The reality is over a long period of time, because all index funds at least twice a year let go the losers and pick up winners not in the index, over a long term the index will go up. In the short term or medium term, active management might do as well or better than indexing. That said, there is always lots of disagreement among investors what is the correct strategy.

In an article by Svea Herbst-Bayliss of Reuters, the largest asset management firm in the world is BlackRock and has over $10 trillion in assets under administration (AUM). Blackrock owns multiple funds including index funds, closed end funds, private equity funds and the list goes on. In every one of their funds, every year the Board of Directors is voted on. Most of the votes go smoothly and as long as the fund is making money, everyone is reelected.

In some closed end funds, a hedge fund manager Boaz Weinstein through Saba Capital Management has a large holding. Mr. Weinstein wants to replace the BlackRock nominees for Directors with nominees from Saba Capital. The process is a simply voting and a 50% plus 1 vote wins. Saba Capital has fought BlackRock for the past couple years and lost each time.

Glen Hubbard, Chair of the Boards of BlackRock Closed End Funds, noted for the 2nd year in a row Saba has failed to convince shareholders that Saba will deliver more value than the fund’s current stewardship and management teams.

There are 12 funds in the Closed-End Funds, in 10 of the funds have voted with BlackRock and 2 more will vote in July as they did not meet the quorum requirements for number of shareholders.

Closed-end funds unlike open-end funds, do not issue or redeem new shares which can leave them trading above or below the value of the securities held by the fund. Saba Capital has made the case if BlackRock bought shares from investors and that could potentially unlock $1.4 billion in value.

Linking to dividend paying stocks, on Wall Street performance is promised or expected and if delivered investors are happy to pay whatever fees are associated with the management of the funds. If the performance is not delivered, investors can either sell or vote against management at the Annual Meetings. If you own dividend paying stocks, as long as the company is profitable and pays a dividend, investors are more willing to understand prices go in both directions, however over the course of a year one expects to be more of the high side than the low side. When you buy your stocks what is your expectation?

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

If you think about Henry Ford and the assembly line, one of the reasons Ford was the largest employer in Detroit was the Model T sold very well, but the Ford Corporation owned all the supply aspects to make the Model T. They own the iron ore mines, the ships to bring the ore to the steel mills, after the steel was made it came to Detroit to be made into the cars. The basic materials were all owned and put together on an assembly line which allowed Ford to have a low-price vehicle and keep it that way. The Model T was a profit center and the supply system was considered to be very good. Times change and different supply chain models exist today because owning all the supply system means the company needs to put it on their balance sheets as liabilities until the car is sold. What if the supplier kept the parts till Ford needed them, the suppliers would have to store the inventory. How much inventory to keep is a difficult question to determine and we moved to just in time deliveries to everything in between. There are software companies that specialize in supply management issues to manage on-time delivery rates.

In an article by Mike Stone and Allison Lampert of Reuters, Boeing agreed to acquire Spirit AeroSystems Holdings for $4.7 billion in an all stock deal.

The deal is subject to regulatory approvals because Spirit also supplies Airbus.

Back in 2005, Boeing spun off Spirit to be an independent company but still supplying Boeing and the company has remained a supplier. In recent months, Boeing has imbedded some of their people into the Spirit manufacturing process to improve quality.

Linking to dividend paying stocks, all models of operations are constantly in flux as companies decided whether to do it in house or use outside help. There are multiple advantages to both, but the market will dictate what they are favoring at the moment. At the moment, the trend is to do more inhouse, but trends change. For your investments, what do they do for their supply system? What percentage is on-time delivery rates?

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

In the downtowns of the major cities large law firms and investment banks are to found. One division is devoted to mergers and acquisitions (M&A) and they are the sexy side of investment banking. The idea of every company is it grows, at some point the adds on or additional market share the senior executives will consider is what we do core business or what business are we in. The strategic plan will address this issue and after the Board passes it, the company will act on it. The senior executives often will have a list of companies they admire and move to bring them into the companies orbit to use the talents and diversification. Then they will consider selling a piece. All of this is normal activity for companies.

In an article by Anirban Sen and Anousha Sakoui of Reuters, global M&A activity grew at a sluggish pace in the 2nd quarter, but dealmakers are forecasting transactions will pick up in the 2nd half of 2024. Higher interest rates (cost of pay back the loans), a hostile regulatory environment (the regulators say no) and a high stock market makes the cost higher.

Globally the deals signed in the 2nd quarter was 7,949 down 21% according to Dealogic. The dollar value grew to $769.1 billion.

Damien Zoubek, co-head of US corporate M&A at Freshfields Brukhaus Deringer believes it is turning out to be a good year and we will keep cruising along.

In 2018 and 19, the deal volumes averaged $4 trillion a year.

Private equity firms led $286 billion deals in the first half.

The US M&A volumes were $324.4 billion down 3%, Europe is up 27% and Asia-Pacific is down 18%.

To finance the activity, more companies are turning to private credit than the traditional bank loans. Don Mendelow, co-head of Evercore noted Banks are partnering with private equity or raising their own funds so they can have the same product capability.

The biggest deals were ConocoPhillips’ $22.5 billion takeover of Marathon Oil; Silver Lake’s $13 billion taking private Endeavor Group Holdings and J&J $13 billion acquisition of Shockwave Medical.

Linking to dividend paying stocks, companies that have cash or access to capital can do mergers and acquisitions, it does not mean they have to but they can. If you invest in dividend paying stocks, likely they will be doing a merger and selling low growth sections of the company. It is one of many reasons why they are able to continually make profits to pay dividends.

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