If you look around to see how people move around a common denominator will be the smartphone. People walk down the street with their phones, people put their phones on a stand in their vehicles, part of the clothing is given to the smartphone. The 2 biggest suppliers on phones are Apple and Android (powered by Google), but the more important company is Apple. For the past few years, before the growth of services, the company lived on the sales of iPhone.

In an article by Stephen Nellis, Max A Cherney and Yuvraj Malik of Reuters, Apple reported for the quarter and Apple expects to return to a growth in the future.

In the 2nd quarter, sales fell to $90.8 billion beating the estimates of $90.01 billion. For the quarter, iPhones sales fell 10.5% to $45.96 billion compared to analyst expectations of $46 billion.

Apple executives note in February, Apple benefited from a $5 billion surge in iPhone sales as the company caught up with supply-chain snarls during the pandemic lockdowns. China is Apple’s biggest market and sales were $16.37 billion down 8.1% but above analyst expectations of $15.59 billion.

CEO Cook told the analysts, Apple had spent over $100 billion on research and development over the past 5 years and feel very bullish about our opportunities in generative AI. Expect to see the new iPhone will some capabilities in the September launch.

Apple also announced the largest stock buyback of $110 billion. The effect of a stock buyback is to reduce the shares which all things being equal will increase the earnings per share which means the multiple of earnings to price will be low or the stock price will increase to the old level multiple. Apple earned $1.53 per share, above the estimates of $1.50 per share.

Linking to dividend paying stocks, analysts evaluate stocks and for the larger companies, they tend to be close or within a slight margin of error. It is very rare that a larger more established company does remarkably better (it happened with Nvidia) or worse than analysts’ expectations. For your investments in larger companies, this means you can trust the analysts. You picked the company for a variety of reasons and being profitable is one of them. The company still needs to deliver or execute on their business plan, but will larger companies there will be fewer surprises and that is a good thing.

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

In every industry there is the hot aspect or exciting part of the industry or the elements which make the press. They elements cause excitement for outsiders who may not understand the basics of the industry, but it allows conversations to be held among the general public. For those involved in the industry, they look to the nuts and bolts of the industry to see opportunity.

In an article by Karen Weise of the New York Times News Service, 2023 was the year of the AI chatbot and 2024 is the year of the AI plumbing.

Companies such as Microsoft, Meta, Amazon and Alphabet disclosed they had spent more than $32 billion on data centres and other capital expenditures (capex) in the first quarter of the year. All the companies have a desire to spend more on capex.

Most people have heard about the California gold rush (for example the San Franciso Football team is called the 49ers) and the people who made the biggest fortunes were not the miners but those that sold the shovels, tents and jeans (Levi). This means for this type of capex, look to the companies such as Nvidia, Oracle, Intel and Cisco systems. Companies which ensure the data centres work to the expectation the leaders in cloud-computing need.

Analysts expect the capex spending to continue for a few more years which is founded in the supply and demand. Microsoft said its generative AI could be bigger if the company had enough data centre supply to meet the demand.

For the computing infrastructure, the key is the chip inside it. Infrastructure demands generally fall into 2 buckets: one, there is the building the largest, cutting-edge models which some AI developers say could top $1 billion for each new round. The second part is inferencing or querying the models to actually use them.

Start with the hot companies in the media, but more often than not, do your homework to find out which companies are the suppliers so the hot companies can do what they do best.

Linking to dividend paying stocks, it is good to have the hot companies in your portfolio but as an dividend investor you want to determine which supplier companies are consistently profitable and can pay a dividend. At some point hot companies cool off and the price will decline, however supplier companies tend not to rise as fast or fall, but be able to year and year out make profits to pay dividends. In the middle and long-term horizon, they are often the hot companies in your portfolio.

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

When public companies generate profits there is an expectation that after the company has invested in itself, the company will reward shareholders. The shareholders is rewarded by the profits which allows the company to buy back stock and pay dividends, often times both. For some investors, they would prefer stock buybacks which are not taxable, but does help increase the share price. Other investors prefer the cash, but if you own thousands of shares taxes plays a role in your decision making.

In an article from Reuters, for many years the big tech companies have generated billions in cash and most of the money has gone into large bank accounts and the reinvestment in the business. Last year, Facebook announced a dividend. This year, Alphabet has announced a dividend along with a $70 billion stock buyback. Buybacks work as follows: every share trades a price multiple calculated as EPS or earnings divided by number of shares outstanding. If the number of shares decreases, the earnings will increase on a per share basis which pushes the share price higher.

For Alphabet, revenue was $80.54 billion for the quarter, compared to estimates of $78.59 billion. The value of the shares increased with the quarterly results.

Linking to dividend paying stocks, there are a number of reasons to own stocks however once it can consistently make a profit to pay for dividends it allows for the holding to become years rather than the owning for the growth of the share price. It is a good thing for a company to pay a dividend because most companies cannot. The fact the company can means less risk as a shareholder for the cycles of the stock market.

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

When something is new or new to the general public, it is often expensive and early adopters pay extra. As the general public believes it needs to have the new item or gadget there is a rush to provide to them and eventually prices come down and the new item is embraced by the general public till the next innovation. Along these lines, AI software is new to the general public and the adoption is becoming rapid.

In an article by Karen Weise and Cade Metz of the New York Times News Service, similar to other new gadgets and products, the race to build generative AI systems, the tech industry has been bigger is better, no matter the price tag. Now that AI is in the general public, the expectations are that more and more products and services will use the generative AI, companies are embracing AI technologies that are not as powerful, but costs less and that can be a good trade off for many users.

Microsoft has introduced 3 smaller AI models that are part of a technology family the company has named Phi-3. The smallest model can fit onto a smartphone and can run on chips that are not Nvidia’s or the AMD type.

Chatbots are driven by large language models or LLMs. The system does analysis on digital books, news articles, chat logs and other text culled from across the internet. By pinpointing patterns in all that text, the system learns to generate text on their own. To do this process requires considerable computing power and that is expensive.

This is the reason why the large technology companies are building data centers

The smaller models are a trade-off between power and size. Researchers believe the smaller models can at least approach the performance of the leading chatbots such as ChatGPT an Google Gemini.

Linking to dividend paying stocks, in every industry there are trends and cycles, the big cycle at the moment is generative AI. The generative AI is the new part, the AI has been used in many companies for a long time, but it was limited to a few users particularly trying to match ads to consumers to raise spending or when your app says the offers best suited to you to open your wallet. As months go by, the generative AI will be in most products and that can be a very good thing to allow for better decisions. One very good decision is lose less money which means depend on both dividends and capital gains. In the universe of companies there is much choice and most of us cannot buy every company, how do you choose?

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

In the movie the Field of Dreams staring Kevin Costner, a line was repeated if you build it, they will come. The movie was about baseball and the Kevin Costner character built a baseball field in the corn fields for deceased ballplayers to play baseball. Because it was the movies, the players came to play. In reality, there was no one watching the players and the baseball field was less than profitable. In the real world, if there is a large enough government grant, infrastructure will be built.

In an article by Ken Ritter of the Associated Press, a $12 billion high speed passenger rail line between Las Vegas and LA has started construction. The promoters of the rail line suggest that by 2028, millions of people will take the train at a cost of $400 round trip. If you believe the millions or the trains carrying 30,000 people a day, check out the Amtrak trains or Interstate 15 traffic. In 2028, the summer Olympics are to be held in LA.

The government has received $6.5 billion from the Biden administration including a $3 billion grant from infrastructure funds and approval to sell $2.5 billion in tax exempt bonds.

The company building the train is called Brightline West and operates a fast train between Miami and Orlando in Florida. The train will be in the median of I-15 and cut the 4-hour trip by car to 2 hours. Las Vegas is a popular driving destination for Southern Californians and I-15 is often crawling on Sunday traffic.

Linking to dividend paying stocks, if you think about the Field of Dreams there are many ideas in the marketplace searching for dollars, most of them should remain as ideas. However, the dreaming is a good thing in order to make things better. For a dividend investor, the idea actually has to have a market that is willing to buy the product or service at a profit or profit = revenues – expenses. It is simple formula, but before you put your money on a dream, examine the balance sheet to ensure there is money to be made after the government money is used.

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

In many countries around the world, many services started as private but as time went on the country decided to bring them under a quasi state control because the services provided were needed by everybody. Some examples are the transit, utility sectors, and water and sewer services, in most states this is provided by government because everyone needs to use the services. As time went on, the philosophical argument about having the private sector do the job would result in greater efficiency and lower bills. This was done in London, UK.

In an article by Sarah Young of Reuters, Thames Water which supplies about 25% of the British population with water and sewage services, is trying to have the regulator raise bills by 40%. This increase would allow Thames Water to tackle sewage spills and fix leaks and do environmental projects. The additional problem with Thames Water is it has $27 billion in debt and the regulator Ofwat, wants to minimize bill increases.

It is noted that the 40% increase propose by Thames Water compares to the 31% increased proposed by the other water and sewage companies.

Chief Executive Officer Chirs Weston said we will continue to discuss the issue with the regulators and stakeholders as the desire is to make a good return on investment. The owners included Britain’s Universities Superannuation Scheme, China Investment Corp, Ontario Municipal Employees Retirement System (OMERS), British Columbia Investment Management Corp (BCI) or large institutional investors. The owners rejected adding a $846 million equity lifeline, saying raising prices is a better solution. Some of the owners have since written down the value of their assets.

The regulator will propose a draft solution by mid June.

Linking to dividend paying stocks, as investors we often believe have private equity or public shareholders will make an organization better. The problem is for organizations that are to serve the general public, it is very hard to cut off the service or limit the service to people who can afford the price of the service. Private companies can limit service or not service non profitable customers, organizations serving the public have to service the public. Otherwise they are efficient as any other organization.

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

In politics making politicians will talk about middle income values and the idea that with a larger middle income, more people could afford housing, vehicles, savings and investments. One of the things the politicians do not talk about is money or raises for workers. In many states, legislatures had the chance to raise minimum wages but they declined. In some states, the Governors threatened workers that we do not want unionized workers but offered no raises. In the 1960’s when more people afford life’s choices, a higher percentage of workers were unionized. That does not mean every workplace was better, it just meant more people had higher wages than minimum wage. There was a marked decline in unionization as companies shut down plants and moved them to lower wage south and out of the country to Mexico or China.

In an article by David Koeing of the Associated Press, the Union Auto Workers (UAW) won a stunning 73% at VW after losing elections in 2014 and 2019. It was the union’s first win in a Southern assembly plant owned by a foreign automaker.

UAW President Shawn Fain said the fight will go on to all the auto plants across the Southern US. The next UAW drive is the Mercedes-Benz plants in Tuscaloosa, Alabama for 5 days around the 15th of May which the union lost the vote.

Harry Katz, a labor relations professor at Cornell University noted the UAW will have a harder fight because of aggressive management resistance and even community resistance. One of many reasons is labor unions are tied to communism and there is a long history of fighting communism, but not a long history of paying employees well.

One of the advantages the union movement has is President Joe Biden, he believes unions help raise workers’ wages to promote a larger middle class. President Biden encouragement means the federal regulators are not putting up barriers to the union. The workers in the southern states see the gains the unions made in more money and benefits in the northern states and wonder why not here?

Linking to dividend paying stocks, just because there is a union does not mean middle income is the result. Most of the writer’s career was with a nonunion higher paying financial companies which found a method to let people go who wanted unions. In addition, one job was with a union who agreed to $1.00 above minimum wage, not exactly middle-income results. Unions come with all types of bargaining abilities but when workers see management doing well and they are doing less well, they are willing to try. For the companies you invest in, what is their labor management practice? what is the ratio between the President’s compensation and the lowest entry level job? will change come to the company?

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

In the 1960’s a TV show was produced called Star Trek whose mission was to explore strange new worlds, to seek out new life and new civilizations, to boldly go where no man has gone before. For most of us, we are not going to outer space anytime soon, outside of flying in a plane, but we can go to new worlds through books. There are a vast number of jobs and most tend to be in one category for most of our lives, which is terrific if you like or love your job or your field. However, with books we can sometimes see possibilities which can help us invest or make life better. One such book is called Grunt by Mary Roach, published by WW Norton and Company, New York, 2016. The book is subtitled The Curious Science of Humans at War.

Ms Roach has written a number of books in the same premise on different subjects, but Grunt is about people who try to make life a little easier to soldiers. We as a society will send many people to train for war in basic training and it tends to be one size fits all. Basic training is to break people down and rebuild them to make them think like a soldier in terms of discipline, bonding with your troop (teamwork) and paying attention to orders. After the person has become a soldier, they are given basic uniforms for all the jobs they will be tasked with, does the uniform fit all the jobs they will be tasked with?

The military has many doctors and researchers trying to determine how to ensure the dangers of warfare are lessen. Within the researchers, a great amount of information is gathered, some of which could be used outside the military, to the general public. If it is used for the general public, that means investment dollars could be enhanced.

There are many people in the world who enjoy fashion and looking good, in the military what cloth is the best one? The place the US Army determines that is the labs at US Army Natick Soldier Research Development and Engineering Center or Natick. Everything a soldier wears, eats, sleeps on is developed and tested here. If someone in the fashion industry believes they have developed a better flame-resistant fabric, the fabric is tested at Natick. They will run a gamete of tests to determine when it works well and when it does not work, because in the Army people are working in all kinds of temperature and will need to reuse the clothing multiple times.

If you look at the average person today, they are carrying a cellphone somewhere. When cellphones were invented, pockets on clothing was a secondary concern, now fashion designers have to think about the phone. In the military, one of the tasks of those that shoot other people is to be a sniper. Most of the time, they wait till the person or persons arrive, while they are waiting are zippers good? It turns out the answer is no, there are other solutions. US government button specifications run to 22 pages, sometimes it seems complicated.

One of the best things about the Iran war was the advances at the Walter Reed Hospital and Rehabilitation Center. Prior to the advances, over the years many soldiers lost limbs but the prosthetics were not that good. There have been tremendous advances in both the replacement limb and wheelchairs which has moved to the general public and some form of normalcy has come forth.

Another subject for the military and the general public is dysentery or diarrhea. William Osler in 1892 wrote for every American killed by battling injuries during the Mexican War of 1848, 7 died of disease mostly diarrheal. During the American Civil War, 95,000 soldiers died from diarrhea or dysentery. During the Vietnam War, hospital admissions for diarrheal diseases outnumbered those for malaria by nearly 4 to 1. Fortunately at the Entomology Branch of the Walter Reed Army Institute of Research people are studying the issue both foreign and domestic deployments.

Ms. Roach does a variety of other subjects including hearing, trying to survive in a submarine which has malfunctioned and a host of interesting parts of military.

Linking to dividend paying stocks, we all look for ideas for the next great thing and often we look to universities for research. The military has a number of research facilities and their solutions make the life of the soldier better. Some of those solutions can be used with the general public and that means revenues. In your investments, how does your company look for great ideas to implement?

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

If you think about the building of the country, most people lived near the coast because the easiest form of transportation was by boat. Eventually, the railway age came to the US and every community knew that it wanted a railway or it would not grow and likely stagnate. Railways were built and then for a hundred years consolidations happened. After WW II, the interstate highways were built and only profitable railways were operational. At the present time, what is both convenient, practical or cost effective, and reasonable has evolved and the supply system fit into the operations of trucks and railways.

In an article by Peter Eavis of the New York Times News Service, the collapse of the bridge in Baltimore has thrown the supply system in a loop. All ports to a degree in specialize and for the port of Baltimore, besides everything else under the sink, the port specialized in farm and construction machinery and autos. The port handled 1.3 million tons of farm and construction machinery and 850,000 cars and light trucks.

In the article, an example was the green John Deere tractor, normally it was shipped from a factory in Waterloo, Iowa and went to Baltimore to go around the world. At the present time, the alternative is the port of Brunswick, Georgia. Griff Lynch, Chief Executive Officer of Georgia Ports Authority, noted while the business is good, the capacity is limited. In April, the port handled 17,000 more vehicles than the normal 70,000 in a month. (if you ever been around a car manufacturing plant, cars and trucks take up a lot of space).

In the trucking industry, they are struggling to get drivers and loads to where they need to go on time and not lose money. Akram Ayyad of 410 Transport said he has to go to the Port of New York and New Jersey, which means his customers have to pay more for freight.

Beth Rooney, a director of the New York Port Authority reached out to the Baltimore people and now they are handling 2/3 of Baltimore’s container business and 1/3 of the auto cargo.

Before the bridge collapsed, Kathleen Kropp’s trucking business, Triple H Trucking with 15 trucks moved containers from the port to York, Pa about a 95 mile trip. Now the trucks must go from Baltimore to Norfolk, Virginia to pick up the containers and then to York before returning to Baltimore. The customers pay more, the drivers earn less because they make fewer runs each week. For some companies do more in overtime, but how long do people wish to do overtime? It has taken a month before the ship was moved, but the bridge will take longer.

Linking to dividend paying stocks, the infrastructure is built and it is very hard to move it so supply chains are built around the infrastructure. Similar to the Port of Balitmore, it is always possible to find alternatives for a short time, but costs and people will dictate what will happen in the future. For your investments, what are the alternatives for the supply chains?

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