Many years ago, while reading an annual report from a small country insurance company, the Chairman wrote to the effect last year there was 10 barn fires and we had to pay out. This year there was 3 barn fires and we recorded a surplus. This year we always inspected the barns and put in preventive measures for barn fires not to spread.

The insurance company was doing risk management, it likely costs farmers more to insure preventive measures were in affect for lower insurance rates. In larger insurance companies, one of the most important departments is risk management or what rates should people pay that will ensure the insurance company makes money?

In an article by Patrick Cooley of the New York Times News Service, whether you believe in climate change or not, insurance companies are motivated to make money and they react to changes. In the last few years, because weather has been changing both drought and floods, the risk management people in the insurance companies have been hard at work. American farmers who grow fruits and vegetables are often finding crop insurance prohibitively expensive or even unavailable.

A 2021 study from researchers at Stanford University found that rising temperatures were responsible for 19% of the $27 billion in crop insurance payouts from 1991 to 2017.

About 85% of the country’s commodity crops which include corn, soybeans and wheat are insured, according to the National Sustainable Agriculture Coalition.

In contrast, barely half the land devoted to specialty crops such as strawberries, apples, asparagus and peaches was insured in 2022.

An example is Bernie Smiarowski who farms 700 acres in western Massachusetts. His farm is fertile and along the Connecticut River. Last year due to floods, he lost $1.25 million worth of potatoes. It was the 3rd straight year of challenging weather. His expenses are $2,000 an acre with yields from 20% to just breaking even.

One of the problems with the federal insurance system is that agents make more money insuring vast tracts of corn and soybeans. Most insurance plans cover a single crop, meaning specialty farms growing a variety of fruits and vegetables need to buy multiple policies.

Kristen Ward, regional V”P for crop insurance at Farm Credit Mid-America, said her company worked with farmers in 6 states covering barley to grapes. Premiums offered to farmers are based on risk, which is rated according for where the crop is grown.

More than 220,000 American farms grow specialty crops according to the American Farm Bureau Federation. However only 18,659 whole farm revenue policies have been sold in a decade.

Federal crop insurance started in the Great Depression, under the program the $18 billion program pays half a farmer’s crop insurance premium to guarantee a secure food supply. The current bill was extended to 2024, what comes next is anyone’s guess as there are many different points of view. For example, Sen Chuck Grassley, a Republican’s farmers benefit so he says leave the program alone.

For Mr. Smiarowski’s farm, he and others appealed to the Governor for help but his share only covered 20% of his losses. As a true farmer, he said when times are bad, you get what you can and you hope for a better next year.

Linking to dividend paying stocks, vest financial interests are where to look for when examining issues. There may or may not be climate change, however insurance companies change their premiums because something changed, and they do not like reporting losses. Fortunately, many insurance companies are mandated by the government to have reserves or be able to use re-insurance to mitigate losses and report profits to pay dividends.

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

One of the most important revenues for Wall Street firms is the IPO or Initial Public Offering. The IPO is both speculation and vindication of a successful company. The speculation is based on other similar companies, what are they worth now and the future? the vindication is taking the company to the next level as companies have to change when they go from private to public. In every IPO, part of the job of the Wall Street firms who help the company go public is to ensure it has maximum media exposure or the general public knows about the issue, if they do some will or could be buyers.

In an article by Medha Singh and Yuvraj Malik of Reuters, in late March, an IPO meant all the criteria for a successful IPO. The company was former President Donald Trump’s company of Trump Media and Technology Group. The IPO happened, there was market demand to push the one day level to $79.38 a share but it closed at $57.99. If you take the price times the shares outstanding, the company was worth $8 billion that day.

Mr. Trump’s shares are locked up for 6 months before he can sell, which means on paper he was worth about $6 billion, but since the shares cannot be locked up or they cannot be pledge for a loan, it is paper value only. If the price stays high for 6 months, one would expect Mr. Trump to sell some of his shares on the market.

On Wall Street, the analysts examine the valuation of a company. People are buying the shares for a reason, but it is not financially rational. The company had an operating loss of $10.6 million for the first 9 months of 2023 on revenues of $3.4 million.

The biggest revenue area of the company is Truth Social and in February had 8.9 million sign-ups. Its competition including X has 238 million active users, Facebook has 2.1 billion users and Reddit has 73 million users. Investors are paying $1,000 per signed up user in Truth Social, $147 for Reddit, $80 for X and $46 for Snapchat.

If you are an investor, you must believe the numbers will go for Truth Social because all Social Media platforms are essentially advertising companies. The greater the number, the more advertising comes and the higher the rates companies are willing to pay for the spots.

Linking to dividend paying stocks, there are many reasons why a stock can go up, but to stay up for months and years takes a rational approach to its revenues and ability to make profits. For a company similar to Trump Media, it went up, but why would it stay there unless the sign-up level multiplies at levels it has previously not seen? It could happen, the present valuation of the company allows it to buy another one, but if the sign-up level does not change greatly over the short and medium term the company will be pennies on the dollar and an interesting story line.

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

In the business world having a lawyer or access to lawyers is a normal part of operations. There are many contracts to be negotiated and signed and firms are sued on a regular basis. Sometimes the suits are good, sometimes there are less than advantageous to the company, and sometimes the suits last for decades. Often times the ones that last for decades are when companies have near monopolies, and they can charge a fee for their services. Companies using the service will try to negotiate for a lower fee, but when is a fee too high?

In an article by Ken Sweet and Mae Anderson of the Associated Press, Vias and Mastercard announced a settlement that ended decades of litigation over fees. While many people own a credit card with either VISA or Mastercard, the real business of the companies is owning the wires every time a debit or credit card is swiped or tapped to the chip to connect.

The lawsuit means the fees will be reduced to 2030 then they will either go up again or be negotiated. The issue for the National Federation of Independent Businesses is Visa and Mastercard sets the interchange rates but small businesses have to pay the highest fees.

The interchange rate are calculated as a fixed fee plus a percentage of the sales total, typically from 1 to 3%.

After 2030, companies must negotiate the fees with merchant-buying groups. The law firm that announced the settlement put the value of the savings close to $30 billion. This particular lawsuit started in 2005.

Linking to dividend paying stocks, both Visa and Mastercard pay dividends and over the years have been a good investment to own. The bulk of the revenues come from owning the wires or connections for consumers to use a debit or credit card. Another source of revenue is from the interest on the credit card. Companies have started small but the heart of the business is the volume needed to generate revenues minus loan losses, if losses are low, it is a healthy business to be in. When you examine the companies you invest in, it is important to know where the majority of the revenues come from to generate profits. The easier it is to generate on going revenues the easier it is to invest in the company.

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

In the corporate world, once someone achieves the CEO’s position it is going to be very difficult to remove the person. There are a number of reasons which included in many public companies there are no controlling shareholders which means the CEO has to make the institutional shareholders who control the company very disappointed. The CEO reports to the Board, a good CEO ensures that whoever is on the Board they are in constant communication with the CEO, and in reality for most of us, firing a friend is never easy or you may want to give the benefit of doubt because maybe the cycle turns and the CEO will produce great results. When you read a CEO is leaving before his time is over, something drastic has happened and the person generally leaves with a substantial money in his pocket to smooth the transaction. For most employees, they accept the range in which they are employed at, at the CEO level the contracts are negotiated and at the time the Board wants the CEO.

In an article by Sydney Ember and Niraj Chokshi of the New York Times, the CEO of Boeing, Dave Calhourn is stepping down at the end of the year.

The company is under pressure for various safety measures including the grounding of Max aircraft, a door flying off during an Alaska Airlines flight and the FAA is clearly not happy.

Boeing is considered a jewel of a company and has a duopoly with Airbus, the two airlines dominate the commercial aircraft industry with a 95% plus share. Boeing also has a division for planes with the US military. In the world of airlines, being the CEO of Boeing is generally a sweet position. The 2 divisions produce aircraft for the world and more and more people are travelling, airlines need aircraft. In normal times, that translates into profits and dividends.

At Boeing, there were other management changes and safety is the most important issue at Boeing. Remember the slogan at Ford – quality is job 1.

CEO Calhoun tried to put a good face to the announcement saying he has been CEO for 5 years and is 67 years old, but the announcement was made in late April rather than waiting until the May annual meeting. In later reports, Mr. Calhoun will leave with a $24 million payout.

Linking to dividend paying stocks, when you own a stock, you own a piece of the company and can vote at the annual meeting, companies similar to ProxyVote make voting easy. The votes are for the election of the Board of Directors, Appointment of auditors, Advisory votes on executive compensation and Shareholders proposals (shareholders from 1 to many shares can contact the company to go determine who a shareholder proposal is done, but it is possible to have the concern addressed). In addition, shareholders can go to the Annual General Meeting (AGM) and ask a question. For most of us, unless the company is a disappointment, we tend to vote as management recommends, not always but most of the time. If you own shares, you should vote. If you cannot go to the AGM, you can listen online (virtual AGMs are here to stay) or listen to the conference call the company has with analysts.

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

If you ever heard of Ray Dalio, Chief Investment Officer of Bridgewater Associates, you may know he has You Tube videos on the cycles of the economy. All economies go through cycles and all companies go through cycles. Most of only really know when the bottom and top was, Mr. Dalio’s company has been very good at understanding when they are actually happening. If the market is at the bottom, buying is a very good thing; if the market is at the top, selling is very good thing. Mr. Dalio’s company has an excellent track record of outperforming the markets.

In an article by Keith Bradsher of the New York Times News Service, China has been going through a cycle and is near or is at the bottom, what should Premier Xi do? Introduce a new program with a fresh slogan – new, quality productive forces.

The idea is to spur innovation and growth through massive investments in manufacturing and research and development.

China has a forum called the China Development Forum which was started in 2000. The Forum explains the plan released by the Premier to corporate leaders. The corporate leaders have a question and answer series with Deputy Ministers and sometimes the Premier.

The Premier encouraged the Chinese people to replace old cars and household appliances, but there was no word if the government was offering incentives to consumers.

Thanks to the downfall in housing prices, consumer spending has fallen. One of many problems in China is real estate represents 60 to 80% of the average household assets. Real estate prices have fallen over 20% and people are struggling to meet mortgage payments as well as consumer spending is down. If we go back to Mr. Dalio’s economic cycles, countries move from industrial to service countries, and when a country goes into a service economy, the value of real estate is related to consumer spending. China has a glut of real estate and declining prices. China’s manufacturing more that double the share in the US of the economy.

Partners outside of China had questions about how China’s financial industry will keep the property industry going in the midst of local government cutbacks. But for now, the emphasis in China is on strengthening the supply and quality of goods and not on worrying about demand.

Linking to dividend paying stocks, similar to countries companies go through cycles and it is easier to make cuts to spending to maintain margins. Most of us love the company to grow, but management needs to make cuts if needed to ensure when the cycle allows for growth, to maintain profits to pay dividends. Often when there is a downturn, there is a new slogan for the future, is that happening at your company?

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

The quarterly profit projection is the expectation set by Wall Street to determine how a company is doing? good, bad or how is it executing its plan? If the company beats the expectations, the stock tends to go up; if the company does not beat expectations, the stock should go down; if the company execution of the business plan does not measure up, then the stock should go down. Given all the potential downs, senior management want to exceed expectations no matter what the economy is doing.

In an article from Reuters, FedEx after reporting higher quarterly profits, the shares went up. The street was happy to see a higher operating margin at Express, FedEx’s largest unit.

Parcels are a way of life for millions of Americans, which is why 171 million people belong to Amazon Prime which offers free shipping. At FedEx, the Express unit is seeing lower demand and to save costs it parked aircraft, reduced flight hours is trying to fly fewer jets.

In terms of buy back of stock, the Board has plans to buy $500 million in this quarter, part of a $5 billion share buyback program.

Analysts at JP Morgan Chase & Co., noted FedEx hits all the high notes this time with lower capex (capital expenditures). a reloaded buyback program and a beat in Express in view of low expectations.

CEO Raj Subramaniam said, weakness in global trade continues to constraint demand in the international business.

Linking to dividend paying stocks, the expectation is these companies will be steady as she goes companies continuing to make profits and pay dividends. Steady as she goes is a good strategy for these companies, because if it grows to fast, expectations of the next quarter will be less growth. Sometimes the emphasis is on growth, sometimes the emphasis is on little growth but good margins. For the bulk of your investments, the emphasis is meeting the expectations of the street.

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

One of the reasons as an investor you want to buy dividend stocks is because they have the ability to raise prices. If prices are rising all and sales continue on the same path, revenues should be higher. Raising prices is more of an art than anything else because companies need to ensure the value the consumer believes is in the price, stays with a higher price. If the item was in the luxury category, it is easier to raise prices. If the company competes on price, then raising prices is much harder to do.

In an article by Madelline Ngo of The New York Times News Service, when grocers raised their prices were they price gouging? The Federal Trade Commission (FTC) wrote a report saying large US grocery retailers took advantage of supply chain disruptions to beat out their smaller rivals and protect their profits during the pandemic.

During the pandemic, many places were closed which changed the normal supply chain operations. The FTC noted some large firms pressured suppliers to supply them first over competitors. Food and beverage retailers posted strong profits during the height of the pandemic and continue to do so today. The prices that were pushed up during the pandemic have remained even though the supply system has been fixed.

Small grocers had a problem getting supplies during the pandemic. Large companies not so much.

Using public data on profits in the grocery retail industry, the FTC found that in the first 3/4s of 2023, food and beverage retailer revenues reached 7% over total costs. That was up from 6% om 2021 and 5.6% in 2015.

Food costs affect everyone which in an election year makes it an election issue. Besides food costs the potential $25 billion merger of Kroger and Albertsons is held up.

Linking to dividend paying stocks, one hand as an investor you like the fact that some companies can increase their prices, on the other hand if you are a consumer, you like it less. In many areas of the world, the idea of having or achieving a balance is important. Perhaps the dividend increases and the increase in the stock price more than pays for the increased consumer prices.

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

If you think about spring time, eventually a plant or two will come up because at some point the earth warms and trees and plants begin to grow. One of the plants could be tulips because they are normal spring time plant. If you like tulips, and most people do, you might have seen the huge fields of tulips in the Netherlands. The Netherlands has a long history with tulips, for investors there is the time tulip bulbs were bid up to hundreds of thousands of dollars and came crashing back. For now tulips can be bought at garden centres or places such as Home Depot. Similar to all industries, AI is coming.

In an article by Mike Corder of the Associated Press, an AI robot nicknamed Theo but produced by H2l Robotics is used to search those massive tulip fields for diseased tulips. The robot is the size of a sports car with caterpillar tracks and costs about $272,700. The company H2L has made 45 of them.

Erik de Jong of H2L Robotics, says artificial intelligence helps them to identify sick flower and very precise GPS co-ordinates allows them to pinpoint the flowers that need to be destroyed.

The software in the robot has thousands of pictures of tulips and as the camera examine the tulips it looks for the diseased ones and pulls them up. In the past, the job was done by a disease spotter, but they are harder to find and train.

Linking to dividend paying stocks, in every industry looks for better ways to do all the jobs in the company, some will take a little more time to envision how it can be done better and with less expense to find a true alternative. Thus every company is changing and as AI continues to grow or be seen more, there will be greater possibilities to use AI in the production facility.

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

If you examine the history of just about any town or city, there has been grants or incentives for the largest employer to locate in the community, it could have just happened but it was likely the result of the City officials, the Mayor, the State Representative, Senator to offer incentives to the employer to locate in the community. All of them believed the long-term effects of the employer – whether it was a manufacturing company or educational institution or government facility was good for the community. The same line of thinking happens with pro sports facilities, there seems to be a government grant needed.

In an article by Alexandra Alpher and David Shepardson of Reuters, the Biden Administration passed the 2022 Chips and Science Act to boost semi-conductor output with $52.7 billion in funding including $39 billion in subsidies for semi-conductor production and $11 billion for research and development.

Intel received nearly $20 of the $52.7 billion which it is using to build 2 new factories and modernize an existing plant in the Phoenix, Arizona area. Intel also has a plant under construction in the Columbus, Ohio area and does research and development in the Oregan area.

According to the Semiconductor Industry Association, the share of global semiconductor manufacturing capacity in the US had fallen from 37% in 1990 to 12% in 2020. The big winner has been Taiwan.

Other companies receiving grants include: GlobalFoundries $1.5 billion to build a semi-conductor chipmaker in Malta, NY. GlobalFoundries is the 3rd largest contract chipmaker.

Awards for Samsung and Taiwan’s TSMC are expected to be announced soon.

Linking to dividend paying stocks, when manufacturing companies decide to enhance their capacity, there is a tremendous opportunity to take advantage of grants for most counties and states in the country. There maybe a few which are not involved, but very few. The reality is most locations have a grant attached to them somewhere, whether to stay where they are or expand existing facilities. If the companies you invest in do not take advantage of grants and subsidies, they are often leaving a competitive advantage on the table, is that good?

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