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.

If someone were to ask you – what company was started in a garage and now is one of the most admired companies in the world? Most people would likely say Apple. The company was founded by Steve Jobs and Steve Wozniak in a garage, because the 2 guys had little money but believed in a hobby type computer which eventually helped changed the world. The company introduced its first product the Mac and sales went through the roof. Afterwards it came out with products but not all were successful and eventually the Board asked Steve to leave. New management came in, could not achieve the same success, a few years later the Board bought NEXT which was started by Steve Jobs and he came President once again. Soon new products came and with the launch of the iPhone everything changed both the world and the company. Mr. Jobs was on the top of the world, however he got cancer and passed away too quickly. What happens to the company?

In a book called After Steve written by Tripp Mickle published by William Morrow, an Imprint of HarperCollins Publishers, New York, 2022 the author examines what happened at Apple.

There will be 2 people introduced who made Apple what it is today. Jony Ives a brilliant designer and present CEO Tim Cook.

If you think about Apple, you often think about the brilliance of its designs. The 2 people most responsible were Steve Jobs and Jony Ive. The design team was led by Jony Ive and it was the design team’s job was to bring the impossible to reality. Steve Jobs tended to drop in once a week and say yes or no, more often no until the simplicity of the use of the product pops out to the public. Jony Ive has the same exacting standards of Mr. Jobs and would carry on his legacy. Often bringing the impossible to possible is expensive but all accounts the design is beautiful and functional.

Mr. Cook has shows his brilliance in different areas than design. Mr. Cook came up through operations and spreadsheets and became a master at inventory control. One year, his control was so good, Apple almost had no inventory. The companies in China which made the products of Apple had a yellow line in the middle, the companies financed the inventory, and it was not until the product went over the yellow line to be made into computers and laptops that Apple booked the inventory to their books. That yellow line helped make billions for Apple.

Mr. Cook negotiated a deal with the largest Chinese Mobile Phone company – China Mobil to sell iPhones the same as they do in the US. Most people do not buy the phone outright but pay installments. China Mobil has the biggest customer base and outreach in China. This action helps sales, which is the reason all analysts look to sales of Apple products in China.

Another thing that Mr. Cook did was to enhance the services aspect of Apple. Once a person buys a Mac or iPhone or an Apple product, they are in the Apple universe or ecosystem. The company started small by focusing on music with iMusic and then buying the company Beats. After the success of iMusic, Apple expanded services to include TV and Movies and other entertainment features. If you are an Apple shareholder you are thinking iPhone has sold over 1 billion units in sales, there are many people that are in the Apple ecosystem or potential buyers of services and every year some will upgrade to the next level of Phone.

The book has a focus on Mr. Ives contrasting to Mr. Cook – do Apple products change because one of the best designers in the world is no longer focused on the design of Apple products. Mr. Cook is one of the best bean counters in the world which is wonderful to shareholders. A book such as this one also shows how public relations works from a crisis situation and how congressional hearings work from the CEO perspective.

Linking to dividend paying stocks, all companies have good faith and reputation about its consumers who look at the company in a million different ways. The customer base often changes as time goes on, that does not matter the company better or worse, just different. For investors, you may love what the company is doing, but overtime the emphasis on what they are doing changes, do you still love it? the best description is often a small company will do something extraordinary well, then it expands and the company changes, it is better or worse?

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

In our daily lives, we are exposed to many of the same concerns as countries face. What is good for the individual, does not often translate into what is good for the country. All around the world, most people have felt higher prices or your money does not go as far as it seem to the past. As an individual you have to make choices or gain income. As a country, you have to pay the debts but the people in general may or may not like it.

In an article by Libby George, Karin Strohecker and Aaron Ross of Reuters, two countries where people are not liking it are Kenya and Bolivia. Both countries have faced opposition from the public to higher taxes to pay down deficits. Bolivia’s credit rating is junk and Kenya owes over $80 billion and both governments want to increase taxes.

The public has seen inflation eat up the value of their spending power, they also see less spending on public infrastructure are the country seems to be falling apart. If they pay more taxes what will be fixed? The public is not happy and are protesting.

In Kenya, the country borrowed heavily in the mid 2000’s when interest was law and China was splashing cash to lend to emerging markets worldwide via its Belt and Road Initiative. Kenya borrowed money and roads, railways and factories were built. But not all the projects were finished resulting in many Kenyans feeling they had not benefited and not surprisingly there was some corruption along the way.

Debt can be wonderful, but it has to be paid back whether you are an individual or a country.

Linking to dividend paying stocks, hopefully when these companies take on debt they are buying a company to increase their profits and sell off assets or doing mergers. Debt can be a four letter word, so it is always wise to monitor your investments debt levels or changes will be made frrom investors on the outside.

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

If you are thinking of buying a car or truck, you would go to a dealership and you may think it is an independent company but in the reality the software system which helps run the dealership makes it all interconnected. In many companies, they buy software systems from software makers because the software helps makes the business better. The software companies tend to specialize and because they specialize if something goes wrong with the software, the public finds how interconnected the system really is.

In an article by Wyatte Grantham-Philips of the Associated Press, the software company behind car dealerships is called CDK Global Inc. In late June, CDK was cyberattack and the system was down for at least a week. Customers of CDK include Group 1 Automotive, a $4 billion automotive retailer, Lithia Motors Inc and AutoNation Inc.

CDK Global is based outside of Chicago, provides software technology to dealers that helps with the day-to-day operations such as facilitating vehicle sales, financing, insurance and repairs. GDK servers over 15,000 retail locations across North America.

GDK press release noted it receive back to back cyberattacks on June 19 and out of an abundance of caution, shut the whole system down and is providing alternatives to its customers.

Stellantis, Ford and BMW were affected. Group 1 Automotive owns 202 dealerships and franchises and 42 collision centers, said it took measures to protect and isolate its systems from the GDK platform. Lithia Motors and AutoNation did the same.

Mike Stanton, President of the National Auto Dealers Association noted dealers are committed to the protection of their customers’ information. Cybersecurity experts noted if a customer believes their data is breached, they should monitor their credit or freezing their credit and monitor any suspicious phishing messages.

Linking to dividend paying stocks, when you buy shares in a company, you often think it is reasonably independent, but if you look closely most companies buy software systems from other companies and hopefully adapt it for their own uses. There are companies who have large technology groups, but surprising most companies purchase software from others. You may want to know what groups provide the software which runs the business.

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

In every country, traditions develop over the years and people generally like them. Why the traditions develop is a different story but in general, what people eat has developed over many years. The food traditions typically developed around the landscape – in moderate temperatures where beef cattle roam and there is plenty of land and food, people eat beef. In climates which are have a lot of moisture, people developed and harvested rice. Often as people move around the country and the world, those habits will change but in times of festivals they come out again.

In an article by Candelaria Grimberg of Reuters, if you think about the country of Argentina, you likely will think about temperate weather, wide open plains and lots of beef cattle. Not surprisingly, beef has been a stable food item for generations. Many Argentine home have built in grills to cook the beef. Steakhouses dot street corners around Buenos Aires and barbecues can be found at constructions sites and protests.

Beef is an integral part of the Argentine diet. Looking at the diet of a country and examining it for trends can tell you what the average person in the street is worried about. Argentina’s economy has been going on a rough patch with triple digit inflation (about 300%) and a recession. While new President Javier Milei is pushing through austerity measures to lessen the government’s role in the economy, the economy is not doing well.

One of the places you see it, is in the butcher shop. People are still buying beef, but they are choosing less expensive cuts and looking for alternatives for their protein. There are alternatives as much of the world lives without meat, but it takes a changing economy to do the alternatives.

Beef demand is down, for the cattle industry the good news is exports have risen with the biggest customer China has increased buyer of Argentina beef.

Linking to dividend paying stocks, all areas of the world have traditions and some of the traditions will benefit particular stocks. For your investments, for the biggest markets, what traditions help continue to sell the goods and services? Why would that change? by looking at people’s traditions it can help you understand the overall economy and why they continue to buy the goods.

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

If you have flown from coast to coast, you may have been surprised about the prices and wondered where are the cheap fares? You may have heard for the past few years, it was possible to fly from London, UK to Venice, Italy for the price of the pizza. There were many stories about people going away for the weekend and the price of the flight was the least of their concerns.

In an article by Eric Reguly of the Globe and Mail, the cycle of economics using the airline industry is explained. The first step was in Europe every country believed and did have their own national airline for the health of their economy. Most lost money and after numerous years, deregulation or cutting the expenses of the airline was the cry by the politicians and citizens. Deregulation happened and 20 new airlines started operations and many them competed on the same air routes.

When the plane leaves the runway, it either has people in its seats or not, has cargo to be flown or not. To ensure passengers were in the seats, fares went down and people flew more, although over time fees started to increase. What was good or great for the passenger was not good for the company flying the planes. Airline consolidation is under way and that translates into less competition and rising market share for the big incumbents.

An example of the above is the US, there was deregulation and the system has an effective 4 airline oligopoly. The Big 4 are Delta, Southwest, American and United. The combined passenger percentage is 70% with each holding a 16 -18% market share, according to the US Department of Transportation. In 5th place is Alaska Airlines with 6%.

A recent IATA, the International Air Transport Association found that in the US to reach 50% of scheduled seat capacity, 3 airlines were needed. In Europe, it took the top 10 airlines to reach 50% capacity. It was not surprising European fares were less expensive.

The European market is now consolidating – Germany’s Lufthansa bought 41% stake in Italy’s ITA, the successor to bankrupt Alitalia.

IAG which owns British Airways, Iberia, Vueling and Aer Lingus has agreed to buy 80% of Spain’s Air Europa.

Air France-KLM wants to buy 20% of Scandinavian carrier SAS.

The Portugal government has put up its airline for sale, expect bids from Europe’s big airlines.

The airline bosses’ say consolidation means the bigger airlines profitable allowing them to renew their fleets and offer reliable, expanded services. They do not say fares are going up.

The consolidation of Europe’s airlines will mean by 2025, the top 5 groups will control about 73% of the market.

Linking to dividend paying stocks, in every industry there tends to be competition which is good for the consumer, but eventually consolidation which is good for the companies. As an investor, you want to own the industry stock in the consolidation phase as the companies are profitable but compete on the margins.

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

If you think about Amazon Prime members, which is 230 million people worldwide, and membership includes free shipping. As a Prime member you may start small, but soon rather than going to a store and looking for an item, you will likely see it on Amazon and it will seem easier to order it. Billions of packages are sent and equally Amazon makes billions of dollars from the subscription in 2023 it was a little over $40 billion. For years, if you ordered something, the package needed to have filler and that was supplied by plastic air pillows.

In an article by Michelle Chapman of the Associated Press, Amazon has announced it is shifting from plastic air pillows to recycled paper. The reason is two-fold: it is environmentally better and for Amazon the paper works better. (for a company the size of Amazon, it needed to be less expensive too).

Amazon began transition away from plastic air pillows in October at an automated fulfilment center in Ohio. The company was able to test and learn which resulted in a transition process including changing out machinery and training employees on new systems and machines.

During the testing, Amazon discovered the 100% recycled paper offers the same, if not better protection during shipping compared with plastic air pillows.

Linking to dividend paying companies, it is a long process to change processes and while the worthwhile goal of being environmentally friendly is good, for companies the cost to change machines and training people is more important. It took time to change from air pillows to paper and that is the way it should be. Companies are always examining process to find cost savings, hopefully the cost savings meats other corporate goals and the result can be relayed to the public to improve goodwill. There is a reason why it takes time in a large organization.

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