If you remember the auto workers strike at the big 3 – Ford, GM and Chrysler, many analysts were looking at Tesla and saying the gap between the big 3 and Tesla would widen and Tesla would have a competitive advantage in its electric vehicles. Part of the basis of the analysis was that Tesla is non unionized, but has competitive salaries. In every industry there will be unionized and non unionized workers, that does not mean that one is better than the other, it just means the owners or senior management has to deal with one or the other. Many years ago, my personal experience was working in a unionized environment and the wages were on the low end or very close to minimum. There are companies that do not want unions and others that tolerate or work with them.

In an article from the New York Times News Service, in Sweden, Tesla has about 120 mechanics working in the shops, however 90% of Sweden is unionized or covered by a collective agreement. The workers for Tesla went on strike which disrupts service to the owners of Tesla vehicles. Int addition, unionized dock workers said they would either stop or delay unloading shiploads of Tesla’s to support the mechanics. Other unions have called upon Telsa to bargain with the mechanics union.

Sweden has the world’s 3rd highest share of electric vehicle sales after Norway and Iceland, according to the World Resources Institute. Tesla’s vehicles are manufactured in Germany and the Model Y has been the top selling EV in Sweden this year.

Elon Musk has for years resisted efforts to unionize and in 2018 threatened to fire workers who wanted to unionize which is against US labor laws or Tesla was fined.

Linking to dividend paying stocks, there are advantages and disadvantages for companies to work with unionized workforces, although every company says they like the flexibility they have without unions. However, if you examine many companies, they will have settled lawsuits for unfair labor practices (is that a cost of doing business?). When companies are profitable and have very good margins, they are much more likely to work with whatever labor force they have or inherited. When companies want to cut costs, labor costs are high on the list and that is when unions tend to be needed by both sides who are open to changes in the processes of work. There are always better methods to be productive in both labor and management, hopefully the companies you own investments work with management and labor well.

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

If you watch Jim Krammer from Mad Money, and it is a good thing to watch, one of the sayings he offers is buy and hold is a good thing to do, but you need to be in the right stocks to make the greatest impact on your assets under administration. Most of the time, stocks go sideways, but there are some weeks where the market goes up and you will make most of your money in those weeks. This is why it is best to be in the market rather than being on the sidelines and watching for the right moment. If you are watching for the right moment, the only perfect information of the markets is past history and markets typically give off conflicting information, so you will likely miss most of the rallies. If you are in the markets, you need to be in the right stocks.

In an article from Reuters, an ETF or exchange traded fund tied to Nvidia is the top performing ETF so far this year. The GraniteShares 1.5X Long NVDA Daily ETF that tracks 1.5 times the daily percentage change of Nvidia has gained 328.5% this year, while the stock is up 190%.

This particular ETF uses leverage to amplify the returns of the underlying index or stock.

Will Rhind, the CEO of GraniteShares says the reason why NVLD is the up is because of the astonishing performance of the underlying company. Nvidia has become the number one stock to own in AI.

Single stock ETFs that allow for increased exposure to shares have garnered a lot of interest this year, particularly among investors interested in the Magnificent 7 – Nvidia, Meta, Alphabet, Microsoft, Amazon, Tesla and Apple.

Linking to dividend paying stocks, this year owning big tech stocks you would made money while if you own other sectors the returns would be much lower. In the Wall Street, there are always new products for example the single stock ETF with leverage. The issue is always what are your expectations of the return, leverage works on the way up as well as on the way down, so be careful. If you pick the correct stock or the correct sector, you will do well, if not you may lose money. In the case of dividend stocks, you can always buy for the dividend first, for example Microsoft is the largest payer of dividends in the index. It also happens to be doing very well for growth and use of AI. When you receive a double reason for owning, it makes the decision much easier to own and you have protection when the price falls, remember stocks go up and down. When the stocks go down, the ETF provider makes new ones and collapses old ETFs for you to buy the newer version. A few years ago bought an ETF of biotech stocks, they are not hot and the ETF provider collapsed the ETF, this will be normal practice.

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

If you are thinking about being a dividend investor you want to take a longer view and in many cases it is hard. If you examine the Fortune 500 list and go back 10 years or 20 years you will see many companies do not stay in the list. The fortunes of companies go up and down, sometimes based on the underlying commodity or reason the company exists. If you bought them and kept them, for some you would lose money, for others the combined dividend payments and capital gains would make your portfolio very healthy. Most investors start in one area of the economy and hopefully branch out, but staying close to where you earn your money, your interests, and what you spend money on typically means we do not invest in all sectors of the economy. If you want to do that a low-cost ETF is a very good place to begin. In the long term, change tends to be a constant and to be a long-term investor means you like the changes that are coming.

A change that is coming, is the Green Economy and one book among many is The Green Collar Economy by Van Jones, published by HarperOne, New York 2008. The book is old, but many of the ideas being circulated are now coming into the economy.

If you read, the US sits atop the 2nd largest fund of geothermal resources in the world. The American Midwest is the Saudi Arabian of wind: North Dakota, Kansas and Texas could produce enough harnessable wind to meet all the nation’s electricity demand. If solar was on 19% of the most barren land in the Southwest, it could supply as all the nation’s electricity needs without any rooftop installation.

Those are theorical numbers, but there is a movement to capture some of the wind and sun’s energy. For there are large barriers, the oil and gas industry and coal receive subsidies and has infrastructure to make the change harder. The national grid cannot accommodate new kinds of power or it would need to be upgraded. There are numerous local rules that impede access to new markets and the state and federal government would need to develop energy efficiency standards that would incentivize the private sector to move towards non fossil fuels faster.

Recently heard a speech in Congress that was trying to discourage incentives in the green industry without acknowledging the oil and gas industry receives subsidies or there is still a long way to go.

In the book, there is the reality as energy prices increase, the alternative is to increase energy efficiency in existing homes and buildings. If that is done, jobs are created to put in the energy efficient installation, windows, and new ways to heat and cool the homes. In reality, most home owners do not have access to change the home and need some form of government assistance.

There are ideas that all new processes should consider what happens to the product when it needs to be fixed or changed or used. Should we pay extra to throw in the garbage, or should the manufacturer build the action in the price as an added cost of business?

Linking to dividend paying stocks, to invest in these stocks is to invest in the long term and think of the long-term future which will be better for you and the world. It is important to ensure that you are thinking about the long term and move your assets to those companies that benefit from changes in the economy. By being positive about the future, you will be able to embrace what is new and has lasting legs of income stream to invest in. One of the most important aspects of being a dividend paying investor is being positive about the future, are you?

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

If you are a dividend investor, one of the sectors you either own or have examined is the utility sector. There are very good reasons which include we all have the need for electricity, the companies have near monopolies, the utility rate board will increase prices by inflation on a regular basis for the companies to earn a profit and pay constant dividends. In the western world, the only times the utility goes down is weather related and we expect the utility to continue to learn lessons and be up and running in a manner of hours. But what if the country is at war?

In an article by Eric Reguly of the Globe and Mail, when Russia invaded Ukraine and the war continues, it was not surprising that Russia targeted the infrastructure of Ukraine in the hopes of turning the people to its side. That has not worked as the Ukraine is more independent than before, but the war goes on. Ukraine’s biggest private power producer DTEK produces about 25% of the country’s electricity mostly from coal plants.

Last year, Russia targeted the coal plants and transmission network, this year the company has been barricading its generating plants and transmission networks. Steel cages have been erected over boilers and compressor units from compressor units to protect them from drones. Sandbags and concrete blocks encircle the generating plants.

The military is bulking up its air defenses near the plants. Dmitriy Sakharuk, the company’s executive director said the where is classified but the goal is to avoid last winter’s disaster where Russia damaged the key assets. The company has 6 coal plants in Ukraine and 2 in Russia occupied territory, along with transmission lines and electricity transformers.

An extensive rebuilding program costing $734 million has raised the capacity to 80%. The program included more domestic production of coal and imported coal from Poland. It also included greater natural gas production to be held in reserve.

Ukraine President Zelensky said that Ukraine is ready to counter attack if the electricity is crippled again.

The company is Ukraine’s largest employer with 55,000 employees and almost 10% are in military service. The company has lost about 1,000 employees to death and injury since the start of the war.

Linking to dividend paying stocks, as investors we expect the utilities to operate like clockwork and meet our demands and expectations. We also are dependent on the utilities to work and most of us cannot imagine what it would be like in war time and that is a very good thing. In wartime very different management is needed and while we all train for crisis situations, the crisis tends to be relative minor in comparison. Most of us never have to worry about bullets being fired at us to do the job and thank goodness for that. Crisis are crisis and we can all learn from how to ensure the company strives and continues to be profitable.

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

When a company becomes large, the rules will change and when the company does what government policies would like to be done, the rules continue to change. One of the rules is when a company cannot pay its debts, the company has to sell assets and become a much smaller company. However if the company is doing the bidding of the government, then the govenment will ensure that it has all the possibilities of a turnaround as can be given.

In an article by Clare Jim and Xie Yu of Reuters, the biggest property developer in China is the Evergrande Group. The company has $300 billion in liabilities, but only $240 billion in assets and at the moment is the poster child of a debt crisis that engulfed China’s property sector.

For the past 30 years, the property sector has been one of the drivers of the economy of China accounting for 25% of the world’s second largest economy. The government through modernizing the country has paid for billions in infrastructure to transform the rural population to the urban centers to live and work as China was the world’s manufacturing hub. The economy is changing and higher prices for housing are not happening as property prices fall.

One of companies which holds bonds is Kirkland Ellis and one of the partners Neil McDonald said the company has been a very clear message by the court that this is the last change to propose a viable restructuring plan that is acceptable to the creditors. The court date is set for December 4.

Linking to dividend paying companies, by their nature and size, the companies often mimic the government of the day because they are doing what the government wants them to do. In the above example, the real estate company has been having debt problems for years, Evergrade defaulted on debts in 2021, but it has taken a long time to go through the system. With every company there are some assets, and some bond creditors will be paid closer to 90 cents on the dollar, with bonds they bought for cents on the dollar. However, the common shareholders will have limited value for the shares will be diluted or more shares issued for bondholders if they believe the underlying values will rise. Outside looking in, when a company controls more than 5% of the market, the government wants to the company to survive in one form or another.

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

When ChatGPT was released to the general public, it instantly became the number one subject and remains a constant for companies. Consider senior executives mentioned the terms AI or artificial intelligence an average of 3.7 times a call with analysts in the second quarter or more than double the year before. AI remains a topic which every company says they will use, but is it effective?

In an article by Sam Sivarajan, it is useful to understand the limits of AI, at least at the moment. A recent Harvard Business Review article puts it: Artificial intelligences are prediction machines. They can tell you the probability it will rain today, but not whether you should bring an umbrella. The umbrella decision requires more than prediction.

The decision requires a judgement, which reflects individual preferences and experiences. When the forecast is 10% rain, some will take an umbrella, and others will not, it comes to personal preferences.

For your investments, you see individual risk tolerances all the time. Some will buy high risk low cost stocks, others will buy dividend paying stocks. The probability of a loss (or gain) from those investments is the same for all investors. Some investors have a preference and tolerance for higher probabilities of loss than others. This is why determining an investor’s risk tolerance is not a straightforward exercise.

In the Major League Baseball World Series won by the Texas Rangers, one of the stars of the Rangers was Jordan Montgomery. Last year he played for the New York Yankees, the Yankees traded him because they did not trust him to win big postseason games.

There are limits to the prediction machine. It does not factor in individual human preferences or experiences. Nor does it account for learning, adapting or adjusting on the fly. In the baseball game the batter and pitcher are not the same in the latter innings as they were in the earlier ones. The prediction machine cannot account for that, yet.

These limits of data and prediction machine can have costly implications for companies and investors. In February, the tech based real estate company Zillow Group Inc, set up its AI to value homes and make cash bids. By November the company stopped doing it because the homes it bought could not be sold for higher prices. The company had to do a $304 million inventory write down. The stock fell and 25% of staff were laid off.

The point is AI will be and is very valuable to analyze reams of data and provide empirically testable conclusions, which save valuable time. But humans should be involved in making the final decisions. because context is important.

Linking to dividend paying stocks, there are some industries and some companies that using AI to value the company should be easy as clockwork, unless the company is doing something illegal. But more stable companies, ensuring they have consistent revenues, their margins have not fallen and they are profitable can be relatively easy. It is the growth companies that an expectation of growth is needed that requires judgement. Generally as an investor you expect the company to be using AI and making better decisions to ensure the company remains competitive and profitable.

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

The time between Thanksgiving and Christmas is traditionally defined as the holiday season for a wide range of actions. Often times people have a choice between meeting at Thanksgiving or Christmas and Thanksgiving works out a little better because of weather conditions, there are fewer of them. The day after Thanksgiving is Black Friday because after meeting the family, they needed something to do and going shopping was on the list. All the above is based on expectations and companies in the retail business will live and die on those expectations.

In an article from Reuters, Amazon believes a jump in 4th quarter revenue and profit boosted by a holiday marketing blitz, faster delivery, and improving outlook for its cloud division. Amazon’s total revenue was $143.1 billion.

Amazon is the world’s largest cloud provider and online retailer. In cloud services it recently invested in Anthropic which makes chatbots. On the retail side, Amazon has reorganized its delivery network to locate goods closer to shoppers, letting it fulfill orders faster than before at less cost. One method Amazon is using is more robots in the warehouse.

Andy Jassy, Amazon’s CEO said its cloud service or AWS continued to stabilize.

AWS brought in revenue of $23.1 billion.

Marketing events help prop up sales. Amazon had a Prime Day during the summer and it brought in its biggest sales ever. Another Prime Day (for those who pay $139 a year for free shipping and other events to be a Prime member) was scheduled for October.

Amazon is expecting holiday revenue to be above $160 billion.

Linking to dividend paying stocks, in the current environment with a possible downturn in the economy, analysts and investors are paying particular attention to expectations and did the company meet or exceed them? if no, the stock falls, if yes, the stock could rally. For a dividend paying investor whether the company beat expectations for growth is secondary to whether it remained profitable. Growth is nice, but being profitable and maintaining margins is much more important. If the company’s profits fall, then it is time to find alternatives, but chances are high the company would have told investors to lower their expectations before releasing the numbers to the public.

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

In every industry, part of the business landscape is the mergers and acquisitions which results in bigger companies. Just because they are bigger does not mean they automatically are successful; the companies still must execute to meet customer demands. As well as the commodity inputs have to remain relatively constant. In high profile mergers, after they have been announced, then it is time to evaluate what is the expectation the mergers will succeed?

In an article by Clifford Krauss of the New York Times News Service, ExxonMobil and Chevron announced mergers of $50 billion each to buy a competitor. Exxon bought Pioneer Natural Resources and Chevron bought Hess Corporation.

Exxon believes the added acreage of Pioneer Natural Resources in the Permian Basin will add significantly to its cash flow. Chevron believes Hess ownership in a well off the coast of Guyana will mean it has significant oil to produce well in 2030’s.

On the other side of the equation is a report by the International Energy Agency which says the demand for oil and gas should peak in 2030 as sales of electric cars and other use of renewable energy surges.

If you add the sales of electric cars, mopeds and bikes, 1 out of every 5 new vehicles sold this year will be battery powered, up from 1 out of every 25 in 2020. Will that be closer to 1 out of every 2 in 2030?

Daniel Yergin who wrote the book The Prize which deals with an earlier mergers in the oil industry, believes consolidation is about giving the companies the scale to be more resilient to meet various priorities at the same time.

Mr. Yergin says oil executives have conflicting signals from Washington, on one hand produce more oil and gas domestically, but not on federal lands and waters. On the other hand, the administration wants the companies to lead in energy transition.

At the moment, oil prices are in the $80 range per barrel. If it stays in that range, the companies make money, if demand falls the price is likely to fall.

When Exxon merged with Mobil, the prices were near the bottom.

For the big American based oil companies, the one thing they are not doing is straying from what they know best. Some of the European based oil companies are investing in non oil and gas production or alternative energy.

Linking to dividend paying stocks, profitable companies often buy other companies and then they have to execute to ensure the reason why they were bought, and market conditions demand they buy the company. The economy goes in cycles and in every cycle, there is plenty of money that is invested in companies that do not execute on their mergers, in hindsight it would have been better to invest in Treasury bills. However, that is only in hindsight. As an investor you can do is evaluate if the merger is good for the next year? 5 years? or should you look for alternatives for the only perfect answer is in hindsight, but we live in the present.

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

Often times when there is a strike or disruption in a company’s normal course of operations, the financial press will outlay some details as a general public you may not know. This helps you enhance your knowledge of the industry and what to focus on if you decide you want to be an investor. An example this year is the UAW or United Auto Workers contract was up with the 3 largest American car manufacturers – GM, Ford and Stellantis or Chrysler. Vehicles still play an important part of the average working family and that makes it newsworthy. Ford and Stellantis have settled and GM is the last one to settle. In the meantime, the union increased its strikes at GM facilities.

In an article by Joseph White of Reuters, the UAW went on strike at GM’s Arlington, Texas factory which builds highly profitable Cadillac Escalades, Chevrolet Suburbans and other large SUVs.

The move to shut down one of GM’s most profitable plants will push the weekly cost of the union’s strike well above the $200 million a week rate GM executives outlined for investors.

GM’s 3rd quarter net income fell 7.3% to $3.06 billion while revenue rose 5.4% to $44.1 billion. The adjusted earnings per share was $2.28 which beat Wall Street expectations and up from $2.25 a year earlier. The buyback of shares helped the earnings per share number.

GM is reworking its EV strategy pulling back a strategy to challenge Tesla’s lead. The Chevrolet Bolt EV will be launched with a lower cost lithium-iron battery. The goal to build 400,000 EVs from 2022 to mid 2024 is cancelled because of lack of buyers. While the company agrees EVs are the solution in the future, it is lobbying Washinton to change the ambitious emissions and fuel economy aimed at pushing EVs to 2/3’s of the US vehicle market by 2032.

Linking to dividend paying stocks, all investors depend on the financial press, although most of the time the financial news in not on the front page. When the news is on the front page, everyone can see and talk about the event, but most do not know the details of the issue. Most of the time in the business side you will be given some details and then you can make some decisions. For example in the above article, the highly profitable Arlington Texas plant. The implication is if that strike goes on for a longer period of time and those SUVs are not sold, GM makes less money. In all likelihood, GM makes money it just makes less money. Ass investor you can wait till the share price falls, and when the strike is over, buy the shares to allow GM to meet the demand for its vehicles and profitability is restored. Patience is needed.

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