Ever since the Russia war with Ukraine, prices of oil and other commodities have risen and many people have bought oil stocks and hopefully the price has gone up. Generally when a crisis happens we look domestically first, but afterwards we need to look around to the international world. For if a domestic industry has benefited that means an foreign industry has benefited. In this case the non domestic industry is Saudi Arabia.

In an article by Saeed Ahar and Maha El Dahan of Reuters, the biggest producer of oil in the world is Saudi Arabia and a couple years ago, the Saudi Arabian Oil Co went public which means it reports its results. The company profits doubled in 2021.

Saudi Arabian Oil Co or Aramco made $110 billion in net profit up from $49 billion a year earlier. The net profit was in line with analysts’ expectation of $106 billion. Analysts are expecting net profit of $140 billion in 2022. The dividend was $75 billion.

Saudi Arabian Oil Co says it would boost capital expenditures (capex) to $40 billion to $50 billion this year up from $31.9 billion. The company expects to have production of 13 million barrels of oil a day by 2027 and to increase gas production more than 50% by 2030.

Linking to dividend paying stocks, if your investments are linked to a commodity and the price of the commodity goes up and stays higher, expect higher dividends and higher share prices. There are many analysts following every industry, which means you can have an idea when prices are expected to go up and expected to go down, just try not to time the market. You will know when prices are down when dividend payments are cut, however being positive when prices are up, expect higher dividends.

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

If you listen to Kevin O’Leary of Shark Tank when interviewed about what he is buying and selling, we will often say if a stock goes above 5% total holding I sell or trim my position. He does this because the stock has made gains and for Mr. O’Leary the risk – reward position will change if he does not trim positions. There are many other funds which do the same thing, it is a good discipline to have.

Another type of fund is the US defined benefit pension funds, when they are set up they offer a set percentage of 60% stock and 40% fixed income combination. In stable times or in low growth the funds do not have a large effect on the market. However, they have a reporting regulation for the government which is the end of March. At the end of March, they need to start April with the 60/40 combination.

In an article by Scott Barlow, a report by JPMorgan quantitative strategist Nikolaus Panigirtzoglou says the US defined pension funds have about $7 trillion in assets. The 60/40 asset allocation needs to be adjusted and $126 billion of selling of fixed income assets and buying equities needs to be done. In Norway the world’s largest sovereign fund and Japan’s government pension fund needs to shift $62 billion between asset classes after the end of March.

Linking to dividend paying stocks, there are many variables on the stock market and when the largest players are institutional investors, it means they have reporting requirements which must be met. This means sometimes there are rational reasons why the markets go up and down, sometimes there are less rational reasons, but in the end if a company earns a profit that can pay a dividend, it will be worth more in the long run.

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

If you consider a tax haven of money, one of the critical aspects is data is hard to find, there are estimates but no one really knows for certain because then people might have to do something about the number. Generally in official ideas the number is always lower than reality and to the critics of the system, the number is always higher than reality. Then a crisis happens and the truth slowly comes to the forefront.

In an article by Oliver Hirt and Brennan Hughes Neghaiwi of Reuters, the Swiss banks hold up to $213 billion of Russia wealth. When the western world imposed sanctions on Russian wealth, few expected the Swiss or any jurisdiction that holds tax free assets to reveal or put holds on the money inside their vaults. However the Swiss Bankers Association (SBA) estimated the banks holds $213 billion of Russian client money in offshore accounts.

The SBA stressed this was small compared to the overall assets held in Switzerland. The share is in the low single digit percentage range (around 5%) of the total cross border assets deposited in Swiss banks.

Linking to dividend paying stocks, in every crisis new information is released because the other side has its estimates. The company has to be closer to the truth, not the accepted wisdom because the truth eventually comes out. If the company is not giving the truth, others wonder about the numbers and ask journalists questions so the truth does come out. When a crisis happens and the numbers you expect from your investments are not the same or the expected, it is time to find alternatives.

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

Every company in the world , once they are successful are offered the ability to buy into other companies. Smaller companies tend to say no, larger companies are buying and selling companies as they no longer fit their core holdings. Many people have worked for an organization and then the parent decides to sell and they have to find new work, it is part of the corporate process.

When companies buy and sell companies for strategic purposes, one of the reasons is they say their skill set can help grow the company, execution is what investors have to examine.

In an article by Niall McGee of the Globe, AMC Entertainment – the company which runs movie theatres is buying a stake in struggling Nevada mining venture called Hycroft Mining Holding Corp. The amount of money is $27 million which is not a great deal for the company but what do they know about mining?

The high cost, low production and heavily indebted Hycroft says it will pay off some its debts with the money.

Adam Aron, Chairman and CEO of AMC, says that he sees Hycroft with a lot of debt and a year ago, AMC was in the same position and now AMC has the experience and skill to help Hycroft realize its potential.

The Hycroft mine has 15 million ounces of gold and 600 million ounces of silver, but it is not in the proven and probable category, it could be there. The mine is refining small amounts of gold and silver (open pit mining) which is high in cost and money losing. At the end of last year, Hycroft was holding $12.3 million in cash and $159 million in debt. The name before Hycroft was Allied Nevada Gold Corp was went into bankruptcy and was reorganized.

Linking to dividend paying stocks, there are a great many opportunities for profitable companies to buy a division in the name of diversification. Not all will work out but companies with money often want to spend it, some will work out wonderfully. If your company buys a division and you do not think it will work out for a number of reasons, it is best to look at alternatives.

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

For generations or 145 years the prices of basic commodities have been set on the London Metal Exchange or LME and if you own a company in the industrial trade often you will hear about prices on the LME, how they are hedging to ensure a steady price.

When Russia went to war against the Ukraine, prices went up because Russia is a major producer of aluminum, copper, nickel and oil and gas.

In an article by Andy Home of Reuters, the industrial metals were in a bull market because when the world shut down metal prices dropped when the world opened again demand surged.

In the world of commodities, after the price surges, one would expect more companies to go short or expect prices to flatten out or even fall. One company which shorted was China’s Tsingshan Group which is a major producer of stainless steel and nickel production. Nickel was a new high of $48,078 a tonne and when Russia invade Ukraine a short squeeze happened in which Tsingshan Group and all the other companies who were short needed to buy or offer more margin. The price was around $25,000 a tonne. The LME which strives for an orderly market suspended trading to calm the market, otherwise many firms would be out of business. (since the news, the price jumped to $100.000 a tonne, the LME closed down, cancelled all trades and went it opened the price fell).

The LME’s core contracts are not cash settled futures but forwards with positions financed by credit lines secured by collateral.

Nickel was not the only commodity affected, zinc went to a new high of $4,896 a tonne and lead went to a 10 year high of $2,700 a tonne.

Aluminium dropped from a high of $4,073 to $3,498; Tin went down from $49.500 a tonne to $39,080 a tonne. Copper was flat.

The Russian company Norilsk Nickel was not sanctioned but it does provide 63% of the market for refined nickel in Europe. The company also is a strategically significant global supplier of pallaium and the price has reach a high of $3,441 a tonne.

Russian copper supplies 4.4% of European consumption according to the firm Natixis.

UC Rusal supplies 4 million tonnes of aluminum to Europe annually.

For now there is both a supply and demand crunch and the LME is trying to have steady stable markets.

The good news is the LME has announced a probe about the events and why trading was cancelled.

Linking to dividend paying stocks, if you own a company involved in the commodity exchanges the price can fluctuate as the world circles around the sun. All companies try to diversify where they receive their product from, but war is a unknown variable and prices will react. Hopefully the war is over soon and stability comes back to the markets.

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

One can think of a country’s electric planning commissions, everyone in an urban area needs electricity to function, we need to turn on the lights. The electricity companies started with tapping the water resources and dams can last for hundreds of years; then coal was used, however the reality is the exhausts are not good for the environment, (read a Dickens novel – the weather was always foggy but reality it was both fog and coal dust or look at the weather in Beijing – the city is in a bowl similar to LA and sometimes the coal is in the air till the wind blows it out). then companies move to oil and then gas. Italy did all those moves when natural gas was lower priced, as a result they moved from 27% to 43% dependence on Russian natural gas. It will take 2 years to replace noted Italy’s Energy Transition Energy.

In an article by Colleen Barry of the Associated Press, even before the war Europe’s was facing a serious energy crunch that drove up costs for electricity, food, and supplies for people and businesses.

One example is Vento-based paper and packaging company, Pro-Gest. Gas prices moved from $125 megawatt hour to over $420 a megawatt hour. To remain profitable, they would have to double prices from $947 a ton to $1,670 a ton. Pro-Gest sells recycles paper which supplies 1/3 of all Italy’s packaging needs.

Acciaierie Venete shut down 3 of its steel mills for a few days during March as spiked to 10 times above normal. Francesco Semino an executive with the company which makes high quality steel for automotive and agricultural machinery says never ever has this happened.

Linking to dividend paying stocks, there are always prices that companies can not control, most of us believe that technology and innovation will help make business adapt to the changes. Sometimes elements out a companies control happen and everyone hope it is short time, but changes need to be made and how the company adapts and comes out stronger is why you would want to invest or find alternatives.

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

All countries all over the world, once they have satisfied their domestic market look to export goods and services to over countries. Of of the biggest employers of the world is the movement of goods and services across borders or the import-export business. For those companies who export, they want to be treated the manner in which the home country treats them, for other countries they want the goods and services. Every once in a while the local politician will say why do not we make the item within our borders, but consumers tend to trust some countries products over others.

In an article by Adrian Morrow, the Group of Seven countries and the European Union are moving to revoke Russia’s most favored nations trading status and exclude it from the International Monetary Fund and World Bank as the West continues to impose sanctions on Russia.

The US will ban imports of Russia vodka, seafood and diamonds, while the EU will block iron and steel goods from the Russia. The US has imposed an embargo on Russian oil, gas and coal.

Most favored nation status means permanent normal relations allows a country to trade with low tariffs or low import taxes.

The EU is Russia’s largest trading partner buying nearly 38% of its exports in 2021. The US does about $35 billion in annual trade with Russia or about 1% of US imports.

Linking to dividend paying stocks, often analysis will talk about stability in the marketplace and that often comes with trade deals. The former President talked about the US – Mexico – Canada deal a great deal, although in reality he was tinkering with it rather than redoing it. Ever since two countries had a border, trade is a political issue. We want it but we want the benefits one way, unfortunately trade goes 2 way. After politicians sign trade deals, companies react to the trade deals to send goods and services and sometimes choose the least expensive place to produce the goods, and send the goods both ways. In the Ukraine Russia conflict we have seen countries willing to break long standing contracts over the war. On balance that is a good thing and hopefully we will have peace and stability which is good for business.

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

When people think of Wall Street, investment bankers will come high on the list. One of the most profitable firms is Goldman Sachs. In the world of investment bankers, where there is money to be made, you will find an investment banker making a pitch. When the money dries up, they are off to the next deal. For some of the deals are going to be wonderful and profitable to shareholders but many are profitable to the dealmakers. The issue is often times the investor does not know which is which, because a company could be the break through one.

In the US, the IPO market was booming and billion dollar offerings were coming every month. When the market started valuing real profits not just higher sales, one of the consequences is last month no IPO came to market. What is an investment banker to do?

In an article by Niket Nishant, Matt Scuffham, and Sinead Cruise of Reuters, Goldman Sachs is closing their Moscow office employing 80 investment bankers. The bankers will be working out of Dubai. The reason for leaving Moscow is the sanctions the western governments have imposed on Russia and that means very little money is flowing through the economic system in Russia. Overseas funds are frozen and Russian companies are banned at exporting. There is little business to do.

When Goldman Sachs was operating in Moscow, the bank held Russian securities and reported it has a $650 million credit exposure. Goldman was the 7th largest investment bank generating income behind Russia’s VTB Capital is number one, JPMorgan second with $32.8 million, Morgan Stanley with $27.3 million and Citigroup at $22.8 million. Citibank has a $10 billion exposure as it operates a Russian consumer business.

Linking to dividend paying stocks, investment bankers played an important role in the capital markets and they will be anywhere fees are generated. For dividend paying companies, they do not have the need for the IPOs, but a healthy IPO means stock prices are generally up; the companies will have bond issuance and sometimes selling more stock, and selling under performing divisions or divisions deemed not to be core business or buying companies to enhance existing businesses. It is very helpful if there is a strong IPO market, because someone will believe turn arounds are possible, and sometimes they are.

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

If you are a fan of John Grisham and many people are, some of his books have been made into movies. One book that was made into a movie was called The Firm. The law firm hired the brighest and best lawyers, it was located in the most prominent office building in Memphis and from the outside looked well established. The character played by Tom Cruise who graduated from Harvard Law reasonably quickly came to understand the owner who the law firm protected was the Chicago mob. The book was fiction and in the end, the firm was dissolved.

In real life, there are many firms working for those with money how they received it, is not discussed, but they have it and the firms ensure the money is working in the economy. In an article by Matthew Goldstein, Kenneth Vogel, Jesse Drucker, Marueen Farrell and Mike McIntire of the New York Times News Service, there are numerous firms around New York City managing money for Russia oligarchs.

One firm is called Concord Management LLC which manages between $4 and $8 billion and the money goes into hedge funds and private-equity firms.

On one hand politicians talk about the rich hiding assets, on the other side they help them. In London and New York and many other cities, there is a thriving industry of lawyers who specialize in hiding assets.

The firms have to decide if the fees they receive from Russian oligarchs or Russian companies on the sanctions list is high enough to deal with the bureaucratic hurdles and reputational risks. Over the past month many high profile law and public relations firms have said they no longer represent their Russia clients or operations.

The firms include law firms Skadden Arps, Linklaters, Norton Rose Fulbright, Debevoise & Plimpton, Ashurst. Accounting giants PWC, KPMG, Deloitte and EY have all provided extensive services to oligarchs and their networks of shell companies.

Linking to dividend paying stocks, legally speaking there is nothing wrong with working for sanctioned companies as long as certain rules are followed. Somebody needs to work with them to follow the rules. Often times, firms are drawn to work with the oligarchs because they pay their bills and do not worry about the fees, it is price of doing business. A couple of months ago, working for oligarchs was under the radar of most of the population and the fees were good. With sanctions, changes happen and maybe when the sanctions are off, the old practices will return. For now, it is often very difficult to be on the right side of the law all the time, ideally when a company makes a profit selling its goods and services over a long time, all its relations both good and bad can be seen and generally the public is good with it. If the public is good, then as an investor you can be good.

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