If you have flown on a plane or gone by the airport to watch planes fly from the airport, you eventually determine the airlines were using 2 manufacturers of planes – Boeing and Airbus. The world of commercial aircraft is a duopoly and that allows investors in Boeing to be very confident airlines will buy their planes. In the last 3 years, Boeing has had a problem with their planes – first it was the Max 737, although that problem has been fixed and planes are coming off the assembly line and being sold. The other plane is the 787 which has some structural repairs and face further regulatory inspections.

In the world of airplanes, similar to many other manufacturing industry, the government has regulatory agencies to determine if the plane is safe and once given approval, the public accepts and happily goes flying. Generally things have to be very serious before the regulatory bodies say no, however in the last couple years saying no is heard loud and clear.

In an article by Uday Sampath Kumar and Eric M Johnson of Reuters, Boeing announced its 4th quarter results in late January and stated it incurred $4.5 billion charges on the 787 program. To become positive cash flow Boeing plans to increase production of the 737 and 777.

Reports suggest the 787 program will be stalled for months as US regulators review repairs and inspections over structural flaws in the jets. Often after the US regulatory agency has approved other countries will rely on their work and approvals will be easier to come by.

David Calhoun, the CEO of Boeing, noted the company is working to build stability and predictability going forward. Production with remain at 5 jets a month and soon will be able to sell to Chinese airlines.

The issue with the 787 is Boeing switched to carbon composite structures that make the jet lighter and cheaper to fly for the airlines, however there are tiny gaps barely visible to the naked eye which have resulted. Boeing is using ultrasound devices and tools to find the gaps.

The good news for shareholders is the 737 Max is producing 26 planes a month up from 19 and they are selling. Boeing is trying to reach 31 planes a month.

Linking to dividend paying stocks, all manufacturing companies produced goods but a flaw or bad manufacturing which makes the company redo means cash flow will take time in the months to fix. Regulatory bodies do not operate under the same pressures and time frames as public companies, they take time to do their thing. As members of the public, that is what you expect and desire – the regulatory agencies to take their time and when they say it is safe, the public can use the product. If one of your companies has a issue in their manufacturing process, a good strategy is to move to another alternative company and if desired buy it when it has solved the issue and sales return.

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

For the past 2 years, more people have bought things on line that ever before and carriers such as Amazon need to deliver the goods to homes and businesses. To deliver the packages, vans are needed and it used to be the Postal Service took most of the vans but private companies are in the business of packages. All the companies use vans to deliver packaged goods.

In an article by Karen Weise and Neal E Boudette of the New York Times News Service, Amazon has an instiable appetite for electric vans thanks to a ballooning logistics operation and a pledge that half of its deliveries will be carbon neutral by 2030.

The reality is Amazon has signed many contracts which is good, the bad news is there are few deliveries, but there are promises to be met. Rivian Automotive has a contract for 100,000 vehicles, Dodge Ram has orders for thousands, Daimler (think Mercedes) has an order for 1,800 Sprinter vans. In India, Amazon has formed a partnership with Mahindra & Mahindra for 10,000 electric 3 wheel vehicles by 2025.

At the moment Amazon has 175,000 vans according to Ross Rachey, who oversees Amazon’s global fleet.

According to data from MWPVL, a logistics consultancy, Amazon now delivers 50% of its orders globally and has 6 times as many delivery depots now than in 2017, with at least 50% more new facilities set to open in 2022.

Delivery vans are well suited to electric propulsion because they usually travel 100 miles or under in a day which means they do not need the large battery packs. The trucks can be charged overnight, due to the fewer parts in electric vehicles the maintenance budget is less.

Mr. Rachey said Amazon is building the largest EV fleet and charging network in the world.

Linking to dividend paying stocks, companies such as Amazon have the ability with the help of van building companies to lower their cost of fossil fuels and stay very competitive in the marketplace. Fossil fuel or crude oil prices are expected to be in the $100 barrel of oil which is expensive for the economy and a company, how does it lower costs – goes electric and stays competitive. It is sometimes easier for a profitable company to change because of costs.

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

In the commodity business, if you own the commodity you love to hear there is a short squeeze because short squeezes means higher prices. That scenario is playing itself on the London Metal Exchange (LME) for nickel. Prices have increased to over $24,000 a tone for the first time since 2011.

The squeeze is going on physical delivery.

In an article of Andy Home of Reuters, the nickel market is in a tight squeeze which eventually leads to higher prices for the uses of nickel. There are 2 markets for nickel – stainless steel and battery for electric cars. (One would suspect that people are working on alternatives to nickel, but we are not there yet).

According to a report from Goldman Sachs, the most significant degree of tightening surprise in balances across the base metals in 2021. The bank was forecasting a surplus of supply of 49,000 tonnes last year, but now estimates a deficit of 159,000 tonnes.

JPMorgan analysts project nickel usage in batteries to grow by 50% year in year in 2022, taking over from stainless steels as the biggest driver of demand growth.

In terms of supply, a new mine in Indonesia will help. What would not help is the issue of Ukraine and potential sanctions if Russia crosses the border. Russia is a major producer of nickel, aluminium and palladium.

The last time the market was in a short squeeze was in 2007 when the price of nickel went to $50,000 a tonne.

Linking to dividend paying stocks, if you own stocks when there is a short squeeze it is wonderful because prices rise. Trying to play the squeeze can be expensive because in markets, with high prices company look for alternatives to bring the price down. For those who remember high steel prices meant automobile companies starting using more aluminum in the manufacture of vehicles. If you own the stock and the price rises, ensure you take profits and look at alternatives. Eventually the price will fall and you can buy back into the stock at a lower price.

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

When you think about Wall Street or the stock market, it has many companies all trying fighting for the investors dollars. On Wall Street there are people with many theories of why a company should do well for the next few years and beyond. At some points, it is seemingly easier to see for example during the first part of COVID when governments around the world shut down the economy for health reasons. What did this mean, it meant people who often commuted a distance and time to work, were at home longer. What did they do? Some of it was entertainment or streaming services such as Netflix. The longer the stay at home, the more people turned to Netflix. The company was a growth stock and it was relatively easy to understand how and why they were growing.

In an article by Lisa Richwine of Reuters, even though Netflix has some of the most watched shows which allows it to have greater subscriptions and bring in advertising dollars, some people changed to not being at home all the time. The growth component of Netflix is changing, there will be other reasons to own Netflix. The company had projected 5.9 million new viewers, the actual was 2.5 million and the stock went down 20% erasing the gains from 2020.

You may still like Netflix and watched the shows, but you need to understand Wall Street has a herd mentality of what it likes and does not like. For the past few years it has been growth as number one element to the business strategy; now it is looking for profitable companies and in a few years may love value companies. Wall Street does and will change.

Linking to dividend paying companies, if you tend to buy profitable companies (and can pay a dividend) they tend to trade at higher multiples because they can profits or higher EPS multiple. Wall Street can change but eventually the street will like profitable companies over growth companies because the number one rule is still try not to lose money.

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

In investing, sometimes you are drawn to companies which are based on commodity prices, when prices reach a particular level all activity after the price is very profitable. The issue is if the price goes down past the breakeven level, the act of bringing the commodity from the grown is unprofitable, what do you do if you own shares. The first issue is to know what the breakeven point is for your investment. If analysts project higher prices, wait till the prices come because the stock will be very profitable.

In the world of oil, in an article by Dhara Ranasinghe of Reuters, oil prices may be headed towards $100 a barrel (oil prices are determine by a barrel of oil). If oil prices go to $100 a barrel, inflation will result.

At the start of the pandemic, governments around the world locked down their countries for health concerns, this had the effect of lessening the demand for oil. Low demand for oil meant prices fell. As the world has opened up again, Brent crude futures, which were up 50% in 2021) are up 14% in 2022 to $89. Where will the price of oil go? Goldman Sachs is predicting $100 by mid 2022; JPMorgan predicts oil this year at $125 a barrel and increasing to $150 by 2023.

If oil prices go up, policy makers in the Euro will have a difficult time as they had assumed Brent crude prices will be $77.50 in 2022 and declining to $69.40 by 2024.

If oil prices start hurting consumption and slows down economic growth, energy demand tends to self-correct. If you want another viewpoint, Massimiliano Castelli, head of strategy, Global Sovereign Markets at UBS Asset Management expects oil to stay in a range of $60 and $80 a barrel.

Link to dividend paying stocks, for all commodity based companies, the defining element is the price of the commodity. Do your research for all companies tell you what will be the effect if the price of the commodity moves to a particular level, find it or ask the company. If the price of the commodity is high enough to be profitable and you like the outlook for the commodity, then you can buy and and hold for as long as the price keeps the company profitable. If the price falls, you can easily look for alternatives. Often times when commodity companies are very profitable they quickly look to returning money to shareholders in special dividends, stock buybacks or dividend increases.

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

In every thriving economy, access to credit is the a key metric. If banks do not give credit, although it can make wonderful common sense on some personal accounts, the actions cascade throughout the economy and people spend less which means the economy is heading downwards. If more credit is given, people tend to want to spend money which helps the economy. Central banks are always trying to balance what is good for the economy and what is good for individuals.

In an article by Matt Scuffham of Reuters, ever since COVID shut down sectors in the economy for health reasons, the central bank has levered up liquidity and trading activity to ensure Wall Street is running well. The banks with large trading desks such as Goldman Sachs, JPMorgan Chase and Morgan Stanley have been the biggest of market volatility. Trading revenues have increased, but the Fed is changing which means revenues will fall.

There is good news for the trading desks with the Fed decreasing its injection, interest rates are expected to increase which helps the bond markets. On the trading floor, as long as there is volatility in one area of the economy, the trading desk can make money which translates into large bonuses. Analysts are expecting the overall environment to remain positive for trading activity, albeit below the levels of the past 2 years.

Linking to dividend paying stocks, for investors you want a relatively non volatile market where the companies you invest in continue to sell their goods and services to make money and able to increase prices to maintain margins. It is an easy ask, but over 90% of the market does not do it. Quality is a good thing for investors.

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

When you think about electronic gaming, do you think about the $175 billion industry? Microsoft has and it announced its intention to buy Activision Blizzard for $70 billion. If you have not heard of the company, you might know some of its games – Call of Duty and Candy Crush.

In an article by Karen Weise, Kellen Browning, Michael J de La Merced and Andrew Ross Sorkin of the New York Times News Service, Microsoft is paying $95 a share roughly 45% premium before the announcement.

Phil Spence, the chief executive officer of Microsoft’s gaming business, believes the metaverse is a huge potential, but gaming will be at the forefront of making that mainstream.

Microsoft owns the Xbox system, but is not in mobile gaming and Activision Blizzard will give the company a strong foothold in the mobile gaming world. Microsoft would become the 3rd largest gaming company by revenue behind Tencent Holdings and Sony.

In addition, Microsoft has 25 million subscribers for its games, Activision has 390 million monthly subscribers. One would expect most will continue to subscribe.

Microsoft has about $130 billion in cash reserve to expand the consumer business.

The reason investors buy Microsoft is the company has largely focused on corporate users for software such as Office and Azure which is the cloud competing division. It competes with Amazon and Google in cloud based solutions.

Linking to dividend paying stocks, one buys a company such as Microsoft for its Office 365 and Azure cloud computing, the gaming is something the company does to stay current with the trends in the industry. As long as resources continue to flow to Office and Azure, the gaming business is a good on add to the company. The issue in the gaming business is everyone is looking for the next blockbuster game to generate excess cash.

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

In the world of macro economics, after you examine the growth in your local area (micro economics), then you want to know what is happening in the US, Europe and China which are the three biggest economic blocks in the world. All countries post updates and often one suspects the updates from the US and Europe are more open, but updates are posted.

In an article by James Griffiths and Alexandra Li of Reuters, China announced its economy grew 8.1% in 2021 above the official target of 6%, however a slowdown in the 4th quarter led to the slowest growth since early 2020.

The year of 2021 was off to a strong start after the pandemic induced slump but lost momentum because of a property downturn, debt crisis and strict COVID 19 restrictions which have hit consumption.

China’s industrial output grew by 4.3% in December after a 3.8% increase in November. Consumer spending showed a 1.7% increase.

China is hosting the Winter Olympics this year and whenever there is an outbreak of COVID, officials lock down the area until the disease is more manageable.

Zhu Tian, a professor of economics at the Shanghai based China Europe International Business School said if things go well for China expect to see between 5 and 7% growth.

Linking to dividend paying stocks, a stock trading on the exchanges has to meet the regulatory agreements of the exchange and tell investors how they are doing. Thus the reason for quarterly reports and earnings season, the ability to have information reasonably open means investors can review the data and see how companies are doing. Are they meeting their targets, exceeding targets, what are the headwinds, why is the company continuing to make money and/or grow. Investors and analysts examine the numbers the companies release and make decisions. In China the government controls the information, but somewhere in the data is the real story. For investors an reasonably open system works best.

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

If you examine the history of the world since oil became a fuel of choice to help run our lives, the history is mixed with big oil. Originally it was Standard Oil and John D Rockefeller which was broken up to into 7 very large companies. The ones based in Europe have always had a government backed portion which meant finding and developing oil was in the national interest. The big oil companies in Europe are BP, Royal Dutch Shell, TotalEnergies, Equinor and Italy’s Eni. All the companies went all over the world to discover oil and influence the governments where the oil was discovered.

In Europe, climate change is more ingrained into the politics of Europe than it is in America and according to an article by Ron Bousso and Sabrina Valle, the big oil companies in Europe will become less dependent on oil and more on greener companies.

In the oil industry, similar to every commodity based company, once oil is discovered in a commercial pool, the cost of finding the oil and the cost of selling the oil is based on the commodity price. For the oil companies, the price of oil has gone up over the years and the big oil companies still have reserves discovered at low prices. Typically, the oil companies would determine long term projects than would cost billions to discover more commercial oil.

Times have changed and the big European companies are now doing a different strategy which includes giving shareholder the lion’s share of cash. For example, Shell sold its Permian shale oil business (Texas holdings) for $9.5 billion, promising to return $7 billion to shareholders. BP has said it will cuts its output to roughly one million b/d by 2030 from 2019 levels.

In contrast, the American based companies such as ExxonMobil and Chevron, encouraged by the White House are spending more money on oil projects.

In 2022, European firms are set to return to investors, a record $54 billion in dividends and share buybacks, according to analysis by Bernstein, while Exxon and Chevron are set to pay out more than $30 billion.

Linking to dividend paying stocks, the big oil companies around the world for generations have been some of the biggest dividend paying companies to own. Given high oil prices it is hard not to have money in the sector, the issue an investor should consider is if you own European big oil the dividend payout is likely higher or own US based companies which pay dividends and find new discoveries.

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