In all businesses there are changes in who uses the services and when they become mainstream. For many years, gamers were considered a minority subset of people who played in their parent’s basement, however that has changed. Listen to the new generations of people and ask them have they ever gamed and likely they will say yes. If they say yes then you can ask them what games they play and wonder who makes the games. How do the games make money for their companies and how much do people spend on gaming? In turns out the money spent on gaming is comparable to the amount spent on going to the movies.

In an article by Nivedita Balu and Tiyashi Datta of Reuters, two bigger gaming companies are merging – Take-Two Interactive bid $11.04 billion for Zynga. The merger of the two companies would produce a gaming powerhouse for people using console, PC and mobile devices. The real growth is mobile devices.

D.A, Davidson analyst Franco Granda noted many console developers are finding out that creating mobile devices is very hard. It may be easier for companies to buy other talents to capture mobile devices.

Take-Two Interactive biggest blockbuster is Grand Theft Auto and Zynga has FarmVille.

Linking to dividend paying stocks, in all industries they build and develop and many times as investors you either do not pay attention to them for personal reasons or they are not in the industry you are in and that is ok. It is important to realize in the world of consumers, there are many consumers doing many things but once they become mainstream it means there is serious money at play and you should examine the industry. You can invest in everything, but there is never a lack of homework to do when investing or not investing.

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

If you own an insurance company, you would want to pay out something, but not too much. You business is giving peace of mind for an annual premium and hopefully you would not pay out. A perfect client is one who paid, used preventive measures and never claimed. However with climate change, it is the climate changing all over the place and extreme temperatures often lead to extreme desire for claims at the insurance companies. In the world of insurance company company, the company underwrites the risk and then shares the risk with reinsurer companies and the biggest in the world is Munich Reinsurance of Germany.

In an article by Tom Sims and Alexander Huebner of Reuters, Munich Reinsurance gave their annual briefing on the world on reinsurance.

Insured losses from natural catastrophes totalled around $120 billion in 2021, second only to $146 billion in 2017 which many hurricanes caused damages.

Ernst Rauch, chief climate and geo scientist at Munich Re said the 2021 are striking because some of the extreme weather events are the kind that are likely to become more frequent and more severe as a result of climate change. (or the 100 year story is likely to come again before 100 years).

The result of the frequency means insurance companies have begun to raise rates and in some places that damage is coming too often stopped coverage. The issue for the government is what to do with the people that live in the area?

Linking to dividend paying stocks, every industry has a business strategy, in the insurance company case it is to pay, but do not pay too much and have a clear definition of what too much is. It is one of the reasons many consumers do like insurance companies (a great example is the movie The Rainmaker based on a John Grisham book – in the book the Tom Cruise character cross examines the insurance executive and claims manager about procedures at the company). The point is to understand how your investments make money and how they do not. Then you can determine if the company how the company is doing in every business cycle.

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

In every industry there always tend to be some standouts and people examine the company to determine what is their secret sauce? It can be a variety of items from the boardroom to operations, what makes the company successful?

In an article from the New York Times New Service, in the automobile business one of the biggest concerns has been computer chips because the average vehicle uses 200 computer chips and that is only going up. The chips allow the vehicles to have more features and the owners can maintain their vehicles better. Ever since COVID chips have been harder to get because of the demand from other sources – more gaming at home, more people working from home (they need work station(s), more household services have chips and the list goes on. However Tesla has somehow been able to produce vehicles at record levels, what gives?

The answer is the company had a superior command of technology and its own supply system. When Tesla could not get the chips it wanted, the engineers at Tesla rewrote the software on the chips it could receive to suit its needs. The larger companies could not do that because they rely on outside suppliers for much of their software and computing expertise.

Professor Morris Cohen of the Wharton School at the University of Pennsylvania noted Tesla controlled its own destiny by writing their own code.

Linking to dividend paying stocks, most companies who sell items to the public have embraced the supply systems which are in place. In most companies outsourcing is a way of life and that works very well until it does not. Sometimes doing everything inhouse works, sometimes it does not, the issue is how does the company react when the supply system does not work well?

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

When you are the number three in the category, it is very difficult to move up to number one however it is certainly possible to do many strategies to ensure your survival. Often times people look towards the leaders of the industry, but there will be many other participants who can and do make money, they just are not the market leaders.

In the case of the auto world, Chrysler was always number 3 and a number of years ago merged with Fiat to become Stellantis.

In an article by Joseph White and Gilles Guillaume of Reuters, Stellantis and Amazon have decided to work together to develop cars and trucks with Amazon software and deploy electric vans in Amazon’s delivery network.

When you think about the Amazon trucks that deliver packages around the world, in the future many of them will be made by Stellantis. The truck’s software will have Amazon’s digital cockpit requirements for navigation, vehicle maintenance, ecommerce marketplace and payment services.

Stellantis will use Amazon or AWS as its preferred cloud provider, the trucks should roll out in 2023.

Linking to dividend paying stocks, every industry has many players although most of us focus on the leaders, just remember there is money to be made if a company has good margins even if it is not the top market name.

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

In early January a trial involving Elizabeth Holmes and her company Theranos ended with Elizabeth Holmes found guilty of fraud. Essentially, her product which involved taking a little blood was going to revolutionize the blood taking industry. It was a great pitch, no more needles, her machine would do the work in less time and customers would be happy. The only problem is the machine never worked or partially worked, however venture funds from the San Francisco (the Bay) area invested heavily into her company.

In an article by Erin Griffith of the New York Times News Service, Ms. Holmes was suggesting this was more than a health care company it was a tech company. Ms. Holmes used the mentorship and credibility of tech industry heavy weights Larry Ellison and Don Lucas to raise money from others. She used the startup playbook of hype, exclusivity and a few of missing out to win over later investors. (The judge in the case allowed the defense lawyers to suggest it is common in Silicon Valley for promoters to engage in overly optimistic puffery. Any statements that were not entirely truthful were about the future. It is what investors wanted to hear) Except the machine did not work.

Don Lucas was a Silicon Valley venture capitalist was on the Board of Theranos from 2003 to 2013, was involved with more than 20 investment vehicles that backed Theranos. They included his son’s venture firm, Lucas Venture Group, PEER Venture Partners and trust and foundations associated with members of his family.

Mr. Lucas introduced Hall Group, a real estate firm that put $4.9 million into Theranos. Mr. Lucas’s nephew’s firm Black Diamond Ventures invested $5.4 million. Other Silicon Valley funds were ATA Ventures, Beta Bayview, DCM, IVP, and Drapper Associates. Wealthy families such as heirs to Amway, Cox Enterprises, and Walmart invested.

For a while, the start company of Theranos was receiving money from some of the smartest people on the planet and they were seeing the value go up, except for the machine did not work.

Not everyone invested, in the book Bad Blood by John Carreyrou, he writes Bijan Salehizadeh of Highland Capital Partners decided not to invest because Ms. Holmes was unwilling or unable to answer most of his questions. For a number of years, people would say to him Theranos is the hot thing and passed the unicorn valuation of $1 billion, how could you not invest?

Linking to dividend paying stocks, sometimes there are technologies that can and do change the way we do things, however there will be many that promise to do so but do not catch on to the public. It is difficult to pick the winner, however with dividend paying stocks, you can ask how many years has the company been profitable and paying dividends? If the answer is 10 or 20 or 30 years plus, it safe to predict they will continue to pay dividends in the future. The risk of losing money is small, the reward of dividends and higher multiples on profitable stocks is high.

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

In every market where sales and margins are high, there will be and is competition. It is always important to remember that because all over the world, people are examining markets and trying to determine how to capture some of that margin in the sales in order to be profitable. An example is the electric truck, which is coming in the future.

In an article by Joseph White of Reuters, the world of the electric truck will be changing in the near future. You may have heard about Tesla and Rivian who stock all climbed on the announcements of a truck. Then the big companies stepped up to the plate, Ford announced the Lighting and has since doubled its production. The other major players in the truck business is GM and Dodge Ram which is coming in 2024.

GM came out with a $35 billion electric vehicle strategy being in 2023 and starting with the Chevrolet Silverado pick up truck. GM CEO Mary Barra announced at the CES technology conference in Las Vegas the first phase will be the $39,000 WT work truck that will be delivered to a limited group of commercial fleets. In the fall of 2023, consumers can buy the truck but the price tag will be $105,000. If you want a truck for less, wait a year until 2024 and other versions will be released.

If you love the shape of the Hummer, then you will like the new Silverado.

GM’s strategy is to win in the long run, by developing dedicated electric vehicle architectures and vertically integrated battery and motor production chain, then launching models in high volume by the middle and end of the decade.

Linking to dividend paying stocks, the wonderful thing about business is there are different strategies that can and do work. A long term strategy requires the ability to have large resources behind you, a short term can be to capitalize on a trend and stretch it out into the future. In the end can the company make good margins and turn a profit which can pay shareholders? when you buy shares, you are buying into the company’s strategy until you disagree with it.

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

If you think about Oklahoma, besides the Broadway show by the same name, Oklahoma is a staunchly conservative state with a history of drawing people in search of wealth from the land. Oil and gas are produced, cattle are raised and two major Universities among other things produced top ranked college football team Oklahoma University and Oklahoma Sooners.

According to an article by Simon Romero of the New York Times News Service, one of the biggest growing business is in the agricultural field – producing cannabis. Greenhouses are popping up all over the state because every since the state legalized medical marijuana 3 years ago, Oklahoma is the easiest place to launch a weed business. The state now boasts more retail cannabis stores than Colorado, Oregon and Washington combined. In October, Oklahoma eclipsed California as the state with the largest number of licensed cannabis farms – more than 9,000. The average farm has about 25 employees or over 200,000 workers.

In Oklahoma just about anyone who wants a medical card, about 10% of Oklahoma’s nearly 4 million residents have a card.

The other reason why an influx of stores is the barrier to entry is $2,500 versus close to $100,000 in most states. For a very conservative state, state officials have taken a fairly hands-off approach. Because of the growth, groups representing ranchers, farmers, sheriffs and crop dusters have joined forces to call for a moratorium on new licences. They cite climbing prices for land, illicit farms, strains on rural water and electricity supplies. (those are almost blue state reasons).

Adria Berry, the director of Oklahoma Medical Marijuana Authority, which oversees the industry and reported nearly $138 million in revenue from retail, state and local taxes in 2021 from the sale of cannabis, believes the moratorium is not likely.

Why are people starting business in Oklahoma? money – growers can grow cannabis for $100 a pound, and then turn around and sell it for $3,500 to $4,000 a pound in California and New York State. The big multi companies are not in Oklahoma because too much competition and selling out of state is not 100% legal. The end result of too much competition is prices fall, some farms go bankrupt and consolidations happen till money can be made.

Linking to dividend paying stocks, in every market there are barriers to entry or moats, some of them are relatively small and some of the moats are large. As an investor, it is easier to invest in industries with large moats (ask Warren Buffett) however all business operate under the same basic principles. The lower the barrier to entry, the more people who will come into the industry but there will be more money losers, although there are great stories involved. As an dividend investor you want to read the stories, but have money coming into your brokerage account on a regular basis.

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

In all countries, the politicians either directly or indirectly encourages businesses to expand their businesses and when it works everyone is happy and looking forward to the future. However in the economy cycles happen, things beyond control happen and then what does the government do?

In an article from China, the government has encouraged the major developers to build hundreds of thousands of apartment buildings across China. In some cases, there are ghosts cities where developers built but hardly anyone lives there, one wonders about the cash flow deficits. The question is how do the private property developers who were essentially following the government’s desire stay in business given the cash flow problems.

In 2008, governments around the world took stock in banks to keep the economy afloat because mortgage back securities had little value. Property prices were not rising and people could not keep up with payments so defaults were the result. In China, the government has made it easier for state backed property developers to buy up the distressed assets of debt laden private peers.

The way that will be done is, if a state backed developer buys distressed assets, it will not be counted as debt under rules that cap borrowing. The 3 red lines policy restricts the amount of net borrowing property developers can raise each year by placing caps on their debt ratios.

A state backed developer in theory has the resources of the taxpayer in their back pocket.

Linking to dividend paying stocks, all profitable companies are in constant contact with governments because government regulations impact the business. the issue is not what a government can and will do when expansion is the norm, but what they do when there is a downturn. How well does the company you invest in work with the government?

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

If you think about North Sea oil what country comes to mind. Likely you said the UK, but in reality the biggest beneficiary of North Sea oil was Norway. The government put much of the money in a pension fund which is one of the world’s largest funds owning 2% of all stock market holdings. The fund has tight restrictions to ensure it remains that way when the North Sea oil runs out.

If you were to think about electric vehicles sales, which countries would you think of? In an article by Victoria Klesty of Reuters, China is the biggest overall car market but Norway with a population of 5.4 million has the world’s highest proportion of electric vehicles. Thanks to taxes on gasoline power vehicles, more than 2/3’s of new sales in Norway were electric vehicles.

If you think about the climate of Norway (think about the movie Frozen) and then consider if electric vehicles are viable there, they are viable anywhere.

In Norway, electric vehicles do not have the taxes than gasoline power vehicles have. Also there is a tax on gasoline power vehicles coming into the cities. These tax breaks is expected to drive the proportion of overall electric sales as high as 80% in 2022. In 2025 there is suppose to be no or very few sales of gasoline power vehicles. 176,276 electric cars were sold.

Tesla has a 11.6% share followed by VW with 9.6% according to the Norwegian Road Federation.

The most popular brands were the Tesla 3, then the hybrid RAV 4 from Toyota and the VW ID.4.

Linking to dividend paying stocks, in every country tax considerations play an important role in decision making. If taxes are greater in one industry, then people will seek alternatives. If the industry which you own shares in is heavily taxed, unless the profits are great, it is time to look for alternatives.

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