In June many companies held their Annual General Meetings to elect Board of Directors, appoint auditors, determine executive compensation and report on how the year ended. That is good, however on Wall Street that was yesterday and today there are new concerns. How is the quarter going? what is the impact of inflation? are margins okay?

In an article by Caroline Valetkevitch of Reuters, for the second quarter earnings, analysts are expecting a 64% jump over a year ago, the biggest increase for any quarter since 2009 according to IBES data from Refinitiv.

According to Jonathan Golub, chief US equity strategist and head of quantitative research at Credit Suisse, right now companies are able to pass on all the higher input costs to their consumers, so profit margins are under no pressure at all.

The S&P 500 is up 11% in 2021, yet the index is trading at 22 times forward earnings, slightly below the 23.5 times at the start of the year, according to Refinitiv.

Next year’s outlook is less clear. The S&P is currently projected to increase by 36.5% in 2021 and in 2022 a more normal 11.7%.

Linking to dividend paying stocks, the stock market values have increased and all investors like that. While we will all take 20% plus gains, the normal is not 20%, financial planners budget for 4% gains. As a dividend investor while you enjoy the gains in the value of the stock, your bias is the dividend which continues to pay you. The growth in the value of the stock is the extra and for the past year or two the extras have nicely increased the value of your wealth.

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

If you own an index fund for a long period of time, the trend line tends to be upwards because all index funds rebalance themselves or drop laggards or “losers” and bring in winners. Most individual stock pickers who own more than 10 stocks owns at least one stock which has lost money or is not rising in value, but there is hope. The stock was chosen for a reason and hopefully that reason still exists and maybe the market will find it.

In an article by Chuck Mikolajczak of the Associated Press, on the last Friday of every June the firm which runs the Russell Indexes called FTSE Russell refreshes its indexes. On the stock markets, passive investing or index investing has taken a larger share every year because over the long term it works, however if you need to take money out over the short term, remember markets fluctuate. If you can leave your money in the index will be higher.

At the end of 2020, about $10.6 trillion in investor assets were benchmarked to Russell US indexes – The Russell 2,000 of small cap companies; Russell 1,000 of large cap names; Russell 1000 growth, Russell 2000 value.

Market capitalization for the Russell 3000 index increased from $31.4 trillion in 2020 to $47.7 trillion as of May 2021.

This year the trends include SPAC and meme stocks, the stocks that met the threshold will be included in the new indexes. Goldman Sachs expects 255 additions and 297 deletions at the Russell 3000.

The affect of the rebalancing is volume on the exchange will surge as stocks are bought and sold and rebalanced in the indexes, resulting in the biggest trading volume day on the exchange. Most of the activity happens in the last 15 minutes of trading and the estimated net trade will total $75 billion.

Linking to dividend paying stocks, an index fund over a long period of time will perform very well because the fund will drop losers and pick up winners. The other way to have similar results is buy profitable companies which pay a dividend. While the multiple of the market will go up and down, the dividends ensure your total return remains high and that is a good thing while investing.

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

When you think about the internet, you may think about Google and that is good but it reality google is a search company and advertising company and many people use its services. However the internet is much more than google.

In an article in the Associated Press, in mid June a software bug at a major network provider briefly knocked dozens of financial institutions, airlines and other companies across the globe offline during peak business hours in Asia. In the afternoon when people are trying to do business, the internet was down in Asia and Australia. The company said there was a software bug on a service that protects customers against denial-of-service attacks. For the customers all traffic was rerouted in minutes, but it took 4 hours to restore the system.

The company is called Akamai Technologies and is based in Boston, Massachusetts and Akamai Technologies, Inc. is a global content delivery network^[2] (CDN), cybersecurity, and cloud service company, providing web and Internet security services.^[3][4] Akamai’s Intelligent Edge Platform^[5] is one of the world’s largest distributed computing platforms. The company operates a network of servers around the world and rents out capacity on these servers to customers who want their websites to work faster by distributing content from locations near the user. When a user navigates to the URL of an Akamai customer, their browser is directed by Akamai’s domain name system^[6] to a proximal edge server that can serve the requested content. Akamai’s mapping system^[7] assigns each user to a proximal edge server using sophisticated algorithms^[8] such as stable matching and consistent hashing, enabling more reliable and faster web downloads. Further, Akamai implements DDoS mitigation and other security services^[9] in its edge server platform. (source Wikipedia).

Akamai’s customers includes more than 300 of the world’s largest banks, more than 30 airlines, more than 200 national government agencies and 825 retailers.

The article notes recent outages underscore how vital a small number of behind the scenes companies have become to running the internet.

Linking to dividend paying stocks, Akamai Technologies does not pay a dividend but one day it will likely because it has a solid base of customers who will renew their contracts every year. The reason why you may consider the company is think about plumbing in a house. No one buys a house for the plumbing, but someone supplies it to make the house work, whoever is the supplier maybe the company to invest in because all houses need plumbing. Sometimes the best investments are not the household names but who supplies the households. Research needs to be done before investing.

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

Investors around the world are looking to central banks in the quest to see if inflation needs to tackled after the emphasis has been on jobs and creating the best conditions to have more jobs. If one consumer buys items, then it is good but if many consumers are opening their wallets to spend money, then central banks worry about inflation.

In an article by Terje Solsvik and Victoria Klesty of Reuters, the Central Bank of Norwary gave notice it expects to raise interest rates 4 times by mid 2022 (next year) as the economy shakes off the effects of COVID-19. The Norway Central Bank is called the Norges Bank and Governor Oeystein Olsen said expects to raise rates by a quarter every 3 months.

The Swiss National Bank signalled monetary policy would stay ultraloose for the foreseeable future.

In Norway, growth is expected to be 4.1% up from 3.4% and inflation was slowing from 3% to 1.7% below the goal of 2%.

The finance ministry would raise capital requirement held by the banks termed supplementary buffer capital 1.5% of the balance sheet up from 1%.

Linking to dividend paying stocks, all central banks in the developed countries have been using the tools in their toolbelts to maintain their economies. As people are vaccinated and people can gather allowing more industries to open up, the central bank is trying to lessen their role in the economy. It is a hard balancing act but investors always look to seeing when measures are too harsh or restrictive. If too harsh and inflation runs up, then alternatives to investing open up. If too restrictive the tools may not work for many of its citizens.

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

If you look at a map on the US and look to the north you see blue or a waterway from the Atlantic Ocean to Buffalo across to Cleveland over to Chicago and up to Duluth and it is easy to see both great history and economic activity connected to the Great Lakes. Great American cities were form and expanded because of the movement of goods and services on the waterways. Many of us take the movement of goods on the waterways as normal or we do not give much thought to it.

In an article by Nicolas Van Praet and Eric Atkins of the Globe and Mail, the levels of the St. Lawrence River is lower than normal. The levels have dropped even though the water in the Great Lakes is monitored and controlled by the International Joint Commission, the primary source of water for the St. Lawrence River is Lake Ontario and according to the International Lake Ontario-St. Lawrence River Board, Lake Ontario has seen its driest conditions since 1966. The reason is as much as we in the north east like and dislike snow, the snow and the important snow melt is down meaning less water is flowing into the Lakes.

The lower levels in the St. Lawrence means ships carrying goods have to lightened or carry less goods or do more trips. The formula is each reduction of 10 centimetres of water represents about 3,000 metric tonnes that has to be removed. More trips mean higher fees. If you think about the ship which caused the blockage in the Suez Canal earlier this year, it was a massive ship moving containers, to keep up with the demand of moving containers.

Linking to dividend paying stocks, climate change affects logistics which affects the supply system which affects prices. When climate changes the normal, alternatives need to be found and alternatives always mean extra time and effort and higher fees. The alternatives are trains and trucks, but the cost is higher.

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

The bull market on Wall Street has continued which translates into higher share prices which translates into more supply or initial public offerings (IPOs).

In an article by Anirban Sen and Krystal Hu of Reuters, the IPO market has already total $171 billion which is greater than the $168 billion in the total year of 2020, according to data from Deallogic.

The market is expecting some big numbers in the last half of 2021 including Didi Chuxing Technology, Robinhood Markets Inc and Rivian Automative LLC.

According to Eddie Molloy co-head of equity capital markets for the Americas at Morgan Stanley, the IPO markets will continue to be very busy.

The average one day gain in IPOs has been 40.5% compared with 28.2% in 2020 and 25.5% in 2019.

Investment bankers are expecting the year end total to be between $250 and $300 billion in IPOs.

Jeff Bunzel, global co-head of equity capital markets at Deutsche Bank said $500 million used to be a pretty big IPO, now the numbers seem to be $750 million to over $1 billion.

Valuations are strong, fund flows are strong and all the ingredients that you need to have an active and successful IPO market remain intact right now.

The success of the IPO market is attracting companies that would stay private for longer periods of time said Paul Tropp, co-head of capital markets at Ropes & Gray.

Linking to dividend paying stocks, IPOs are not companies which pay dividends but it a diversified portfolio it is worthwhile owing some. However if you do buy, remember portfolio management and that means taking profits. At some point down the line, the markets will return to normal when profitable stable companies are the best investments for the long term, with your profits you can buy more dividend paying companies.

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

Every work day after 4 pm when markets close, banks do an inventory of how cash they have and invest in with the central bank in a operation called reverse repo. The money is parked with the Federal Reserve and all is good with the banking system for another day.

The issue is the size of the operation, in an article by Ian McGuggan , the size is about half a trillion dollars a day.

The size can be seen as a warning sign that the Fed’s program to pump cash into the economy has tipped to too much and it needs to be rebalanced or the Fed will taper its cash stoking tactics. The easiest method to do that would be raise rates a bit. The Fed has said they will continue the course until the economy is fully healed for those who were hurt the most.

The Fed has been buying $120 billion a month of Treasury and mortgage bonds since June 2020. The idea and it has worked is to hold down longer term interest costs by bidding up the price of bonds (remembering bond prices and yields work in opposite directions).

Much of the surplus cash appears to be going into reverse repos. A reverse repo is the Fed sells Treasury securities to a financial institution with the promise it will repurchase the securities the next day. This takes cash off the financial institution’s balance sheet overnight and turns it into an asset.

In today’s low interest rate environment the trade is a wash in terms of profit and loss as the repurchase takes place at the same price of the original sale. Why do it? without them the interest rate would sink into negative territory, according to Robert Armstrong writing in the Financial Times.

Oliver Allen, markets economist at Capital Economics wrote one of the reasons why bond yields are staying low is the portfolio adjustments by the large US banks. Regulations to ensure banking safety means banks are required to hold large amounts of high quality liquid assets, such as Treasury bills. Given that central bank reserves and reverse repos are near zero, the banks may be buying US Treasuries instead.

Mr. Allen believes by year end the 10 year Treasury will be yield 2.25%.

Linking to dividend paying stocks, there are many elements which affect the market and those in the industry look to a wide range of metrics. As a smaller investor these things are good to know but you can judge your company how long it has been profitable and can pay dividends. Then you can determine how the biggest divisions are doing, if you believe the divisions are doing well, there is little to do and that can be a very good thing for you can focus on family and summer.

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

Is the glass half empty or half full? It depends on who you talk to is the answer particularly if the issue is inflation.

In an article by David Randall of Reuters, it is easy to see reasons why the glass is half full and inflation is raising its head, in many industries because of supply and demand there are backlogs in the movement of goods from factories around the world to distribution hubs to consumers; consumer price indexes are rising as prices rise; wages and salaries have risen; the Fed is trying to buy less in the bond market.

However, maybe the glass is half full, according to Russ Koesterich, portfolio manager of the $27.6 billion BlackRock Global Allocation fund, as long as the increase in inflation is modest, stocks could continue to move higher.

Generally as the population ages, older consumers purchased less stuff so that is disinflationary force, along with the gains in efficiency due to technology. We know companies are doing more with robotics and Artificial Intelligence to make gains in efficiency.

Jeff Mayberry, portfolio manager of the DoubleLine Strategic Commodity fund said the market was looking for a reason for inflation to be transitory and they got it.

Morgan Stanley’s Michael Wilson believe the rate of change for inflation is peaking which means some commodity prices will fall and shipping bottlenecks will be corrected.

Mohamed El-Erian, chief economist advisor at Allianz said the world’s most powerful central bank is not thinking about thinking about easing its foot off the stimulus accelerator.

Linking to dividend paying stocks, the dividend yield you receive is compared to the interest rate on bonds, which for A rated companies and the government a guarantee. As long as the yield is higher for dividend paying companies, your total return of dividend and stock price over the long term will likely be higher for dividend paying companies. Inflation has raised its head, you need to ask do the companies you invest it have the ability to raise prices to keep their margins?

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

It is a rare politician that does not support some sort of trade deal because although all western politicians say they like the market system, companies will lobby some countries unfairly help their home industries which makes selling their products very hard. In the world of aviation there are two giants and then other companies are on the horizon Boeing and Airbus. Since the US has opened up, the passengers boarded one of the two companies planes.

If you think back to the the past administration, former President Trump said America first and wanted a tariff on anything to have the supply chain be based in the US. That never happened, but along the way the other countries the tariffs were aimed at, imposed tariffs on American goods exported and generally they had little to do with the bigger industries. In an article by Lorne Cook and Aamer Madhani of Reuters, the US had imposed what could have amount to $7.5 billion on European exports because they said France and other countries subsidized Airbus (they do); the EU imposed tariffs on the US of $4 billion because the EU said the the US subsidized Boeing (they do but it more indirect).

President Biden was recently in Europe and the US Trade Representative Katherine Tai said the 2 sides have come to terms to phase out the tariffs on each side regarding aviation. The tariffs on aluminum and steel are still in effect and hopefully will come to resolution by the year end. Ms. Tai noted the tariffs were imposed on Europe but the focus should have been on China, as Europe is a close ally of the US.

Linking to dividend paying stocks, politicians say things and some of it will never come to pass, some of it with cause concerns to companies who export (most of them) and some of the words will tend to hamper sales. The politicians have their own agenda, but it is wonderful if they actually meant the reality of companies. In a competitive environment for sales working against your own government is not the ideal.

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