If you think about the history of the US, eventually you are going to run into the name John D Rockefeller who created the giant Standard Oil with operations around the world and controlled the oil industry from the drilling to rail cars to pipelines to oil refineries to the gas station. Standard Oil was eventually broken up and the biggest company from the group is called Exxon. For generations, not only did Standard Oil pay the most dividends of any public company on the stock exchange, it had a significant influence on foreign and domestic policy of the US. The shareholders of this widely held company agreed with management and for the most part the US was better off. Money flowed into the oil industry and returns were good.

Then along came climate change, every year more and more people see the climate changing and one of the biggest contributors is the fossil fuel industry. For a company that is used to getting everything its own way and the government agreeing to it, at the end of May something changed in corporate America.

Shareholders including the world’s largest fund managers want every company to say how they are dealing with climate change to lessen the problem. According to the Associated Press, a group called Engine No 1, spent $30 million lobbying shareholders while the company spent $35 million for the opposite vote placed 2 shareholders as directors on the ExxonMobil Board. The 2 Directors will push Exxon to transition faster to a cleaner economy.

The President of ExxonMobil Darren Woods’ said the company was moving in that direction but warned moving faster would jeopardize profits. Given the oil companies reported losses, the institutional fund managers voted against management and for more changes.

Linking to dividend paying stocks, as shareholders you have a vote for the Board of Directors of the company and if you look at most of your investments, you would see management as long as they make profits tend to receive over 90% more often over 95% of the votes. The proxy firms often make it easy to vote as management recommends. For ExxonMobil to lose 2 directors seats over the issue of climate change means society has changed much faster than the oil company. It also means the relatively easy process of evaluating an oil company – it costs x amount to drill and it sold for x plus to make plus money for shareholders will be more complicated. However society changes and demands actions, how will the oil companies respond? Will they still be as profitable? We do know the demand for oil and gas is not changing tomorrow, but will change.

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

If you think about the images of Hollywood, California movie studios will likely be in one of the image you consider. There is very good reason for that image to come to your mind, with the invention of sound, the movie industry found a home in Hollywood and still many studios are to be found in the LA area. Similar to all movie studios, MGM has gone through a number of cycles and is still a respectable studio. At one time MGM was the biggest studio in LA and America and the world lined up at cinemas to see the movies. Some of the older movies include: Singin’ in the Rain, the Wizard of Oz, Gone with the Wind. The rights to those movies were sold some time ago to Warner Bros Entertainment.

MGM has a stable of movies including James Bond, Thelma & Louise, Rocky and others you will see when the Lion roars at the start of the movie.

The owners of MGM (Anchorage Capital of New York) had put up the studio for sale because streaming service providers are the method people prefer to see movies. Many groups came to kick the tires including Apple, Comcast and the winner was Amazon.

In an article by Brooks Barnes and Nicole Sperling of the New York Times News Service, tries to answer why would Amazon pay 40% more than the competition wanted to pay?

The first reason is it can. The company has $71 billion in cash and market capitalization of $1.64 trillion.

The second reason is the Prime membership program.

According to Morgan Stanley, people pay $119 a year to Amazon or $13 a month for free shipping and other perks including Prime Video streaming service. The average household with Prime membership spends $3,000 a year on Amazon, which is twice what households without Prime spend. About 200 million people pay for Prime memberships. (200 million x $119 is $23.8 billion in cash flow for Amazon).

According to Mr. Bezos as Prime Video turns 10 years, over 175 million Prime members have streamed shows and movies over the past year which is up over 70%. Prime Video needs content and because of streaming services such as HBO Max, Disney+, and Paramount+ the movie studios are less willing to license their libraries of films to outside companies. Amazon Prime needed content and the best method to ensure content was buy a studio. Amazon also owns cloud computing giant AWS which fits into streaming movies.

Linking to dividend paying stocks, industries evolve and assets are seen differently by companies and individuals. An individual may see a movie and if they relate to it find the movie to be good. A company sees the movie as a method to sell something else to the consumer. Amazon sells Amazon Prime to people buying things needed to be shipped, they also add movies for added value. The added value becomes important to the consumer and to ensure the Amazon Prime is renewed every year, the content of the streaming needs to improve. The company wins and the consumer wins, which is a win win situation.

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

If you remember a few years ago, former President Trump at campaign rallies would say he loved the steel industry and the steel industry will come back to its 1900’s global domination. It never did but the steel industry did invest in new capacity, however every time there is an investment in capacity it tends to mean more robots doing the work or more technology and the same number of people. It is ironic that under President Biden, the steel industry is experiencing a comeback partly because steel prices are at a record high.

In an article by Matt Phillips of the New York Times News Service, steel companies are performing very well on the stock market with Nucor as the top performing stock on the S&P 500. Although it is not clear how long the boom will last. Companies are hiring, primarily because shifts are not being used.

Since the 1960’s more than 400,000 jobs disappeared as a combination of foreign competition and production processes requiring less people. However, the future prices for 20 tonne rolls of domestic steel – the benchmark of most steel prices went above $1,600 a tonne.

Goldman Sachs predicts by 2023, roughly 80% of the US steel production will be under the control of 5 companies, up from 50% in 2018. The latest mergers include Cleveland-Cliffs purchased a majority of ArcelorMittal’s American mills after buying AK Steel. US Steel bought Big River Steel by purchasing the shares it did not already own.

Steel imports are down 25% since 2017 as domestic producers are capturing prices as much as $600 a tonne above those prevailing on the global markets.

Linking to dividend paying stocks, all commodities go in cycles, although for some commodities the government tries to ensure prices do not go down too much, as an investor you like that because losses will be mitigated. Whatever industry you invest in, ensure your homework includes check up on commodity prices then you can buy low and sell high.

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

In the world of business, analysts tell the public those areas that are making high margins and as an investor you like that news. As a consumer, maybe not so much, but as a investor you are looking for those high margin areas where you can invest your money and make more money. In the case of Apple, recently analysts have been promoting the App store or services as a healthy profit center for the company, which means you do not have to pay as much attention to iPhone sales. What investors tend not to ask is how does Apple maintain the margins, as the concern is more can they?

Court cases tend to provide answers as people have to tell the truth or go to jail. A number of months ago Epic Games sued Apple and similar to most court cases time goes on. Apple’s CEO Tim Cook testified in late May over whether the iPhone maker’s App Store profits from developers such as Epic Games are justified and whether Apple faces any real competitive pressure to change its ways.

In an article from Reuters, Mr. Cook testified for 2 hours, the Judge Yvonne Gonzalez, pressed Mr. Cook to concede that game developers generate most of the App Store revenue and help subsidize other apps on the store that pay no commission.

The issue is important to Apple because the App Store anchors $53.8 billion services business. Epic Games alleges Apple had 78% profit margins.

Linking to dividend paying stocks, all companies have proprietary information that you can see the results but not how they actually earn the income, court cases shed light on the information. As an investor is a company is making margins the way that Apple is alleged to, you are delighted because the business will be a growth center for a while to come before margins begin to come down and then you will look for other areas for the company to grow from. Margins are always a double edge sword, too high and people will want to be in the business, too low and no profits will be made.

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

We all have a strange relationship to what we make, for the bulk of the population we work for someone else who when the annual review is given, the information is to be kept secret. However, just about everyone knows the range of pay in the workplace and most people are rated on a bell curve so there are very few secrets. The longer someone has been in the workplace and as they have received a raise every year, they are either higher or lower in the pay range. This is all mentioned because of the reaction politicians have towards the unemployment numbers.

In an article by Lucia Mutikani of Reuters, for a number of weeks there has been a federal government subsidy of $300 on top of the normal unemployment insurance for those workers who industries were shut down by the government because of COVID. With the increasing number of people being vaccinated, people are able to attend to events and group functions. At the functions for example the sporting arena, the people are paid the minimum wage ranging from $7.25 to $15.00. Some politicians believe the added subsidy is allowing people the choice of finding work or staying home.

The other side says lack of child-care facilities (particularly when schools are shut down), lingering fears of catching COVID in a group setting and with an aging population some took early retirement so they do not need to go back to work.

In the commodity world, we all thing of supply and demand as prices on the commodity exchanges rise and fall. Somehow with wages, it is not the same. If there is a hard time attracting people, the employer must make it more attractive to fit the needs of their workplace. That seems logical, but when it comes to money, there is a different mindset at play.

Linking to dividend paying stocks, one of the reasons why you want to own dividend paying stocks is the dividend or money you receive on a quarterly basis. The money gives you options, and the more money you receive in dividends the less you are dependent on work wages which allows you to work at the pace you want to. Ideally the amount of dividends you receive is close to what you make working, which allows you to work or not to and society believes that is a wonderful thing.

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

In the stock market, we all know stocks go up and down, but sometimes they go up and down because of government actions. Governments tend to change over time and when they change, policies change and the negative affects of the government goes away which means stock prices can and often do go up. The concern is always timing, when does this happen?

In China the company which is the Amazon of China is Alibaba Group Holding Inc. For a number of years, Alibaba had the backing of the Chinese government and the company is large. Alibaba moved into fintech with a company called Ant Group Inc. however just before it was going to go public at valuations for a fintech company, state banks went to the government and said Alibaba which was taking business away from the state banks should be seen and regulated as a bank. The government agreed and the valuation of Ant went from $37 billion to half or $18.5 billion.

In an article be Ian McGugan, he suggests there are things to like about the stock. The revenue went up 64% to $28.6 billion. The company recently purchased the grocery supermarket chain Sun Art which helped push up sales. The company made $4 billion in profit up 18% in the year. The company had to pay a fine to the government, but it is a one time event.

The stock fell from $310 to $213 and trades at 26 times earnings.

Linking to dividend paying stocks, every company that is profitable eventually runs in concerns from the government. The government may think the company did or did not do something it should have. Investors have to ask what is the face saving solution for the government and the company. How long does it take to work through the year? When is a good time to either buy more or get in on a seemingly inexpensive stock? Just because there is opportunity it does not mean the opportunity to automatically make more happens overnight. How much time is needed?

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

If you have ever taken a bus tour and liked it , then the idea behind cruising is very similar. In each people go together, they generally pay one fee for hotels, food and the bus or boat and off they go to visit the world. Both bus tours and cruises are popular with those who have retired, because many people have put off seeing the world until they have time and after they have fulfilled other responsibilities like raising children, paying off mortgages, etc. If you have never been on a cruise, as long as the weather is good, they are a delight and ever year more people were going on cruises. With COVID-19, the cruise industry was shut down because it involved lots of people in small places. Now the economy is opening up as people are vaccinated, are cruise stocks worth buying? The prices are still trading 25 to 50% below pre COVID levels.

The 3 big cruise ships are Carnival, Royal Caribbean Cruises and Norwegian Cruise Line Holdings. Other companies such as Disney as a cruise line, but it is not a pure play.

Larry MacDonald examined the companies:

Carnival, the largest operator with other 100 ships. Its revenues fell 2/3s to $830 million during the 12 months ending February 28, net income is a loss of $11.4 billion. Carnival has a negative cash flow or cash burn of $530 million; Royal Caribbean cash burn is $270 million a month and Norwegian is $170 million. On a per ship basis, Norwegian has the highest cash burn.

During the past year and half, the companies have been trying to stay in business by selling 10% of their ships, issuing shares and selling bonds to raise $40 billion and they still have cash sitting on their balance sheets. Carnival has $11.5 billion in cash and short term investments.

Advance bookings saw a 90% jump in booking volumes over the previous quarter and reservations for 2022 are stronger than they were in 2019. There is pent up demand from people who have been on cruises.

The bad news are there are many challenges: Carnival has 90,000 employees to bring back to work who live in many different countries. The selling of bonds was in junk bond rating which meant interest rate payments for Carnival went from 200 million in 2019 to $1.2 billion in 2020. When people are cruising again, the issuing of shares or share dilution and smaller fleets means the earnings per share target will be a greater challenge.

Linking to dividend paying stocks, similar to a person’s real life in debt is low and assess to credit is high, they make it easier to invest in. It is wonderful people wish to cruise again, and likely the costs will be low to get people in the door, but will cruise lines be profitable again only time will tell.

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

When a company is profitable over the years governments at all levels highlight the wonderful good things the company does in the economy and for a stable workforce. The government generally allows the company to do what it wants as it stays within existing regulations. If the company loses money, then everyone begins to poke their noses into the operations of the company. Shareholders who voted 95% plus for management question policies and procedures; governments question policies and procedures and the general public particularly those employed or affected by the company worry about the future of the company. There are multiple opinions and add stress of being a manager. Eventually someone has to take early retirement or be shifted to new positions.

In Switzerland, similar to the US the large global banks are a symbol of pride and when Credit Suisse lost money on risk management failures, the politicians are having their say. In an article by Michael Shields of Reuters, Credit Suisse which lost money on the investment bank Archegos and British supply chain finance firm Greensill, politicians are asking why a global bank had such as risky position on two clients?

Prisca Birrer-Heimo, a member of the lower house’s economic affairs committee said it is the politicians’ turn on the Credit Suisse issue.

The new Chairman of the Board, Antonio Horta-Osoria has said a thorough review of what went wrong was being undertaken. The bank had to raise money, stop buying back shares, cut its dividend and changed senior management. The bank has said, it will keep limits on its risk weighted assets.

Linking to dividend paying stocks, recently attend virtually a number of AGM or Annual General Meetings, those companies that are making money had 90% plus voting for management’s positions and very few questions from shareholders. Those that did not do as well, people believe the strategy can be changed. If management wants the least questions from shareholders, make profits to pay dividends.

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

It used to be that if someone said they were vegan, the many meat eaters would automatically say words that were not flattering. The vegans operated outside the mainstream, but it was relatively easy to find stores which serviced the niche market. Then something happened to the market and although people may not be completely off meat, they do try some of the products and they went mainstream. Now the big supermarkets carry the products and private equity money is involved.

In an article by Jack Ewing and Lauren Hirsch of the New York Times News Service, companies such as Oatly and Beyond Meat and a whole host of others are raising money from the established private equity firms.

Oatly which went public on the New York Stock Exchange is a producer of a milk substitute made from oats that can be poured on cereal. As the public embraces climate change they want the foods they eat not to be a leading contributor.

Oatly is an entity owned by the Chinese government called China Resources, Verlinvest, a Belgian firm that in invests some of the wealth of the Anheuser-Busch InBev beer empire (think Heineken and others), Blackstone private equity owns 8%.

According to PitchBook which tracks the food industry, over $18 billion in venture funding is in food tech companies which makes food that tastes like animal products. Companies including Ripple (made from peas); Moalla (bananas), the world’s biggest producer of packaged food, Nestle has a line of alternative food.

In the US, milk substitutes make up a $2.5 billion industry that is expected to grow to $3.6 billion by 2025 and globally from $9.5 billion to $11 billion.

Linking to dividend paying stocks, often times dividend paying investors tend to be more conservative in their outlook, sometimes paying attention to the counter culture will make you money as trends change. When the kids are talking about their concerns, something in the marketplace will change and opportunity will open up.

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