In investing prior to the allocation of your dollars, homework needs to be done to ensure that you lose as little money as possible. Analysts all over the world examine the financial records and try to determine what the next quarter, the fiscal year and a 5 year outlook. In some industries it is relatively easy to do because they operate similar to utilities. In over industries, as long as you can justify your expectations, you need to estimate and hope.

In the property industry, because of lead time and access to capital, the expectations should be closer to the reality. Analysts can track sale of homes, lease of space, or how the industry typically makes money. In China, the property giants have sold millions of apartments and houses and still vast towns and cities are vacant. Who paid for those was never quite determined but they exist.

In an article by Andrew Galbraith and Marc Jones of Reuters, the Chinese property developer giant Evergrande Holdings has affected the entire Chinese property markets and bond prices are falling drastically. The Chinese high yield bond market is a $5 trillion sector and helps drive the Chinese economy. Now that Evergrade is close to defaulting, the Chinese Premier who originally was proud of the work of the company is examining the large lenders to see if they were too close. The large lenders include Citic. Evergrade owes $300 billion in liabilities and that is at risk.

Companies such as CST Group, Modern Land, and Sinic Holdings are now saying they may default on their loans. The bonds have decreased in price by 75% and are trading near 30 cents on the dollar. Companies that were supposed to be better grade such as R&F Properties and Greenland Holdings and seen 20% wiped off their bonds.

Harbin, the capital of northeastern Heilongjiang province was one of the first cities to announce measures to support property developers and their projects.

Linking to dividend paying stocks, when the giant of the industry group is in trouble the whole group will be affected even thought there might be great quality in some of the names. This is when you have to do your homework, at some point in the future the group will sort itself out, with the larger names selling assets. Who buys the good assets at below replacement value are the names to invest in. Eventually, the whole group will become investable again, but for now in an effort to try not to lose money, watch from the sidelines but be ready to pounce on the good stocks at low prices. Eventually quality companies rise in value.

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

Shortly after the oil spill off the coast of Orange County, those politicians who do not like offshore drilling made a pleas to ban to ban offshore drilling.

In an article by Jessica Resnick-Ault and Daniel Trotta of Reuters, the good thing the politicians did was to trill to determine what caused the the pipeline to burst. About 3,000 barrels of crude oil spilled into the Pacific Ocean killing wildlife and closing beaches south of Los Angeles. In reality the offshore drilling off LA could be closed because at the moment there are 23 rigs producing 12,000 barrels of oil a day. If you think about the Daniel Day Lewis movie There Will Be Blood, there were hundreds of rigs and California produced more than 200,000 barrels a day.

According to Martyn Willsher CEO of Amplify Energy, the pipeline was moved more than 30 meters from where it should have been. Possibly an anchor move it for the US Coast Guard Captain Rebecca Ore said the pipeline was moved laterally.

Linking to dividend paying stocks, whenever there is an accident, the reason behind it needs to be investigated and hopefully it does not happen again. There is a reality in owning companies that drill in the sea offshore, accidents do happen. What as an investor you need to do is see how the company deals with the accident and inspires confidence that it should not happen again.

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

Whenever a state or country wants to encourage a business to relocate to their area, one of the levers they use is to lower the corporate tax rate. The trade off is the workers would be on salary and they would have to pay state taxes. However, the math never adds up equally and on balance the workers pay more in taxes and the corporations pay less. This idea has been going on for years and generations but it tends to mean government coffers are in deficit because they do not collect enough money. Most states can not run a deficit or the process of tax reduction continues.

In article by Reuters, there are talks in Paris, lead by Chairman of the Reserve System Janet Yellen (as opposed to the cuts made by President Trump) to have a floor across all countries of 15% tax rate.

Ireland is the lowest corporate tax rate in Europe and many multinationals have their home in Ireland at least during the AGM time period. Ireland objected the legal language of at least 15% and to appease the Irish, the Irish wanted a floor not a starting place of 15% only to see it be raised. Given that countries around the world have a multitude of governments orientation, Ireland did not to see the tax go higher than 15% which would mean an increase from the 12.5% at the present.

Linking to dividend paying stocks, we all hear the phrase let them pay their fair share; what the fair share is what the meetings in Europe are about. Every President and CEO will tell you the same thing, but then they go the CFO who gets a bonus if taxes are as low as they can be and will tell you all the other taxes the company pays. It is hard to see low taxes going being changed soon.

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

If you look at the Forbes 400 Richest People in the US or the World, you can rest assure only the tiny minority are not using tax havens somewhere in the world. It used to be European countries, then it expanded to Caribbean Countries and now there are countries around the world how offer tax havens. It turns out some US states are also becoming tax havens, even though there are few billionaires in the state. The leading states are South Dakota, Florida and Delaware.

In an article by Randall Chase of the Associated Press, a key reason why many wealthy people turn to a certain tax is that lawmakers have abolished the rule against perpetuities. Eliminating the rule has allowed the establishment of dynasty trusts in which wealth can be passed from generation to generation while avoiding federal estate taxes.

One might guess why the law changed in South Dakota – to allow farms to be passed onto one generation to the next. However the dynasty trust has attracted billions of dollars. Another law in South Dakota and Delaware allows for asset protection trusts, which protects wealth from claims of creditors. Such trust can be attractive to wealthy lawyers and doctors as a measure to shield their assets from malpractice claims. Trusts can also protect assets against ex spouses, disgruntled business partners or angry clients. The trusts can be changed as the trustees desire it to be changed.

Delaware has a long history of corporate protections and many of the fortune 500 companies are incorporated in Delaware or have assets or trusts in shell companies set up in Delaware.

Linking to dividend paying stocks, while most of us expected the companies we invest in to be good corporate citizens, they are also likely to have trusts designed to protect the wealth and most CFOs are well aware of the use of tax avoidance. There is a reason why Apple has a Ireland address. Papers such as the Panama Papers or the Pandora Papers shed light on how the elite and the corrupt use offshore accounts and most companies use them. The tax havens likely will be with us for many years to come.

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

Most Annual General Meetings (AGM) are relatively calm affairs, with management taking a great deal of time to ensure they have more than 50% of the votes to elect the new Board of Directors. In widely held companies, once in a while what the public wants is reflected and there is some questions but the AGM goes in management’s direction. Once in a while there is a change and last December was once in a while. A hedge fund called Engine No 1 led a charge for 3 board seats and won 2 of them. The biggest institutional money managers agreed with the hedge fund in regards to ExxonMobil. The decision made waves of publicity for the hedge fund.

In article by Ben Klayman and Seva Herbst-Bayliss of Reuters, Engine No 1 announced it had bought shares in GM as it makes its transition to battery electric vehicles. According to Refinitiv data, Engine No 1 bought 400,000 shares around $50 a piece. When a fund makes an investment, it speaks to senior management and Engine No 1 said it had constructive and collaborative 2 way conversations or they agree on the strategic direction of GM and their CEO Mary Barra.

GM has announced it would spend $35 billion on electric and self driving vehicles through 2025 and will outline what 2030 will bring forth at investor conferences.

Linking to dividend paying stocks, whether you buy one share or multiple shares, when you buy a company you either like or dislike their strategic directions. Hopefully the more shares you buy the more homework you do in the strategic directions and where you see the company going to ensure it is profitable and can pay a dividend. Doing your homework whether you are a hedge fund or small investor is still the most important part of trying to avoid the first lesson in investing – try not to lose money.

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

Oil prices during the pandemic dropped because governments around the world asked people not to drive and commuting helps drive up oil demand. People are beginning to commute which drives up demand and with all the other normal activities becoming normal, energy demand is up. However, governments around the world want to lessen their demand of oil and gas by concentrating on renewables.

In an article by Stanley Reed of the New York Times News Service, OPEC decided not flood the market with oil and gas, but only do a modest increase of 400,000 barrels a day or 0.5% increase.

Richard Bronze, head of geopolitics at Energy Aspects, a research firm, said, it is going to take oil prices sustaining above $80 a barrel for a period of time or pushing sharply higher.

Oil prices climbed on the news to $78 a barrel, the highest since late 2014. Oil prices have doubled in the past year (in addition many oil stocks have doubled).

OPEC will meet monthly to decide whether to increase the limit, the next meeting is scheduled for November 4.

Linking to dividend paying stocks, some of the best paying dividend stocks for the past 50 years has been the oil companies. It is hard not to have some in a dividend portfolio even if you want renewables to play a significant role in the generation of electricity. With every industry revolution there is a transition to the new one but when you examine how people heat their homes and drive vehicles, the transition will be in years not months. When the average person buys an electric car, we will be on the back end of the oil transition.

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

For the last 40 years or so, one constant in the economic world was China’s economy was going to grow as it became the manufacturing hub to the world. China consumed more raw materials than other country and its growth affected prices. If you went into Walmart to shop, many of the items are from China and in a country of a billion plus people many people moved up the economic ladder into the middle income. That outcome is a good thing. A negative affect is China is the world’s biggest consumer and source of climate-warming greenhouse gas. China was to change that to peak in 2030 and by 2060 be net zero.

In an article by Shivani Singh and Min Zhang of Reuters with every climate change goal there are roadblocks along the way. China wants to cut its greenhouse gas emissions and in November there is a big Conference sponsored by the UN in Glasgow, Scotland and China wants to say it is doing better.

One method to doing better is cutting down on emissions from coal, however China is world’s largest user of coal to generate electricity and recent cutbacks in the the amount of coal being used to help both manufacturers, consumers and pushed up coal prices and causing power shortages. The power shortages are affecting manufacturing companies who had to slow down production. The companies facing slowing down include Apple and Tesla.

Steel, aluminum and cement industries have been hit hard and according to Morgan Stanley analysts production capacity is down 7% in aluminum and 29% in cement.

Nomura Securities cut its 3rd and 4th quarter GDP growth forecasts to 4.7% and 3% from 5.3% and 4.4%. The global supply of textiles, toys and machine parts could be affected.

Linking to dividend paying stocks, all companies have to a role to play in lowering green house gases, however there will be a time lag between how they and their supplier companies use energy to how they use energy in the future. For your investments, how are they managing to use less and still make generate profits to pay dividends?

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

China is different than most countries and we all tend to forget what is considered normal in China. In China facial recognition and keeping control of the population is very important and China is extending control to what people do on their computers or smartphones. On one hand the facial recognition is very interesting, there was a news story about the Chinese using facial recognition at a football game and found people of interest to the police in the crowd. The person or people were caught, from a societal point of view it could be good for the rest of society that person was caught. However, we all think we have a certain level of privacy, however in China rules are changing. The Party has said kids under 18 can no longer do gaming.

In an article by Paul Mozur and Elsie Chen of the New York Times News Service, video game industry is under going massive changes. The market for gaming is very high in China and with over a billion people even if millions play, that is still a strong market. The government has decided that children under 18 will be limited to gaming for 3 hours a week and during prescribed times during the weekend. For someone under 18, to game they must show their identification card as proof of age.

Chinese leader Xi Jinping has decided young people are spending too many hours on screens and should be doing something else. But it is a complex because of the one child policy that was on changed last year and parents expecting to work long hours, gaming was a good outlook for many young people. In addition, the most popular games are made for smartphones (China is the number one user of smartphones) and are free to play. The gaming businesses make the games live and make their money by attracting large number of users and the extras which gamers have to pay for to advance to higher levels. Given the business model, the gaming companies have become experts in hooking players to play their games.

Linking to dividend paying stocks, what is great for companies to make profits such as in this case young people spending lots of time, energy and money on games is not always the best thing for society at large. Although for people above 18, it is entirely possible to work in game development, e-sports or make a good living from games. Gaming companies similar to tobacco companies it is good to get the people when they are young and allow them to age gracefully with the company products. With every product there are good aspects to the products and sometimes there are some negative, as investors you need to focus on the good.

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

Climate change is something every company and government is trying to slow down, however the solutions mean that once in a while there will be conflicts which sends prices up. A case in point is natural gas prices in Europe have increased both because COVID had reduced demand and as every country is coming out of COVID, demand is increasing. However due to regular maintenance schedules of natural gas plants, supply is limited also because of climate change storms are bigger which means actual supply is down. When those elements are combined, those charts from economics 101 of supply and demand happen.

In an article by Daanica Kirka of the Associated Press, gas prices have risen in the UK which means the UK’s Business Secretary Kwasi Kwarteng is trying to ensure the public there will be gas to heat homes and keep the lights on, without costing an arm and a leg.

The UK does have diversified sources half is domestic production (North Sea), 30% from Norway (North Sea) and the rest from European pipelines including from Russia.

Regulators have approved a 12% increase in prices beginning in October.

Linking to dividend paying stocks, utility stocks are part of many investors core holdings because regulators tend to raise prices which ensures the company can maintain its profitability. That is good for the investor, not so wonderful if you are a consumer because there are very few options. All utility companies are moving to ensure part of their supply is renewable from the sun and wind, but with changes in society there are lag times and it will seem if we only used more ….

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