Every once in a while, there will be a large company that has overextended itself, often times the company seems to have the backing of the government, till it does not. The latest example is the Chinese company Evergrande Group.

In an article by James Griffiths of Reuters, Evergrande Group has about $300 billion in liabilities is China’s 2nd largest property developer. ($300 billion is roughly 2% of China’s GDP) In mid-September it owed $83 million payment on a $2 billion bond that was trading for 30 cents on the dollar.

The backstory is ever since China legalized private home ownership in 1998, real estate has been one of the country’s most successful sectors – with roughly 90% of households owning a home and the world’s biggest asset bubble. Chinese real estate is rife with speculation owing to easy credit and a massive oversupply. In 2018, a nationwide study found nearly 50 million apartments, about 22% of the country’s total housing stock sitting empty. Since 2010, housing prices are up 600%.

Evergrande is emblematic of the problem, the company owns more than 1,300 real estate projects in over 280 cities and creates about 3.8 million jobs a year. It has operations in many other fields including a football team and building a stadium for it, theme parks and many other ventures.

The company had backing and has backing from the Chinese government although the government was trying to slow down the real estate sector by introducing 3 red lines for developers. The lines were limits on debt to asset ratios, debt to equity ratios and cash to short term debt ratios. However Evergrande was above what the Chinese planners set out and nothing really happened.

In all likelihood, many believe the Chinese government will ensure Evergrande Group is restructured and life continues on.

Linking to dividend paying stocks, the more successful a company is the more goodwill it has with the government. The issue is always if the market change rapidly and the company lost money would the government set it to help? The answer is never a black or white one, for in politics the grey comes to light. As an investor, one hopes you have found alternatives (particularly when the company lowers its dividend payments) and watch what happens from the outside looking in.

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

Many companies in order to grow sell outside their country borders and it can be a very good thing to do. Sales increase, revenues increase, and profits grow those are good things. Since there are negative aspects such as currency risks, and sometimes government risks.

One company with government risks is Mastercard however this New York headquartered company has some aces in its sleeve with the US government.

In an article by Aditya Kalra of Reuters in India, for multiple reasons, the government of India has banned Mastercard from issuing new cards. The government of India also banned American Express and Diners Club. The Reserve Bank of India says the companies broke the rules regarding local data-storage. It is important to note, the ban does not affect existing customers.

Brendan A Lynch, the deputy assistant US trade representative for South and Central Asia has emailed the Reserve Bank of India to express displeasure and find methods to resolve the problem.

Mastercard counts India as key growth market and 2019 wrote it was bullish on India. Banks which partner with India are finding other companies to issue cards for because credit card fees are important revenue source for banks.

Linking to dividend paying stocks, when a company sells outside its borders and has reasonably significant revenues, one of its new partners is the government in Washington. The government wants trade and revenues to continue to flow to the US and more often than not are willing to help with the company’s concerns. For likely some companies in the country are doing business in the US and they do not want to be shut out of the US market. Governments can do what they want if they are willing to pay a price both domestically and foreign. When you look at your investments and revenue is outside the headquarters of the country, in this case a New York based company getting along with Washington?

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

When COVID hit the world and people for public health were told not to travel and shut within their home countries, the restrictions placed great pressure on the airlines and hospitality sectors. Some governments gave bailouts, bought bonds and some governments told equity positions.

In an article by Christopher Steitz , in Germany, the airline company Lufthansa announced it was doing a capital increase to raise $3.2 billion to pay back part of a state bailout. The airline received a $12 billion bailout from the Economic Stabilization Fund (ESF) because airline companies are an important aspect of every countries economic performance.

Chief Executive Carsten Spohr said we have always made it clear we will only retain the stabilization package for as long as necessary. People have begun to fly again and based on Lufthansa operating performance in July and August, the company is expected to post positive adjusted earnings before interest and taxes in the third quarter.

A number of funds under the management of Blackrock have entered into a sub-underwriting agreement for a total of $300 million as part of the capital increase and have committed to fully exercising their subscription rights. Currently the ESF has 15.6% of the shares and will try to sell them within 2 years of the completion of the share sale.

Linking to dividend paying companies, some of these companies are the backbone of their countries economies and even if the CEO does not like government involvement, they accept it to stay in business and have a future. When COVID happened and the government imposed measures to protect the health of its citizens, it also offered to help companies affected or they would have gone bankrupt. Government help is not always the answer, but it does help.

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

Recently the writer was watching a podcast and the personal finance advisor was talking about how people spend money on the latest fashion trend when the old styles work just fine. The person said he did not understand why people needed to buy the new. If you think about the fashion industry, it sells the latest trend, similarly on Wall Street they sell the latest trend until there is very little traction left in the product and then something new comes up for sale.

In an article by Anirban Sen and Krystal Hu of Reuters, the latest trend on Wall Street was for wealthy individuals to raise capital into a special purpose acquisition company or SPAC and then buy another company with the money, some investments would be taken public similar to venture capital money. The SPACs lower the cost of a more regulated IPO. According to Dealogic 91 companies in January went public through SPACs versus 27 companies doing IPOs.

When Wall Street likes a trend it goes all in, with 438 SPACs have raised over $130 billion looking for mergers. If they do not find them, money has to be returned to the investors. This has meant some companies which SPACs listed on the exchange are trading for less than the $10 a share which they came out as. University of Florida professor Jay Ritter says 94 SPACs of the 131 that have announced mergers since October, 2020 are trading below their $10 IPO price.

The average redemption ratio for deals completed in July-August stood at 50% up from 24% for the mergers completed in April-June. It is now common for a SPAC IPO that raised $200 million to have only $40 million left in trust after most shareholders redeemed before the merger was complete.

Linking to dividend paying stocks, in the fashion industry some clothes never go out of style and some go out of style in a year. In the stock market there is always the next and best thing because both industries have a sales culture and that means selling merchandise. As a dividend investor more often than not, as long as the company makes a profit and can pay dividends, you do not have to buy anything, just hold for the dividends. What you do with the dividends is up to you but if the stocks can earn profits through whatever cycle there happens to be, you do not have to follow every trend.

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

Governments around the world have discretionary power over many elements of their economies, if they do nothing they allow the companies to try to make their revenues. Sometimes governments will exert their power to show the companies who is boss.

If you think about China, for years gambling is allowed but just off the coast of China and a boat ride from Hong Kong is the former Portuguese colony of Macau where the economy relies on gambling for its revenues. If you have a picture of what Las Vegas looks like, then you know the skyline of Macau for the same casinos operate in both places.

In an article by Farah Master and Donny Kwok of Reuters, shares of gambling casino stocks fell because Lei Wai Nong, Macau’s Secretary of Economy and Finance gave notice of a 45 day consultation period on the gambling industry pointing at deficiencies in industry supervision.

Bejing examined Macau and seems to be be wary of Macau’s acute reliance on gambling but has not said how the licence rebidding process will be judged.

JP Morgan analyst D.S. Kim downgraded to neutral or underweight all Macau gambling names from overweight because of the tougher scrutiny on capital management and daily operations ahead of licence renewals.

Beijing has stepped up a war on cross-border flows of funds for gambling, hitting the funding of Macau’s junket operators and their VIP customers. Similar to gambling casinos everywhere concerns about underground lending and illegal cash transfers every once raises the bureaucracy eyebrows.

Perhaps by Thanksgiving it will be time to revisit gambling stocks.

Linking to dividend paying stocks, investors all search for seeming recession proof stocks and generally gambling stocks are because in good times people gamble, in bad times more people gamble and the house wins. However all casinos are regulated by governments and governments can change their minds, watch the signs of regulatory bodies in whichever industry you invest in.

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

All of us come into contact with many different types of software and sometimes we think or lead to believe it is from the company we are dealing with, but in reality the company we are dealing with contracts the software from another company. If you consider the home you live in, someone provided the plumbing and electrical features which are usually behind a wall, but if you find out who they are it is possible to find opportunities which you never really considered before.

In an article from Reuters, Intuit known for its small business accounting and do it yourself (DIY) tax filing software (TurboTax) announced it is acquiring Mailchimp for about $12 billion in cash and stock. The company says it will use cash plus new debt of about $5 billion. Last year Intuit bought Credit Karma for $7 billion.

Mailchimp is based in Atlanta and operates a marketing platform for small and mid-sized businesses. Mailchimp has more than 12 million clients globally, with half of its $800 million in revenue coming from outside the US.

Intuit CEO Sasan Goodarzi believes there is incredible power in combining the customer data and the purchase data and we can put the power of data in our customer’s hands.

Linking to dividend paying stocks, recently the writer had some insights into a political campaign and they used MailChimp’s services. We all use services, but we all do not ask the next questions are the company publicly traded and would they make a good investment? When you look for your investments, examine what services you use (for you have good reasons for using the services) and then start your homework is this something I can and should invest in? Sometimes the answer is yes, sometimes no but if you are a user, then others can be a user to. If it turns out to be a good investment, then you can easily determine how you continually like or do not like the services and generally you are not alone in your thinking.

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

In the infrastructure bill, President Biden wants the solar industry to expand and by 2030 half the vehicles sold to be electric. Those are good ideals and can and will create good outcomes to battle global warming. Along the way, there will be logistical challenges of raw materials.

In an article by Zandi Shabalala of Reuters, one of those logistical challenges with be lithium.

To ensure the increase sales of electric vehicles, they will need rechargeable lithium-ion batteries that give the power to run the cars and trucks. According to Max Deudon, a trader at Transamine in Geneva, Switzerland, the market for lithium is very tight with companies competing for any spot tonnage available.

Electric vehicle batteries can use lithium carbonate or lithium hydroxide, but the industry typically talks of volumes in lithium carbonate equivalent (LCE). This year spot prices is LCE have increased 170% to $27,823 a tonne, the highest since April 2018.

Prices of spodumen, a source of lithium mainly mined in Australia has climbed 144% to $1,254 a tonne.

Demand for lithium is expected to jump 26.1% or about 100,000 tonnes of LCE to a total of 450,000 tonnes. or a deficit of 10,000 tonnes according to Benchmark Mineral Intelligence.

Some of the mining companies which mine Spodumen are Albemarle, Pilbara Minerals, Ganfeng and Tianqi Lithium.

Global sales of electric vehicles were up 150% in the seven months to July to just over 3 million units, compared with the same period in 2021. According to Rho Motion 1.3 million of the total was sold in China.

Linking to dividend paying companies, all companies love to have the government on their side and their government doing everything it can to increase their presence in the marketplace, then reality or logistics happen. Supply chains or logistics determine outcomes and what the consumer has choice on. When examining your investments, do your homework on the supply chain to see how well connected and where the loose links are to be found.

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

Every company around the world charges fees for services and for every company at some point in time executives will examine the fee structure to see if they can fees. Many companies have fees but over the years, the fees are considered low and could be raised, but there can be a backlash among others who think the fees are a competitive advantage. Raise fees can bring more money in.

For Apple, the App’s store has become a large generator of fees and Apple has reported it collects over $53 billion in service fees. Similar to people around the world, someone believes they are paying too much in fees relative to other companies.

In an article by Stephen Nellis of Reuters, Epic Games sued Apple to lower fees and a US District Judge Yvonne Gonzalez Rogers rule partially in favor of Epic. This sent Apple shares down because the amount of fees expected to be charged by Apple will decline something. Evercore ISI analyst Amit Daryanni wrote to investors that we suspect the eventual management from this ruling will be manageable.

The Judge did not require Apple to let app makers use their own in-app payment systems, one of Epic’s top requests and allowed Apple to continue to charge commissions of up to 30% for its own in-app payment system. The judge did say Apple can no longer bar app developers from providing buttons or links in their apps that direct customers to other ways to pay outside of Apple’s own in-app purchase system.

Epic Games is going to try to get legislatures to rule on monopolistic conditions in the digital world. Given the legislatures are not up to date in digital practices, one can expect there to be a timing delay.

Linking to dividend paying stocks, one of the reasons why an investor wants to buy the stock of Apple because it had a monopoly like position, although it said it did not, but fees were coming to ensure revenues rose and Apple stayed very popular even if iphone sales did not increase every year. Investors like to see diversified earnings that can weather any economic cycle. On the other side is consumers who do not like to pay too much in fees. All companies fact the balancing act and fees need to be examined every year. Years ago, one company the writer was working at gave an employee a bonus for increasing fees. We were charging $10 and other companies were charging $50 for the same service. Fees should be competitive, otherwise new management will and should raise fees. In your investments, are fees competitive or should be raised?

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

If you think about the times before the credit card, there were only two ways to pay for something – installment or cash. Cash has always been about pay cash, receive right away, the other method was to give the shopkeeper money on a weekly basis (your pay day) and when you paid the installment you could pick up the item to enjoy. Then came the introduction of credit cards – first was diner’s club which became American Express and then the two general cards of Mastercard and VISA, took over from chain store credit cards. While you could enjoy many more things using a credit card, the downside was a monthly payment or after 30 days higher interest charges. to avoid the credit card high interest rate charges, people use their line of credits and pay a lower interest rate. During the installment method, there was plenty of bookkeeping to do and for a few clients it was okay to do, but imagine if there were thousands or millions. Technology has come to the installment plans and offers a choice to higher interest charges of credit cards. (if you are an investor – Mastercard and VISA have wonderful returns because there are many people who pay high interest charges).

In an article by Sayantani Ghosh and Tim Kelly of Reuters, PayPal Holdings is buying the Japanese “buy now, pay later” (BNPL) firm Paidy for $2.7 billion.

The deal follows Square buying the Australian firm Afterpay Ltd. for $29 billion which made the founders billions.

Paidy has more than 6 million registed users and allows Japanese consumers to purchase online and then pay for each month at a convience store or by bank transfer.

Paidy’s backers included Soros Capital Management, VISA and Itochu Corp. Founder and Chairman Russell Cummer and CEO Riku Sugie will continue working for Paidy.

PayPal has grown during the COVID pandemic to more than 400 million active accounts as people buy online and continue to do so.

Linking to dividend paying stocks, both VISA and Mastercard pay dividends and both stocks have increased in price over the past couple of years. When business changes as COVID as changed many industries some industries naturally benefit and others do not. The credit card companies benefited from greater on line shopping, however their bread and butter is hospitality and tourism where people tend to use credit cards to a greater extend. Mastercard and VISA owned the wires which money flows so they will benefit from moves to a cashless society, however it does take a little time. Some companies can pivot or change direction to where their revenues can continue to flow and when they do, it seems little has changed as we all changed with the company, if that happens you can continue to hold your shares.

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