For generations goods have gone from Asia up the Red Sea and then transported by caravans to Cario and then to ship to Europe. For a long time the destination in Europe was Venice, but the distribution point has changed over the years. In 1869, the Suez Canal was open for boat traffic because carrying bulk goods on boat is less expensive than on land.

In the last 20 years, the ability to hold larger ships has made the world’s just in time delivery system dependent on the Suez Canal. Most of us do not pay attention, until something happens and in the last week of March, the world pay attention to a large ship blocking the canal. No one knows exactly why the ship went off course, there was a blame on winds, but 50 miles a hour winds are not uncommon.

In an article by Jon Gambrell and Samy Magdy of the Associated Press, The Japanese owner of a skyscraper sized ship carrying hundreds of containers ran aground and was stuck, The ship is so large it can only be loaded and unload at 5 ports in the world because of the need for specialized cranes. Thus the solution led by a Dutch company called Boskalis, was to dredge or dig around the ship and then have tug boats push and pull the boat to the middle of the canal.

The ship’s crew is from India, the ship is registered in Panama, the operator is from Taiwan and the owner is Japanese, welcome to the world on shipping. All ships are tracked by GPS and data firm Refinitiv shared an analysis more than 300 ships remained on the way as opposed to going around Africa to get to or come from Europe. Many of those ships are carrying oil and gas from Europe to China.

The reason why the delay is important is cargo will be delayed over the new few weeks, if you think about shopping seasons, they would be carrying the summer clothes. Stores need the supplies at the start of summer, not in the middle of the season.

The shipping journal Lloyd’s List estimates every day the Suez Canal is closed it disrupts $9 billion worth of goods that should be passing through the waterway. A quarter of the ships are container ships, the others carry bulk commodities.

Linking to dividend paying stocks, all companies embrace just in time shipping for very good reasons, keeps cost of inventory down and profits higher. The system works till it does not, but the alternative to stock greater inventory is more expensive. The blockage of the Suez Canal, puts what systems do the companies you invest in use for just in time deliveries?

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

When you think about Britain or the UK, one of the concerns you have tends to be how is it doing since Brexit or Britain’s break from the European Union. There was never a concern that Britain would continue, but can Britain continue to attract billion dollar market cap companies to help grow the economy.

For the moment, the answer is yes it can. Reuters reported food delivery company Deliveroo would be the biggest IPO in a decade. The commodities giant Glencore went public in the UK and since attracted over commodity companies.

Deliveroo is partly owned by Amazon (before the IPO 15.8%, afterwards 11.5%) and by going public in London, the British government is shouting from the mountain tops that Britain is still open for business and can attract major IPOs. The City is alive and well.

When Deliveroo goes public, about $1 billion will be for the company and the rest will be made by existing shareholders selling part of their stakes. (The existing shareholders are selling 128.2 million shares including Amazon selling 23.3 million). Deliveroo has opted not to pursue a premium listing which means it will not be in the FTSE indexes.

Given the pandemic, Deliveroo has seen total gross transaction value on its platform go up 121% compared to the year before. You will remember the pandemic started in late March.

JPMorgan Chase and Goldman Sachs are the global co-ordinators and bookrunners. Bank of America, Citigroup, Jefferies and Numis Securities have secondary roles.

Linking to dividend paying stocks, when ever there is a big change from the government, everyone wonders what the affect will be. People are neither all correct or all wrong, it usually comes in the middle. With Brexit, there was a concern Britain would only attract second tier IPOs and the larger companies would shift to either Germany or France. Companies have to move through the changes and come out ahead and consistently profitable companies have a great advantage is they have operated through many changes. You lower your risk by investing in them.

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

The biggest company on the China stock market is Alibaba Group which is controlled by Jack Ma. Alibaba Group has similarities to Amazon, but it owns a fintech called Ant Group. The company was going to an IPO or stock listing but the Chinese government under pressure of banks it owns stopped the IPO. The Chinese Government said Ant Group has to be regulated similar to a bank including having the necessary deposits. This changed stopped the Ant Group from going public and Ant Group said it would comply with the government.

In an article by Julie Zhu and Kane Wu of Reuters, Ant Group will soon be going public but not at the valuations in November. At that time it was valued at $315 billion and the new valuation will be $200 billion.

Even thought the company was going through a different valuation, Ant Group says its business was little affected. Ant Group is the biggest lender in China of small loans and to small business.

In late 2020, Warburg Pincus valued the company at $220 billion and sold some of its holdings at the $190 billion valuation.

Linking to dividend paying stocks, government regulations often help these stocks because the government knows what they are getting and make it more difficult for new companies to break into the business. Government regulations can help some companies and hurt others, when you consider the government in power try to ensure the regulations help your investment industry.

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

Just about all investors should know about Tesla because the stock is up 650% this year, whether your own it directly or indirectly through funds, Tesla has been a superstar in stocks. When a company is successful, everyone looks to the next Tesla. We know that over the next 5 to 10 years, half the vehicles on the market will be electric, but we need to get there first. If Tesla is at the valuations it is, what other companies doing the same thing or similar things should be at the valuations approaching Tesla? Both Ford and GM have announced they are going electric and have enjoyed a rise in valuations. The biggest winners are the German auto makers of VW and BMW.

In an article from Reuters, VW competes against Toyota as the biggest vehicle in the world. VW laid out plans to have 70% of its European sales come from electric vehicles. The big plan announced by CEO Herbert Diess has resulted in the stock moving up 52% to push up the capitalization of VW to E$ 143 billion.

BMW also has plans for electric – 50% of sales to be electric by 2030 and 90% of its market categories by 2023.

UBS recently forecast VW would match Tesla’s output by 2025 and expects the share price to E$ 300 up from E$ 223.

VW owns Porsche and it is considering an IPO for Porsche to raise funds for investments in software and electric vehicles. Tesla is superior to battery technology and EV software. VW is a design and manufacturing powerhouse with vast global reach, ambition to match, ample profits and cash reserves to fund its EV drive.

Linking to dividend paying stocks, one thing you can always count on is when the stock market rewards one company others will be doing the same thing. In this example, Tesla has been the market darling for very good reasons, but time means the other companies in the marketplace are putting in investments to do the same as Tesla. There are always alternatives and when you do your homework and see what the market is rewarding you will know which names to move in and have both capital gains and dividend income.

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

A year or so ago, governments around the world started telling people not to associate with more than a few people, stay home and things will be better. The office workers of the world adjusted and many people work from home which was good for the companies, but not gathering meant wide parts of the economy went to a standstill and they are still recovering. Governments have the ability to do many things, most of the time the average person does not know or see, but sometimes Governments can use their influence and ability to print money to do the right thing.

In an article by Jeanna Smailek of the New York Times New Service outlined what the Federal Reserve did to ensure the financial economy continued or credit was not the issue. Generally, if there is no credit in the system, the system essentially shuts down.

In March of 2020, the US Federal Reserve saw that there was a panic to sell stocks and bonds (all the indexes were down), but they were sitting in cash. On a regular day, Treasury bills or government securities are the safest asset in the world, buyers were not buying or were scarce. Since 2008, the market had not broken down so badly.

On March 15, Lorie Logan who oversees the Federal Reserve’s Bank of New York asset portfolio, told the Board Meeting of the entire Federal Reserve at a meeting in Washington, the New York Fed had been buying Treasury’s to soothe the market but it was not enough. To fix things, they had to act fast and do more, a lot more.

In March, the policy makers were forced to cross boundaries, break precedents and make new uses of the US government’s vast powers to save the domestic markets, keep cash flowing abroad and prevent a full-blown financial crisis from compounding a public health tragedy. The rescue plan worked.

How it Started

In Feb 21, 2020, Italy announced a lockdown of its economy, investors sold and went to safe investments such as US Treasury. Demand for corporate bonds disappeared.

On March 3, 2020 the Fed cut interest rates to 1%,

In the second week of March, investors were selling US Treasuries to be in cash.

On March 15, 2020 the Fed announced it would buy corporate bonds and slash rates. By March 21, Federal Chair Jerome Powell had told Andreas Lehnert, director of the Fed’s stability division to prepare emergency lending programs (which had been used in 2008) and Treasury Secretary Steven Mnuchin signed off on. The Fed promised to buy an unlimited amount of Treasury debt and to purchase commercial mortgage backed securities. On March 23, the Fed went a step further and buy corporate debt and help loans get to mid sized businesses.

The dash for cash stopped and people started buying US Treasuries. In a few months stocks rose in value and 6 months later they were at new highs. The government still owns bonds what should they do with it?

Linking to dividend paying stocks, we live in an interconnected system where all aspects of life are connected on the macro scale. Governments play a role and are needed when there are problems in the system and the whole system, private interests consider them themselves first which does not solve the problem, governments are needed for stability. When there is stability, companies which make profits year over year do wonders for the economy.

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

Purdue Pharma is not the only Pharma company which made and sold prescription opioids, but it made the most money and for years was the number one producer of opioids. The family that owned Purdue Pharma is called the Sackler family and they achieved billionaire status with their ownership. Eventually because people became addicted and died from the usage of opioids, the government sued Purdue Pharma.

Similar to all cases, time is not your friend if you believe in justice, but time is on your side because eventually justice will prevail. According to an article by Jan Hoffman and Mary Williams Walsh, Purdue Pharma will transform itself from making money for the Sackler family to a new corporation with revenue exclusively toward abating the addiction epidemic that it help create.

The money will go to three areas – one to individuals, one for hospitals and insurers, and the third for state and local governments.

In return for the restructuring and revenue changes, the Sackler family lawsuits would be dropped. The legal fees were running at $2 million a week.

By 2024, the people running the company can sell it on the open market.

The plan needs to be voted on by many different parties, but most are on board. however even if the State Attorney General disagrees, they will likely back it because the alternative is more legal fees and less help for those who need it.

Linking to dividend paying stocks, when a company is sued and many companies are sued, it is not a bad thing, but when they deliberately break the law or the norms of society, the Purdue Pharma is an interesting solution. In Purdue Pharma after the restructuring the company’s revenues go to the victims first, then the shareholders. It is another reason why buying into ethical companies which make profits is a good investment.

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

The economy has come back in a K shaped as opposed to the V shape as imagined by the previous administration. K means that some people have gain and others have lost, but there is hope for a V shaped economy. If you consider the sectors which have not gained they included tourism, hospitality, recreation, or things people did after they earned money. The base of the economy allows the local and regional economy to function, but when people gathered for any and all events, that has been missing from our countries.

The Biden administration passed a $1.9 trillion dollar stimulus package, but unlike the Trump’s tax cuts which over 80% of the gains went to corporations and the 1%, the gains are for people making less than $120,000 a year means over 65% of the stimulus is aimed at them. This includes a lot of people and as vaccines roll out, this means money will be spent on something beyond food and rent. The child tax credit will help children and hopefully this means a less dependence of school lunches. The money can be and will be helpful to a lot of people. That is good news, but as investors what does it mean to you and how can you begin to capture gains in the stock market?

For most of us, our portfolios are not big enough to need to take advantage of every shift in the stock market, but to have reasonable returns, some portfolio management needs to be done. The first aspect is to examine your portfolio to see if it is too exposed to stocks which have benefited from the pandemic? You may not have capture all the gains, but some of your investments should have captured some of the gains.

In an article by Tim Shufelt, he wrote the market is beginning to favor value over growth stocks and pro-cyclical sectors over defensive sectors. Mark Haefele, chief investment officer of UBS Global Wealth Management said in a recent report, we recommend investors tilt their stock exposure to sectors that are likely to benefit from higher growth.

It is about earnings, the market is saying we are going to get a massive year over year rebound in earnings.

Globally, corporate profits in cyclical sectors, including energy, materials, financials and industrials are extended to rise by roughly 100% this year compared to last year, compared with last year, according to Bloomberg data. (the stimulus bill has helped and will continue to help ensure bank loan losses are lower than expected).

If you thinking of selling some, but not all tech, the reason is the tech sector has lost earning power – its profits are expected to rise about 40% this year, however you can get the same or better earnings growth elsewhere at lower valuations

In many reports, the average consumer which has benefited from the K economy is setting on a cash pile, because they had forced savings. They are likely to spend some of it. The chief economist at Jefferies Aneta Markowska top companies which they believe will benefit include: Airbnb, Southwest Airlines, Lyft, Home Depot, and Lowe’s.

Linking to dividend paying stocks, if you own them, getting in at the bottom to sell at the high is not the prime objective. It is wonderful when the stock prices rise, but the main reason to own is to gain the dividend. Now if the stock prices rise and the holding because too big in your portfolio it is time to consider portfolio management and capture the capital gains and look at alternatives. The most important aspect is you have time on your side.

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

Cybersecurity is one of those important elements that all companies have 2 choices, do it inhouse or hire someone to do it. It is easier to find many examples of companies which have been hacked, the ones people might know is SolarWinds, but there are many of them out there.

In an article by Frank Bajak of the Associated Press, cyber crime affects everyone particularly the larger profitable companies. Nimble, highly skilled criminal hackers believed to operate out of Eastern Europe have hacked into companies and government agencies on 4 continents have been hacked and the victims include New Zealand’s central bank, Havard Business School, US law firm Jones Day, CSX rail compnay, Kroger supermarkets, and the Washington State’s auditor’s office.

The 2 stage mega hack in December and January of a popular file-transfer program from a Silicon Valley. This is the new problem before the hackers tried to get into the system, but now they are targeting software supply claims and 3rd party services. The software companies would issue a patch or solution to the problem and tell the world Chinese state hackers had penetrated the program.

Now days, the Russian hackers really just want you to pay money – Pay up or we leak your sensitive data on line and then customers will leave your business unless you offer them 2 years free extra services (example is Equifax).

The good news is hackers are finding it harder and harder to gain access via traditional methods as Microsoft and Apple have hardened the security of the operating system. This means the alternative is the supply chain and it works, says Mikko Hyponen, chief research officer of F-Secure.

Linking to dividend paying stocks, as profitable companies it automatically makes them a target of cybersecurity and hopefully they allocate resources to protect themselves whether internally or cybersecurity firms. It is important to ask how much they spend to keep your investments safe or not declining because the company was not secure.

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

In investing there are always a multiple of aspects to consider and sometimes one is more important than the other. The US Dollar or the Greenback value to the rest of the world’s currency is an important consideration for any company doing business outside the US. In investments, we often want diversification so that if one area is now doing as well as expected, another area can make up for it. For example, for the US automakers, the biggest market outside the US is China and all automakers make and sell vehicles in China. The money made in China comes back to the US and there are currency concerns. When the US Dollar is stable, no one worries, but what if the US dollar gains against the rest of the world’s currencies?

In an article by Saikat Chatterjee of Reuters, the dollar had weakened 4.4% in the final quarter of 2020, a trend that helps recovery. The US dollar has gained 3% in the past month. Gains mean sizable outflows from emerging markets to the greenback.

Goldman Sachs Group predicts the US economy will expand 7.7% this year and that should mean more jobs.

Aaron Hurd, a portfolio manager who helps manage $145.3 billion in assets at State Street Global Markets, noted usually a healthy US economy benefits the rest of the world. But the rebound in US growth is allowing the US a 3 to 6 month advantage.

Dollar bears have to run for cover, hedge funds short dollar positions were at $29 billion which is well above historical levels of $9 billion. At the end of January the short was $36 billion.

Analysis by the Bank for International Settlement found that every 1% rise in the dollar shaved 0.3% from the growth outlook of emerging markets studied.

A rising dollar and higher US bond yields pose problems for countries and companies with big debts. There is a run to safety of the US dollar.

Linking to dividend paying stocks, when you buy into the companies, often they have relationships with companies around the world but there is stability in the US economy. Similar to the environment – all things are connected so are the financial markets – all things are connected to the many moving parts. As long as your company is staying close to vanilla solutions, you have little to worry about. Ask or look into how does your company hedge its currency situation.

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