Years ago the local newspaper used to run longest serving businesses in the area, partly for economic development (what types of business have long years of service) but also to thank them for most of them would have placed ads in the newspaper at one time or another. The longer a business is in place, the more attached it becomes to the community and the community comes attached to it, this is a normal range of emotions and is expected. The demise of one of the entities gives you mixed emotions – perhaps it was bought by another company and it is rationalizing its businesses; perhaps the market had changed and the company did not make the money it used to and the list goes on.

In an article written by Gaia Pianigiani and Jack Ewing of the New York Times News Service, in the banking world, banking was invented by the Italians and at present the world’s oldest bank is Banca Monte dei Paschi di Siena. The bank was founded in 1472 during the Renaissance period. The central Italian bank goes by the name of Monte die Paschi and its name will likely live on bank branches, but the head office and control is going elsewhere. In 2008, the bank wanted to be among the largest banks in Italy and (likely with the approval of the Italian government) bought a competitor to become number 3 after Intesa Sanpaolo and UniCredit. The merger did not create greater profits but losses and there has been a number reorganizations, but none has worked as the Italian economy is not so good.

The bank is not on life support, but now days Central Banks and the European Central Bank ran a stress test on the bank if a recession happened, what would happen to the bank’s capital? The result was if a severe recession happened the bank’s capital would be close to zero. The bank would need E 2.5 billion or E 2.9 billion in fresh capital to survive. Therefore the solution is to merge the bank with another one and the Milan based UniCredit is the the preferred choice. If that happens and it likely will, the oldest bank in Europe will be Berenberg Bank of Hamburg, Germany founded in 1590.

The headquarters of the bank has 5,000 people and many of them would lose their jobs or need to take ones in Milan, not Siena. The bank has traditionally been a significant part of the community its community foundation supports multi community activities which is a reason why many people in the area bank with the Monte dei Paschi.

Linking to dividend paying stocks, as an investor you buy a stock because it is profitable and pays the dividend and over the years of collecting dividends and the value of the shares going up, you have an attachment to it. Ideally you can hold onto the company for years and that is a good thing because your total investment return over the years has increased. However all companies go through growth and decline and it is very hard to sell the shares for the decline, wait and then buy back when it is doing well again. Having said that even if you own the company for years, you should always be looking for alternatives even if you do nothing, so if dividends are threatened to be cut you can deploy your capital elsewhere.

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

Hopefully, during the summer you have been able to spend time outside and enjoy the sunshine. The sunshine is also a hope for the future as more and more solar panels are being put on buildings and homes to generate electricity.

In an article by Nichola Groom of Reuters, the Department of Energy projects that solar could supply more than 40% of America’s electricity by 2035 up from 3% at present if Congress adopts policies to make solar more widely used. If the projections happen jobs will be created because it takes people to make and install the panels and connect them to the grid.

With solar, the goal of anyone putting up panels is to compete against the other sources of fuel to generate electricity and over the past 10 years the cost of solar has steadily decreased to be competitive. In states such as California, one of the regulations is for new homes to have solar panels. That can be repeated across the other states as well as companies are installing solar panels to decrease their energy costs. In addition, there are the big solar farms across the sunbelt and with climate change causing warmer weather, the solar panel works well in the northern states.

Linking to dividend paying stocks, one of the best dividend paying stock to own is utilities because they have a semi monopoly which means everyone has to pay into the local utility, there are options but few options. The utilities generate electricity and have changed from coal to oil to natural gas to solar to whatever is the best option for them. With President Biden pushing solar, it means more panels to generate electricity onto the grid and less use of oil and natural gas, but there is still a need. What companies to own is your homework.

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

We all have to shop and and shopping is good for us and the economy particularly in a service based economy. This means many jobs are connected to the shopping experience and if enough people in the economy shop, all is good. Where they shop and how they shop are different stories.

In an article by Karen Weise and Michael Corkery of The New York Times News Service, Amazon is now the biggest retailer outside China. In the past 12 months ending in June, people around the Globe spent $610 billion at Amazon according to the financial research firm FactSet. Walmart was second at $566 billion. If China is included the top retailer is Alibaba Group.

Over the past century the top retailer in the world has changed and you or your family may have shopped at the locations. In the 1940’s the grocery retailer A&P had the government pursing antitrust measures, then after the war and the growth of the suburbs came a new retailer Sears.

Then came Walmart. The home of low prices is also the home of the best logistics company in the world. Sam Walton true innovation was building a vast logistics network that operated and operates with such precision and efficiency that it crushed many competitors. The model works very very well when people have to go into a store and buy things. Walmart’s automatic ordering system ensures the shares are not out of a product.

In the e-commerce world, Amazon is a winner and Amazon captures 41 cents of every dollar spent online in the US, Walmart takes in 7 cents according to eMarketer. Amazon’s model includes the massive distribution system which works for on line customers and equally important, Amazon lists 3rd party sellers list their products beside Amazon. Almost 2 million sellers offer products and they account for 56% of the Amazon’s sales.

The marketplace makes it harder to determine Amazon’s true influence on the retail industry. Amazon captures and reports only the fees it charges sellers to list, ship and market their goods, not the total money that flows through its business. The model is more profitable, but produces less revenue.

In terms of employees Walmart has 1.6 million workers while Amazon has 1.3 workers.

Linking to dividend paying stocks, as an investor you hope and expect the company you invest in will be successful for a long time and along the way the stock price rises and dividends are paid to you. The reality is over time, different models work better at different times. As you review your investments understand how the business model is working and will continue to work for customers and most importantly you.

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

If you think about basic commodities to power the infrastructure system, the company which stands a top is an Australian company called BHP, it is is the world’s biggest miner. The company mines iron ore, nickel, potash and oil. The world is trying to cut its fossil fuel footprint, what should the company do?

In an article by Sonali Paul and Melanie Burton of Reuters, a decision has been reached and it was announced in mid August. The petroleum division will be taken over by Woodside Petroleum for shares in the company.

Analysts value BHP’s petroleum business made of assets in Australia, Gulf of Mexico, Trinidad and Algeria at between $10 and $17 billion contributing 5% of BHP’s underlying earnings of $14.7 billion in the first half of the year compared to 70% coming from iron ore.

Linking to dividend paying stocks, we are in a change in the world and investors when as long as you made profits to pay shareholders, all was good. There is a shift to make money and do something to reduce global warming. Petroleum is a relatively easy business to analyze as long as it costs less to drill than to sell, the oil is essentially a cash cow and makes it easy to distribute money to shareholders. It is similar to what Warren Buffet said about cigarettes – it costs pennies to make it and sell it for dollars, why would you not want to own shares in the business. As dividend investors, it was difficult not to own shares in the oil industry because they have been some of the biggest dividend payers over the past century, however times can change.

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

President Biden proposed a billion dollar infrastructure bill and the Senate approved, which raises the questions which companies should benefit from the money flowing into the countryside. If a gift horse looks you into the mouth where should you do?

In an article by David Randall of Reuters, he asked a number of investment managers what were they buying?

If you like index funds, start with the S&P 500 materials and industrial sector indexes.

Scott Helfstein, head of thematic investing at ProShares said his firm has been buying real estate trusts focusing on ports and cellphone towers such as Crown Castle International.

John Mowrey, chief investment officer at NFJ Investment Group has been adding to companies such as Norfolk Southern Corp or the railways.

The ishares US Infrastructure Exchange Traded Fund has seen positive inflows for 5 of the past 6 weeks is poplar.

Barry James of James Advantage Funds has been adding to FedEx and Amazon in the hope improvement in bridges will improve delivery times for items that travel by the highway.

Linking to dividend paying stocks, the infrastructure fund of $1 trillion is a lot of money, but it is not likely to a game changer, but it will definitely will help which is the reason you consider the alternatives. If the government is giving away money, your company should be benefiting.

There are more questions than answers – to raising questions.

Companies make strategic plans and the strategic planning group examines multiple companies to come up with companies to work together with and possibly merge with. It is a normal practice and often the companies to merge with are in the same field – it is easier to vertically integrate than buying companies in a new regulatory space.

In the UK, there is a British company called Vectura Group PLC which licenses a range of medical inhalers to larger pharmaceutical companies. It is a good business and 2 US companies are interested in buying it – the Carlyle Group and Phillip Morris International. A bidding war has emerged and both of the companies have access to large amounts of credit.

The issue is a number of health organizations have come out against Phillip Morris’s bid because to them it would be unethical for a tobacco company to profit from treating lung diseases that its products helped cause.

Another issue is half of Vectura’s 500 people are researchers, and in Europe, if the tobacco company owned the company its researchers would not be able to work with research universities in Europe.

The ironic part is Phillip Morris International wants to move away from tobacco and become a heath care and wellness business.

Linking to dividend paying stocks, all companies which are profitable have a past history, sometimes it is wonderful, sometimes it is not in keeping with today’s ideals, but companies which are profitable are desirable to own. When there is a merger on the books, those who are against it will use the company’s past to help them win votes, even though they may not be much better. When you invest in the future of the company, the company does have baggage and it is up to you to decide if you would rather find an alternative.

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

When companies begin the most important thing they worry about is sales to customers which bring in profits which eventually allow them to pay dividends. On the financial side it is relatively easy and there are many metrics to help companies. However companies employ people and invariably some sort of internal company culture moves forward, which to the rest of the world likely does not worry or is concerned about it.

As the company is more successful, it hopefully will try to be a good corporate citizen and that means all kinds of things to people. Ideally, it is both about pay, growth, giving back to community and internally ensuring lines are not crossed.

In an report by James Griffiths, recently Alibaba (which is the Amazon of China) fired a male employee accused of raping a female colleague. The female had reported the incident to both the police and the human resources representatives at Alibaba. Nothing was done, the lady decided to take it public in the company canteen and the message spread across the company with employees demanding Alibaba do something.

Alibaba Group Holding Ltd Chairman Daniel Zhang did the right thing of firing the employee but it did some light on what goes on at the company. Mr. Zhang acknowledge within the company there is an internal culture that enables misogyny and sexual harassment. The company will be introducing a dedicated reporting channel for instances of sexual harassment or assault. The surprising thing about the announcement is the 22 year old company with hundreds of thousands of workers did not have such policies in place.

Linking to dividend paying stocks, when people are hired to a company there are rules and internal rules which are followed. If the company pays lip service to the rules and no is held accountable, then little will change until a new management comes in. For a company, the service and goods that it makes are important to the outside world, but internally people have to work together, dividend paying companies are typically mature enough to have actual policies to ensure people work and respect work and home life.

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

Every government around the world looks at its corporate partners and plays a balancing act between corporations doing very well and its citizens doing well. It is no different in the US, although under the previous administration, the emphasis was helping the corporate sector first. In President Biden’s administration the emphasis is helping people first.

In an article by Lucia Mutikani of Reuters, the Department of Commerce reported US corporate profits surged to a fresh record high in the second quarter. Profits from current production increased by $234.5 billion or up 9.2% to a record $2.8 trillion. Non financial corporations were up $169.8 billion.

Jay Bryson, chief economist at Wells Fargo aid elevated margins suggest higher costs have not yet meaningfully eaten into firms’ profits, as firms appear to have more pricing power today than they would typically would this early into an expansion. (it appears firms have the ability to raise prices).

Economists polled by Reuters expected the the 2nd quarter growth would be 6.7%, the economy grew at 6.6%. The previous quarter growth was up 6.3% and the combination has recouped the steep losses suffered in the COVID recession.

Consumer spending which accounts for 2/3’s of the US economy appears to be cooling. Credit card data suggested spending on services such as airfares, cruises, hotels, motels has been slowing.

Bank of America Securities has cut its projection from the 7% growth to 4.5% growth in the 3rd quarter.

Growth is expected to pick up in the 4th quarter as business must replenish its inventories.

On the employment sector, there was a record 10.1 million job openings in June and it the 25 states led by Republican governors, they have stopped the federal government funding including an extra $300 payment. Business groups claimed the money encouraged people to stay home rather than work. In the other states, the $300 payment is scheduled to expire on September 6, affecting 11 million people.

Linking to dividend paying stocks, when you invest in profitable companies which can pay a dividend it is entirely possible to have money coming into your account without doing any work for it, however it is investment income. If you listen to politicians who say people need to work, if you have dividend income that means you can have meaningful work or have options what you do or do not do.

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

After Labor Day, traditionally people came back to the workplace ready to implement the fall plans of the company. Everyone is back to work and what are the possible consequences to implementing the fall plans?

In an article from Reuters in August, they picked 5 broad themes likely to dominate global financial markets:

Holi-dazed

We all know with COVID and stay at home orders for health reasons, tourism is down but how much?

Spain welcomed 75% fewer tourists than in June 2019. Thailand’s Phuket had just 1% of the visitors it had before the pandemic. Turkey tourism revenues were $3 billion as compared to a normal $8 billion. Kenya normally received 2 million visitors in 2019, in 2020 the number was 300,000.

Similar to most regions, tourism is a major draw and contributes to 6% of GDP and 8% of employment. When the numbers are down all tourist economic spending is drastically down.

Headwinds in Asia

For many years, growth in China has been a given, but lately Chinese and growth are not in the same sentence. China is suffering from slowing credit growth as the government lowers leverage and debt from local governments. Thailand is suffering from lack of tourism and the Phillippines might cut its own bank reserve requirements.

Inflation Palpitations

Is inflation making a comeback in the US or can the Federal Reserve make the case for reeling in stimulus sooner than later?

COVID Claims

Most of Europe’s big insurers have stripped cover for the pandemic from their policies. Insurance companies bottom lines are increasing including France’s AXA, Italy’s Generali and Germany’s Allianz. Other companies include Zurich Insurance, Aegon and NN from Holland, and the UK’s Aviva, M&G, and Prudential.

Zambia Votes

It is not only the voting whether the right or left wins, but the debt of the country. The Euro set up the Common Framework debt relief plan and Zambia is the first case. The Euro needs Zambia to be successful.

Linking to dividend paying stocks, with every investment there are always headwinds and it is easy to focus on the glass half empty. As an investor you want the glass half full view where the company can still make profits to pay dividends and has the ability to grow market share.

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