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.

If you think about the telephone for years to use a phone people needed to have lines coming into the house and the biggest company in the world which did that was AT&T. The logistics of the connecting of the lines meant it was a very good thing to have a monopoly because the act of placing the lines on poles and in the ground was very capital intensive. The capital costs would keep up competitors, all went well until the invention of the mobile phone and then the model changed. It took a few years and now people’s first choice is mobile. When the choices of the consumer changed, the company with all the assets had to ask could the assets be used for something else? The answer was yes and telephone companies ended buying media companies because they could send the content down the similar system. AT&T bought Time Warner and all was good, until consumers changed what they wanted and willing to pay for. Mobile communications have continually improved and during wait times, consumers are buying streaming services to watch media.

The resulted in declining revenues for AT&T which means content is no longer king at the telephone system. In an article by Reuters, AT&T which is the controlling shareholder of Time Warner has decided to merge its media assets with the Discovery Inc. The Discovery Inc has programs such as HGRV, TLC, Animal Planet and a host other programming. AT&T bought Time Warner for $108.7 billion in 2018. The new company of Discovery which had a market value of $30 billion would be valued at $150 billion. Prior to the merger, Discovery Channel reached 88.3 million homes in the US and its Discovery Plus had 15 million subscribers. HBO and HBO Max has 63.9 million subscribers. The competition of Netflix has 207.6 million subscribers and Disney Plus has over 100 million subscribers.

Linking to dividend paying stocks, every large company which has regular stable income always looks to enhance it. The companies examine their assets and see what would consumers pay for and we have a built in advantage. How it is executed and how well it does are different questions because the regular stable income portion of the company tends to require different management skills. The ability to grow requires more competitive management skills and the people have to fight for a larger piece of the budget to do their work. Consumers change and companies have to change to be valued as highly multiple as possible and stay profitable. If they are profitable, then strategies can be altered as long as the profitable aspects of the business remain for shareholders who are interested in that aspect of the business.

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

If you think about Microsoft, eventually the name Bill Gates will come up, not only was he the co-founder he owns a lot of shares in the company which has made him one of the wealthiest people in the world. For the past 27 years, he has been married to Melinda, but he recently announced he was getting divorced. With every divorce there is a separation of assets and it may or may not be decision making will be done differently. It could be the two exchanged information about the family investments and both were happy in the investments. The Gates used a firm called Cascade. For a number of years, Cascade has been buying farm land and with the numbers Mr. Gates has the firm is one of the largest private landholder in the US,

In an article by Eric Atkins, Cascade transferred 14 million shares of CN worth about $1.8 billion and 3 million shares of AutoNation worth $315 milion to Melinda Gates for no consideration.

CN was the largest holding of Cascade at 24.4%, followed by Republic Waste Services at 23.9% and John Deere and Co at 18%.

For the world, the New York Times reported the Bill and Melinda Gates foundation which has given away more than $55 billion to health, hunger and education will not change. Bill and Melinda will remain co-chairs and trustees.

Linking to dividend paying stocks, while building and holding a position allows for stability in voting and dividend receiving it is important to remember life is always nearby. People live and die, marry and divorce and relationships change. Depending on the size, it can affect the company and as senior management worry if they have the votes. As long as senior management has the votes, the company can continue to be profitable and pay dividends and change will be at the edges not in the center.

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

One of the many methods to evaluate whether you should buy a stock is the PE multiple of the Earnings per Share. The price of the share is divided by the earnings per share. If a company does well the earnings can go higher and then keeping the same PE multiple means the stock trades higher. Companies can buyback shares which reduces the number of shares which also means keeping the same PE multiple the stocks trades at a higher price. Most people focus on the earnings, which is done quarterly, will the company meet or beat the estimates for the earnings?

In an article by Thyagaraju Adinarayan and Sujata Rao of Reuters, trillions of dollars in corporate bank accounts are starting to flow to shareholders largely through stock buybacks.

According to JPMorgan strategist Nikolas Panigirtzoglou noted about $360 billion in buybacks were announced in the first 4 months of 2021 compared to $190 billion in the 2020. If you project it to a year, that would be $900 billion which is what happened in 2019. (former President Trump cut corporate tax rates and companies bought stock).

Analysts attribute the buyback rebound to corporate cash that stem from last’s years record borrowing and cuts to shareholder rewards. According to data from Refinitiv cash and cash equivalents rose by roughly $3 trillion at S&P 500 and STOXX 600 companies.

Linking to dividend paying stocks, every company buy back stock, every CFO has an good idea of what the range the stock should be worth and when they are fortunate to generate extra cash, the money has two choices. Reinvest in the business or give back to the shareholders either in dividends or buybacks. Treasurers tend to like buybacks because the number can be adjust each year, while if dividends are raised (which is good), Wall Street punishes the company if they decreased them the following year. Buybacks are part of corporate strategy, you can ask what does your investments do?

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

Every company tries to grow to where the markets are growing and it takes time and patience. Depending on the company it can try to build operations, but often it much faster and seemingly simpler to buy a company. In the railway business there is a natural moat around it and one of the reasons Warren Buffett has a large interest in a railway company. The natural moat is it is very difficult to put in another railway to have too much competition or in many areas where the railway goes there is often one choice. Economics tell you that if you need to transport over a 500 miles, railways are a very good and if the raw material is a bulk commodity, railways are less expensive than the competition of trucking. There is another factor in any takeover of a railway – a regulatory body called the STB or the Surface Transportation Board. The Board is charged with the economic regulation of surface transportation such as rail and allows prices to increase and mergers to go ahead or be declined. The STB has declined mergers for competitive reasons or has told winning companies to sell off assets in order to have limited monopolies in major cities.

In an article by Andrew Willis two Canadian based railway companies are eyeing the merger with Kansas City Southern which operates a railway network in the Southwest and Mexico. The Canadian based companies are seeing the growth in Mexico and both operate facilities stretching down the Mississippi in the case of CP to Kansas and in the case of CN to New Orleans. If the CP won there would be very little overlap in operations in the case of CN, the STB would likely say they have to sell off assets because of the overlap.

In takeovers, there is usually a saying from the movies, if you ever have seen Tom Cruise staring as Jerry Maguire, in one scene he shouts Show Me the Money. In the middle of May, the CN bid is higher of $200 a share in cash and 1.129 common shares versus the CP bid of $90 in cash and 0.489 common shares. The totals are $30 billion versus a $25.2 billion bid. The Board of Kansas City Southern is willing to pay $700 million to CP and go with the higher bid by CN.

Linking to dividend paying stocks, sometimes companies are seen as better operators and can give up less money, but in the past 10 years railroading has undergone many changes and both CN and CP are very good operators so the difference is cash and people. Cash that shareholders like and people that KSC people will work with in the future.

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