In all industries there are the companies producing at the top end of the market with the highest margins and those producing at the low end of the market and thus needing volume to meet the lower margins. At the low end, companies would love to do what the high end companies are doing and they try, whether they succeed is a different question but they try.

In the chip making world, Intel for years held the top end of the market and AMD or Advanced Micro Devices was at the lower end. However technology and uses of technology in the 5G world are changing which means there is an opportunity to shift the marketplace.

In an article by Don Clark of the New York Times News Service AMD agreed to buy Xilinx for $35 in stock. The deal will change AMD to be more competitive with Nvidia and compete with Intel as the market for data centers, 5G and automobile electronics change.

Sometimes consolidations are about duplicate product lines and cost-cutting, but AMD believes it can expand the business and boost profits. Lisa Su, AMD ‘s chief executive said Xilinx will help establish AMD as the industry’s high performance computing leader and partner of choice for the largest and most important technology companies in the world.

A number of years ago, the statement was highly optimistic but Intel has suffered technological and financial stumbles and AMD has slowly grabbed a lead in some key measures of computing performance. Intel reported a 29% decline in quarterly profits.

Xilinx founded in 1984 is the biggest maker of a class of chips that can be reconfigured for a variety of specialized tasks after they leave the factory. Such field programmable gate arrays have long been popular in telecommunications applications, and 5G is coming. The gross margins at Xilinx are higher than AMD and company continues to generate considerable cash.

It is noted Huawei is one of Xilinx’s major customers. Huawei is being banned by various countries because of the idea that China receives data and could do something with it. However there are many countries around the world that welcome China and Huawei because they would not have the 5G abilities.

One of the reasons Intel is losing money is they bought Altera (Xilinx biggest competitor) for $16.7 billion in 2015 expecting to produce Altera chips in Intel factories. That process has failed to generate big returns, Intel continues to work on it.

AMD relies heavily on external manufacturing partners, as does Xilinx – particularly Taiwan Semiconductor Manufacturing Co. AMD and Axilix have pushed new technologies for creating new products from packaging multiple chips together.

Linking to dividend paying stocks, all companies look for the best method to generate high gross margins and if the companies are receiving them, investors love the companies. When you examine your investments what margins are the companies receiving and have they been consistent. For example in credit cards, the gross margin is 40% and consistent. It is not hard to earn profits and pay dividends when margins are very healthy.

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

If someone had asked you about the tin markets, you might not have anything to say for it is not a well know subject although prices have weather relatively well.

In an article by Andy Home of Reuters, the price of a tonne of tin since the start of 2020 is up 6.5% to $18.300. The high was in September reach $18.510.

Tin is classified as a critical mineral in the US, but not in Europe. Most people think of tin, they think about the tin can. The big issue in the market is what is China doing?

Total production per year is about 360,000 tonnes. If you think about the tin industry, for years it was a declining demand as steel-makers were using even thinner coatings and the packaging company shifted to using aluminum. The new usage for tin is nano-soldering in electronics. This usage now accounts for 48% of global usage, while tinplating was 13% according to the International Tin Association (ITA).

The producer of tin include the Belgium’s Metallo and the Wa area of Myanmar. China is the world’s largest producer and consumer of tin. The last mine in the US closed in 1993 and the last smelter in 1989.

Linking to dividend paying stocks, all commodities are such to supply and demand and the world’s users are always searching for alternatives. From the tin can to electronics, who was paying attention? There is money to be made in many sectors, sometimes it takes patience.

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

If you were going to own only one Wall Street bank in your portfolio, Goldman Sachs may be the one you should own. Jim Cramer owns it for his charitable trust (but remember Jim worked there), however the real reason is Goldman Sachs reported a 17.5% quarterly return on equity, its highest since 2010.

Many of Goldman’s clients are institutions and governments around the world, that is good for consistent earnings. The bank has a very strong trading desk and equally has very little exposure to vulnerable consumers and businesses suffering from unemployment and pandemic lockdowns. Goldman has some exposure to consumers through Apple pay, but it is relatively tiny.

In an article by Anirban Sen and Matt Scuffman of Reuters, trading revenue jumped 29% to $4.6 billion in the quarter. This business accounted for 42% of Goldman’s overall revenue.

The really good news is the bank set aside $278 million to cover loan losses bringing the number up to $2.8 billion as compared to JPMorgan Chase, Bank of America and Citigroup where the numbers are $10 to $20 billion.

Analysts had expected a profit of $5.57 a share, Goldman reported $9.68 a share.

Linking to dividend paying stocks, when a company has more institutions than individual consumers as customers they tend to have more consistent earnings. If consumers are active in markets, institutions will also be doing the same thing. As much as we sometimes think institutions can be more rational, they see the big jump in stock prices, the pressure is to have some exposure to active stocks to produce higher returns. Hopefully they examine the risk profile more to have fewer losses.

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

If you remember the trading markets this year, you will remember the markets declining over 10% and wondering who made money? It turns out there were some who made money but should have not. If you remember the movie Wall Street – the character Gordon Gecko says to the Bud after Bud gave him information about the pension of an aircraft company, what else do you have. Wall Street runs on information and it is better to have it before everyone else. Later Bud thinks is that insider trading? and wonders how much is enough? It turns out the White House gave some people insider information.

In an article by Kate Kelly and Mark Mazzetti of the New York Times Service, you may remember White House tapes of Bob Woodward, the President said COVID will be much worse than expected and is transported by air. Originally people thought that was the only person the President told and Mr. Woodward did nothing with the information.

On February 24, the President declared COVID very much under control, but hours earlier senior members of the President’s economic team privately addressed board members of the Hoover Institution. Tomas Phillipson, a senior economic advisor to the President told the group everything was not rosy, the outbreak could prove worse than the President was telling the public through news and twitter.

A hedge fund consultant wrote a document to be shared with other members, and wrote What struck me was that nearly every official raised the virus as a point of concern totally unprovoked. The document was circulated and they all though the same manner – short everything. One of the reasons why was the hedge fund consultant not only heard the virus will be worse that the public was being told, but the administration was not prepared to combat the pandemic.

By February 26, the US markets had fallen 300 points.

Other information gained on February 24 was the administration was asking for $2.5 billion in additional funding. On February 25, Nancy Messonnier told the public, it is not a question of if this will happen, but when will it happen.

The reality was President Trump knew but said he did not want to panic the nation. Some people started putting the pieces together and they said how do your make money, short the market. The market fell and their returns were higher.

Linking to dividend paying stocks, all words of the President matter. Whether the words are from the President of the US or President of the company you work for or invest in. There are always interested parties trying to put together pieces to make the pie and then they can make a decision. It looks like by saying one thing in public and another thing in private, those with assess to private discussions were able to take action before the general public. If the President had been more forthcoming everyone could act and make rational decisions for themselves.

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

It the northeast of the US, the biggest provider of electricity is a Canadian company called Hydro Quebec, they have great capacity in producing hydro and if you consider the ultimate consumers around the Boston area – a great capacity to consume hydro. There is only one thing in the way, other states which the hydro towers and lines must go through. If you ever looked at hydro corridor they cut the trees down in the corridor and place the lines and towers in the corridor. The result is electricity is delivered from the dams which the rivers and lakes ensure will run and green, clean electricity is delivered to consumers.

If the New England Clean Energy Connect goes through the contract will be a 20 year deal to supply $10 billion worth of electricity to Massachusetts. The state will decommission some gas plants and consumers will be generally happy when the lights are turned on the electricity is green and given the hydro rates can be relatively constant.

In an article by Adrian Morrow of the Globe and Mail, not everyone agrees with the corridor. The cutting of the trees has environmental groups concerned, the electrical companies who have gas-fired power plants (the vested interests) are not happy and some local politicians believe Maine is not getting enough benefits for its land. Hydro Quebec has offered the state of Maine discounted electricity and $258 million. If you want more information you can check out the New England Clean Energy Connect website.

Even though Maine’s governor and the the Public Utilities Commission both approved the transmission corridor, opponents received enough signatures to trigger a referendum under Maine law.

The real issue is Hydro Quebec has hired consultants and there is a referendum or vote on the corridor. Should Hydro Quebec be paying or should the state of Mass be paying for the consultants? According to filings with the Maine Ethics Commission, Hydro Quebec has spent $8.3 million on the ballot question.

Linking to dividend paying stocks, in many portfolios there will be electrical utilities because people need electricity for home and work, someone needs to provide the electricity and Utility Boards tend to increase the price each year which means every year the companies can pay their dividends. As we move to a greener economy, utility companies can provide greener electricity, however they will be logistics or transmitting the electricity from the source to the consumer. What is good and what will consumers accept? As investors you are interested in the result not how the electricity gets where it is going, but sometimes it is good to think about it for with most things there is a cost benefit to it.

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

For months the average person who collected air miles through the various companies which catered to the travelling business class and public has not been flying. They have used Zoom or one of the other companies because in many cases, if you travel somewhere you have to spend 14 days isolated. When you fly back, you have to be isolated again. COVID has been terrible for hospitality and tourism related businesses. Prior to COVID, every airport in the nation dreamed of being an hub for the airlines because as a hub there were plenty of jobs at the airport. Airports themselves were turned into destination points with shopping, food and hotels. Airports became economic driving areas for cities for jobs and taxes.

One of the issues with COVID is no one knows how long it will last and can things return to normal? In the meantime should airlines, hospitality and tourism facilities be given aid? How much aid should be given and would it be easier to give all citizens discounted seats to travel when normal has returned?

The airlines were given $25 billion plus low interest loans of $25 billion. The airlines have used the money and need more. The airlines had kept people on the payroll but since has furloughed 32,000 workers. Should the airlines receive more money?

In an article by David Koeing of the Associated Press, he spoke to Nicholas Calio who is the president and CEO of A4A (Airlines for America) a trade group representing the largest US passenger and cargo airlines.

If you go back to March, all the A4A members were considered to have fortress balance sheets that were designed to withstand an event 3 times worse than 9/11. In the past decade the passenger airlines spent $424 billion on their work force; $143 billion of their fleet; they retired $91 in debt; and returned $56 billion to shareholders (in dividends and share buybacks).

The companies were in good shape and then traffic fell to less than 10% capacity. Traditionally the peak travelling periods are Thanksgiving and Christmas.

An issue for all airlines is people need to be constantly recertified and retrained which is a process. The airlines can not open up quickly but it is important to note the airlines will not be declaring Chapter 11 bankruptcy because they have strong liquidity in their balance sheets. They need help.

Prior to COVID, airlines were having record years and 2019 was a record year. Airlines will start slowly and build when people can fly. What should the government do?

Linking to dividend paying stocks, the companies were in many portfolios do you still own one or more? There were very good reasons for owning airlines in 2019, there are less reasons now. Markets change and can rebound which is why with airlines you ask are you going to fly soon? if not find alternatives.

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

In every market there are opportunities, that is a wonderful thing to remember. In markets such as we see those with cash or assess to credit have many choices including bulking up or gaining size. One such company is Morgan Stanley. For generations, Morgan Stanley was a Wall Street bank which catered to corporate clients and did some wealth business. That was a good business, but Chief Executive James Gorman wanted to ensure there is steady income from global wealth management.

In an article by Niket Nishant and Matt Scuffham of Reuters, Morgan Stanley agreed to buy Eaton Vance Corp for $7 billion in a cash and stock deal. Eaton Vance shareholders will receive $28.25 a share and 0.5833 Morgan Stanley shares for each share they hold. They will also receive a one time $4.25 dividend paid by Eaton Vance before the deal closes. It is expected to close in 2nd quarter of 2021.

With the merger, Morgan Stanley’s wealth and investment management businesses which account for 40 to 50% of the bank’s revenue. Adding Eaton Vance increases assets under administration (AUM) from $665 billion to $1.2 trillion and will boost the business’s annual revenue by about 1/3.

Barclays analyst Jason Goldberg said Morgan Stanley will help distribute funds to the retail investor since Eaton Vance is the top US distributor of individual separate accounts. CEO Gorman has a reputation of acquiring growth and finding efficiencies to bolster profits. When Mr. Gorman acquired Smith Barney the profit margin went from the single digits to 25 to 30% margins. The last acquisition was E*Trade.

Linking to dividend paying stocks, the wealth management business is expected to come to grow and Morgan Stanley is a very good position to enjoy profits from it. When the banks collapsed in 2008, Morgan Stanley has been a good position to hold and given the size of AUM and fees from that group, it should remain a good position.

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

On the surface, President Trump is more biased towards Wall Street, however Joe Biden is from Delaware. On of the attributes of the state of Delaware is low corporate taxes for companies nominally headquarter in Delaware. Many New York companies are technically headquartered in Delaware for the low taxes. Do you believe someone who has represented the state for years is going to be bad for Wall Street. What he will tend to do is reign in some of the excesses and bring a fairness to corporations and what they do and do not do, but expect good relationships with Wall Street.

If the polls are correct and they were closer than expected, but the Democrats remembered electoral college math and President-elect Joe Biden will take over President in January 2021 and investors will vote with their check books as opposed to voting to take advantage of democracy.

In an article by Matt Phillips of the New York Times News Service, if the Democrats win there will be more regulation and taxes. Some of the regulation is needed because the Trump administration has move the pendulum too far and took away too many regulations. Taxes on corporations will go up to 28% from 21% and more taxes for those earning above $400,000. It must be remember that when taxes were cut, many Wall Street companies bought back more stock and gave larger dividends as opposed to reinvesting in the business. The tax cuts were seen as a one time bonus.

Analysts at JPMorgan Chase & Co examined what companies on the surface should be winners and who will be losers given the biases of Biden. The winners tend to be health care, renewable energy, infrastructure and better trade relations with China (Jim Cramer on Mad Money agrees with the China). Potential losers could be companies with large numbers of minimum wage workers (although the federal government does not employ many people Biden believes the minimum wage should be $15.00 a hour), defence contractors (the defence budget will likely be cut), energy companies (due to climate change and higher demands of fuel efficiencies).

The higher the win, the cleaner the outcome and Wall Street likes certainities.

Linking to dividend paying stocks, companies love to say they want independence from the government then when competition happens they want a level playing field which means playing by the same rules and ensuring the bigger company keeps making money. As long as your investment in the companies can still make money that is your first concern. Under the Trump administration it was much easier to do many corporate activities or the bias was towards the company. Under the Biden administration there will tend to be more emphasis on is the corporate activity helpful to the consumer and employee? There will be a shift but good companies with strong values which consistently make money will continue to make profits.

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

If you read a newspaper or watch TV, some of the content in the news will invariably be about how changes are affecting their business. Sometimes the idea is if it affects the media business, then it affects other businesses. Some of that is true, some of it is not, but if you are in the media world, you have a bias towards media business. It is the same for whatever industry a person works in, a person in the business will tend to know the other players and roughly who is profitable and who is not.

Not long after the invention of the printing press, the news has been a profitable business because people are naturally interested which translates into advertisers wanting and needing to reach the people particularly if the item is to the general public. If you want more targeted audiences start with the specific industry magazines and trade association papers.

Along came the internet and people began to switch from the daily papers to news from the internet whether it be Google or Facebook or other companies as people switched so did advertising dollars. Now days advertisers first think of the internet, then to newspapers. When newspapers were very profitable, the owners also enjoyed a high level of connection to the leadership of the country and businesses. For a long time, the owners have been reaching out to the government for a solution.

In France, the courts are used to advance the case of the publishers. Recently, the appeals court in France ruled that Google must open talks with publishers in France about paying to use their content.

In an article by Mathieu Roseman of Reuters, the ruling means Google must meet with Publishers and News Agencies to find a way to remunerate (give money) to them under the “neighbouring right” enshrined in revamped U copyright rules, which allows publishers to demand a fee from online platforms showing news snippets.

For a number of years, Google and others published articles from the newspapers in their news feeds without paying, but referencing the news feed.

The French court differs from Google’s pledge to pay $1 billion to publishers globally over the next 3 years for their news. Google said they hope to reach an agreement with the French publishers for their news. The French courts confirms a decision in April by France’s competition authority, which ordered Google to negotiate with publishers and news agencies “the remuneration due to them for any re-use of protected content.”

Linking to dividend paying stocks, with all profitable companies they build up goodwill in the eyes of legislators and various decision makers. Whether the goodwill is valid, is not a concern, goodwill for doing business and being profitable happens. This lead to the ability to have multiple avenues to charge off competition if the competition is too tough, including protection of the known and not positive of the changes that could happen. In the case above, the Publishers have changed copyright rules and now expect to be profitable or have a better cashflow from their media outlets. When a company is profitable there are more options to defend itself, including being the best in class.

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