If you read about the auto companies strategies, it includes an electric fleet of vehicles by 2030, in the macro level that is a very good thing to do. The number one reason is as much as everyone enjoys their individual vehicles, the millions that are on the road contribute a great deal to climate change. If they are removed, hopefully the climate changes less.

However, from the macro level to the individual decision to buy is very different. The infrastructure to charge vehicles is coming but it is not here yet. The rules particularly in the cities where there is on street parking have to be worked out, can someone run a cord across the sidewalk to their vehicle? will homes with parking be more expensive because they have access to outlets for the vehicle? One can think of many other concerns, for the auto makers, their concern is to have the government to pay for the infrastructure in the name of the greater good theory.

In an article by David Shepardson of Reuters, the major automakers, parts companies and union (UAW) met not about contract negotiations, but to urge the government to use tax credits and other financial incentives to encourage the average person to buy electric.

The letter noted there are currently 1.5 million Electric Vehicles out of 278 million registered passenger vehicles or at the present 2% of sales are electric. At the moment there are 100,000 public charging places countrywide.

The auto industry association is asking the government to use its ability for fleet purchases to purchase electric and help pay for the infrastructure needed which will drive down costs to the average consumer.

Linking to dividend paying stocks, all large companies need the government to pay for infrastructure which helps them and the public good. The more the industry association can link their industry to the public good, the more the government will and can pay and the more profits can stay with the industry.

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

During the pandemic there has been many companies that have benefited from the government’s decision to tell people to stay at home, but one of the big winners has been Amazon. The company has a number of revenue centers but when most people think about Amazon the order and deliver service comes to the forefront. The company is involved in cloud computing with AWS; Amazon Prime, and a host of other services.

In the order and deliver service Amazon has increased the number of fulfilment centres across the world and has hired more than 500,000 people. Amazon is now the second largest private sector employer in the United States, after Walmart.

With as many people as Amazon has, some people are bound not to happy at work, at one of the retail unions has been organizing at Amazon. The RWDSU (Retail, Wholesale and Department Store Union) has a test site at Bessemer, Alabama located in central Alabama outside Birmingham. Given this is a test case, generally Amazon has not wanted a union, but is not likely as anti-union as Walmart. (Walmart shut down stores which unionized).

In an article by Mike Spector and Jeffrey Dastin of Reuters, the former head of the National Labor Relationships Board, Wilma Liebman said if the union win, this is groundbreaking because forming unions particularly in the south has been discouraged by companies and the government.

The President of RWDSU Stuart Appelbaum said the campaign has been a victory is many ways. The vote will go one way or the other, but doors have been opened to more organizing around the country.

President Biden has asked for fair elections. Senator Bernie Sanders had rallies in Alabama.

Dave Clark, chief executive of Amazon’s consumer division has encouraged people to vote against the union.

The workers voted and said no to the union.

Linking to dividend paying stocks, some companies are unionized, some are not, it is a matter of the company and its attitude toward people. Most electrical utilities are unionized, many companies in the financial sector are not unionized which means if you favor one side or the other there are choices for you. The wonderful thing in an economy the size of the US means there are many alternatives, having your values reflecting your investing is a relatively easy thing to do.

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

When companies become successful and generate tons of cash, they will try to capture more market share doing something else, but related to their business. After all if they are a success, why would would they not be in the new field because they have the ability to spend enough resources to get it done.

In an article by Daisuke Wakabayashi of the New York Times New Service, Google tried to copy Amazon to become the shopping hub of the internet, but so far they had little success.

Amazon is the elephant in the room with over $295 billion in Amazon’s third party marketplace. According to Juozas Kaziukenas, founder of Markeplace Pulse, a research company, Google’s effort is closer to $1 billion.

Amazon has been essential for marketers and its Global advertising business grew 30% to $17.6 billion, trailing only Google and Facebook.

During the pandemic every time the government closes the economy for public health, the only way for retailing to survive and prosper is to go online. The choices have been Amazon, Shopify and Google. After setting up shop online, the need to buy ads is required, and Google has algorithms to pick where the ads will go and what products to feature, depending on the budget. In the article on business placed $1,800 in ads which were viewed 3.6 million times and led to $247,000 in sales.

The retailer considered Amazon’s marketplace but Amazon fees are higher than Google’s. There is a possibility of selling more product, but at less margin. The fees can account for up to 1/4 of every sale, not including advertising. Amazon also likes to do everything in house which means it is harder to give your brand an unique identity and it limits the retailer to generate future business.

In the article, the retailer had a problem with the Google site because their algorithms noted the shipping costs on Google and the shipping costs on Shopify were different, the retailer said they were the same but it took time to sort it out.

Google is trying to break people out of their Amazon habit, but the pull of Amazon is great. Amazon has the lead on many things including same day service (it is expensive to duplicate); which means Google is trying the normal things such as lower fees, free search, and partnering with Shopify.

According to the research firm eMarketer, in October Amazon had 37% of online shopping and Shopify has 9% up from 6%.

Linking to dividend paying stocks, every industry has leaders and those in second place wanting to become leaders. There are often huge barriers to overcome and resources to be allocated if the company wants to become number one, in the meantime the number one company is continuing to push its success. Often times it is waiting game, eventually the number one company becomes complacent and then market share can shift. All industries have leaders and it is your homework to see why they are number one?

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

On Wall Street credit is the most important aspect in operations. The greater amount of credit, the greater the ability to leverage trading and the greater profits roll in. Unfortunately, every once in a while the opposite is true, if there is greater leverage and the trades go the other way, margin requirements have to be filled. The first thing to do is use cash, then stocks are sold and then higher interest rate bond financing is needed.

In the world of billionaires, if an investment manager only looks after one family money, very few regulations have to be followed because the family is expected to perform oversight of the investment managers. When investment managers have a great deal of success with a strategy, the oversight is less. When money is lost, the cry for oversight or regulations are heard.

In an article by Judy Babu of Reuters during the last days of March, a family holding company called Archegos Capital Management needed to sell large blocks of stock which had the affect of lowering the price of the shares. Companies such as ViacomCBS, Discovery Communications, Baidu, Tencent Music Entertainment were affected.

The investment banks have a division called prime brokers which deals with hedge funds and block trades. In that world, when one prime broker moves stock at a lower price to get the shares off their books or limit losses, the other prime brokers are trying to do the same thing. In the Archeogos case Goldman Sachs and Morgan Stanley were able to sell billions of dollars of stock leaving Deutsche Bank, Credit Suisse, Nourma Securities and others needing to sell more at lower prices. The root of the problem was leverage and a successful strategy by the investment manager. Bill Wang had success and his style was very active which means a generated a great deal of fees, in the world of fees he is a investment whale. Given the size of his portfolio, (Mr. Wang owned 100 million shares in ViacomCBS) investment banks were willing to sell synthetic products, however because they have a very specific purpose the products themselves are concentrated and illiquid which means when Mr. Wang is leveraged 8:1 or 20:1 there is very little room for error. The reason Mr. Wang used synthetic products or Total Return Swaps is to keep his trading less public than other investment managers. Hedge Funds need to file 13F reports to the Securities and Exchange Regulators and all over Wall Street when they are published, people review them to see what strategies successful funds are doing or what stocks they own. When the reports are published – analysts, reporters and people on You Tube will report what the top funds are doing. Then you can do something or nothing, one of the most reviewed 13F report is what is Berkshire Hathaway doing?

The issue for the Investment Banks should have been risk/reward or risk management – what is the downside and how much risk is on the books? While generating fees is wonderful, if the firm loses money was it worth it? In one report suggested the Prime Brokers had met and a strategy of an orderly exit, which meant few losses. However losses by Mr. Wang meant the strategy was null and void and the Prime Brokers were on their on. Goldman and Morgan Stanley acted first to limit losses.

Linking to dividend paying stocks, leverage is one of those double edged swords, it is possible to make more money, it is also possible to lose more money. If you buy dividend producing stocks, you are buying for the dividend and not the capital gain, although if the capital gain comes you welcome it, which tends to mean you are buying the stocks in a non leveraged position. While the price of the stock will move up and down, if you are more concerned with the ability to pay dividends, there will very few sleepless nights.

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

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.