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.

When you think about how governments raise money, they have only 2 real choices to raise the bulk of their revenues – taxes from individuals and taxes from companies. In the words of most politicians for the past 20 years it should be a balance but reality was cutting was heavier on the corporate side. Under former President Trump, the US cut its corporate tax rate from 28 to 19% and this helped boosted profits at corporations. How it helped employment and raised wages is a different story but corporations benefited. In the US, deficits have increased but there was no corresponding increase in personal taxes or the government just collected less. If you expect the government to do less, that is a good thing.

During the pandemic, governments around the world have boosted spending because people could not meet in groups and if you think about how many activities people do that need people to gather from conventions, to sporting events, to going to restaurants and bars, to any gathering. Around the world, people were told not to gather, which meant for many people they were without a job or anything to do at their place of work, the government supported them. As the vaccines are placed in more and more arms, the ability to consider and begin to expect to meet becomes part of the expectations of where the economy is going. How does government pay for the extra expenses?

In England, the Treasury Secretary or Chancellor of the Exchequer Rishi Sunak announced a corporate tax hike from 19% to 25%. According to an article by Paul Waldie of the Globe and Mail, it was the first time the rate has been increased since 1974 after successive Conservative governments lowered it from 28% over the past decade.

The Chancellor said it was not popular but it was the honest thing to do. Britain has spent almost $705 billion on various supports for business and workers. The government borrowing is over $640 billion in 2020 which is more than anytime since WW II. Total debt is almost 100% of gross domestic product (GDP).

The increase in corporate tax is expected to bring in additional $30 billion by 2025 according to the Office of Budget Responsibility, the government’s fiscal watchdog.

Britain was harder hit by COVID than most European countries and its economy shrank 9.9% last year. It also is dealing with the Brexit, but there are signs the economy is recovering, but there is still a long difficult spring to get through.

Linking to dividend paying stocks, governments around the world will be looking at those companies who can still earn profits and think we need a bigger share to pay down debt. The usual arguments will be given, but the reality is if governments want to pay down debt, there are few choices other than to raise corporate income taxes.

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

The word inflation is beginning to raise its head and inflation means higher interest rates and higher interest rates mean alternatives to stocks. It is never ending story line because it is true. One of the reasons it is true is the world is awash in bonds.

In an article by Marc Jones and Tom Arnold of Reuters, they took a look around the world to examine the debt levels of countries. Everyone knows about the G7 countries and how much debt they have, but what do other countries debts look like. The reason it is important are 2 fold: they push up borrowing costs and cuts the premium existing debt offers investors compared to the ultra safe and liquid US Treasuries.

Bank of America estimates emerging markets will sell more than 3/4’s of a trillion dollars worth of debt this year – $210 billion by governments and $550 billion by corporates.

Brazil and South Africa are countries whose combination of persistent weak growth, rising public debt, very steep yield curves with very high long-term real interest rates has become a big source of concern said David Lubin, Citi’s managing director and head of emerging markets economics. Mexico might also be on the list.

Ricardo Adrogue, head of Barings sovereign debt and currencies group, said we could be at the door of a big, big economic boom. Some of the these countries that seem hopeless today could actually be okay.

Some of the countries might not be so lucky, such as Ethiopia who is about to become a test case for the new Group of 20 Common Framework debt relief plan, which stipulates private creditor debt must also be restructured, meaning the government has to default.

In May, Belize was expected to default in May. In June and July Laos and Sri Lanka have key payments. JPMorgan lists 16 countries at risk for defaulting from Cameroon to Tajikistan sitting on $61.4 billion in debt.

Tellimer’s senior economist Patrick Curran has a list which includes Jamaica, Tunisia, Ecuador, Sri Lanka, Belarus, Ethiopia, Laos, Bahrain and Oman.

Countries such as Mexico, Jamaica, Panama, Mauritius, Montenegro, Jordan, and Fiji where tourism accounts to 10% of GDP, will wonder whether vaccines will come quickly enough to save their busy seasons this year.

Linking to dividend paying stocks, many large corporations have operations outside America and there are always good and bad aspects to it. The good is more goods and services are sold and the company has a diversified income streams which allows stability in earnings. The bad is not all companies operate the same or similar to America and risk and returns come into play. Unless the company has moats or is near monopoly, running a profitable company over the years requires good management and execution a strategic plan on a consistent basis.

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

If you think about the office workers in the big downtown office towers, most of the people who came to the towers worked from home. How did they do this? One method was to use Zoom, as well as other access to the workplace, but Zoom allowed meetings to happen. It was possible that people could have called in, but meetings are more effective if everyone can see each other. Facial expressions tell stories.

In an article by Michael Liedtke of the Associated Press, Zoom’s growth is tapering off. The issue will be what will Zoom look like in one year’s time? President Biden has announced every who wants a vaccine can get in by the end of May and companies are looking at the real estate they pay and saying I want some bodies in them. It does not have to 100% all the time, but 70% is expected. Who stays home and who comes will be issues companies have to figure out. In the meantime, Zoom announced their year end results.

Zoom finished January with 467,100 customers with at least 10 employees that were paying for the subscription version of the its service. This was an increase of 33,400 customers, but below the gains of 63,500 and 183,500 in the previous 3/4’s of operation during the pandemic.

Zoom posted revenue of $882 million in the quarter or $2.65 billion for the year. That was 4 times more than the previous year. Profits jumped from $15 million to $260 million.

Zoom is introducing new services such as internet phone for voice-only calls of which it has 10,700 customers.

The company has $4.2 billion in cash and a stock price around $400 which allows them to merge or buy another company.

Linking to dividend paying stocks, while Zoom is not dividend paying it did benefit from a trend in society and almost overnight it was a success story. The trick with dividend paying companies is they are profitable over many years and can pay dividends. Sometimes you buy growth, but for dividend buyers you are buying profitability over the long term.

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

One of the best successful investors over the years is Warren Buffett, he controls the company called Berkshire Hathaway Inc. and every year he sends out a letter or press release of how he feels the economy will do in the future. Considering the holdings of the company which is based in Omaha, Nebraska including BNSF Railway, Geico car insurer, Dairy Queen ice cream and See’s candies. Berkshire Hathaway also has a sizable stock portfolio including $120.4 billion of Apple.

In an article of Jonathan Stempel of Reuters wrote an article about Mr. Buffett’s annual letter to investors or press release.

Berkshire Hathaway bought back $24.7 billion in stock, as he considers it undervalued and he is optimistic the stock will increase in value. His conclusion to the letter is Never bet against America.

He called the investment in Apple, the BNSF Railway, Geico and insurance and Berkshire Hathaway Energy the crown jewels or core holdings. The net income for the company was $35.84 billion in the quarter and $42.52 billion for the year. Operating income fell 9% to $21.92 billion.

In terms of cash or cash equivalents, Berkshire ended the year with $138.3 billion.

In 2016, Berkshire bought Precision Castparts Corp and until people stopped travelling it was a good buy. Since the pandemic the company has laid off 40% of its workforce and Mr. Buffett took a $9.8 billion write down of assets.

Linking to dividend paying stocks, Mr. Buffett over the years has great success in buying companies that are near or function similar to monopolies because they have wide moats or large barrier to entries for the competition. The companies tend to produce excess cash which Mr. Buffett can use it on a regular basis to help bail out companies that have slipped a bit but should have the ability to generate cash flow. The formula works because of the excess cash flow which can be redeployed into other businesses. Over a period of time it is an excellent formula to pursue.

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

Sometimes you can read reports or books for seemingly different reasons and they have a part of a chapter as background and it means something more than what the author had likely desired. Recently read a book called In the Wake of the Plague (about the Black Death) and how the world was changed written by Norman F Cantor, published by Simon & Schuster, NY, 2015. In the book, the focus is on what happened in England, but the reality of Europe was similar to matter where a person was.

90% of the wealth of England in 1340 lay in land. Of this land, 40% was owned by the king and royal family and the high aristocracy that usually carried the titles of duke, earl, baron or lord. Another 30% was held by ecclesiastical officers (the church) and corporations. About 30% was held by rural upper middle class who came to be called the gentry, the remaining 2% was in the hands of free peasants, later called yeomen.

In England, before the Black Death there was about 1/2 million people in the gentry class. In 1400 that number was half. The family income varied from the equivalent of $50,000 to $3 or 4 million. The lesser gentry was sometimes called esquires. About half the gentry were considered knights to be Sir … If a person was a Knight there were other duties such as increased military and tax liabilities, extra hospitality and entertainment budgets. If the King toured the country, he often stayed at Knights’s homes.

Marriage, the production of progeny (or male heirs) and inheritance were the core of gentry life. If the King favored the gentry family, he often added lands or income. In the country a person could increase the wealth by good estate management. In the gentry class and above, a good marriage is one in which the bride brought in a dowry to the new family. If the family was fortunate to have children to inherit the estates, it was possible for the estate to remain intact for centuries.

When the Black Death was over, many people died including those that would typically inherit the estates, this lead to many squabbles which meant send in the lawyers. One of the beneficiaries of the many deaths was the need for common lawyers to settle out the issues. The lawyers became so expert in doing the things that needed to be done that a body of real estate law was created and largely remains in tact today.

The other beneficiaries were the women of the gentry class. The common law had a procedure for protecting widows, partly because the gentry landlords engaged in serial marriages with wives who died like flies in childbirth and were often gone by 30 years of age. The law said every widow had a right to “dower” or 1/3 of the income of her husband’s estate until she died. Within 40 days of her husband’s demise, she was suppose to leave the family estate, but at least she had income to live off. With these rules or laws, people lived lives around and with them.

Linking to dividend paying stocks, the most important aspect is the stock continue to pay a dividend, then it can be spent, saved, buy more assets, go towards an inheritance and continue the family name, but it all starts with income on a continuing basis. It may not be overnight riches but it can be lasting and fulfill your and your families desires both in and out of the grave.

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