When most of us in North America think about automobiles, we tend to think about Detroit and the 3 big companies GM. Ford and Chrysler-Fiat. The companies have operations around the world, but we are bias and look to the home market first. There is another market where all the big auto companies have operations in, which is China. The Chinese market does not have 100 years of personal ownership of autos such as the US does, they are a more recent market where automobiles are available and can be purchased by the average mythical family. In newer markets, innovation tends to be the rule. While Americans want power and trucks and SUVs, the Chinese market is more focused on electric vehicles. Partly they do not have the infrastructure for gasoline and electric can be plugged in.

In an article be Norkhiko Shirouzu of Reuters, GM is overhauling its Chinese lineup with greater emphasis on electric cars and smart-driving technology. The reason it is important to GM investors is China has been providing a fifth of its yearly profits.

GM is bring up an electric vehicle for Cadillac as well as Chinese brands such as Baojun and Wuling. Along with Buick and Chevy vehicles, GM sold 4 million vehicles in 2017 and 3.1 million in 2019. Part of the the reason for fewer sales is the tough competition in the marketplace, the formerly very inexpensive and poor quality Chinese vehicles of Geely Automobile Holdings and Great Wall are still inexpensive but the quality has improved. (Consider Toyota and Nissan (Datsun) when they introduced their vehicles to the US, they were inexpensive and not great quality. Now you would not say that).

The Chinese market is over 25 million vehicles a year and GM has a 12.2% share.

New GM China boss, Julian Blissett said in the next 5 years, more than 50% of our capital and engineering will go towards the electrification and autonomous-drive technology. The reason is the electrification of cars is going to happen much faster in China than the US.

Linking to dividend paying stocks, eventually all auto companies will be producing electric vehicles in the home market of the US and technology companies will play a significant role. In the old days, the auto companies would have bought the technology companies but will it be the other way around? Companies adapt to what consumers will pay for? we will be looking to China to see what the new automobiles will be like for American consumers. We do know, electric vehicles are less expensive to make than internal combustion engine vehicles because they have less parts. Will prices go down for the average car or stay the same with higher margins for the auto companies?

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

We are in the midst of elections and generally the elections are something the would be politicians would try to find a cause they can rally the base to vote for them and after the election, things would go to normal. The bogey man is not a simple solution and life continues.

In this election, the nastiest is coming and does come from the top. Trade Advisor Peter Navarro might say the President is working 24 hours on the issues of the day, but in reality he watches too much TV and tweets about what he feels is wrong. You would thing the most powerful person in the US, could pick up a phone and call the President or Chairman of the company and sort things out, but he tweets.

In an article by David Shepardson and Jan Wolfe, the President tweet people should not buy Goodyear Tires because the company has a policy that political attire is unacceptable for the workplace.

Goodyear is a $15 billion company making tires said to be clear, we have a long standing corporate policy of zero tolerance for any form of harassment or discrimination. The company asked its employees to avoid workplace expressions of support of political campaigning for any candidate or political party.

Because of the President’s tweet, Goodyear shares fell 6% but rallied back to where it started from. If the President was not the President, what he did could be called a Securities and Exchange violation.

The local Senator Sherrod Brown said it was absolutely despicable that the President would call for a boycott of an American company, based in Arkon that employees thousands of US workers.

Linking to dividend paying stocks, this year the election is going to be nasty and companies will feel the wrath of one party or the other for misdoings. In the past, companies could avoid saying much, but this year they have to proactive to protect themselves and hope once the election is over, things of this nature will not happen again.

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

In the early 1990’s one of the books which made the best sellers list was by John Grisham. It was similar to his other books, well written moves quickly and based on what could be the truth. The story of the Pelican Brief (made into a movie starring Julia Roberts and Denzel Washington) was someone was killing off Supreme Court judges so new Supreme Court judges could be appointed to make the correct decisions. In this book, the prime reason was a case was coming to the Supreme Court about drilling for oil in the Mississippi Delta where oil and gas was expected to be found but existed a Pelican bird sanctuary.

If you were cynical about the Trump administration, you would say all areas of the US which has resources should be open for business. In part that is true, the administration under the Department of Interior has made resource extraction seemingly its first priority. It is interesting under the Trump administration 14% of the hydro is now comes from solar and wind. As the cost to the utilities goes down and more wind and solar facilities go up. President Trump said he loved coal, but it is expensive and many coal companies have filed for Chapter 11 bankruptcies because natural gas is less expensive and utilities who are biggest customers switched from coal to natural gas.

During COVID two things have happened to oil production, the health reason for staying at home has dropped the demand for oil as commuting slowed down and roads were drive able to those who needed to commute. The second thing is production based on fracking for oil has decreased as expected. The first years of the Trump administration brought a boom in the bringing oil from Texas and North Dakota, however those wells are drying up.

One of the areas of the world, where there are oil and gas reserves is the Arctic, but until now it has been very expensive to bring the oil out due to weather conditions. The global warming including the Arctic makes some of the Arctic more accessible, there are big problems but one was a number of years ago, some of the land was declared to be the Arctic National Wildlife Refuge in Alaska. Essentially the animals were allowed to be free range of people or no oil and gas drilling and then the pipelines to carry the oil and gas to refineries and ships to be sent south to California to be refined.

In mid August, in an article by Brad Plumer and Henry Fountain of the New York Times News Service, Interior Secretary David Bernhardt finalized plans to open up part of the Arctic National Wildlife Refuge in Alaska for oil and gas drilling.

There are on going problems with the Arctic, people believe there is oil and gas in the Refuge but not sure how much. In order to justify drilling, one needs to find a major discovery. In 2017, the Trump administration and Republican in Congress included in the tax bill authorizing the Interior Department to establish a plan to sell leases in the coastal plain. The agency must conduct at least 2 lease sales of 400,000 acres each by the end of 2024. As part of the process the Department of Energy conducted a review of the potential environmental effects of drilling. Their recommendation was for oil and gas leasing of 1.5 million acres of the coastal plain.

Do not expect any rush to drilling because environmental groups have been lobbying investment banking and Goldman and JP Morgan Chase have said they will not directly finance any oil and gas drilling in the Arctic. The other issue is no seismic data has been done on the Refuge lands so if the Trump administration was expecting upwards of $1.8 billion on the leases, the reality might be closer to $45 million. What companies would bid? All the major companies have signed on the Paris agreement.

Linking to dividend paying stocks, at one time there was a clear distinction between the economy and the environment and people voted for the economy. Now the economy is a mixture and there are jobs to be found and created in the environment and people want both. There is a transition, however both sides need to be considered. It is not one or the other, the economy needs both for its citizens to live, work and play. Many dividend paying companies have embraced both, they gain more of their energy from renewals which is a good thing it is less expensive in the short and long run. Cost matters.

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

There are old songs about coins in your pocket including brother can you spare a dime; pennies from heaven; penny arcade and the list goes on. It was a normal thing for people to have some money in their pockets to pay for vending machines, laundry, allowances, the tooth fairy and the list is endless. Then came COVID and as we shutdown, people did not want to deal with cold hard cash or dollar bills. We started using debit more, pay companies such as PayPal, Square, VISA, Mastercard all benefited from increased volumes. What we do not have is coins in our pockets.

In an article by Sarah Skidmore Sell of the Associated Press the Federal Reserve announced in June that the supply system for coins has been severely disrupted by the pandemic. The issue is not the coins themselves but the circulation because businesses and consumers are spending as usual. The US Mint and Treasury Secretary Steven Mnuchin have urged Americans to use coins or turn them in to banks for help for now. At some point the coin supply is expected to normalize.

Brian Wallace, Chief Executive of the Coin Laundry Association noted we provide a basic service, people need to do their laundry. About 56% of the laundromats take quarters as the only form of payment. 89% take quarters as some form of payment with cards, loyalty programs or mobile payments as an alternative.

Quarters were easy to access, go to the bank or the supermarket and they would give you quarters. The Federal Reserve put restrictions on the coins and supermarkets were not accepting cash for a few months, many are now.

Linking to dividend paying stocks, there are many things in our lives which we think as routine as something that always happens until there is a roadblock. Similar to all things in life, in takes time to figure things out but they can be. One of the reason to invest in dividend paying stocks is they should have the ability to weather some time as they sort out the concerns. If the company has been profitable for a number of years, it should have the luxury of time to figure out the roadblocks, if not you need to find alternatives.

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

Very often there are cycles in the investing market, because some industries are more tied to weather than others. One can think about farm implement dealers, they do not sell many machines during the middle of winter. What does a farmer do with it? There are other industries such as home building, in over half the country there is the winter weather. Winter weather means it is cold outside, this means when you look towards home information such as projected home starts you can think about buying the companies which build housing or the suppliers such as Home Depot and Lowes. This year COVID happened and those who typically live in housing have been rushing out to Home Depot and Lowes.

In mid August, Home Depot reported its biggest rise in quarterly same store sales in at least 2 decades. In an article by Uday Sampath Kumar of Reuters, Home Depot recorded an amazing sales growth of 23.4% per store, analyst’s were expecting 10%. Sales increased to $38.05 billion and net income increased to $4.33 billion or $4.02 a share. All very good news as analysts were expecting $3.71 a share.

The stock fell on the very good news. Why because with Wall Street the issue is not what have you done, the issue is what will you do? Home Depot had a record same stores sales, will they repeat it? Now that people have repaired, add on, bought more items from Home Depot will they do it again? The answer tends to be the next quarter will be less. Seth Basham of Wedbush Securities said We will see a slowdown the question is the degree to which the slowdown occurs.

Sometimes when companies perform too well, the stock market punishes them because the expectation is they will not likely repeat it. Sometimes when the company performs badly, Wall Street likes it because there is hope to perform well. In Wall Street there are a lot of depends.

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

At many press conferences, President Trump likes to point out how Wall Street is doing and while that is good, it is almost important to understand what Wall Street does not include. Most business in the US are small and medium sized and are not public, only Wall Street public companies are listed. The average person in the US does not own shares, they may own them indirectly through their pension and retirement packages which come through work, those holdings are called institutional money and as long as paychecks are paid, the institutions will have money. Some of the bigger funds are Teachers Pension Funds; Employees of the State; Insurance Company funds and Mutual fund companies both active and passive or fee or indexed funds.

In an article by Stan Choe, Alex Veiga, and Christopher Rugaber of the Associated Press highlighted the reasons:

Some business have done better in the pandemic and that include the big tech names FANG – Facebook, Apple, Amazon, Netflix and Google. Some stocks have done worse such as American Airlines but they have smaller percentages in the index (it would take 280 American Airlines to have the heft of one Apple) . The 5 big tech companies account for 22% of the S&P 500 index.

A famous saying on Wall Street is Don’t Fight the Fed. At the moment the Federal is doing all it can and more to keeping interest rates low and buying corporate debt. With interest rates low, investors are turning to stocks, gold and other investments.

Wall Street tends to look toward what will happen in 6 to 9 months, not what is happening today. There is hope for next year. There are many areas where the hope can be eroded but there is hope.

Linking to dividend paying stocks, the economy is not Wall Street and it is regrettable that the President often confuses the two. There exists 2 separate economies, one which is doing okay and having the ability to shop on line and do renovations because they are spending less money on entertainment and travel. The other economy is people are worried about rent and car payments because their income is based on people socializing. When investing, where possible ensure your money is where companies benefiting from the on going situations in the economy.

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

With public companies, when executives sell shares, they have to report their selling of the shares. It is the same when they buy shares, although the disclosure is not real time, it takes a month. Many people examine the reports to see if there is a clue to the buying and selling. Sometimes buying is seen as a smart move; sometimes selling is to diversify their holdings. If most of your assets are tied to the stock of the company, it is reasonable to sell some and hold something else – bonds, real estate, gold, or spend it on a lavish lifestyle ie pay off the debts.

In regulatory filings, Jeff Bezos sold 1 million shares to raise $3.1 billion. It should be noted Mr. Bezos still owns 54.5 million shares worth about $174.64 billion (54.5 million times $3,225).

Mr. Bezos said every year he will sell at stock worth at least $1 billion to fund his rocket company Blue Origin.

Linking to dividend paying stocks, similar to Mr. Bezos it is great to be a position to sell some of your holdings when the stock rises in portfolio management. Sometimes you sell to ensure than whatever happens in the economy, your financial position is secure. There are many reasons to sell and remember you do not have to hold a stock for a lifetime, you can and if it continues to provide you with an income which allows you to live comfortably there maybe no reason to sell. Even billionaires sell once in a while, do not fall in love with any stock.

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

Sometimes law suits give you the investor a deeper understanding of how the business works. For example, if you own Apple shares directly or indirectly, one of the reasons for holding the company is the increasing dollars spent in the service component of their revenue.

In an article by Stephen Nellis and Munsif Vengattil of Reuters, Apple removed a popular video game Fortnite from its App store for violating the company’s in-app payment guidelines. Epic Games sued to try to change Apple policy.

Apple takes a cut between 15% and 30% for most app subscriptions and payments made inside apps. although there are some exceptions. Analysts believe games are the biggest contributor to spending inside the App store which is the largest component of Apple’s $46.3 billion services segment.

Epic’s free-to-play battle royal video game Fortnite has reached massive popularity among young games since its launch in 2017. Epic Games is headquartered in North Carolina and is partly owned by Chinese internet giant Tencent.

In July 2020, Fortnite had 2 million downloads in Apple’s App Store and Google’s Play Store, but according to mobile analytics firm SensorTower, Apple users spent $34 million while Google users spent $2 million.

Linking to dividend paying stocks, all companies love subscriptions because it is recurring income which if the company is successful is renewed on a yearly basis. Then it is up to the company to increase the add ons for more income. Part of the success of Apple is the services business, however once you are in, it is hard to get out even if you want to. The ecosystem is powerful or captures people for a long time, for an investor that is good news. For the subscriber one hopes they gain value from it. If the subscribers continue to renew at high rates, then holding the stock is a good thing.

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

In a normal year, all over the world people would be getting married and going through the process of engagement rings, wedding rings, inviting people to witness and celebrate the wedding. All wonderful aspects of life. When COVID hit and people having to keep space between each other, the wedding business has collapsed. Business has also collapsed for diamond sales. The demand has plummeted freezing sales and squeezing prices.

In an article by Helen Reid, Tanisha Heiberg and Rajendra Jadhav of Reuters, the only bright spot in the diamond industry is for large, high quality diamonds from affluent investors, according to financiers and sales data. Prices for high quality one carat diamonds have risen 12%, however lower than 1 carat the prices have gone done or not gone up, according to trading platform RapNet.

The issue for diamond miners is most diamond that come from the mine are not the large high quality diamonds they are the lower quality stones. The diamonds typically travel to India where 80% of the world’s diamonds are polished. Indian imports of rough diamonds plunged from $1.5 billion in February to just $1 million in April, data from the Gem & Jewellery Export Promotion Council show.

Antwerp, Belgium long a diamond hub, saw rough imports drop 20% according to the Antwerp World Diamond Center. The city’s exports of polished diamonds fell 46%.

The large diamond miners have either not opened up or slowed production such as Rio Tinto’s Argyle diamond mine in Australia; Storoway Diamonds’ Renard mine in Canada; Petra Diamonds’Williamson mine in Tanzania and Firestone Diamonds’ Liqhobong mine in Lesotho.

A number of years ago, De Beers who once controlled the diamond retail market had an advertisement than says diamonds are forever. De Beers is laying off people.

In 2019, the diamond industry was worth $80 billion. The bright blue box of Tiffany noted during February-March engagement jewellery was the worst performing category, with sales halving. Traditionally people get engaged in the winter months and married in August.

Linking to dividend paying stocks, we all grow up with expected biases and notions and for many people buying engagement rings and wedding rings are the expected in society. With COVID, people were not meeting, things changed rapidly. Hopefully when health rules are back to normal, people will go back to the normal habits of engagement and weddings. All businesses examine their operations for a worst case scenario, most never expect to deal with it unless it is a natural disaster. How are your investments doing with the changes?

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