Hopefully, in the way you earn a living, you are not dependent on commodity prices, however if you think about mining, one of the considerations should be the commodity price cycle. Hopefully most young people when they learn something about economics see the price-demand charts. For the mining companies of the world, those charts are what defines them. The higher the demand, the higher the prices. For investors around the world, when you hear about the return to normal that should mean higher demand for something. If President Biden passes the infrastructure bill, it will mean higher demand for basic commodities and that means higher prices because of more construction.

Generally when the average person thinks about commodities they think about gold and silver. (apparently there is a day in Vietnam where the average citizen is suppose to buy gold to have a lucky year – if one is cynical, the jewelry companies are doing a great thing in the country). For industrial purposes the commodity to think about is the price of copper. Some of the readers will remember a number of years ago, the price of copper was high enough for people to strip old houses of copper, go to electrical utility sites and steal copper. Hopefully people are not doing that now.

In an article by Niall McGee, copper futures hit a 8 year high trading as high as $3.84 a pound on the Chicago Mercantile Exchange or CME. The reasons why copper is increasing in price is rebounding global demand (more users), a tightening supply and looking to the future on copper’s use in a green energy world.

Robin Bhar, an independent consultant with London-based Robin Bahr Metals & Mining Consulting believes the market is overheated, because speculators have jumped into the metals.

Citibank analyst Alexander Hacking noted Citi expects demand will outstrip supply by a half million tonnes of copper this year. In the future, the green deal could increase the demand because battery powered electric cars typically use about 3 times more copper than internal combustion engine cars. (although the reality is work will go on to find a less expensive alternative).

In 2011, copper prices peaked at $4.50 a pound. The price fell in 2012, when expectations of China’s demand fell dramatically. At the moment, the existing mines are forced to dig deeper which is more expensive to the miner. However there are mines being developed in Democratic Republic of Congo, Chile, Panama to name a few places around the world.

Linking to dividend paying stocks, in some industries the most important aspect of the business is the commodity price and all you have to do is look at the price and determine is the price going to be stable or go up or down? If you believe the price is stable and will go up, you can invest and you should have capital gains and dividends as the company makes profits. If you determine the other direction it is time to find alternatives that are more stable. Think about those simple supply and demand charts (guns versus butter) and try to bring you investments down to the simple level. Then it is easier to make a decision to hold or find alternatives.

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

In firms around the world, sometimes what they do and how politicians act are a broken connection and need to be investigated. They need to be investigated because the politician does something which causes the stock to fall and the issue is did anyone make money from it? In Brazil which is run by President Jair Bolsonaro who tries to be a populist had an issue with the state-controlled oil company raising its prices for diesel or gas prices.

In an article by Aluisio Alves of Reuters, the President of Brazil changed the President of the oil company called Petrobras from Roberto Castello Branco to Joaquim Silva e Luma. The problem is on Thursday, the President of Brazil mentioned the changes on his Facebook account and complained about the rise in the price of diesel. On Friday or the next day in the Brazilian stock market the common shares of Petrobras or Petroleo Brasilerio SA lost 8% of their value and the preferred shares lost 6.6% of their value or the company was worth $5.2 billion less. Who made money shortening the stock?

On the face of it. Mr. Luna maybe a good administrator, he is a former army general and was in charge of overseeing the state-run Itaipu hydro dam on the border of Brazil and Paraguay and Argentina. Mr. Luna said he needs to find a balance in fuel pricing considering the impact on shareholders, investors, sellers and consumers.

The former President of Petrobras Mr. Branco had spent his time trying to sell underperforming assets and pay down debt. The stock market was liking what Mr. Branco was doing. It is not the first time, the President of Brazil has interfered in the state oil company.

Linking to dividend paying stocks, when the government is a partner whether it is silent or majority controlled, it has an agenda which involves winning more votes. Winning more votes has more to do with variable pricing than with a running a profitable company which can pay dividends. Often times, in a state controlled company, it will end up with assets that have to do with encouraging people to vote for it rather than rationalize the company. In addition what it owns and how much it pays its senior executives may come up in elections. If you own shares in such a company, be careful around election time.

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

One easy method to examine any company is did they do what they say they would do or how is there execution of strategy. When the strategy is released it looks good or if you do not think it looks good you should quickly find alternatives or have enough shares to change management. Strategy is a key reason why as a shareholder you pay the senior executives higher than normal compensation packages, so how is being executed?

Every company has a logistics concern, in the northeast as this is being written it is snowing or weather is a concern. In the automotive world, every new vehicle has at least 100 chips it in, at the moment there is worldwide chip shortage because of demand due to the COVID adaptions companies had to make and people using gaming more than in the past. At GM the largest of the companies making internal combustion engines, Chief executive Mary Barra said GM will not lose any production of its high profit full size pickup trucks and SUVs, although the supply of computer chips is a bit fluid.

In an article by Ben Klayman and Paul Lienert of Reuters, the shortage of computer chips which is called fluid could shave up to $2 billion from 2021 profits. GM reported a 4th quarter profit of $2.8 billion.

If you want a GM car, there are production cuts at North American plants and rival Ford has lost some production of its high profit top selling F-150 pickup truck.

Similar to every large organization taking a stake in a computer chip company or increasing its horizontal leverage is an option. Do you make the parts yourself? outsource them, but be the biggest customer? or take your chances in the normal sourcing of parts?

Linking to dividend paying companies, profitable companies have various strategies to deal with the above questions to determine how the company maintains its ability to make profits and pay dividends. All companies go through the options, as extraordinary few companies do everything in house, they use the products of another company to add value to what they do. One method to investing is try not to invest in the final product but who are the suppliers to the company? There are always different methods to invest.

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

For as long as there has been smartphones there has been dating apps. People need a way to meet and apps are a good first step. It is not surprising there are many dating apps and those who use them likely use more than one. Each of the app has its advantages and disadvantages, but it is a large market.

Bumble is an app which is unique among dating applications for letting women make the first move. It empowers women to feel safer and more in control of the dating which is a good thing.

Women have become large users which attracts men which eventually means the company has decided to sell shares in the IPO or Initial Public Offering market. It is a good thing to do because in 2020 companies raised a record $168 billion according to Dealogic.

In an article from Reuters, Bumble is selling 45 million shares at $39 a share to raise as much as $1.8 billion valuing the company at $7 billion. Last year the company had considered offering 34.5 million shares at $28 to $30 a share. One of the big beneficiaries will by Blackstone Group who is a majority shareholder. Goldman Sachs and Citigroup are the lead underwriters.

Linking to dividend paying stocks, in a crowded market such as dating apps, Bumble offered something unique and people were attracted to it. It is surprising that it was the first app to let women make the first move because 50% of the customers are women. The market to empower women must be a big market, perhaps we will see more companies cater to women.

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

The last Presidential election cost over $1 billion and in many ways, it was money well spent. If the desire is for as many people to vote as possible, then the Presidential election was an overwhelming success with over 80 million voting for President Biden and 74 million voting for Mr. Trump. For a billion dollars, that is very heavy fundraising and both parties turned to corporations for their major funding. All smaller donations are wonderful and needed to ensure the grassroots turns out to vote, but the large donors play a significant factor. It is one of the reasons why most politicians are wealthier than the average voter and fundraising is a 12 month exercise, not just before the election. One election finishes, another one starts.

Each of the 2 parties Democratic and Republican policies tend to attract some companies over the other. It is not that the companies can not work with the other, in some industries it is much easier than others. The classic case is the oil industry has given more to Republicans because the Republicans start with liking the oil industry, the Democrats tend to tolerate it. There are industries that both parties find it easier to raise money.

All major companies have Political Action Committees (PACs) and they all have government relations departments to ensure legislation is helpful rather than harmful to the companies.

In an article by Reuters, for political activity, companies disclose their actions to the Federal Election Commission. They are regular filings, similar to companies filing at the Securities and Exchange Commission (SEC). In January companies including Microsoft, Walmart, AT&T and Comcast did not donate to 147 Republicans who voted to support former President Trump after the January 6 assault on the US Congress. The reason why the companies did not give money is former President Trump had not declared he lost fair and square. In the world of business and politics the game has moved on without former President Trump.

During the last 2 year cycle, those 147 lawmakers would have received more than $2 million from the PACs. In January 2017, the 10 company PACs donated $190,000 and during the 2019-20 election cycle, the PACs gave $10 million.

Linking to dividend paying stocks, if you wonder who finances political activity, it is the same companies who make profits and pay dividends. There are valid reasons to giving money, guaranteed access and to ensure people vote to do no harm, which can save money for the company. Making profits and paying shareholders is the reason to own the shares, but companies can and do more in the outside environment.

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

Prior to the pandemic, there were a number of companies taking large amounts of space in office buildings, the companies were in the co-working industry. The wonderful thing about the internet is if you have a laptop, you can start a company. The challenge is to find paying customers, but you have all the tools to start the company. One of the tools you did not have was the great office place to meet clients. Clients are still reasonably impressed if you have a seemingly solid place to hang your hat or address. Along came companies such as We Work, IWG and others who rented space in office buildings and you could have access to a private office, a board room, the attributes which lead creditability to the permanence of your company. The desire was for people to meet generally downtown, partly for the infrastructure supports and ability to socialize to further your business. The pandemic comes and people started working from home, who needs the office downtown?

In an article by Rachelle Younglai, IWG the world’s largest co-working company is trying to adapt its business model to reduce its exposure to long-term office leases. These co-working places paid the rent on the building and charged their customers rent for the space. The rent varied between the classes of real estate A was the highest and C the lowest and in many cities there was plenty of choice. The problem is the business model needed many short-term subtenants to use the space and with many working for home, the ability to work in the shared spaces is limited, because of the 6 feet of distance. Many of the co-working spaces depended on shared spaces and meeting in board rooms, now there are enhanced software programs to do it on Zoom.

IWG brands include Regus and Spaces has 3,300 locations in 110 countries and anyone can sublease. (a number of years ago working on a political campaign, we used the space and it worked well. We had a office, because you need a office, the use of the boardroom for events and gatherings).

IWG has slashed prices and noted demand in the suburbs has increased, while downtown are facing more immediate challenges or low demand. As companies slowly move back to what was considered normal, the co-working places may be an alternative for the larger companies which downsized there office space needs.

Linking to dividend paying companies, all companies have business models and they work because they are in business and continue to expand because the business model works given how the economy works. When the economy is changed business models have to be changed. It is good IWG is changing its model, as a large player in the industry, they see the demand for their product just not the way it was. Will the business model change again? how will the company tap into the new reality? Fortunately sometimes the large players have larger credit lines to ensure they can get through the changes, but as an investor, you can move to alternatives and watch how the new reality shapes up and then get back into the stock if you desire.

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

On the stock market, most days there is limited speculation but on some days it is easy to find. Most people investing in the stock market are not doing it to speculate, because when you speculate some days you win and some days you lose money. Therefore the challenge is to limit market risk. If you want very limited speculation, you should restrict your investments to stocks similar to dividend producing stocks. However in every market there is opportunity to speculate.

In an article be Saquib Iqbal Ahmed of Reuters, it is possible to buy very leveraged and inverse exchange traded products (ETPs) which magnify the moves of an underlying index or stock several times. It should be noted, these products only account for 1% of the $5.9 trillion universe of exchange traded products.

We all look for funds that have done very well, we compare them to our funds and think maybe I should put some money into those funds. We all tend to forget the past performance does not guarantee the future performance, but we are people and when you read about a fund that is up over 1,000% in the last 11 months, tongues wag. It should be noted throughout the history of the stock market whenever a sector does well, money flows into the sector. The PHLX Semiconductor Index is the bases for the Direxion Daily SemiConductor Bull 3X Shares which seeks to amplify daily moves in the chip index threefold.

Other funds which seek to do the same with other indexes include the ProShares Ultra VIX Short Term Futures ETF, the ProShares Ultra Pro QQQ, not surprisingly millions of dollars have flooded into theses funds. Whether the risk is understood, it is a debatable question, but the desire to have the return is evident, for sometimes the losses can be quick and staggering or large.

Experts or people who spend their days in front of a screen trading, say the ETPs are designed to be short term trading vehicles and not to hold them long term.

Linking to dividend paying stocks, there will be and always is speculation in the stock market, sometimes people win and sometimes people lose. If you are willing to take the risk, then go ahead, however over the long term investing in profitable companies which pay a dividend is very rewarding with limited risk. If you make 50% this year and lose 45% next year or you can make about 10% total return over the 2 years which is better? The answer is Option B because over 2 years the return is 5% and 10%. If you did do Option A, it would be quite a ride, but Option B increases your wealth over the long term.

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

Through the history of oil and gas production around the world, the oil and gas is found in places where there are not many people. The oil and gas needed to be transported, first by the railroad and the railroad is a good alternative, then by pipelines. Transporting by pipelines is the less expensive for the oil companies and for the pipeline, as long as the oil and gas flows, the company can pay dividends.

Across the world, the building of pipelines has become more complicated as people weigh the advantages and disadvantages of the pipeline crossing their lands and of course political considerations come into place. Some see pipelines in black and white differences, others see the grey.

In an article by Vladimir Soldatkin of Reuters, the situation in Europe is more complicated than the US because of the rise of Green Parties or environmental parties. However, the reality is Russia has enormous supplies of natural gas and needs to export it to finance the country. There is a pipeline to Europe going through the Ukraine and often there is where geo-political considerations come into play because the US can influence how much gas flows to Europe.

In the commercial scene, Gazprom from Russia, Germany’s Uniper SE, BASF SE, Anglo-Dutch Shell, Austria’s OMV AG and French based Engie SA are building a pipeline under the Baltic Sea and it crosses various countries borders. The part going through Denmark to Germany is completed. The pipeline has a capacity of 110 billion cubic meters of gas and politically Germany has said the project is a commercial project and wants it to go forth.

Linking to dividend paying stocks, once the pipeline is in place, the pipeline will produce a consistent return of profits and dividends to the owners because there is a need for the oil and natural gas. The drama of how the pipeline was built will be long over and customers will use the products. All developments have back stories but often times they become less important to users as time goes by.

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

Most of us do not really think about how companies operate or receive their inputs because we expect the companies are competitive because they control their costs and can achieve a market share to earn profits. In an article from Reuters, the climate think tank Ember noted China’s aluminum sector must shun dedicated power capacity equivalent to more than Germany’s entire coal fleet over the next decade to keep Beijing on track to meet its carbon pledges.

In North America, the key to manufacturing of aluminum is relatively inexpensive hydro costs or the reason why you find the aluminum plant is because of hydro dams nearby. In many instances, the hydro is partly owned or highly dedicated to the aluminum plant first. Then the power can be used by the community or exported to other areas on the grid.

In China, much of the aluminum manufacturing is in Shandong province although it should be in Yunnan which has abundant hydropower resources. It is of course easily to move in theory, it is harder in reality because the assets are built. In Shandong, the aluminum makers have long relied on the off-grid captive power plants for the energy intensive smelting process. The aluminum companies account for 65% of the power used. Essentially, China has built many coal plants to produce power and coal has a problem of emissions. In China’s case the plants have emitted more than some countries such as Indonesia and Brazil.

In China, more than 45% of China’s inefficient captive coal capacity is in the smelting heartland of Shandong province, with more than a 1/3 or 17 GW belonging to top private sector producer China Hongqiao Group.

Linking to dividend paying stocks, in the coming years and it is starting now, investment managers are deciding to include environmental impact in their decision making to own stocks or bonds in companies. Some of the biggest banks in the world are saying they will not lend or use their investment banking abilities for some industries. It means that besides making profits companies have to be doing their part to ensure the planet stays healthy. If the environmental impact is “too high” then the cost of financing for the company will be higher compared to its competition.

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