If there is one image that captures the plight of many Americans is lining up for hours in their cars to get free groceries at a local food bank. In San Antonio, Texas the lineup was estimated to be 10,000 people.

If you believe the President who says he is a cheerleader for the economy, he favors a V shaped recovery or a sharp recovery.

According to Eric Reguly if you look at the statistics, things might be different. The US economy has never fully recovered from the 2008 financial crisis. The growth in wages has been flat (more people working but little savings – 40% of Americans are worried about the next $400 expense). On top of that President Trump is trying to dismantle the Affordable Care Act and have an extra 30 million people without health care coverage. In addition, many working have health care coverage tied to their work. If work is shut down, what about their coverage.

The federal government has sent out stimulus money and that has helped. However workers are slowly being called back to work and at least 20 million Americans have lost their jobs and economists predict 40% will be permanent.

A survey by Apartment List, an online rental platform revealed 30% of Americans missed their rents or mortgages in June. That was up 24% from April and on par with the May numbers. Given the federal government has more influence with mortgages than rents, except the rent figure to go up.

In addition, if you consider that lineup of vehicles in San Antonio, most people pay “rent” or installments for their vehicles. If they are missing payments is the car payment far behind. Without a vehicle what do they do?

Linking to dividend paying stocks, you can still be optimistic about a V shaped recovery, but only if the government extends protections or keeps giving money to people and businesses. Some of the payments are scheduled to run out at the end of July. Should the government do more? Whatever the government does or does not do, there will be some companies benefiting from the existing working people or there will be opportunities. It would be easier if there is a V shaped recovery, but it case there is not, which companies are still making money?

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

Bayer AG of Germany which you know one of their products – the aspirin, bought Monsanto a giant chemical company among whose products is a weed killer called Roundup. The side affect of Roundup after many uses is Roundup may cause cancer. When something may cause cancer there will be lawsuits somewhere. In the US there are 125,000 lawsuits and in late June, Bayer announced it had come to terms with 75% of the lawsuits and $10.9 billion will be distributed to law firms and their clients.

In an article by Ludwig Burger and Tina Bellon of Reuters, Bayer’s Chief Executive Officer Werner Baumann said the settlements bring a level of certainty to the issue. The company will make a payment of $8.8 billion to $9.6 billion to resolve current Roundup litigation and put in an allowance of $1.25 billion for future litigation.

The Bayer verdict is higher than Merek & Co $5 billion deal over Vioxx and Bayer’s $2 billion over Yasmin and Yaz birth control pills.

In 2018, Bayer spent $63 billion to buy Monsanto, but does not have to write down the value on its books, reflecting average analyst estimate at the time.

Bayer said it expects to maintain its investment grade credit rating and its dividend policy.

Linking to dividend paying stocks, a company similar to Bayer has many assets, some of which are held in reserve for the settlement of lawsuits. This speaks to the profitability of the company as the reserve funds are quite large. When you invest in profitable, dividend companies one of the advantages is they have reserve funds to continue business when adversity or change happens. One method to reduce your risk is to buy these types of companies.

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

When the COVID started to show cases around the world, governments in the name of public health told everyone who could to stay home. This action helps, but it did have economic significance to what we all considered normal. One of the affects was cars were parked and few people traveled or why buy a new or used vehicle? The result was auto sales declined drastically, however for every country which has auto plants, they are a large driver of the economy, in terms of jobs and goods sold.

In England, in an article by Paul Waldie of the Globe and Mail, the auto industry has seen 6,000 jobs disappear. Experts are warning it could take 5 years to recover.

Sales ground to a halt in April and have modest improvements since then. Vehicle sales for the year are expected to be 920,000 units which is a 1/3 less than the previous year. It is possible the number will be less if Britain and the European Community do not agree on tariffs. If no tariffs go higher or prices go higher in the EU. The issue is 81% of the autos in England are exported and more than half go to the EU. The domestic market of the UK is not that big.

In addition, Prime Minister Boris Johnson is coming under increasing pressure to help the auto industry as Germany and France has helped their companies, the companies gave billions in aid.

Linking to dividend paying stocks, institutionally we all have an idea of what is normal and to change the economy to the new normal takes immense change. Will governments go for the new normal or try to go back to the old normal. President Trump wishes to go back to the old normal, but COVID has jumped in the US. There are more unknowns that normal, but what we were all hoping for a short period of time for the shutdown looks longer and longer as the weeks go by. Hopefully you have made changes to your investment portfolio to include the COVID stocks which benefit from a shutdown as you watch the old normal stocks which were profitable try to come back. The good news is everyone suffered the same, those who had dividend shares suffered a little less.

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

After the shutdown of business due to social distancing and public health, the government noted it was not the fault of any citizen affected and wanted to help out its citizens. The Treasury department examined a number of alternatives and decided to use the IRS as the best database. This was a good choice except when someone dies they need to file an income tax for the time the person was alive. The IRS did not flag these accounts and during an audit, the Government Accountability Office discovered the error.

According to an article by Alan Rappeport of the New York Times Service, in a rush to pump the money into the economy to allow bills to be paid, the IRS knew of the risk that money would go to dead people, but there was political capital to be made. Treasury Secretary Steve Mnuchin said heirs should give the money back. According to Michael Graetz, a Columbia University law professor, said it is not cost effective to try to recoup the $1,200 by ligitiation.

The IRS said they will do better, if another stimulus check is to be sent.

Linking to dividend paying companies, often we believe that more data than actually is can and does speak to one another. In the above case, the IRS was under political and economic pressure to send out the money as quickly as possible, items will be missed. In profitable, dividend paying companies we tend to believe they have time on their sides. The issues can be worked out before the action takes place or there are very reasons for errors. The government agencies were pushed to action and mistakes are made – whose fault and who will take responsibility?

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

If you think back to John D Rockerfeller, the creator of Standard Oil, the company developed so much so fast that when it was broken up the companies became part of the 7 sisters which ruled the oil markets of the world. The companies which ruled the oil fields of the middle east and around the world and were called Anglo-Iranian Oil which became BP; Royal Dutch Shell; Standard Oil of California – Chevron; Gulf Oil which belongs to Chevron; Texaco which became Chevron; and Standard Oil of New Jersey which became ExxonMobil. For generations the big oil companies have been profit machines and paid out billions in dividends. In many dividend portfolios big oil company shares can be found.

One of the reasons is not many companies can write off $17.5 billion in assets and still be profitable to pay the dividends, but British Petroleum or BP can. In articles by Reuters and Eric Reguly, BP’s dividend accounts for 7% of the dividends paid by the FTSE (the British equivalent of Dow Jones) 100 companies.

BP is lowering the Brent oil price forecasts to $55 a barrell until 2050 down from $70. New Chief Executive Officer Bernard Looney cut about 15% of the workforce; writing down $8 to $10 billion in early stage development projects and $8 to $11 billion in existing property plant and equipment.

With natural gas playing a greater role in producing electricity, it is less expensive than coal, finding and producing natural gas is at the forefront.

BP has since sold off its chemical division for $5 billion to Ineos a British based chemicals company.

Linking to dividend paying stocks, with the COVID we have seen low demand for gasoline as commuters stayed home. As the economy begins to open up in phases, demand will see some pick up, not as much as before but some. Will commuters still commute or work from home more often, we do not know, but companies have to make predictions what are the expectations for what was normal to be normal or is it something else and they have to make money for it? With large companies they have the cash reserves to try to figure it out and still earn profits to pay dividends.

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

Sometimes governments do things with the right intentions, but if the rules are not enforced the rules seem to be head scratchers – why would the government do such a thing? The example is for wealthy foreigners to invest in a company for $500,000 in return for creating jobs a EB-5 Visa can be issued. The government is encouraging investment in the economy which is a good thing.

In an article by Reuters, a California couple Charles Liu and Xin Wang was raising funds to build a cancer treatment center that has never been built. Maybe the extra funds were for the couple to spend to ensure they did not get cancer, the deal was fraud. They convinced 50 people to put down $500,000 were caught and sued.

The SEC has a practice of forcing defendants to surrender profits obtained through fraud as part of its enforcement of investor protection laws in federal courts. As an investor this is a good thing, if you are frauded, you want your money back.

The couple sued all the way to the Supreme Court arguing Congress never gave the SEC authority to seek disgorgement. The Supreme Court partially agreed by limiting the scope of what can be sought through disgorgement to no more than the net profits of the conduct at issue. The court also decided that disgorgement generally must go to investors.

It is a shame the Supreme Court went to net profits, as an investor who have been defrauded you are not interest in net profits. You are interested in receiving your money back or the the returns you were offered at the beginning. In this case, the fraudsters were arguing they should not have to pay back as much money. Generally the only way to deal with fraudsters is to take all their money and then they do not have the lifestyle to spend other people’s money.

Linking to dividend paying stocks, eventually all government programs move into the grey area as fraud becomes the first objective. One way to stay away from fraud is to ensure most of your money is protected by being in profitable stocks which pay dividends and have done so for the past 5 years plus. Fraud typically can only be concealed for a couple years, eventually its shows up in the financials, the cash flow drops and the company is on a life line before Chapter 11 is needed. Trying to preserve your capital is a good thing, take time and patience to make your decisions.

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

The results of COVID show there are 2 distinct economies at the moment and government political parties do not know what to do. In normal times during elections, one party typically on the right side of the political spectrum campaigns on smaller government and lower taxes for all; the party on the left side of the political spectrum tends to believe governments should be bigger and taxes can be higher. This year with the shutdowns of the economy by the government to protect public health, governments around the world gave money to all those could not work and stayed at home.

We have seen those people who had to go to work tended to be on the lower wage scale than those who tended to stay home. The governments noted it, but did not add money to their wages. For those that stayed home, outside the grocery store and e-commerce there was little to spend the money on which increased savings. The emergency programs are scheduled to be stopped at the end of July.

What should governments do? The Republican Party is leaning to paring back support. The Democrats want another stimulus bill to go forward, although less than $1 trillion.

In an article by Ian McGugan, he writes a key question is how much of the cash that governments are giving people will actually filter through into the rest of the economy?

Frances Donald, global chief economist at Manulife Investment Management noted in April total wages in the US dropped by $1 trillion. However, government transfers jumped by $3 trillion or personal income was up by $2 trilllion. Some of that money went into savings resulting in the highest personal savings rate in decades.

The US economy is 60% dependent on consumer spending, that money can be spent but only if consumers feel confident enough to spend.

The political parties have different solutions, the Republicans want the country to be opened, less support and people go back to jobs. The Democrats are pushing for the an extension to January of the extra $600 a week in emergency unemployment insurance to people who have lost their jobs.

Linking to dividend paying stocks, there tends to be a balancing act with most things in life and government support is one of them. Can all the states open up to phase 3 and 4? will people be confident to visit and meet in groups? are you confident to meet in a group larger than 10 people? time will tell. in the meantime utility like revenues or consistent revenues is what you need to invest in.

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

One of the high flying financial technology companies in Germany has come crashing to the earth. Wirecard joined the German blue chip Dax index in late 2018 and trade above E200 and is now trading at E20 or E10 billion ($11.17 billion) value has been wiped out. The shares are now trading at pennies.

Wirecard is a payments company and is missing $2.85 billion which according to a whistle blower is not surprising because there is a web of sham transactions. Wirecard is trying to keep the company together however its auditors Ernst & Young would not sign off on its accounts. The accounting company did sign off on previous years. Lawsuits have been filed was Wirecard legit or a house of cards?

Linking to dividend paying stocks, we have seen Enron and others do accounting fraud, high flyers come down to earth and you think why did I buy some of its shares? The important part if you did keep the position weighted so the stock may go up and down but your total portfolio is in balance or can weather any storms. If you the bulk of your portfolios you sometimes miss the high flyers, but when they come down to earth you miss that too. Rule number one of investing is try not to lose your money.

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

One of the biggest cruise ship operators Carnival based in Miami, Florida reported a $4.4 billion in quarterly losses because of COVID as reported by Reuters.

Carnival said it had $7.6 billion in the bank, but it was spending or burning $650 million a month. Consider $650 million x 10 is $6.5 billion, if there is no virus or ships do not sail then Carnival is not looking good. The cruise company said it was waiting for regulatory approval for the redemption of some of its lines in the hope that customers will come back later this year.

The problem for Carnival is many of its customers are over 60, which are the people who should be social distancing and not necessarily safe of the ship because of the HVAC systems and the way air is normally circulated.

Carnival has sold 6 of its ships as it scales back. In terms of of its credit line it has drawn down $3 billion and issued $6.6 billion in debt and equity. Carnival has debt that is maturing within a year and is hoping its creditors waive some of the conditions over wise what was a high rating bonds will breach some of the conditions of the bonds.

The company normally receives bookings 6 to 1 year in advance and customers have canceled, refund or rebook thousands of tickets. Carnival customers are loyal and about half want refunds and half decided to rebook.

In the second quarter, Carnival reported a net loss of $2.4 billion or $3.30 a share.

Linking to dividend paying stocks, with the COVID it depends on how you see the future. If you see a future with a cure in the near future, then people will be cruising, consider half rebooked their tickets. Having gone on a cruise, if the weather is calm it is a wonderful way to enjoy the sea and other countries. If you see the cure coming in 2021, then Carnival will not survive but go into Chapter 11 reorganization to come out as something else. Is the glass half full or half empty?

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